
	Trending ▼ ICSE CBSE 10th ISC CBSE 12th CTET GATE UGC NET Vestibulares ResFinder

Buffett Shareholder Letters - 1993 Letter

20 pages, 21 questions, 0 questions with responses, 0 total responses,

	Buffett Letters	+Fave Message
	Profile Timeline Uploads

Home > buffett_letters >

Formatting page ...

BERKSHIRE HATHAWAY INC. To the Shareholders of Berkshire Hathaway Inc.: Our per-share book value increased 14.3% during 1993. Over the last 29 years (that is, since present management took over) book value has grown from $19 to $8,854, or at a rate of 23.3% compounded annually. During the year, Berkshire's net worth increased by $1.5 billion, a figure affected by two negative and two positive nonoperating items. For the sake of completeness, I'll explain them here. If you aren't thrilled by accounting, however, feel free to fast-forward through this discussion: 1. The first negative was produced by a change in Generally Accepted Accounting Principles (GAAP) having to do with the taxes we accrue against unrealized appreciation in the securities we carry at market value. The old rule said that the tax rate used should be the one in effect when the appreciation took place. Therefore, at the end of 1992, we were using a rate of 34% on the $6.4 billion of gains generated after 1986 and 28% on the $1.2 billion of gains generated before that. The new rule stipulates that the current tax rate should be applied to all gains. The rate in the first quarter of 1993, when this rule went into effect, was 34%. Applying that rate to our pre-1987 gains reduced net worth by $70 million. 2. The second negative, related to the first, came about because the corporate tax rate was raised in the third quarter of 1993 to 35%. This change required us to make an additional charge of 1% against all of our unrealized gains, and that charge penalized net worth by $75 million. Oddly, GAAP required both this charge and the one described above to be deducted from the earnings we report, even though the unrealized appreciation that gave rise to the charges was never included in earnings, but rather was credited directly to net worth. 3. Another 1993 change in GAAP affects the value at which we carry the securities that we own. In recent years, both the common stocks and certain common-equivalent securities held by our insurance companies have been valued at market, whereas equities held by our noninsurance subsidiaries or by the parent company were carried at their aggregate cost or market, whichever was lower. Now GAAP says that all common stocks should be carried at market, a rule we began following in the fourth quarter of 1993. This change produced a gain in Berkshire's reported net worth of about $172 million. 4. Finally, we issued some stock last year. In a transaction described in last year's Annual Report, we issued 3,944 shares in early January, 1993 upon the conversion of $46 million convertible debentures that we had

Related ResPapers
Buffett Shareholder Letters - 2012 Letter
by buffett_letters

Buffett Shareholder Letters - 1988 Letter
by buffett_letters

Buffett Shareholder Letters - 2005 Letter
by buffett_letters

Buffett Shareholder Letters - 2011 Letter
by buffett_letters

Formatting page ...

Tags : Finance, investment help, value investing, stock market, s&p 500, dow jones

buffett_letters chat

Horizontal lines at:
Guest Horizontal lines at:
AutoRM Data:
Box geometries: