The accounting literature has extensively discussed and tested income smoothing [2, 5, 7, 8, 9, 10, 11, 14, 15, 171. However, the role of extraordinary items in the "management" of income was not specifically and separately' tested for. The latter is the focus of this paper. For the purpose of our study we operationally define smoothing as the observed dampening of fluctuations about some level of income assumed to be normal for the firm. The object of smoothing is assumed to be the stream of ordinary income (before extraordinary items) per share.' From observing the stream of net income, and that of ordinary income before extraordinary items, we infer whether firms' managements behave as if they use extraordinary items either alone or incrementally in order to dampen the fluctuations of ordinary income.