Berkshire Hathaway 2003 Annual Report Download - page 45

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Notes to Consolidated Financial Statements (Continued)
(13) 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, 2003 and 2002 are shown below (in millions). 2003 2002
Deferred tax liabilities:
Unrealized appreciation of investments ............................................ $10,663 $7,884
Deferred charges reinsurance assumed ............................................. 1,080 1,183
Property, plant and equipment .......................................................... 1,124 1,059
Investments ....................................................................................... 337 282
Other ................................................................................................. 1,350 648
14,554 11,056
Deferred tax assets:
Unpaid losses and loss adjustment expenses..................................... (1,299) (870)
Unearned premiums .......................................................................... (372) (413)
Other ................................................................................................. (1,448) (1,701)
(3,119) (2,984)
Net deferred tax liability ...................................................................... $11,435 $8,072
Charges for income taxes are reconciled to hypothetical amounts computed at the Federal statutory rate in the table
shown below (in millions). 2003 2002 2001
Earnings before income taxes .............................................................................. $12,020 $6,359 $1,438
Hypothetical amounts applicable to above
computed at the Federal statutory rate .............................................................. $ 4,207 $2,226 $ 503
Tax effects resulting from:
Tax-exempt interest income.............................................................................. (88) (109) (123)
Dividends received deduction........................................................................... (100) (97) (101)
Net earnings of MidAmerican........................................................................... (150) (126) (47)
Goodwill amortization ......................................................................................... — — 191
State income taxes, less Federal income tax benefit ............................................ 53 57 44
Foreign rate differences ....................................................................................... (104) 59 82
Other differences, net........................................................................................... (13) 49 41
Total income taxes............................................................................................... $ 3,805 $2,059 $ 590
(14) Dividend restrictions – Insurance subsidiaries
Payments of dividends by insurance subsidiaries are restricted by insurance statutes and regulations. Without prior
regulatory approval, insurance subsidiaries may pay up to approximately $3.7 billion as ordinary dividends during 2004.
Combined shareholders’ equity of U.S. based property/casualty insurance subsidiaries determined pursuant to
statutory accounting rules (Statutory Surplus as Regards Policyholders) was approximately $40.7 billion at
December 31, 2003 and $28.4 billion at December 31, 2002.
Statutory surplus differs from the corresponding amount determined on the basis of GAAP. The major differences
between statutory basis accounting and GAAP are that deferred charges reinsurance assumed, deferred policy
acquisition costs, unrealized gains and losses on investments in securities with fixed maturities and related deferred
income taxes are recognized under GAAP but not for statutory reporting purposes. In addition, statutory accounting for
goodwill of acquired businesses requires amortization of goodwill over 10 years as compared to 40 years under GAAP
for periods ending December 31, 2001 and prior. As of January 1, 2002, under GAAP, goodwill is only subject to tests
for impairment.