A revised method of accounting, in use for the first time in 1979 annual reports, reveals a radically altered, ominous view of the health of many major U.S. corporations.

For the first time, investors and the public at large are being given a glimpse of the toll inflation has taken on corporations.

Inflation adjusted figures are sweeping aside historical figures that show record sales and profits, sometimes reveling instead marginal earners or losers, particularly in the nation's large manufacturing industries and utilities.

Viewed through inflation-adjusted figures in the back of annual reports, what once appeared to be corporate robustness may now seem like alarming pallor. What seemed to be reasonable dividends may now look like unjustifiable luxuries, draining away the capital that industries need to survive.

"It's really very sobering, and we're somewhat overdue getting to it," Securities and Exchange Commission chairman Harold M. Williams said of the bleak new picture of the economy.

"Accounting has just not told the story. We're running down our wealth generating machinery without really knowing it," said Michael Alexander, director of research for the Financial Accounting Standards Board, which developed the format for inflation accounting now being used by the nation's major public corporations.

"If you look down the line, you really see a lot of Chryslers in the manufacturing industries," he said. Generally, high technology companies where costs are being reduced as the product improves come off best in inflation accounting.

"What the figures are telling us in the aggregate is that we are not generating and restaining the corporate profits necessary to keep our plants modern, to invest in productivity or new plants and to create the jobs and the new products that really underlie our standard of living," said Williams.

"What the figures are telling us in the aggregate is that we are not generating and retaining the corporate profits necessary to keep our plants modern, to invest in productivity or new plants and to create the jobs and the new products that really underlie our standard of living," said Williams.

What the figures tell about Ford Motor Company, for instance, is that once inflation is taken into account, income from containing operations is only about a fifth of what it appears to be using historical accounting methods that have been required.

Those figures show income of $1.169 billion for 1979. But when those figures are adjusted to take into account the general effects of inflation, the figure is reduced to $375 million. When the figures are adjusted specifically to take into account inflation in the costs of resources Ford must buy, the figure drops to $213 million.

"All things considered, I would say we had a pretty good year," Ford chief executive officer Philip Caldwell said in Ford's annual report. "Earnings of $9.75 a share -- $1.2 billion -- were the third highest in the company's history," he said.

But just as many individuals have come to realize that apparently higher salaries have been eroded by infaltion to the point that purchasing power has been lost, observers are getting indications that "record" corporate sales and profits have also been eroded.

For instance, the $9.75 per share earnings, adjusted for general inflation are $3.13. Adjusted specifically to reflect Ford's costs, they are $1.78. In contrast, Ford paid a cash dividend of $3.90. This year may be even bleaker. Some estimates suggest that Ford will be lucky to break even on income using conventional accounting.

"In some instances, the figures will point out that, in effect, companies are paying dividends out of capital, not earnings, and in reality the corporation is in a state of liquidation," said Williams.

Although Williams, analysts from the FASB and others maintain the new, inflation adjusted data is reasonably accurate and a good indicator of what is happening in the economy, others are less certain.

Historical accounting methods provided an incomplete picture because they based depreciation, or the cost to the company of using up its inventory and eqiupment, on prices paid when assets were acquired. Inflation accounting looks at the cost of replacing those assets right now.

Critics note that a weakness in the new method is that it assumes the complete replacement of productive capacity at current prices and assumes that selling prices will be constant.

Clarence Staubs, assistant chief accountant at the SEC, also cautions that the figures must be taken with a grain of salt because in many cases they provide a "worst case" analysis of the company's fortunes. "It's really a very conservative view," he noted.

The new methods were required by an October 1979 ruling by the FASB, which make the rules governing preparation of financial reports. Public companies with inventories and property of more than $125 million on $1 billion in assets are required to discuss their income for the fiscal year ending on or after Dec. 25, 1979 using the new method.

Inflation accounting techniques are still somewhat experimental in nature and the format used from company to company may vary.

Basically the FASB standard requires adjusted information about costs and expenses, net income, earnings per share and unrealized gains from money owed or losses from monetary assets held. This year, besides reporting figures using conventional methods, companies must also report what the figures look like adjusted to reflect changes in the consumer price index (constant dollars.)

For fiscal 1980, companies will also be required to disclose information on a current-cost basis that reflects specific price changes on the items a company buys.

In some cases, reductions in income produced by inflation accounting are offset by the amount of money made through holding debt. Just as individuals with large mortgages make paper profits in a time of inflation by being able to repay debt in cheaper dollars, so do corporations.

On the other hand, a gain from holding huge debts may be a sign of ill health rather than good health, according to analysts. The most heavily mortgaged companies may not be the soundest.

Some corporations have bounded into the ear of inflation accounting with more enthusiasm than others. Even though it may make good sense in the long run, corporate managers governed by short-run considerations such as annual bonuses and pleasing their directors and stockholders may prefer accounting techniques that give a rosier view of operations. Also, the change in methods is a major departure after years of use conventional methods. c

General Electric has done one of the most complete and enthusiastic jobs of incorporating the new data in its annual report, even referring to it on the cover.

"Severe inflation distorts the financial reporting of business, giving the illusion of soaring profits when in fact, real profits -- profits stripped of their inflationary increments -- have failed to keep pace with the rising costs of replacing buildings, machinery and equipment; maintaining inventories; and supporting research and development," according to GE's annual report. "Your management welcomes the initiative taken in 1979 by the Financial Accounting Standards Board." chairman Reginald H. Jones said.

GE has gone even further, setting up seminars for top management on coping with inflation.Nearly 1,000 mangers have already been through the course, and another 1,000 mangers at the next level are now scheduled for it, said Terrence E. McClary, vice president of corporate financial administration.

"We do a good deal of measuring our results using inflation adjusted data," he said. "On our requests for plant appropriations -- if we're undertaking to expand a plant or enter new business -- we ask our managers to present data two ways," he said.

Using a combination of conventional data and inflation adjusted data and forecasts, they decide "what type of business we want to allocate resources to," he said. Although GE has adjusted some data on the basis of inflation for several years, it now gets more emphasis, he said.

Results are influencing how GE grows, suggesting getting into service-oriented lines of business, such as information services, and out of capital-intensive and low-margin businesses. For instance, the company has gotten out of the food service business and a wire and cable manufacturing business in Canada.

One reason for the corporate embrace of inflation accounting is because it can be used as an argument for lower corporate taxes. If corporations are in fact riding out losses instead of reaping obscene profits, then their taxes should be lower, corporate officials argue.

"Whether a change in tax law ever comes to pass or not, I think we have to be realistic about understanding what corporate earnings are," said Williams. "We don't understand what role profits play in the economy and society. Rather than being obscene, they are pretty helpful." Inflation accounting will help foster that understanding, he said.