According to the first quarter "CFO Outlook Survey," conducted by Financial Executives International and Baruch College's Zicklin School of Business, CFOs rate their optimism on the economy at 71 out of a possible 100 and their optimism about the financial prospects for their company at 75. Both numbers have been within a two-point range of these rates for the past four quarters.

Survey results seem to confirm broader senior management optimism: earlier in the quarter the Business Roundtable's CEO survey reported a high level of confidence. The CFOs' forecasts also substantiate recent theories that businesses, not consumers, will be leading this economic expansion.

This quarter's 13 percent forecast for a capital spending increase over the next year closely tracks their forecast from last quarter and remains significantly higher than the 8 percent increase forecast six months ago.

More than 90 percent of respondents expect long-term interest rates to rise over the next 12 months. Sixty-six percent expect 10-year rates to land between 4.29 percent (their yield on February 28) and 4.75 percent, and 25 percent predict they will go above 4.75 percent. Nevertheless, rising interest rates ranked sixth in a list of their companies' biggest worries, far behind the traditional business pressures of competition and U.S. economic growth but slightly ahead of the price of oil and cost of compliance.

"In the past several surveys, CFOs have forecast short-term interest rates more accurately than the markets," said Burton Rothberg, Assistant Professor of Accounting at Baruch College. "Interesting, in contrast to prior quarters when CFOs felt that futures market were overestimating interest rate increases, a quarter of our respondents are now expecting a significant rise. Their attitude about long-term rates suggests that CFOs won't be taken by surprise by higher rates and are prepared for them. This bodes well for the economy as a whole."

CFOs expect health care costs to rise 9 percent in the next 12 months. The impact is affecting employee coverage. Forty-two percent of private companies, which are typically smaller than the public companies in the survey, say that high costs have caused them to trim benefits. Of those cutting back, 71 percent have reduced the number of plan benefits and features, while 79 percent now require higher employee contributions. Of the 10 percent of respondents who said they enhanced their health care coverage despite rising costs, 78 percent said they improved the quality of the benefits.

Of the companies in the survey offering 401(k) plans, more than half (56 percent) changed the mutual fund choices in their plan last year. Although most said the reason was a desire for better performance (35 percent) or broader diversification (27 percent), a smaller percentage (14 percent) said they wanted funds untouched by irregular trading.

"Even if the mutual fund scandals were not the main reason to change providers, their high public profile compelled many companies to take a closer look at their defined contribution plans," said Colleen Cunningham, President and CEO of FEI. "In the end, this is likely to be a plus for plan participants."

Regarding the FASB's recently issued final statement requiring the expensing of share-based payments, significantly one-third of the surveyed companies have not yet chosen a valuation model. Of those that have made a choice, 62 percent indicated that they will be using the Black Scholes model for valuing options, while 36 percent plan to use the binomial lattice model.

Sign up for the free SmartPros Accounting News & Insights weekly e-newsletter!

Today's Headlines