Michael P. Cangemi FEI President and CEO May 3, 2007 Baruch Financial Reporting Conference

1. Michael P. CangemiFEI President and CEOMay 3, 2007Baruch Financial Reporting Conference

2. FEI Mission • To be the preeminent associationfor financial executives via: Networking Knowledge Advocacy Ethics Providing forums for peer networking Alerting members to emerging issues Promotingethical conduct Advocating the views of financial executives

3. Financial ExecutivesResearch Foundation (www.FERF.org) • Independent non-profit research affiliate of FEI • Facilitate learning from other financial executives through: • Research publications and alerts • Interactive forum with peers (FELIX) • Distance learning with CPE • New titles: • A Top-Down Approach to Risk Management and Internal Control • Current Financial Reporting Trends: A Qualitative Review of SEC Comment Letters • Survey of Income Tax Disclosures • What Do Users of Private Company Financial Statements Want?      • XBRL Reference Guide: Guidance for the Application and Conversion Capabilities of XBRL     

4. Complexity in Financial Reporting:A Call For Action • “I want to work with the FASB, AICPA, PCAOB, FEI and others to begin a project to eliminate unnecessary complexity in financial reporting ... I could see an independent body headed by a prominent person to begin this project.” • SEC Chief Accountant Conrad Hewitt before the 2007 Foundation of Accounting Education SEC/FASB Conference, 1/22/07 • “…the complexity that pervades the reporting system – as evidenced by the volume and detail of accounting, auditing, and reporting standards, rules and regulations – poses a major challenge to maintaining and enhancing the accuracy and transparency of financial information reported to investors, creditors and the capital markets.” • FASB Chairman Bob Herz, Congressional testimony, 3/29/06

5. FEI’s 4-Point Plan to Combat Financial Reporting Complexity • General agreement that investors are not well served by complex financial reporting. • Therefore FEI recommends: • Stable platform while FASB and all stakeholders focus on conceptual framework, stop proliferation of rules. • Adoption of meaningful class-action reform. • SEC and PCAOB to develop a regulatory framework that balances investor protection with the need to maintain U.S. competitiveness. • Stakeholders should come together to form a “Committee on Complexity.” • “Advocacy group FEI has also joined the fray, calling for FASB • to stop issuing new rules and instead simplify existing ones.” • -- Business Week, April 23

6. FEI Hot Button Issues in Financial Reporting • Pension Accounting – FAS 158. • FEI Committee on Benefits Finance and Committee on Corporate Reporting following. • Fair Value Accounting – FAS 157. • FEI Committee on Corporate Reporting (CCR) voiced concerns with complexity, reliability of Fair Value Measurement project. We want to work closely with FASB and other stakeholders as further consideration of fair value continues. Jury is out on FAS 159 … which allowed optional election of Fair Value Option.

7. FEI Hot Button Issues in Financial Reporting • FIN 48. • CCR and FEI Committee on Taxation following closely. • Sarbanes-Oxley Section 404. • CCR and FEI Small Public Company Task Force support movement to a more principles-based, top-down, risk-based approach; included recommendations for further improvements in the proposed rules; we support letting the regulators move toward these fixes rather than amending the legislation. • FEI has monitored 404 costs since 2004. New report will be released this month. • Average cost for Section 404 compliance was $3.8 million during fiscal year 2005

8. Global Accounting Convergence … moving ahead, what’s next? Critical focus area for standard-setters and regulators • FASB/IASB “Norwalk Agreement” – commitment to development of high quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting. • Several current projects being addressed jointly, i.e., Conceptual Framework, Financial Statement Presentation, Business Combinations, more. • SEC announced in late April plans to release a proposed rule this summer to give foreign private issuers a choice between filing in IFRS or GAAP. • SEC also plans to issue a Concepts Release on issues relating to the possibility of treating U.S.-based and FPIs the same by permitting U.S. companies to also have a choice of filing in IFRS or GAAP. • EU is considering removing the reconciliation requirement from GAAP to IFRS for U.S. companies filing internationally as well.

9. Upcoming FEI events of note … • Global Financial Reporting Convergence Conference September 28, 2007 Marriott Marquis Times Square, New York • 28th Annual Current Financial Reporting Issues Conference November 12-13 Marriott Marquis Times Square, New York

10. Other important initiatives • XBRL • FEI’s Committee on Finance & Information Technology has shown strong support; CCR members caution further evidence from the current voluntary filer program should be carefully studied before considering making XBRL mandatory. • FERF has issued a number of educational publications on XBRL with more in the works • Earnings Guidance – Should it continue? • Others have questioned if earnings guidance should continue – this is a topic our members will consider. • Private Companies • Half of FEI’s members are from private companies, we have an active Committee on Private Companies • Closely following the joint FASB-AICPA initiative on private companies – members question if there should be carve-outs for private companies; others recommend reducing complexity, burden for all companies

11. U.S. Competitiveness: Problem or Paranoia? • Treasury Secretary Henry Paulson stirring debate over U.S. competitiveness • March 13 event at Georgetown University • Committee on Capital Markets Regulation formed late 2006, issued 32 recommendations to improve U.S. competitiveness. Co-chairs are Glenn Hubbard, Dean of Columbia Business School, and John L. Thornton, Chairman of the Brookings Institution. • McKinsey Report sponsored by NYC Mayor Michael Bloomberg and NY Senator Chuck Schumer warns of New York’s potential decline as a global financial capital. • U.S. share of global GDP fell to 27.7% in 2006, down from 31% in 2000. Share of the BRICs (Brazil, Russia, India and China) rose to 11% over the same period, up from 7.8%.

12. Restatements: Bad News and Good (?) … • Public companies filed 1,876 restatements in 2006, a record number. • Restatements from larger companies (over $700 million public float) declined by 20% last year. • Micro-caps, with less than $75 million in public float, filed 42% more restatements than the prior year. • Problem areas: backdating of stock options, measurement and recognition of debt and stock or equity instruments, accounting related to cash-flow statements and tax issues. • Other drivers include: • Second-guessing of reasonable judgments; • Complexity of rules; • What is material? What matters to investors?

13. Michael P. CangemiFEI President and CEOMay 3, 2007Baruch Financial Reporting Conference