October 18, 2021

Warren Buffet

Berkshire CFO Attempts to Kill SEC Curiosity

When you’re a folksy billionaire octogenarian, you can afford to have others do your dirty work. In the case of the Warren Buffet, he has Charlie Munger hate on accountants for anything and everything under the sun.

Similarly, when the SEC comes calling, the Sage of Omaha can ring up Berkshire CFO Marc Hamburg. On the one hand, you might expect WB to shoot the breeze with the SEC employees since they likely share a fondness for a certain film genre.


However, when the conversation turns to business, the old man probably claims that he has an interview on tax cuts, a bridge match with WHGIII or a lunch date with Z-Knowles. This allows him to turn the SEC scamps over to Hamburg who plays a little bit of a bad cop to the Buffet’s chatty, dirty Grandpa. The CFO then lets the SEC know, in no uncertain terms, that they’re barking up the wrong tree:

In an April letter, the SEC asked Berkshire why it was not recording write-downs on shares with $1.86 billion in unrealized losses, all of which had been in that position for at least a year.

Given the duration of those losses, the SEC said they appeared to be more than temporary and as such should have been written down.

In a detailed response, Berkshire Chief Financial Officer Marc Hamburg said most of the losses with more than 12 months’ duration as of December 31 were concentrated in Kraft and U.S. Bancorp, shares it had acquired in 2006 and 2007.

Hamburg said that as of December 31, Berkshire determined both companies had enough earnings potential that their share prices would eventually exceed the original cost of the stock. It also has the “ability and intent” to hold the shares until they recovered, he said.

“We believe it is reasonably possible that the market prices of Kraft Foods and U.S. Bancorp will recover to our cost within the next one to two years assuming that there are no material adverse events affecting these companies or the industries in which they operate,” Hamburg said.

And if this doesn’t work, they’ll just schedule Munger for another speech.

SEC questioned Warren Buffett’s Berkshire on loss accounting [Reuters]

Gerri Willis Doesn’t Care What A Couple of Old Men Think About Tax Cuts

In case you haven’t heard, there’s a bit of a debate over what to do about the expiring Bush tax cuts. And because it’s an election year, they make for a perfect political pigskin to throw around.

Fox Business Network is marking this momentous occasion with Taxed to Death Week (a demise that we do wish for our worst enemies) and wons to Gerri Willis of the Willis Report.

Going Concern: Tax cuts are a pretty popular way for politicians to pander to their constituents. It seems pretty convenient that they are set to expire right after the mid-term elections. Who should we blame for this?

Gerri Willis: There are plenty of people to blame – George W. Bush put them into place way back in ’01 and ‘03 and we knew way back then they had an expiration date – so take yer choices, there are plenty of politicians to point the finger at.


GC: And God knows Americans need someone to blame. Since Congress let the estate tax expire, is there a real risk that the tax cuts could expire without any action?

GW: Sure, it’s actually the easiest action to take because it requires absolutely no effort on the part of anybody – Congress doesn’t have to do anything. The President doesn’t even have to pick up a pen to sign the bill. They could all just dither until midnight December 31. Whoosh! Tax hikes.

GC: Just like tornadoes in Brooklyn. And that’s not good for anybody. Anyway, there’s a lot of information and misinformation out there with regard to the tax cuts. Can we safely assume that objectivity is taking a back seat to political gain and Americans are at the mercy of the rich and powerful (who, incidentally, are the ones greatest affected by the ultimate outcome)? How can Americans know what’s really going to happen? How can accountants best sort through all the noise to best serve their clients?

GW: Surprise! Politics are involved – of course they are, but Americans aren’t stooges. There are plenty of places to get objective information on the tax cuts. I’d suggest Fox Business and The Willis Report. Frankly there is no way for accountants or anyone else to know what is going to happen – Congress is really holding us hostage – my financial advisor sources say nobody is going on vacation in December because they know that something can happen anytime that will change the landscape.

GC: Here’s something strange – Warren Buffet has indicated that he’s in favor of eliminating tax cuts for the wealthiest Americans. Alan Greenspan is in favor of letting all the tax cuts expire. So we have one of the richest people in the world saying he’s willing to pay more taxes and the former head of the Federal Reserve saying that everyone should pay more taxes. Generally speaking, these are smart guys. Are they onto something or is this a sign that we need to start ignoring everything that old men say?

