Author Topic: Buffett/Berkshire - general news  (Read 466953 times)

flesh

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Re: Buffett/Berkshire - general news
« Reply #350 on: November 21, 2016, 03:23:31 PM »
Berkshire filed a standard correspondence note back and forth with the SEC today - no big deal, but some might find management's summary of Precision Castparts' business and the oligopoly markets it sells into interesting.  I did.  Starts on page five on this section of correspondence "As background, PCC..."  ->

https://www.sec.gov/Archives/edgar/data/1067983/000119312516732679/filename1.htm

Sweet, thanks for posting! Can anyone articulate the relevant effects on the financial statements in which brk would benefit from having these intagibles subjected to impairment opposed to amortization?


longinvestor

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Re: Buffett/Berkshire - general news
« Reply #351 on: November 21, 2016, 03:42:34 PM »
Berkshire filed a standard correspondence note back and forth with the SEC today - no big deal, but some might find management's summary of Precision Castparts' business and the oligopoly markets it sells into interesting.  I did.  Starts on page five on this section of correspondence "As background, PCC..."  ->

https://www.sec.gov/Archives/edgar/data/1067983/000119312516732679/filename1.htm

Sweet, thanks for posting! Can anyone articulate the relevant effects on the financial statements in which brk would benefit from having these intangibles subjected to impairment opposed to amortization?


Although WEB does not specifically address impairment versus amortization as it relates to intangibles, here is something on the subject and it's potential to boost earnings 5 years or so down the road. The below is from the 2014 letter.


Our income and expense data conforming to GAAP is on page 49. In contrast, the operating expense
figures above are non-GAAP and exclude some purchase-accounting items (primarily the amortization of certain
intangible assets). We present the data in this manner because Charlie and I believe the adjusted numbers more
accurately reflect the true economic expenses and profits of the businesses aggregated in the table than do GAAP
figures.
I won’t explain all of the adjustments – some are tiny and arcane – but serious investors should understand
the disparate nature of intangible assets. Some truly deplete over time, while others in no way lose value. For
software, as a big example, amortization charges are very real expenses. The concept of making charges against
other intangibles, such as the amortization of customer relationships, however, arises through purchase-accounting
rules and clearly does not reflect reality. GAAP accounting draws no distinction between the two types of charges.
Both, that is, are recorded as expenses when earnings are calculated – even though from an investor’s viewpoint
they could not be more different.
14
In the GAAP-compliant figures we show on page 49, amortization charges of $1.15 billion have been
deducted as expenses. We would call about 20% of these “real,” the rest not. The “non-real” charges, once nonexistent
at Berkshire, have become significant because of the many acquisitions we have made. Non-real
amortization charges will almost certainly rise further as we acquire more companies.
The GAAP-compliant table on page 67 gives you the current status of our intangible assets. We now have
$7.4 billion left to amortize, of which $4.1 billion will be charged over the next five years. Eventually, of course,
every dollar of non-real costs becomes entirely charged off. When that happens, reported earnings increase even if
true earnings are flat.
Depreciation charges, we want to emphasize, are different: Every dime of depreciation expense we report
is a real cost. That’s true, moreover, at most other companies. When CEOs tout EBITDA as a valuation guide, wire
them up for a polygraph test.
Our public reports of earnings will, of course, continue to conform to GAAP. To embrace reality, however,
you should remember to add back most of the amortization charges we report

KinAlberta

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Re: Buffett/Berkshire - general news
« Reply #352 on: November 22, 2016, 11:27:51 AM »
Not sure if this has been posted anywhere yet.

A Buffett interview

Buffett after Trump win: '100%' optimistic about America
CNNMoney
 

https://www.youtube.com/watch?v=auukuYuizq4


Oops - I see it warranted it's own thread here:
http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/buffett-interview-on-cnn-money-11-nov-2016/


flesh

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Re: Buffett/Berkshire - general news
« Reply #353 on: November 23, 2016, 09:39:57 AM »
Berkshire filed a standard correspondence note back and forth with the SEC today - no big deal, but some might find management's summary of Precision Castparts' business and the oligopoly markets it sells into interesting.  I did.  Starts on page five on this section of correspondence "As background, PCC..."  ->

https://www.sec.gov/Archives/edgar/data/1067983/000119312516732679/filename1.htm

Sweet, thanks for posting! Can anyone articulate the relevant effects on the financial statements in which brk would benefit from having these intangibles subjected to impairment opposed to amortization?


