Instead of attacking Jeffrey Immelt for poor management, maybe Jack Welch should be counting his lucky stars. Or, rather, acknowledging his star accountants. During the fabled CEO’s two-decade tenure at General Electric, the accounting profession stood at the ready to assist with smoothing and boosting results. In these post-Enron days, they have become the officious referees, demanding ever more elaborate disclosures in the name of “transparency” and at the same time blocking the Hail Marys that used to be the mainstay of meeting Wall Street expectations. My question is, are investors better off?

Do we really believe that during Mr. Welch’s tenure at GE the law of averages was revoked and the company was never buffeted by an economic headwind? Nonsense.

When Mr. Welch ran GE, he had at his disposal any number of accounting tricks that, legend has it, he liberally employed to produce quarter after quarter of smooth-as-glass results. As GE Capital grew, ultimately providing 40% of total company income, it became an endless source of discretionary profits and losses as the unit bought and sold dozens of businesses each year.

For sure, GE occasionally stumbled. Consider its disastrous 1986 acquisition of Kidder, Peabody & Co. Employee defections and various scandals eventually led GE to sell the company to the PaineWebber group in 1994 for a small premium over liquid assets.

The sale occasioned a $350 million non-cash write-off at GE, an unusually embarrassing slipup. In Mr. Welch’s book, “Straight from the Gut,” he describes the management huddle that took place: “The response of our business leaders … was typical of the GE culture … many immediately offered to pitch in to cover the Kidder gap. Some thought they could find an extra $10 million, $20 million, and even $30 million from their businesses to offset the surprise.” Hmmmm.

Was the Kidder disaster an isolated event? Only GE insiders know for sure. What we do know is that in today’s world, a CEO has a much more limited toolbox to “fix” problems like the Kidder charge.

For instance, one of management’s most handy tools has always been the ability to take huge and therapeutic write-offs. I heard the cast of CNBC’s “Squawk Box” talk the other day of how they hoped that a particular company had taken a “kitchen sink” writeoff. They should know that it’s no longer possible. The accountants, essentially, forbid you to write down or write off any asset without solid proof of impairment and a detailed plan for disposal.

Especially for an incoming CEO, the opportunity to write down past investments or to anticipate losses in underperforming operations was heaven-sent. When Stanley O’Neal took over as CEO of Merrill Lynch in 2002, he quickly took a $2.2 billion “restructuring” hit to earnings. In the 2002 annual report, mention is made of some of that reserve possibly flowing back into income as “estimates” of the business reorganization are modified. Such charges in the past often set the stage for two or three years of positive comparisons, an attractive option for a new manager.

An accounting change that’s much discussed currently is FAS 157, which took effect last November, and which is required for this year’s financial statements. This ruling from the Financial Accounting Standards Board requires public companies, including banks and investment banks, to “mark to market” certain financial instruments, adding to their losses in today’s turbulent markets. Never mind the impossibility of establishing prices on unmarketable assets in the midst of chaotic markets. Never mind that the charges taken today will likely be reversed in the future, further distancing investors from any real understanding of a given company’s “core” earnings power.

A professor of accounting at the Stern School of Business at New York University, Stephen Ryan, views FAS 157 more positively. “Disclosure of fair value is unambiguously good,” he says. “The only way to help informed investors is to provide more disclosures. You have to look at more than one number on an income statement to understand operating income.”

Mr. Ryan suggests that FAS 157 and other rulings that have cluttered up financial statements are a natural outgrowth of the changing nature of the financial markets: “Transactions are more complex, with derivatives and risk management products that didn’t exist 20 or 30 years ago.” He concedes, though, that “the typical investor may not understand the new statements.”

In general, I would argue that accounting practices today have become more auditor-friendly and less helpful to investors and to managements trying to inform those investors.

I recently read Wachovia’s first-quarter results. I should be writing about a company that has more recently reported earnings, but it’s a little like picking up “War and Peace” and missing the next few days’ newspapers. The company’s quarter required 37 pages of small-type explanation. Really! Remember when quarterly information was mailed out on a fold-over card?

I don’t believe investors have benefited from the increased complexity of today’s accounting presentation. Others, of course, disagree. Tom Robinson, from the Institute of Chartered Financial Analysts, says he thinks that the additional required disclosures have provided analysts with useful information. He agrees, however, that the gains may not serve everyone.

“I used to teach graduate students a 45-hour course on how to read financial statements,” Mr. Robinson says. “The average investor hasn’t had that training. It’s information overload.”

The bottom line? Investors can perhaps feel more comfortable that financial statements today are accurate. It’s just unfortunate that they don’t understand them.

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