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NIPA Corporate Profits and Reported Earnings: A Comparison and Measurement Issues

Author

Listed:
  • Charles Ian Mead
  • Brent R. Moulton
  • Kenneth Petrick

    (Bureau of Economic Analysis)

Abstract

The users of the national income and product accounts (NIPAs) often compare the growth rates of NIPA profit measures with those of other publicly available measures of reported earnings, such as Standard & Poor's 500 earnings. Differences between the NIPA profit measures and the other reported earnings measures reflect differences in purpose, definitions, and methodologies. Reported earnings are used by the Bureau of Economic Analysis, however, in preparing the quarterly estimates of profits, based on the extrapolation of the tax-accounting measures published by the Internal Revenue Service. In recent years there have been large revisions to NIPA corporate profits when tax-return-based measures have become available. Differences between financial accounting and tax accounting in the treatment of employee stock options have contributed to the revisions. This paper explores these differences and examines possible improvements to the methods used for extrapolating NIPA corporate profits estimates that would incorporate more current information on employee stock options.

Suggested Citation

  • Charles Ian Mead & Brent R. Moulton & Kenneth Petrick, 2004. "NIPA Corporate Profits and Reported Earnings: A Comparison and Measurement Issues," BEA Papers 0036, Bureau of Economic Analysis.
  • Handle: RePEc:bea:papers:0036
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    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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