FEI CEO's top financial reporting issues for 2004.

• Author: Heffes, Allen M.
• Position: Domestic News - Financial Executives Institute - Colleen Sayther

In a year of unprecedented regulation, FEI President and CEO Colleen Sayther offers the following list of 11 financial reporting issues that require the attention of financial executives during 2004. She notes they are not listed in any particular order, as the level of importance is certain to vary among companies.

1. Internal Controls. Ensure that you have complied with Sarbanes-Oxley Section 404, which requires management to assess its internal control environment and the external auditor to attest to the internal control environment.

2. Variable Interest Entities (VIEs). Comply with FIN 46, which requires that companies consolidate variable interest entities. The rule was issued in response to Enron's off-balance-sheet treatment of such entities. It was originally supposed to take effect in the third quarter, but on October 8, FASB extended the deadline due to the significant implementation issues companies and their auditors were dealing with. There have been numerous FSPs issued related to FIN 46 attempting to address the myriad of implementation issues; review those as well (as we go to print we were at FSP #46-7). In mid-December, FASB was still looking at overhauling FIN 46 prior to the effective date of the first reporting period after Dec. 15, 2003.

3. Pension Disclosures. Comply with new pension disclosures. FASB is due to issue a final statement before year-end 2003 as FASB Statement No. 132 (revised 2003, rather than FASB Statement No. 51), but has tentatively decided to require additional disclosures for 2003 calendar year end companies based on comments received from its recent exposure draft.

4. MD&A Guidance. Comply with MD&A guidance. As we go to print, the SEC is planning to issue some additional guidance before the 2003 reporting season, which will likely suggest an "Executive Summary" section intended to highlight the important items in the MD&A. Also, ensure that your disclosures of Critical Accounting Policies are robust enough for a user to understand your business model.

5. Revenue Recognition. Comply with EITF 00-21, Revenue Arrangements with Multiple Deliverables. Also, monitor FASB's Revenue Recognition project.

6. Off-Balance Sheet Arrangements Disclosures. Comply with FR-67, Disclosures of Off-Balance Sheet Arrangements and Contractual Obligations. This was issued by the SEC in January 2003 for...