Berkshire Hathaway 2002 Annual Report Download - page 41

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40
Notes to Consolidated Financial Statements (Continued)
(6) Realized investment gains (losses)
Realized gains (losses) from sales and redemptions of investments are summarized below (in millions). Realized
losses include impairment charges of $574 million and $247 million in 2002 and 2001, respectively.
2002 2001 2000
Equity securities and other investments 
Gross realized gains...................................................................................... $ 787 $1,522 $4,467
Gross realized losses..................................................................................... (583) (369) (317)
Securities with fixed maturities 
Gross realized gains...................................................................................... 688 411 153
Gross realized losses..................................................................................... (255) (201) (348)
$ 637 $1,363 $3,955
(7) Goodwill of acquired businesses
Effective January 1, 2002, Berkshire adopted Statement of Financial Accounting Standards (SFAS) No. 142
Goodwill and Other Intangible Assets. SFAS No. 142 changed the accounting for goodwill from a model that
required amortization of goodwill, supplemented by impairment tests, to an accounting model that is based solely upon
impairment tests. Thus, Berkshires Consolidated Statement of Earnings for the year ended December 31, 2002 includes
no periodic amortization of goodwill.
Berkshire completed its initial assessment of goodwill during the second quarter of 2002 and no transitional
impairment charges were required. In addition, goodwill was reviewed during the fourth quarter of 2002 and no
impairment charges were required. Subsequently, goodwill must be reviewed for impairment at least annually, and
impairments, if any, will be charged to operating earnings.
The increase in goodwill from December 31, 2001 to December 31, 2002 reflects Berkshires acquisitions that
were completed during 2002. Substantially all of the $788 million increase is attributable to the several business
acquisitions described in Note 2.
A reconciliation of Berkshires Consolidated Statements of Earnings for each of the three years ended December
31, 2002 from amounts reported to amounts exclusive of goodwill amortization is shown below. Goodwill amortization
for the years ended December 31, 2001 and 2000 includes $78 million, and $65 million, respectively, related to
Berkshires equity method investment in MidAmerican. Dollar amounts are in millions, except per share amounts.
2002 2001 2000
Net earnings as reported............................................................................ $4,286 $ 795 $3,328
Goodwill amortization, after tax................................................................ ─ 636 548
Net earnings as adjusted............................................................................ $4,286 $1,431 $3,876
Earnings per equivalent share of Class A common stock:
As reported ................................................................................................ $2,795 $ 521 $2,185
Goodwill amortization............................................................................... ─ 416 360
Earnings per share as adjusted................................................................... $2,795 $ 937 $2,545
During the fourth quarter of 2000, Berkshire concluded that an impairment of goodwill existed with respect to the
Dexter Shoe business. Goodwill amortization shown in the accompanying Consolidated Statement of Earnings for 2000
includes a goodwill impairment charge of $219 million related to this business.
(8) Derivatives
General Re Securities (GRS), a wholly owned subsidiary of Berkshire, regularly utilizes derivatives in
providing risk management products to clients. In January 2002, it was announced that GRS would commence a long-
term run-off of its operations. The run-off is expected to occur over a number of years during which GRS will limit its
new business to certain risk management transactions and will unwind its existing asset and liability positions in an
orderly manner. Additional information regarding GRSs derivative instruments follows.
The derivative financial instruments involve, to varying degrees, elements of market, credit, and liquidity risks.
GRS controls market risk exposures by taking offsetting positions in either cash instruments or other derivatives. GRS
manages its exposures on a portfolio basis and monitors its market risk on a daily basis across all products by calculating
the effect on operating results of potential changes in market variables, which include volatility, correlation and