Berkshire Hathaway 2007 Annual Report Download - page 38

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37
(9) Property, plant and equipment
Property, plant and equipment of insurance and other businesses is comprised of the following (in millions):
Ranges of
estimated useful life 2007 2006
Land......................................................................................... — $ 607 $ 548
Buildings and improvements .................................................. 3 – 40 years 3,611 3,203
Machinery and equipment....................................................... 3 – 25 years 9,507 8,470
Furniture, fixtures and other.................................................... 3 – 20 years 1,670 1,702
15,395 13,923
Accumulated depreciation ...................................................... (5,426) (4,620)
$ 9,969 $ 9,303
Property, plant and equipment of utilities and energy businesses is comprised of the following (in millions):
Ranges of
estimated useful life 2007 2006
Utility generation, distribution and transmission system.... 5-85 years $30,369 $27,687
Interstate pipeline assets..................................................... 3-67 years 5,484 5,329
Independent power plants and other assets......................... 3-30 years 1,330 1,770
Construction in progress .................................................... — 1,745 1,969
38,928 36,755
Accumulated depreciation and amortization ...................... (12,707) (12,716)
$26,221 $24,039
The utility generation and distribution system and interstate pipeline assets are the regulated assets of public utility and natural
gas pipeline subsidiaries. At December 31, 2007 and December 31, 2006, accumulated depreciation and amortization related to
regulated assets was $12.3 billion and $11.9 billion, respectively. Substantially all of the construction in progress at
December 31, 2007 and December 31, 2006 related to the construction of regulated assets.
(10) Derivatives
A summary of the fair value and gross notional value of open derivative contracts of finance and financial products businesses
follows. Amounts are in millions.
2007 2006
Notional Notional
Assets * Liabilities Value Assets * Liabilities Value
Credit default obligations................................... $ — $ 1,838 $ 4,660 $ — $ 952 $ 2,510
Equity index options .......................................... — 4,610 35,043 — 2,436 21,155
Interest rate and foreign currency swaps ............ 626 434 7,887 632 473 10,851
Other .................................................................. 123 55 2,301 69 99 5,477
Adjustment for counterparty netting .................. (50) (50) (77) (77)
Derivative contract assets and liabilities ............ $ 699 $ 6,887 $ 624 $ 3,883
* Included in other assets of finance and financial products businesses.
Berkshire utilizes derivatives in order to manage certain economic business risks as well as to assume specified amounts of
market risk from others. The contracts summarized in the preceding table, with limited exceptions, are not designated as hedges for
financial reporting purposes. Changes in the fair values of derivative assets and derivative liabilities that do not qualify as hedges are
reported in the Consolidated Statements of Earnings as derivative gains/losses. Master netting agreements are utilized to manage
counterparty credit risk, where gains and losses are netted across other contracts with that counterparty.
Under certain circumstances, Berkshire is contractually entitled to receive cash or securities from counterparties as collateral
on derivative contract assets. At December 31, 2007, Berkshire held collateral with a fair value of $328 million to secure derivative
contract assets. Under certain circumstances, including a downgrade of its credit rating below specified levels, Berkshire may be
required to post collateral against derivative liabilities. However, Berkshire is not required to post collateral with respect to most of
its long-dated credit default and equity index option contract liabilities. At December 31, 2007, Berkshire had posted no collateral
with counterparties as security on contract liabilities.