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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (66911)	8/27/1999 4:21:00 PM
From: BSGrinder	Read Replies (1) \| Respond to of 132070

Michael, It's official! Even Greenspin says earnings are overstated: New technologies and the bull market they've helped create are leading to overstated earnings by causing problems with accounting for stock options and corporate contributions to pension funds, Greenspan said. ``It is thus incumbent on us to improve our understanding of the process by which projections of future earnings are translated into asset market value,' he said in today's speech. When fair value for stock options is not charged against income and options which fall out of the money are repriced, it serves to ``understate ongoing labor compensation,' he said. According to Fed staff calculations, that's overstated growth in reported profits by one to two percentage points annually for the past five years. Profits have also been artificially augmented because rising stock prices have reduced the amount companies have to contribute to pension plans, he said. ``These upward adjustments in reported earnings, of course, are a consequence of rising stock prices, and hence, may not be of the same dimension in the future,' Greenspan said. /Kit