Counting Profits Editor The Wall Street Journal: 12/15/48 an accountant, I wish to take excep- tion to the newspaper heading and discus- sion of Dr. Sumner H. Slichter's recent testimony before the House-Senate economic subcommittee investigating corporate prof- its, which was published in your paper under date of December 7. I dislike to think that Dr. Slichter could testify in the manner reported and even feel generously enough toward him to think that the newspaper account was poor reporting. In the first place, Dr. Slichter in talking about "real-profits" is speaking in economic terms and not those customarily used in the business world, at least by accountants. .Net profit is not the balance after deducting amounts "available to pay dividends, ex- pand plant, raise wages, or reduce prices. Accountants record historical facts and not imaginary amounts to reflect some possible happening in the future, except provisions for measurable reserves to cover anticipated losses. Dr. Slichter is reported to have said that "most corporations still insist on counting a rise in the cost of replacing inventories as profits, and most corporations count the rise in the cost of replacing plant and equipment as profits." This is the most weasel-worded, deceptive explanation of the present problem that L have heard and sounds like the tes- timony of an advocate and not that of an objective witness. My reasons for this state ment are as follows: He ignores entirely the fact that many corporations follow the "lifo" (last-in, first-out) method of accounting for in- ventories, many use the base-stock method, and many set up estimated reserves for probable losses. 2. He ignores the fact that inventories turn over in many cases time after time and that any balance sheet losses as of a given date would be for only one inventory, which can be adequately and properly provided for under pres- ent accounting rules. 3. He ignores the fact that much prop- erty having higher replacement costs will not be replaced for many years in the future and possibly at dates when the price levels will be lower. 4. He ignores the fact that when property is replaced, in most cases, a business does not replace the same piece of equipment but one often much more modern and efficient, with latest labor- saving features; also, that money bor- rowed today is at interest rates much lower than those available when the replaced equipment was installed. As an accountant, I would like to assign the task to Dr. Slichter of valuing property and inventories from time to time under his principles, in the fluctuating amounts that occur, any of which valuations would be sub- ject to dispute, and to give him the task, particularly, of handling the accounting problem when price levels are below those of today. When that time comes he would undoubtedly change his tune to the expedi- ency of the time. E. ARNOLD SUNSTROM Knoxville, Tenn.