BusinessCompany NewsMerrill Lynch to use FASB guide on estimates

Merrill Lynch to use FASB guide on estimates

In the wake of the Enron scandal, Merrill Lynch has announced a plan to more accurately evaluate a company's quality of earnings.

Merrill’s director of equity research, Deepak Raj, told analysts in a memo they should be employing measures that go beyond pro forma earnings and consider the US Financial Accounting Standards Board’s guidelines when formulating earnings estimates and ratings opinions.

Some lawmakers and investors have said that analysts rely too heavily on pro forma results, which often overstate a company’s profitability.

In addition to industry-specific criteria already being used, the company suggests researchers focus on cash flows compared to net income, return on capital, return on asset measures, and receivables and inventory turnover.

Raj also warned analysts that some companies may have ‘significant pension liabilities, as well as off-balance sheet financing and the potential impact of mark-to-market accounting’.

Merrill Lynch expects to have its new evaluating framework in place by its second quarter.

Related Articles

BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

3m Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

7m Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

7m Alia Shoaib, Reporter
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

10m Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

10m Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

10m Emma Smith, Managing Editor
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

10m Emma Smith, Managing Editor
Mazars strengthens audit team with partner appointment

Accounting Firms Mazars strengthens audit team with partner appointment

10m Emma Smith, Managing Editor