Berkshire Hathaway 2014 Annual Report Download - page 70

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Notes to Consolidated Financial Statements (Continued)
(12) Derivative contracts (Continued)
The aggregate intrinsic value (which is the undiscounted liability assuming the contracts are settled based on the index
values and foreign currency exchange rates as of the balance sheet date) of our equity index put option contracts was
approximately $1.4 billion at December 31, 2014 and $1.7 billion at December 31, 2013. However, these contracts may not be
unilaterally terminated or fully settled before the expiration dates. Therefore, the ultimate amount of cash basis gains or losses
on these contracts will not be determined for several years. The remaining weighted average life of all contracts was
approximately 6 years at December 31, 2014.
Our remaining credit default contract was written in 2008 and relates to approximately 500 zero-coupon municipal debt
issues with maturities ranging from 2019 to 2054. The underlying debt issues have a weighted average maturity of
approximately 16.75 years. Pursuant to the contract terms, future loss payments would be required in the event of non-payment
by the issuer and non-performance by the primary financial guarantee insurers under their contracts. Payments under our
contract, if any, are not required prior to the maturity dates of the underlying obligations. Our premium under this contract was
received at the inception of this contract and therefore we have no counterparty credit risk.
A limited number of our equity index put option contracts contain collateral posting requirements with respect to changes
in the fair value or intrinsic value of the contracts and/or a downgrade of Berkshire’s credit ratings. As of December 31, 2014
and 2013, we did not have any collateral posting requirements. If Berkshire’s credit ratings (currently AA from Standard &
Poor’s and Aa2 from Moody’s) are downgraded below either A- by Standard & Poor’s or A3 by Moody’s, additional collateral
of up to $1.1 billion could be required to be posted.
Our regulated utility subsidiaries are exposed to variations in the prices of fuel required to generate electricity, wholesale
electricity purchased and sold and natural gas supplied for customers. Derivative instruments, including forward purchases and
sales, futures, swaps and options, are used to manage a portion of these price risks. Derivative contract assets are included in
other assets of railroad, utilities and energy businesses and were $108 million and $87 million as of December 31, 2014 and
December 31, 2013, respectively. Derivative contract liabilities are included in accounts payable, accruals and other liabilities of
railroad, utilities and energy businesses and were $230 million and $208 million as of December 31, 2014 and December 31,
2013, respectively. Unrealized gains and losses under the contracts of our regulated utilities that are probable of recovery
through rates are recorded as regulatory assets or liabilities. Unrealized gains or losses on contracts accounted for as cash flow
or fair value hedges are recorded in other comprehensive income or in net earnings, as appropriate.
(13) Supplemental cash flow information
A summary of supplemental cash flow information for each of the three years ending December 31, 2014 is presented in
the following table (in millions).
2014 2013 2012
Cash paid during the period for:
Income taxes .................................................................. $4,014 $5,401 $4,695
Interest:
Insurance and other businesses ............................................... 360 343 319
Railroad, utilities and energy businesses ........................................ 2,487 1,958 1,829
Finance and financial products businesses ....................................... 465 573 653
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions ............................ 6,334 9,224 1,751
Equity securities exchanged in connection with business acquisitions ..................... 2,478 — —
Borrowings assumed in connection with certain property, plant and equipment additions ..... — — 406
Treasury stock acquired in connection with business acquisition ......................... 400 — —
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