This largely has to do with stock-compensation costs, which many companies are now deducting from earnings to provide a more accurate view of their finances. Some analysts, to appease large investors, aren't recognizing those costs in coming up with their own estimates for how much money companies will make.

The irony is that investors should benefit most from getting a more comprehensive view of companies' financial health - especially since some executives in the past used shady practices like manipulating earnings to boost their company's stock value and their stock-based compensation.

That maneuvering won't be so easy under new accounting rules that force companies to subtract such compensation costs from earnings, rather than just listing the estimated costs in a footnote to the financial statements. The change went into effect starting with companies whose fiscal years ended in June.

There had been some hope from opponents of expensing that Congress would thwart such action, but that is looking less likely after the nominee to head the Securities and Exchange Commission, Rep. Christopher Cox, said last week that he supports the accounting shift.

Still, not everyone is embracing the idea of those new rules.

Consider how analysts are forecasting Microsoft Corp.'s earnings. Two years ago, Microsoft became one of the first and largest companies to announce it would expense stock-compensation costs from earnings. And just last month, it told analysts that it would no longer break out such costs when issuing its earnings guidance.

"We firmly believe that stock-based compensation is a true expense of our business, and expect that analysts and investors will begin to include the impact of compensation in the financial statements in their models," Microsoft chief financial officer Chris Liddell said during a conference call with analysts in July when the company offered its earnings guidance. A transcript was provided by Thomson Financial's StreetEvents.

But that hasn't spurred much change among analysts. They didn't include such costs when Microsoft first starting expensing in 2003 and they still aren't deducting those expenses from Microsoft's earnings when calculating their estimates. That means what Microsoft reports will look far lower than what analysts are forecasting.

The Seattle-based company said it expects diluted earnings per share to come in at $1.27 to $1.32 a share for fiscal 2006 and 29 cents to 31 cents for its first fiscal quarter. But analysts' consensus is for Microsoft to make $1.43 for the year and 33 cents for the quarter, both excluding the stock-based compensation costs, according to Thomson Financial.

Mike Thompson, director of research at earnings-tracker Thomson Financial, believes such behavior on Wall Street is being driven by demands from large investors on the buy side of the market, including mutual funds and pension funds, which rely on analyst research to help make their investment decisions. A lower per-share figure that comes from option expensing could potentially lower stock valuations.

That's infuriating to Jack Ciesielski, who writes The Analyst's Accounting Observer, a popular industry newsletter. As he pointed out in a recent entry to his Web blog: "What's most disheartening is that those who stand to benefit in the long run from clean reporting of compensation are part of the resistance to it."

In addition, Ciesielski says the Wall Street firms are doing a disservice to their clients by not giving them the slimmed-down numbers.

"Nobody is having enough guts to do the right thing and where possible, demand that fully-loaded earnings estimates are presented," he said. "Better to keep the client satisfied; tell them their clothes are perfect, even when they are naked."

The good news is that some investment firms are stepping up the pressure on their own analysts to change their ways. Among them is UBS, which issued a report in June called "Goodbye Bad Option Accounting." Starting next year, UBS' analysts will not exclude employee stock-option expense from their estimates.

The hope is that most other research outlets follow suit, and present the numbers as the accounting rules now intend them to be.

Investors all around should support this effort. It is for their own good.

-- Rachel Beck