energy and employee costs still top concerns
new york (august 11, 2005) ? cpas serving as chief executive officers, chief financial officers and in other financial positions are less optimistic about the u.s. economy than they were six months ago, according to the results of the business and industry economic outlook survey, a semi-annual study conducted by the american institute of certified public accountants (aicpa).
indeed, only 57 percent of these cpa decision makers have a positive outlook on the state of the economy, as opposed to 71 percent in december, when the prior survey took place. about three quarters of the respondents (74 percent), however, expressed continued optimism about the prospects for their own organizations; this represents a marginal increase over the 73 percent who responded similarly in december.
?what?s particularly interesting is that despite the concerns about the economy, expectations for growth, spending and workforce increases continue to be robust at the individual company level,? said john morrow, aicpa vice president for members in business and industry. the one potential area of weakness revealed by the survey is in the workforce plans for the largest companies. only 12 percent of the total said their organizations would decrease the size of their workforces in the next six months. however, 22 percent of those working for companies with revenues of more than $1 billion reported plans for workforce reductions.?
the major concerns fueling their reservations about the economy are ballooning energy and employee costs; increased regulation; and the cascade effect of sarbanes-oxley act provisions. more than 50 percent of the respondents reported being more concerned about these issues than they were six months ago.
on specific policy issues cpa executives indicated greater concern about the impact of changes in short-term interest rates on inflation than unemployment. on social security reform, more are concerned about maintaining current tax rates than current benefit levels.
respondents also wrote in additional issues that concerned them, including escalating home prices, the corresponding levels of financing and the high degree of consumer debt.
revaluation of the yuan
?we were also interested in the impact of a potential revaluation of the chinese yuan on our members? businesses,? said morrow. ?the responses were particularly interesting in hindsight, because the yuan did undergo revaluation in july, a month after the survey took place.?
eighty-four percent indicated that a 10 percent revaluation of the yuan would have a minimal impact on their pre-tax profits. for companies that would be impacted by a revaluation of the yuan, there was an even split between those that would experience pre-tax profit gains and those that would experience a negative effect on their profitability.
the survey, conducted in june, represents the views of 1,465 aicpa members in public and privately held companies, government, and not-for-profit organizations. of that number, 205 serve as ceos, and 830 are cfos. most of the respondents (47 percent) work for companies with revenues of $10 million – $100 million. the second largest group (23 percent) is affiliated with organizations that have less than $10 million in annual revenues, followed by those with $100 million – $1 billion companies (20 percent). respondents with companies that take in more than $1 billion a year represented the smallest number (10 percent).
of the 1,465, nearly two thirds work for privately held companies.
the complete survey results are available at the aicpa financial management center: http://fmcenter.aicpa.org/
the inaugural business and industry economic outlook survey took place in june 2004. the next is scheduled for december 2005.
the american institute of certified public accountants (www.aicpa.org) is the national, professional association of cpas, with nearly 350,000 members, including cpas in business and industry, public practice, government, and education; student affiliates; and international associates. it sets ethical standards for the profession and u.s. auditing standards for audits of private companies; federal, state and local governments; and non-profit organizations. it also develops and grades the uniform cpa examination.