Back in 2000, in the excitement of the bull market, hardly anyone took notice of the footnote in the year-end report from International Business Machines Corp. -- the one that disclosed that around 10 percent of its $11.5 billion in pretax profits came not from selling more computers but from investment income earned by its employee pension fund.

They're noticing now.

IBM, like many other companies, was following an accounting rule that allows it to count expected pension gains as income regardless of how its fund's investments actually perform. Even as its pension fund began to shrink with the dramatic plunge in stock prices, IBM continued to report pension gains: more than $1.4 billion in 2001 pretax earnings, for example. Now the technology giant says it may scale back its expected rate of return on pension investments, which IBM said would reduce its profit by around $700 million next year.

At the stock market's peak, 163 major U.S. corporations -- following generally accepted accounting principles -- recorded earnings from their pension plans. Last year, 50 of the largest U.S. companies recorded total pension income of some $54 billion even though their plans actually lost $36 billion, according to a recent study by actuarial firm Milliman USA.

"What these companies are doing is extremely misleading," Rep. Robert T. Matsui (D-Calif.) said in an interview. "They aren't breaking the rules, but the rules clearly need to be changed. Companies should be more honest in reporting these things."

It's not just the earnings impact that has investors and Wall Street analysts paying closer attention to corporate pension funds these days. Because the value of many funds has shrunk during the 30-month bear market, companies will soon need to pay in money to refill pension coffers. This will require them to divert cash that could otherwise have been invested in helping their businesses, and therefore the economy as a whole, to grow. IBM, for example, said last week that it now contemplates diverting $1.5 billion to its pension plan by year-end. That would help it fill an estimated $13 billion gap between its assets and the cost of the promises it made to retirees, according to a report by Wall Street's Credit Suisse First Boston Corp.

"If they end up making contributions, that's money that could have been used to fund investment and help grow the business," said David A. Zion, a CSFB accounting analyst who helped prepare the report. "You will probably also see companies changing the estimates that led to earnings some say were overly optimistic."

The typical corporate pension plan went from being 7 percent overfunded in 2000 to around 6 percent underfunded last year, according to Standard & Poor's Corp., a credit-rating firm. The CSFB report estimated the current pension shortfall at $243 billion for the companies that make up the S&P 500-stock index. Although there's no danger the companies will be unable to pay out retirement benefits in the near term, the companies will either have to put in more cash now or hope that a market recovery will help erase some of the deficit. No one knows, of course, when a recovery might come or how quickly it would restore fund values.

The list of affected companies reads like the blue-chip roster of the old economy -- for the most part, companies with lots of retirees that continue to offer traditional defined-benefit pension plans, which guarantee a certain level of retirement benefits to some 45 million Americans. They include automakers Ford Motor Co. and General Motors Corp., Boeing Co., DuPont Co. and AMR Corp., the parent company of American Airlines.

Just this week, S&P lowered its credit rating for General Motors because of concerns about its pension fund, which CSFB estimates will have a shortfall of $29 billion by year-end. The credit-rating organization also put Ford's debt rating on "watch" for a possible downgrade, citing several reasons including its pension-fund deficits. Boeing announced last week that it may take a $4 billion charge to shareholder equity in the fourth quarter to reflect its pension liabilities.

"Red flags should be raised because this can be a major liability on the corporation," said Barton M. Biggs, global investment strategist for Morgan Stanley Dean Witter & Co. "Finally dealing with it will be a bitter pill."

Cash contributions will likely have the most immediate impact. Under federal law, if a corporate pension plan is at least 90 percent funded, the extra payments required to bring it up to 100 percent can be spread over a period of up to 30 years. But if the funding level drops below 90 percent of what the actuaries say is needed, companies may be required to refill the fund within three to five years, meaning larger annual cash payments.

AMR Corp., for example, will have a pension plan that is underfunded by more than $3.3 billion by the end of 2002, according to CSFB estimates, more than four times the company's market capitalization. AMR has already paid $246 million into its fund this year, said spokeswoman Andrea Rader, who added that it should not be cause for alarm.

"Like everyone, the performance of the market has hurt us, but it's a long-term issue," Rader said. "A lot of this is just temporary market fluctuations that could recover."

In just the next year alone, CSFB estimated that the companies included in the S&P 500 index will need to invest $29 billion to their pension funds -- a healthy chunk of their cash.

The impact on corporate earnings could be just as severe, as actuaries are forced to lower their assumptions about the annual rates of return they expect the portfolios to generate in the long term.

During the long bull market, those assumed rates of return had drifted up to between 9 and 10 percent -- a number that seemed reasonable at a time when many pension-plan investments were growing by 20 percent or more each year. By raising the assumed rate of return, companies and their accountants boosted earnings because accounting rules stipulate that each dollar a company expected to earn raises net income.

The expected rates began to seem less justifiable as companies began losing money on their pension plans.

"Most economists say that [stocks] won't keep earning the same rate they were bringing in a few years ago," said John Ehrhardt, a consulting actuary with Milliman USA. "And many companies are shifting their asset allocation from around 70 percent [stocks] to around 60 percent, putting more in bonds, which earn a lower rate. You also have accountants, actuaries and shareholders looking closer at these things nowadays."

IBM said in a conference call with analysts last week that it is considering lowering its projected rate of return to between 8 percent and 8.5 percent. Earlier this year, General Electric Co. lowered its rate to 8.5 percent from 9.5 percent, and Warren Buffett dropped Berkshire Hathaway Inc.'s rate to 6.5 percent from 8.3 percent.

If each of the S&P 500 companies lowered its expected rate of return from the current average of 9.2 percent to 6.5 percent, the total cost to earnings would be $30 billion, according to CSFB.

Generally accepted accounting principles leave companies and their auditors leeway in determining which assumption they want to use about future rates of return, and how quickly they need to respond to gaps between actual and expected earnings. The rules are supposed to shield companies from having to tweak their funds with every hiccup in the stock market.

"The underlying theory is that you'll get both gains and losses and they'll bounce around, but you won't have to keep making adjustments to the plan every time," said Ehrhardt, the actuary.

But those rules have led to what some critics charge are misleading results.

General Motors, for example, reported net income of $601 million in 2001, based in part on an expected rate of return on its pension fund of 10 percent, according to CSFB. But during the same year, GM's pension portfolio actually lost 5 percent in value. If the company had reported the actual decline as a loss on its income statement, the $601 million profit would have turned into a $7 billion loss, CSFB said. GM is considering lowering its expected rate of return by the end of the year, spokesman Jerry Dubrowski said.

In addition, CSFB said six other companies -- Boeing, IBM, Verizon Communications Inc., Lucent Technologies Inc., General Electric and SBC Communications Inc. -- would also each have reported an earnings drop of more than $5 billion, if actual portfolio losses were reported rather than expected long-term gains.

If the market recovers and pension-fund values are restored, these discrepancies will look less glaring. But critics aren't convinced.

Matsui has asked the Securities and Exchange Commission and the Financial Accounting Standards Board to investigate the issue and consider changes in the accounting rules that would give investors and pensioners a more accurate picture of a plan's underfunding and its impact on the company's present and future earnings. "If the regulators refuse to act, we might have to look into other options," said Matsui.