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Technology Stocks : Newbridge Networks
NN 16.12+1.6%Dec 8 3:59 PM EST
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To: Serge Collins who wrote (13780)10/21/1999 4:13:00 PM
From: Doug   of 18016
 
Serge: Upto a half of 1998 Earnings were overstated . The earnings are manipulated by use of the following

a:Options sold to Employees are not accounted as Costs.( Low salaries and big Options is the trend).

b:Pension surplus (due to Stock Market) is show as credit in the Income statement. Look at G.E's 10K.

c:Purchased research and Development is another Accounting trick to write off anything that one wants to charge off instead of showing a Loss. (Wall street penalizes for Losses but not write downs.)

d:Restructuring charges help to create a reserve of Money which can be drawn down to boost profits in future years.

In 1998, the profits of the Fortune 500 amounted to a total of $318B. FASB standards have plenty of loop holes to manipulate earnings. In 1998, the manipulation,excluding Options, was estimated at $72.1B.

The stakes are so high that it is difficult for Legislators to introduce tougher standards.

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