FEI offers caution on S&P framework.

• Position: Advocacy

FEI reacted quickly and with considerable skepticism to the mid-May announcement by Standard & Poor's Corp. that it had created a new method for calculating corporate operating earnings. This "core earnings" concept, the ratings agency said, is based on "as reported" earnings, to which it adds a series of exclusions, such as goodwill impairment charges, gains or losses on asset sales, hedging gains or losses and merger-related fees.

FEI voiced its overall support for continued work on making financial information more meaningful to investors but urged S&P to work with the Financial Accounting Standards Board on its current project on Reporting Financial Performance rather than introduce a new, untested measure on its own.

FEI expressed concern that the core earnings measure developed by S&P oversimplifies the decisions that investors routinely make in analyzing reported earnings and valuing companies, and that its "one size fits all" approach will inherently bias the measure against certain types of industries and companies.

FEI concerns with S&P's core earnings measure include:

* Employee benefit costs included in S&P's core earnings do not reflect the funding status of benefit plans. Accordingly, companies in vastly different positions relative to future payment obligations would look the same to investors.

* Asset write-downs are...