Although WEB does not specifically address impairment versus amortization as it relates to intangibles, here is something on the subject and it's potential to boost earnings 5 years or so down the road. The below is from the 2014 letter.


Our income and expense data conforming to GAAP is on page 49. In contrast, the operating expense
figures above are non-GAAP and exclude some purchase-accounting items (primarily the amortization of certain
intangible assets). We present the data in this manner because Charlie and I believe the adjusted numbers more
accurately reflect the true economic expenses and profits of the businesses aggregated in the table than do GAAP
figures.
I won’t explain all of the adjustments – some are tiny and arcane – but serious investors should understand
the disparate nature of intangible assets. Some truly deplete over time, while others in no way lose value. For
software, as a big example, amortization charges are very real expenses. The concept of making charges against
other intangibles, such as the amortization of customer relationships, however, arises through purchase-accounting
rules and clearly does not reflect reality. GAAP accounting draws no distinction between the two types of charges.
Both, that is, are recorded as expenses when earnings are calculated – even though from an investor’s viewpoint
they could not be more different.
14
In the GAAP-compliant figures we show on page 49, amortization charges of $1.15 billion have been
deducted as expenses. We would call about 20% of these “real,” the rest not. The “non-real” charges, once nonexistent
at Berkshire, have become significant because of the many acquisitions we have made. Non-real
amortization charges will almost certainly rise further as we acquire more companies.
The GAAP-compliant table on page 67 gives you the current status of our intangible assets. We now have
$7.4 billion left to amortize, of which $4.1 billion will be charged over the next five years. Eventually, of course,
every dollar of non-real costs becomes entirely charged off. When that happens, reported earnings increase even if
true earnings are flat.
Depreciation charges, we want to emphasize, are different: Every dime of depreciation expense we report
is a real cost. That’s true, moreover, at most other companies. When CEOs tout EBITDA as a valuation guide, wire
them up for a polygraph test.
Our public reports of earnings will, of course, continue to conform to GAAP. To embrace reality, however,
you should remember to add back most of the amortization charges we report


I'm trying to think through the benefit or having pcp subject to impairment vs amortization. What motivated brk to do this? Shield taxes and maintain book value over time? Anything else I"m missing?

 

John Hjorth

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Re: Buffett/Berkshire - general news
« Reply #354 on: November 23, 2016, 10:30:32 AM »
flesh,

It's an accounting decision - related to the consolidation of PCP in the group financials for BRK at the first time - based on the assessed economics inherent in the aquisition, and based on the price paid for the company, compared to the book value of the company at the time of the aquisition.

It has nothing to do with taxes in BRK group financials.
« Last Edit: November 23, 2016, 10:35:36 AM by John Hjorth »
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flesh

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Re: Buffett/Berkshire - general news
« Reply #355 on: November 24, 2016, 09:50:52 AM »
Sure, I understood that part, probably reading into it too much. Thanks.

gfp

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Re: Buffett/Berkshire - general news
« Reply #356 on: November 29, 2016, 06:47:22 AM »
No big news but it's always nice to see the borrowing rates that Berkshire Energy subs get when they borrow post-acquisition.  One the the easiest levers to pull on these debt-heavy industries is borrowing under the BRK halo despite BRK not guaranteeing the debt (outside of BRK Finance Corp / Clayton, etc).

30 year, 3.7%

http://www.marketwired.com/press-release/altalink-lp-to-issue-450-million-in-medium-term-notes-2179086.htm

Munger_Disciple

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Dynamic

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gfp

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Re: Buffett/Berkshire - general news
« Reply #359 on: December 05, 2016, 05:02:56 AM »
Warren resurfaced for another short interview with Fortune - only his second that I know of since the election

http://fortune.com/2016/12/05/warren-buffett-donald-trump-election/

Talking about the returns of Mid-American / BHE he took issue with the interviewer's characterization of BHE as producing a low return for BRK:
"But I think the return figures that you have are wrong. We paid $35.05 a share for the utility [in 2000]. And this year it’ll earn something around $30 a share, after tax."

edit:
In other news, BHE Renewables has just purchased Alamo 6 Solar San Antonio for $385 million-
http://renewables.seenews.com/news/to-the-point-oci-selling-us-unit-for-usd-385m-549362
https://www.hubs.biz/power/explore/2016/10/110-mw-oci-alamo-6-solar-project-in-texas-to-go-commercial-by-dec-31
« Last Edit: December 05, 2016, 05:49:07 AM by globalfinancepartners »