Merrill Lynch & Co. Inc. announced a new options expensing policy for all U.S. equity research analysts that will be implemented as of the first reporting date after Sept. 30.
Merrill Lynch will require its analysts to include options and other equity-based compensation expenses in their GAAP and pro forma estimates. Analysts will also be required to include a table laying out the difference between earnings estimates including and excluding equity-based compensation expense in research reports for at least the next two fiscal quarterly reporting periods.
"We feel that it is important that all our estimates reflect this new accounting standard," said Adam Quinton, head of the investment firm's Americas Research Recommendation Committee, in a statement. "Both to provide a consistent basis for comparability across our coverage, as well as reflecting the fundamental principle that all compensation expenses be included in a company's income statement." Merrill Lynch said that it would continue to monitor how options expensing is being implemented by companies and regulators. The Securities and Exchange Commission is continuing to weigh exactly how companies will value stock options when it begins requiring that they be treated as a routine business expense.
