BDO Seidman, LLP - Accountants and Consultants

Chicago, IL –  Recent news coverage of food and toy safety issues related to Chinese suppliers, as well as widely publicized data breaches that have occurred at some retailers, have heightened risk management concerns for the retail industry.  According to a new study by BDO Seidman, LLP, one of the nation’s leading accounting and consulting organizations, sixty-one percent of chief financial officers (CFOs) at leading U.S. retailers state that they have increased their level of investment in cyber security to combat potential data problems and almost three-quarters (74%) of the top 100 retailers have increased their investment in this area.  By comparison, close to one-third (32%) of the CFOs say their company has increased the level of personnel and financial resources they devote to risk management for supplier and vendor activities.

“Retailers are wise to be increasing their investments in cyber security and risk management of supply chains.  Since only a percentage of retailers use Chinese suppliers, but virtually every retailer must deal with electronic data security, it makes sense that more CFOs are reporting increased investments to curb cyber breaches,” said Doug Hart, a partner in BDO Seidman’s Retail and Consumer Products practice.  “The survey also shows that retail CFOs are struggling to meet the new requirements of assessing and reporting on income tax risk under the new FIN 48 accounting rule.”

These findings are from the most recent edition of the BDO Seidman Retail Compass Survey which examined the opinions of 140 chief financial officers at leading retailers located throughout the country.  The retailers in the study were among the largest in the country, with revenues of more than $100 million, including 23 percent of the top 100 based on annual sales revenue.   The survey was conducted in August of 2007. 

Some of the major findings of BDO Seidman Retail Compass Survey of CFOs:

* FIN 48 Headache!  More than three-quarters (78%) of the retail CFOs feel FIN 48, a new accounting rule that requires companies to take a more stringent approach to reporting uncertain income tax positions, has increased the difficulty of their financial reporting function.  The impact was even greater among the CFOs at the top 100 retailers.  Eighty-six percent of these largest retailers cited increased difficulty in reporting financials due to FIN 48, with twenty-nine percent describing the level of difficulty as “high.” 

* Size Matters.  When asked what specific reporting areas present the most challenge under the new FIN 48 requirements, almost half (49%) of the retail CFOs cite accounting methods for inventory capitalization and revenue.  More than one-third (38%) cite state-local and internet tax issues and thirteen percent mention international tax issues.  However, for CFOs at the top 100 retailers, a majority (53%) identify state-local and internet issues as the most challenging aspect of the FIN 48 reporting.

* Pay Disclosure Has Little Impact on Retail.  Less than a fifth (19%) of the CFOs report that the new focus on executive pay and stock-based compensation disclosure in financial statements has impacted their company’s compensation practices. 

* Minimum Wage Has Minimum Impact.  While a majority (62%) of the CFOs indicated the increase in the minimum wage over the next two years will impact their labor costs, only nine percent described the impact as substantial.  More interesting, is the finding that better than a third (38%) of the retailers felt the increase in the minimum wage will have no impact at all on their labor costs.

The BDO Seidman Retail Compass Survey is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's largest retailers (with revenues ranging from over $100 million to billions of dollars).

BDO Seidman, LLP has been a valued business advisor to retail and consumer products companies for almost 100 years.  The firm works with a wide variety of retail clients, ranging from multinational Fortune 500 corporations to more entrepreneurial businesses, on a myriad of accounting, tax and other financial issues.

About BDO Seidman, LLP

BDO Seidman, LLP is a national professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. Guided by core values including, competence, honesty and integrity, professionalism, dedication, responsibility and accountability for almost 100 years, BDO Seidman provides quality service and leadership through the active involvement of its most experienced and committed professionals.

BDO Seidman serves clients through 35 offices and more than 300 independent alliance firm locations nationwide. As a Member Firm of BDO International, BDO Seidman, LLP serves multi-national clients by leveraging a global network of resources comprised of 621 Member Firm offices in 107 countries. BDO International is a worldwide network of public accounting firms, called BDO Member Firms, serving international clients. Each BDO Member Firm is an independent legal entity in its own country.

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