In 1972 advertised HP ratings changed from
Gross HP to
Net HP. Gross HP ratings were very nebulous and manufacturers were known to list whatever they wanted.
Before 1972, most American engines were rated under the methodology laid out in Society of American Engineers (SAE) standards J245 and J1995, which calculated the output of a 'bare' engine on a test stand with no accessories, free-flowing exhaust headers (no mufflers), and optimal ignition timing,with a correction factor for standard atmospheric conditions.
Generally, subtracting 25% is good rule of thumb for estimating Net HP from Gross HP. Larger engines tended have more inflated gross HP numbers than smaller engines. To keep it simple, I mentally subtract 100 HP when talking about pre-1972 ratings. When I hear "425 HP big block chevy" I think "325 HP big block chevy".
This website has some really interesting info.
Understanding Gross vs. Net Horsepower Ratings
The result of the new rating system was a dramatic drop in
advertised power. The rated output of
Cadillac Eldorado's mammoth 500 cu. in. (8.2L) V-8, for instance, dropped from 400 gross horsepower (298 kW) in 1970 to 360 gross horsepower (269 kW) in 1971, a drop of about 10%. The engine was basically unchanged for 1971, but
the switch to SAE net ratings reduced the rated output to only 235 net horsepower (175 kW). (Although GM did not quote a net horsepower rating for the higher-compression 1970 engine, it was probably 275-285 hp (205-213 kW).) In some cases, actual output did drop during this period, mostly due to emissions-related changes, but the reduction in as-installed power was generally far less drastic than the numbers suggested.
This thread on a GM forum has some GREAT data comparing the Gross HP & Net HP ratings for 1971 engines.
Net and gross ratings for 1971 GM + Mopar engines
The SAE standard changed again in 2005 and is the reason many engines were rated lower HP in 2006.