Berkshire Hathaway 1999 Annual Report Download - page 37

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Notes to Consolidated Financial Statements (Continued)
(9) Income taxes (Continued)
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax
liabilities at December 31, 1999 and 1998, are shown below (in millions):
1999 1998
Deferred tax liabilities:
Relating to unrealized appreciation of investments ......... $9,383 $10,149
Other ............................................ 1,252 1,615
10,635 11,764
Deferred tax assets ................................... (1,042) (1,008)
Net deferred tax liability .............................. $9,593 $10,756
Charges for income taxes are reconciled to hypothetical amounts computed at the federal statutory rate in the table
shown below (in millions):
1999 1998 1997
Earnings before income taxes ..................................... $2,450 $4,314 $2,827
Hypothetical amounts applicable to above
computed at the federal statutory rate .............................. $ 858 $1,510 $ 989
Decreases resulting from:
Tax-exempt interest income ..................................... (145) (30) (36)
Dividends received deduction .................................... (95) (78) (104)
Goodwill amortization ........................................... 161 39 29
State income taxes, less federal income tax benefit ..................... 28 20 21
Foreign tax rate differential ....................................... 45 — —
Other differences, net ........................................... — (1)
(4)
Total income taxes ............................................. $ 852 $1,457 $ 898
(10) Borrowings under investment agreements and other debt
Liabilities reflected for this balance sheet caption are as follows (in millions): Dec. 31, Dec. 31,
1999 1998
Borrowings under investment agreements ..................................... $ 613 $ 724
1% Senior Exchangeable Notes Due 2001 (“Exchange Notes”) ..................... 449 469
GEICO Corporation 7.5% debentures due 2005* ................................ 106 107
General Re Corporation 8.85% debentures due 2009* ............................ 107 108
General Re Corporation 9% debentures due 2009* .............................. 150 150
GEICO Corporation 9.15% debentures due 2021 ................................ 107 107
GEICO Corporation 7.35% debentures due 2023* ............................... 160 160
Other debt ............................................................. 773 560
$2,465 $2,385
* Non-callable
Borrowings under investment agreements are made pursuant to contracts calling for interest payable, normally
semiannually, at fixed rates ranging from 2.5% to 8.6% per annum. Contractual maturities of borrowings under investment
agreements generally range from 3 months to 30 years. Under certain conditions, these borrowings are redeemable prior
to the contractual maturity dates.
Under certain conditions, each $1,000 par amount Exchange Note is currently exchangeable at the option of the holder
or redeemable at the option of Berkshire into 44.875 shares of Citigroup common stock. Berkshire, at its option, may settle
any exchange or redemption at the equivalent value in cash. The Exchange Notes are carried at accreted value plus an
additional amount (the "contingent value") representing the excess of the value of the underlying Citigroup common stock
over the accreted value of the Exchange Notes. The contingent value component of the aggregate carrying value of the
Exchange Notes was $276 million at December 31, 1999 and $171 million at year end 1998. During 1999, approximately
$136 million par amount of Exchange Notes were converted by holders into Citigroup common shares.