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Abstract
NIPA Corporate Profits and Reported Earnings: A Comparison and
Measurement Issues
by Charles Ian Mead, Brent R. Moulton, and Kenneth Petrick
Presented at the ASSA/AEA meetings, San Diego, CA, January 3-5, 2004
The users of the national income and product accounts (NIPAs) often compare
the growth rates of NIPA profit measures with those of other publicly
available measures of reported earnings, such as Standard & Poor's
500 earnings. Differences between the NIPA profit measures and the other
reported earnings measures reflect differences in purpose, definitions,
and methodologies. Reported earnings are used by the Bureau of Economic
Analysis, however, in preparing the quarterly estimates of profits, based
on the extrapolation of the tax-accounting measures published by the Internal
Revenue Service. In recent years there have been large revisions to NIPA
corporate profits when tax-return-based measures have become available.
Differences between financial accounting and tax accounting in the treatment
of employee stock options have contributed to the revisions. This paper
explores these differences and examines possible improvements to the methods
used for extrapolating NIPA corporate profits estimates that would incorporate
more current information on employee stock options.
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Last changed: January 21, 2004
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