Warren Buffett's company is defending its decision not to write down the value of its investments in Kraft Foods, US Bancorp and other stocks even though they were worth nearly $1.9 billion less at the end of 2009 than what Berkshire Hathaway Inc. paid for them.
On Monday, Berkshire disclosed several letters it exchanged with the Securities and Exchange Commission between April and September about its 2009 annual report. The SEC asked why Berkshire hadn't adjusted the value of its stock holdings to reflect losses that had lasted more than 12 months.
Berkshire officials said they're confident Kraft and US Bancorp stock will rebound within a couple years, and Berkshire is willing to hold the stocks long enough for them to recover.
Seriously?
Can we all use this approach? I am thinking we can't. Typical Berkshire nonsense.
This is my effort to help fit the pieces together to get a better picture of the capital markets.
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
There isn't any nonsense coming from Berkshire These articles are using incorrect terms. Berkshire does record its equity investments at market value. (write ups and write downs)
ReplyDeleteThe question is if they are considered impaired, at which point the impairment would be run through the Income Statement instead of the equity section of the Balance Sheet.
This is not an issue for anyone knowledgeable about Berkshire
So the SEC is wrong? If they have been below book for over 12 months and it could take another couple years to come back it doesn't qualify for OTTI? Really?
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"We believe it is reasonably possible that the market prices of Kraft Foods and U.S. Bancorp will recover to our cost within the next one to two years assuming that there are no material adverse events affecting these companies or the industries in which they operate,"
They will be just fine unless nothing happens. Nothing going on in the banking industry, right?
Perhaps there is a difference between knowing Berkshire and knowing accounting.
If these 2 very strong companies somehow go down, they will be written down to their value. As they have been for many years.
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