Here’s an interesting observation from the WSJ in relation to the operating earnings publicised by Wall Street and GAAP earnings that are reported officially.

In the second-quarter earnings season, so-called operating earnings, which exclude one-time items such as credit-market write-downs, nearly matched earnings conforming to Generally Accepted Accounting Principles, or GAAP, which get reported to the government but get less attention on earnings day.

Companies in the Standard & Poor’s 500-stock index earned an estimated $13.81 a share in the quarter on an operating basis, compared with $13.51 in GAAP earnings.

That is the closest those two earnings measures have been since the first quarter of 2000. The gap widens in recessions and did so significantly in the latest downturn. That they nearly matched last quarter offers another sign of market stability.

Looking at the long term trend, the paper notes that the gap between the two figures has been growing consistently over the last decade or so – meaning accountants are getting more creative or one time losses have just been growing more quickly than one time gains, hmmm.

Investors, It Pays to Mind the GAAP Gaps [WSJ]