Berkshire Hathaway 2006 Annual Report Download - page 44

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(13) Notes payable and other borrowings (Continued)
Berkshire Hathaway Finance Corporation (“BHFC”), a wholly-owned subsidiary of Berkshire, issued senior notes at various
times during the three years ending December 31, 2005. The proceeds were used in the financing of manufactured housing loan
originations and portfolio acquisitions of Clayton Homes. During the fourth quarter of 2006, Clayton Homes borrowed
approximately $1.3 billion whereby all principal and interest collected under certain manufactured housing loan portfolios, together
with any repurchased principal on such loans will be used to pay the principal and interest on these borrowings. The expected
weighted average life of the borrowings is approximately eight years. The proceeds from these borrowings which are not guaranteed
by Berkshire will be used to repay certain debt of BHFC.
Generally, Berkshire’ s guarantee of a subsidiary’ s debt obligation is an absolute, unconditional and irrevocable guarantee for
the full and prompt payment when due of all present and future payment obligations of the issuer.
Principal payments expected during the next five years are as follows (in millions).
2007 2008 2009 2010 2011
Insurance and other........................................................................ $2,229 $ 13 $ 295 $ 61 $ 10
Utilities and energy........................................................................ 1,655 1,975 431 136 1,139
Finance and financial products ...................................................... 1,271 3,645 213 2,172 131
$5,155 $5,633 $ 939 $2,369 $1,280
(14) Income taxes
The liability for income taxes as of December 31, 2006 and 2005 as reflected in the accompanying Consolidated Balance
Sheets is as follows (in millions).
2006 2005
Payable currently............................................................................................. $ 189 $ 258
Deferred........................................................................................................... 18,271 11,994
$18,460 $12,252
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at
December 31, 2006 and 2005 are shown below (in millions).
2006 2005
Deferred tax liabilities:
Investments – unrealized appreciation; basis differences ............................. $14,520 $11,882
Deferred charges reinsurance assumed......................................................... 687 828
Property, plant and equipment...................................................................... 4,775 1,202
Other ............................................................................................................ 2,591 1,165
22,573 15,077
Deferred tax assets:
Unpaid losses and loss adjustment expenses ................................................ (681) (867)
Unearned premiums ..................................................................................... (443) (403)
Accrued liabilities ........................................................................................ (1,335) (815)
Other ............................................................................................................ (1,843) (998)
(4,302) (3,083)
Net deferred tax liability.................................................................................. $18,271 $11,994
Deferred income taxes have not been established with respect to undistributed earnings of certain foreign subsidiaries.
Earnings expected to remain reinvested indefinitely was approximately $1,762 million as of December 31, 2006. Upon distribution
as dividends or otherwise, such amounts would be subject to taxation in the United States as well as foreign countries. However, U.S.
income tax liabilities could be offset, in whole or in part, by tax credits allowable from taxes paid to foreign jurisdictions.
Determination of the potential net tax due is impracticable due to the complexities of hypothetical calculations involving uncertain
timing and amounts of taxable income and the effects of multiple taxing jurisdictions.
The Consolidated Statements of Earnings reflect charges for income taxes as shown below (in millions).
2006 2005 2004
Federal............................................................................................................. $ 4,752 $ 3,736 $ 3,313
State................................................................................................................. 153 129 108
Foreign ............................................................................................................ 600 294 148
$ 5,505 $ 4,159 $ 3,569
Current............................................................................................................. $ 5,030 $ 2,057 $ 3,746
Deferred........................................................................................................... 475 2,102 (177)
$ 5,505 $ 4,159 $ 3,569