May 4, 2019
By Arjun Reddy
Berkshire Hathaway (click here) reported first-quarter earnings of $21.7 billion on Saturday, a stark contrast to last year's first-quarter loss of $1.1 billion. The wide swing in net income is attributable to a new accounting rule which requires companies to now include changes in the market value of investment portfolios within earnings. Swings in derivatives values are also included....
Generally accepted accounting principles (click here) are a set of 10 accounting standards and guidelines created and maintained by the U.S. Financial Accounting Standards Board. Since the FASB established GAAP guidelines in 1973, the U.S. Securities and Exchange Commission and the American Institute of Certified Public Accountants have adopted GAAP as official standards of financial accounting. Both require all public and some privately held businesses, as well as external auditors, to adhere to GAAP standards in all aspects of financial reporting and auditing. The overall objective is to create consistency in financial reporting and financial statements and ensure financial statements contain reliable, concise, and understandable information.
...The company reported operating earnings, which excludes these elements, of $5.6 billion, a 5% gain from a year earlier. Earnings from Berkshire's investment in Kraft Heinz were excluded as the company as not yet reported first quarter results. Buffett recently criticized his investment in Kraft Heinz, saying he "overpaid" for the 27% stake.
The legendary investor and Berkshire Hathaway CEO Warren Buffett has criticized the new rule, saying that the new it would "severely distort" the company's future quarterly results....
