Never any surprises with Goldman Sachs (NYSE:GS). No matter what gets thrown its way, it finds a way to generate ridiculously huge numbers.

Even if they aren't, oh ... what's the word ... true?                  

OK, Goldman's fourth-quarter $4.95 billion, $8.20 per share profit that blew expectations away was legitimate. No rules were broken, as far as I know. But digging deeper shows just how important it is to take these headline numbers with a grain of salt.

Breaking out major segments' revenue for the quarter, here's what you get:


Q4 2009

Q3 2009

Investment Banking

$1.6 billion

$899 million

Trading/Principal Investments

$6.4 billion

$10 billion

Asset Management

$1.6 billion

$1.4 billion

Total Net Revenue

$9.6 billion

$12.4 billion

That looks pretty bad. Revenue tumbled, primarily in the trading segment. JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) showed the same trend when they reported earnings. Same with Bank of America's (NYSE:BAC) results yesterday, when I wrote, "Goldman reports earnings tomorrow morning. If the same trend in capital markets continues, it could be a very, very interesting report."

And it is. The two largest divisions of trading and principal investments fell dramatically:


Q4 2009 Revenue

Q3 2009 Revenue

Fixed Income, Currency, Commodities

$4.0 billion

$6.0 billion

Equities Trading

$1.0 billion

$1.8 billion

But if revenue fell so much, why was net income so strong?

You've probably heard by now; every news agency picked up on it: Goldman reduced its compensation expense last quarter, leaving more money for shareholders.

What hasn't been discussed enough is the extent of which this took place:

Compensation and Benefits Expense

Q4 2009

Q3 2009

Q2 2009

Q1 2009

($519 million)

5.4 billion

6.6 billion

4.2 billion

You're seeing that right: Goldman computed a negative compensation expense for the quarter. That's the equivalent of paying its employees nothing. Now, of course, workers will still get paid for the year, since year-end bonuses accrued heavily over the previous three quarters.

But this "payless" quarter is obviously a one-time deal. If you take a normalized compensation expense -- heck, take half a normalized compensation expense -- it's safe to say net income would have been reduced by $2-$3 billion. When we're talking about a $4.95 billion profit, that's sort of ... kind of ... completely ... important.

What do you think? Share your thoughts in the comment section below.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool has a disclosure policy.