They would be far less tempted to manipulate earnings.

This discretion, however, increases the possibility for firms to make both honest mistakes, such as the accidental use of a wrong useful life, or to manipulate earnings.

Some executives sought to manipulate quarterly earnings to cash out their options at a favorable price, with little regard for the long-term welfare of their company.

But the primary mechanism to manipulate earnings, the complaint says, were through accounting changes known as "top-level adjustments."

But in practice, law enforcement officials and regulators say, users have deployed these same products to manipulate corporate earnings or mask underlying financial woes.

That, he said, would reduce the possible gain from manipulating earnings in any one year.

Regulators have indeed been interested in such insurance products and whether they are being used to manipulate earnings.

But they are generally examining whether corporations alter projections for health care costs, pension plan returns and other factors as a way of manipulating earnings.

"At the very least, options tended to promote a short-term focus," she said, "and at worst, they promoted fraudulent activity to manipulate earnings."

That created the potential for manipulating earnings.