FEI CEO's 2008 Top Challenges for financial executives.

• Author: Heffes, Ellen M.
• Position: Financial reporting

As financial executives of both public and private companies absorb the events and happenings of 2007 and look ahead at what's in store for them in 2008, FEI CEO and President Michael P. Cangemi has compiled the following list of the Top Challenges for 2008--in no particular order:

* Fair Value/Subprime Market Crisis/Derivatives. Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard 157, Fair Value Measurement, was originally required to be adopted for financial statements for fiscal years beginning after Nov. 15, 2007 and interim periods within those fiscal years.

However, on Nov. 14, 2007--one day before it was supposed to have been applied and after various appeals from FEI members and other constituents--FASB delayed the implementation of FAS 157 for certain non-financial assets and liabilities (the comment period on the related FASB staff position that would finalize this is expected to close in January).

Fair value is determined to be a market-based measurement, and the standard sets up a three-level hierarchy for determining the fair value based on "observable" inputs (active markets, etc.) and "unobservable" inputs.

Though not enough to have prevented the crisis, some, including FASB Chairman Robert Herz, have said the disclosures for financial instruments provided by early adopters of FAS 157 helped provide information needed by users on these complex instruments. Certainly, FAS 157 is easier to apply for instruments with active markets. For those instruments without active markets, it's not as clear; in these cases, there are many implications for preparers, auditors and regulators.

And with a new quasi-standard-setter on the scene, the Center for Audit Quality (CAQ), issuing white papers on these matters, standards (and questions) continue to proliferate. Stay tuned.

* Global Convergence of U.S. GAAP and IFRS. Are the U.S. markets ready for principles-based standards? The first step towards answering that question is the U.S. Securities and Exchange Commission (SEC) decision in November to eliminate the U.S. generally accepted accounting principles (GAAP) reconciliation for foreign private issuers that file financial statements in International Financial Reporting Standards (IFRS), as promulgated by the International Accounting Standards Board (IASB).

Now on the agenda is consideration of the comments on the SEC concept release to allow U.S. issuers to file financials in IFRS.

On the flip side, we...