Both - the ratings system changed and Ford reduced the HP as tuning changed during the engine modifications throughout the 1970's. Specifically, what year are you asking about?
120hp is SAE gross hp, measured at the flywheel and just the engine and no accessories. the 86hp is the SAE net hp, measured at the flywheel with certain accessories. same engine and output, just a differents method of measure. converting everything to german DIN hp results in lower numbers, measured at the rear wheels even less.
if you have a chiltons manual for the maverick/comet it show all the stats for horsepower and stuff like that.