Economic confidence is rising among CFOs, according to a new survey that found 57 percent of them saying they plan to hire additional employees in the next six months.
The CFO Optimism Index from Financial Executives International and Baruch College for the third quarter rose to 55.20 from 53.60 in Q2.
Retaining talent at companies is a priority for 80 percent of CFOs. Training and development slightly outranked compensation as the top tactic for retaining talent (47 percent and 45 percent respectively), followed by improvements to office atmosphere and team-building (both 35 percent), and ensuring opportunities for career advancements (30 percent).
The increase in CFOs confidence in October is promising news, especially compared with the alarming dip the index experienced in the second quarter, said John Elliott, dean of Baruchs Zicklin School of Business, in a statement.
Forty-one percent of the 249 CFOs surveyed anticipate that they will work past the age of 65 out of desire, and 31 percent said they will do so out of need. Three percent of them are already working beyond 65. With regard to the idea of an overall increase to the traditional U.S. retirement age, 59 percent said they would be in favor, with three years being the average desired increase among those respondents who specified an age.
CFOs extended tenures may also affect their mixed approach to succession plans for their own positions. In a time when succession plans have become increasingly important to key stakeholders, 30 percent of the CFOs surveyed currently have a plan in place. While 40 percent of the remaining CFOs believe a plan should be created, another 31 percent do not see the need for one at all.
CFOs are demonstrating relatively healthy balance sheets, and see opportunities to boost their M&A activity in the short term. On average, the capitalization of respondents balance sheets includes 65 percent equity and 33 percent in long-term debt obligations, and banks are their most commonly used source for accessing capital.
Over the next 12 months, they are predicting increases in net earnings (13 percent), capital spending (11 percent) and revenue (8 percent), though their projected increases in these areas are slightly lower when compared with Q2. Their inflation concerns remain relatively low, with nearly 60 percent citing concerns as only a one or two on a scale of one through five (with one being not concerned).
When comparing M&A plans relative to the previous quarter, over a third (34 percent) of respondents to the Q3 survey said their companys interest in making acquisitions has increased. Only 3 percent of CFOs said their interest in M&A had decreased, significantly lower than Q2 2009, when the percentage of respondents with decreased M&A interest was 19 percent.
While most respondents (73 percent) see no change in their companys interest as an acquisition target, nearly one fourth said interest had increased (23 percent). This number is up over Q2 2009, when only 16 percent indicated that interest as an acquisition target had increased. Sixty-seven percent of respondents also specified a particular region for acquisitions, but nearly all of them are limiting their targets to North America (92 percent). Asia (19 percent) and Europe (17 percent) came in a distant second and third place as targeted regions.
International Financial Reporting Standards remains a hot-button issue among CFOs, and the findings from this quarters survey demonstrate that amid the chatter, there is still some uncertainty surrounding the timing and anticipated impact of global convergence. When asked about their confidence as to whether a global adoption of IFRS is obtainable, most CFOs (81 percent) feel that it is achievable, but they remain unsure when this would happen.
Another 16 percent do not think IFRS will ever be adopted. In relation to IFRS, 48 percent of respondents identified themselves as private companies that prefer U.S. GAAP, nearly a fifth (19 percent) are private companies that prefer a separate set of standards, and 13 percent are private companies contemplating IFRS for Small and Midsized Enterprises.
Additionally, 15 percent of respondents were public companies that prefer U.S. GAAP over IFRS, and the remaining 6 percent stated that they were public companies that will adopt IFRS if the SEC permits.
CFOs have also not yet gauged the impact of the recent decision by the Financial Accounting Foundation to add two new board seats to the Financial Accounting Standards Board. Most are unsure if it will have any impact on the adoption of IFRS (41 percent), and about a fifth (19 percent) anticipate no impact. CFOs overall remain confident that the FASB additions will not lessen the quality (65 percent) or rate (59 percent) of U.S. accounting standard setting.