GW: Okay, to be fair here there is wealthy and then there is wealthy, right? $250,000 in San Francisco or LA or NYC is not the same thing as $250,000 in Omaha or Comanche TX. And, Greenspan simply continues to try to resurrect his reputation which was harmed by the mortgage meltdown.

GC: Ultimately though, the one thing Congress agrees on is that tax cuts for the middle class should stay and the big debate is whether the wealthy get a short extension on their cuts or a “permanent” (although it’s not really permanent) one. But do rich people really need an additional moderately-priced BMW?

GW: Heehee. Maybe they won’t buy a BMW – maybe they’ll hire someone! The thing for the middle class to know is that it isn’t just your income taxes at stake – there are a handful of beloved middle class tax credits at stake too – write-offs for college loan interest; child tax credit; and of course there is no AMT patch yet this year – if that doesn’t come to pass tens of thousands of Americans could owe AMT — a tragedy.

Warren Buffet Will Bring His A-game Next Time

“It was a very soft sell, but 40 signed up.”

~ The Oracle of O probably didn’t even mention the fact that the estate tax will eventually come back.

Accounting News Roundup: E&Y to Appoint Non-Exec Directors to Global Board; Accounting Remains a Hot Post-College Job; Barclays Calls New Loan Valuation Proposal ‘Potentially Misleading’ | 07.06.10

‘Big four’ auditors bring in independent directors in response to regulators [Guardian]
The Financial Reporting CouncCAEW, issued a new audit governance code back in January that recommended audit firms appoint non-executive directors to their UK firm however, Ernst & Young will go so far to appoint them to their global advisory boards.

“Although the code technically applies only to our UK business, as a globally integrated organisation, we believe it is most appropriate for us to implement the code’s provisions on a global basis also,” said Jim Turley, global chairman and chief executive of Ernst & Young. “Including individuals from outside Ernst & Young on the global advisory council will bring to the senior leadership of our global organisation the benefit of significant outside perspectives and views.”

BP Won’t Issue New Equity to Cover Spill Costs [WSJ]
But if you want to pitch in, they are happy to take you up on an offer, “BP would welcome it if any existing shareholders or new investors want to expand their holding in the company, she said. BP’s shares have lost almost half their value since the Deepwater Horizon explosion that triggered the oil spill April 20.

BP Chief Executive Tony Hayward is visiting oil-rich Azerbaijan amid speculation the company may sell assets to help pay for the clean-up of the Gulf of Mexico oil spill. The one-day visit comes a week after Mr. Hayward, who has been criticized for his handling of the devastating oil spill, traveled to Moscow to reassure Russia that the British energy company is committed to investments there.”

Looking for a post-college job? Try accounting [CNN]
Happy times continue for accounting grads, according to the latest survey on the matter, this time from the National Association of Colleges and Employers. The average salary listed for an entry-level accounting major is just over $50k and the article also notes that most accounting jobs go to…wait…accounting majors.


FASB, IASB Staff Describe Plans for New Financial Statements [Compliance Week]
As always, the two Boards are hoping that bright financial statement users will chime in with their suggestions but they’ve got the basic idea down, “The FASB and IASB are rewriting the manner in which financial information is presented to make it more cohesive, easier to comprehend, and more comparable across different entities. The proposals would establish a common structure for each of the financial statements with required sections, categories, subcategories and related subtotals. It would result in the display of related information in the same sections, categories and subcategories across all statements.”

Accounting rules “practically impossible to implement”, Barclays claims [Accountancy Age]
Barclays’ finance director, Chris Lucas isn’t too keen on these new loan valuation proposals. Besides the ‘practically impossible’ thing, he says, “The sensitivity disclosures…are highly subjective, difficult to interpret, and potentially misleading, particularly when the underlying data is itself highly subjective,” Lucas said.

“It is hard to see how sensitivity disclosures could be aggregated by a large institution to provide succinct data that avoids ‘boilerplate’ disclosure.”

Asking The Difficult Questions [Re: The Auditors]
“Audit committees too often rely on the auditors’ required disclosures without comment. They sometimes lack the independence, experience, or determination to ask the probing questions. It’s critical, however, that committees seek answers to vexing questions and not accept the response, ‘But that’s the way management has always done it.’ ”

Buffett Donates $1.6 Billion in Biggest Gift Since 2008 Crisis [Bloomberg]
WB continues his plan of giving away 99% of his fortune, “[Buffet] made his largest donation since the 2008 financial crisis after profits at his Berkshire Hathaway Inc. jumped.

