Berkshire Hathaway 2012 Annual Report Download - page 49

Notes to Consolidated Financial Statements (Continued)
(11) Derivative contracts (Continued)
Individual investment grade and high-yield corporate contracts in-force as of December 31, 2012 had an aggregate notional
value of approximately $3.9 billion. All of these contracts will expire in 2013. Premiums under individual corporate credit
default contracts are, generally, due from counterparties on a quarterly basis over the terms of the contracts. Otherwise, we have
no counterparty credit risk under our credit default contracts because all premiums were received at the inception of the
contracts.
With limited exceptions, our equity index put option and credit default contracts contain no 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, 2012, our collateral posting requirement under contracts with collateral provisions was $40 million compared
to $238 million at December 31, 2011. 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 $49 million and $71 million as of December 31, 2012 and
December 31, 2011, respectively. Derivative contract liabilities are included in accounts payable, accruals and other liabilities of
railroad, utilities and energy businesses and were $234 million and $336 million as of December 31, 2012 and December 31,
2011, 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 accumulated other comprehensive income or in net earnings, as appropriate.
(12) Supplemental cash flow information
A summary of supplemental cash flow information for each of the three years ending December 31, 2012 is presented in
the following table (in millions).
2012 2011 2010
Cash paid during the period for:
Income taxes ................................................................. $4,695 $2,885 $ 3,547
Interest:
Insurance and other businesses .............................................. 352 243 185
Railroad and utilities and energy businesses .................................... 1,829 1,821 1,667
Finance and financial products businesses ...................................... 620 662 708
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions ........................... 1,751 5,836 31,406
Common stock issued in the acquisition of BNSF .................................... — — 10,577
Common stock issued in the acquisition of noncontrolling interests in Wesco Financial
Corporation ................................................................ — 245 —
Borrowings assumed in connection with certain property, plant and equipment additions .... 406 647 —
(13) Unpaid losses and loss adjustment expenses
The liabilities for unpaid losses and loss adjustment expenses are based upon estimates of the ultimate claim costs
associated with property and casualty claim occurrences as of the balance sheet dates including estimates for incurred but not
reported (“IBNR”) claims. Considerable judgment is required to evaluate claims and establish estimated claim liabilities. A
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