"The CFOs' forecast of price increases of less than 2 percent during the coming 12 months represents a relatively benign inflation environment," said John Elliott, Dean of the Zicklin School of Business at Baruch College. Dean Elliott also noted that the weighted average values cited are smaller than the average values (which give equal weighting to responses regardless of company size), suggesting that larger firms expect less capital spending, lower hiring and smaller price increases.
Further, 67 percent of the CFOs indicate they are reducing their rate of inventory growth and 41 percent are actually shrinking levels. Overall, the CFOs expect a 0.6 percent reduction in inventory levels. One contradictory inflation signal from the CFOs is that they consider "finding qualified workers" a top business challenge over the next 12 months, second only to general market "competition."
Their economic optimism decreased slightly from the prior quarter, as did their optimism about their own company.
Accounting Standards Debate
CFOs are almost evenly divided in their views about the use of International Financial Reporting Standards (IFRS) vs. U.S. GAAP. Just over half of the CFOs queried (55%) said they would support a proposed change by the SEC that would allow foreign private issuers registered with the commission to choose between IFRS or U.S. GAAP in filing their financial reports. Forty-five percent would not support the change.
The SEC plans to request comments on a proposed change that would allow U.S. issuers the choice of using IFRS or U.S. GAAP. CFOs are also split 50/50 in their views on this change. "The globalization of the capital markets demands that we create a dialogue about the virtues of GAAP and IFRS," said Michael P. Cangemi, FEI President and CEO. "At this point, U.S. financial executives need to become more familiar with IFRS. It will at some future point have an impact on how financial statements are prepared.