The value of Buffett’s annual gift to the foundation established by Bill Gates rose 28 percent to $1.6 billion from $1.25 billion last year. The donation, made in Berkshire Class B stock, was accompanied by gifts totaling $328 million in shares to three charities run by Buffett’s children and another named for his late first wife, according to a July 2 filing.”

The case for cloud accounting [AccMan]
Dennis Howlett continues to provide evidence that switching to the cloud provides benefits that are simply too big to ignore, “This 2min 1 sec video neatly encapsulates why this is something you should be considering, especially if you are operating electronic CRM or e-commerce for front of house activities.”

Accounting News Roundup: Reasons Why CFOs Are Still Stalling on Cloud Solutions; IASB Trumpets Latest Convergence Steps; OCA Gets a Deputy | 05.28.10

What’s stopping CFOs putting their money on cloud computing? [Silicon.com]
Some CFOs are still hesitant to jump into cloud computing for three main reasons: 1) They aren’t sure what they’re getting for their money 2) Security and information assurance 3) The cost of migrating their data.

All legitimate concerns, however steps can be taken and questions asked in order to address most concerns (or at least put CFOs in a better informed position than before):


1) “Ask providers to clarify how they intend to deliver your service so that you understand the risks involved and know exactly what you are getting for your money.”

2) “Undertake due diligence and ensure that cloud providers can replicate the appropriate security policies and procedures. Agree realistic [Service Level Agreements] and make certain that services are scalable enough to meet present and future requirements. Finally, ensure that everything is clearly written down in the contract.”

3) “Evaluate how much time, effort and money will be required to migrate data and rework business processes.”

IASB unveils profit and loss proposals [Accountancy Age]
It appears that Tweeds and Co. like the U.S. GAAP method of presenting Other Comprehensive Income: “If adopted, these proposals will result in further convergence of IFRSs and US GAAP in an increasingly important part of the financial statements.”

Buffett to Testify to Crisis Panel on Moody’s [WSJ]
This will be a breeze – folksy insights with a dash of sexual metaphors will clear up this area of the crisis. Plus, no one is going to scold an old man.

H & H bagel big cops to $369,000 tax fraud [NYP]
Helmer Toro simply kept the money. He’ll spend 50 weekends in jail for that little stunt.

Brian T. Croteau Named Deputy Chief Accountant for Professional Practice in SEC Office of the Chief Accountant [SEC]
Prior to the new gig, Mr Croteau was a Senior Associate Chief Accountant at the OCA. He joined the OCA after being a partner in the Assurance practice at PwC in the Auditing Services Group. He obviously wasn’t bothered by the Partner to Senior Associate title change. It must have been the “Chief Accountant” suffix.

Free Ice Cream Outside the IRS Building Should Briefly Distract Any Protesters

Just when you thought things couldn’t get more exciting in the world of overeating, Dairy Queen has announced that it will be handing out free ice cream in front of the IRS Building in DC tomorrow at 10th St. and Pennsylvania Ave. NW.

According to the Washington Business Journal, the Blizzardmobile will be parked outside and mini blizzards will handed out to “taxpayers and accountants” (why didn’t they just say “everyone”?).


This momentous occasion not only marks the end of the traditional return filing season but it is also marking the Blizzard’s 25th birthday. This might, just might, cajole some Tea Partiers to leave their homes as opposed to marching on the Internet (especially since there doesn’t appear to be a limit per taxpayer/accountant).

However! The window of opportunity is short and you’ll only have from noon to 1 pm to get your miniature cup of refined sugary goodness. One might think that since Doug Shulman might be anti-pizza that he also might have something against blended ice cream confections. But on the other hand, Warren Buffet didn’t get filthy rich by giving away crackalicious deserts for free now, did he?

Free ice cream outside IRS building [Washington Business Journal]

Quote of the Day: Hank Paulson Tells No Lies | 02.09.10

“We will get every penny we put into the banks back. I think when you look at all the other programs, we may be surprised at what we get back.”

~ Hank Paulson, to Warren Buffet on TARP.