NEW YORK (CNN/Money) - Suddenly, the stock market seems so much more expensive.

Thanks to the whopping $45.5 billion charge AOL Time Warner (AOL: Research, Estimates) said it was taking when it reported results Wednesday, earnings for companies in the S&P 500 in the fourth quarter of 2002 will likely come in at their lowest level in a decade.

According to Standard & Poor's, AOL's big loss looks to cut S&P 500 as-reported earnings -- earnings according to generally accepted accounted principles -- by 59 percent. Without the charge from AOL (the parent of CNN/Money), the index would be trading at 25.6 times estimated 2002 earnings. With it, that P/E jumps to 30.

By some lights what AOL's big loss does to earnings doesn't matter. Most of the charge went toward writing down the value of AOL's online unit, America Online. Because the loss itself doesn't alter the company's ability to generate cash, most Wall Street analysts judge AOL by its operating earnings -- its results before any "one-time" charges.

Similarly, many Wall Streeters, in analyzing the market, will look at S&P 500 sans one-time charges. It's a much prettier picture when you add all of AOL's 2002 charges (there was another big one in the first quarter), and all the one-time charges from other companies, back into results. Do that, and the S&P's P/E is just 17.7.

"But the bottom line is the charge existed," said Howard Silverblatt, editor of quantitative services at Standard & Poor's. "It's there."

Well yeah, the AOL charge is there, but it seems a little pointless that because of it you would consider the 500 companies in the S&P as more expensive. And how are you supposed to value AOL, which for 2002 posted losses that came in at nearly double its present market capitalization?

The problem with using GAAP earnings is that they often reflect past mistakes instead of present ones. Many companies continued to hire, build new plants, raise inventory levels and make bad acquisitions through much of 2000, not realizing that what looked like a temporary fall-off in business was really the beginning of something much more serious. In 2001, and again in 2002, they took big charges to account for their past mistakes and earnings under GAAP tumbled sharply.

"GAAP is the most honest measure of earnings," said Brett Gallagher, head of U.S. equities at Julius Baer, "but the main problem with it is the cyclicality of it."

To deal with this, some analysts turn to a valuation method popularized by Yale economist Robert Shiller. Shiller looks at GAAP earnings over the past 10 years, which means that all the various charges companies have taken are spread over time. Currently, the S&P trades at 24.9 time its average annual earnings for the past 10 years. Don't include AOL's big fourth-quarter charge, and that P/E slumps only incrementally, to 24.5. Seems like a far more satisfactory way of valuing the market.

The downside? Under this method the S&P's average P/E since 1960 -- an average that includes the excessive valuations of the late 1990s -- is 21.4. So even after three years of losses, the market still looks expensive.