How to Use This Resource: This guide explains the financial data in your Reading the Trend workbook. Read it before starting the assignment to understand what the numbers mean and where they come from.

Berkshire Hathaway Financial Data Guide

Your workbook contains simplified financial data from Berkshire Hathaway's SEC filings for 2019 through 2023. This guide explains what you are looking at and where the numbers come from.

What Is Berkshire Hathaway?

Berkshire Hathaway is a conglomerate, a holding company that owns dozens of separate businesses. Its major operations include:

This diversification means BH's revenue comes from many industries, which makes its financial data more stable than a single-industry company but also harder to compare to peers.

Why Two Earnings Metrics?

This is the most important concept for this unit. Your workbook shows two earnings figures: "Operating Earnings" and "Net Earnings (Loss)." Understanding why they differ is the central analytical insight.

Operating Earnings measures how BH's actual businesses are performing. It includes revenue from insurance, railroads, utilities, manufacturing, and retail, minus the costs of running those businesses. It excludes investment gains and losses.

Net Earnings (GAAP) is the official bottom line under U.S. accounting rules. GAAP stands for Generally Accepted Accounting Principles, the standard rules that all U.S. public companies must follow when reporting their finances. Starting in 2018, GAAP requires companies to include unrealized investment gains and losses in net income.

Here is what "unrealized" means: imagine you own 100 shares of Apple stock that you bought for $100 each. If Apple's stock price rises to $150, your shares are now worth $15,000, a $5,000 gain. But you have not sold anything, so you have not actually received any money. That $5,000 is an unrealized gain. Under GAAP rules, Berkshire Hathaway must count those unrealized gains (and losses) as income, even though no cash changed hands. When the stock market rises, BH reports billions in "income" from stocks it did not sell. When the market falls, BH reports billions in "losses" from stocks it still holds.

Since BH holds over $350 billion in public stocks, market fluctuations create huge swings in reported net income that have nothing to do with how BH's actual businesses are performing. In 2022, the stock market fell sharply, and BH reported a net loss of $22.8 billion, even though its operating businesses earned $30.8 billion that year.

As Buffett wrote in his 2022 Annual Letter (opens in new tab), operating earnings are what matter, not the GAAP figure, which he described as "essentially meaningless."

Where the Data Comes From

All financial data in your workbook comes from Berkshire Hathaway's annual 10-K filings with the SEC. The income statement data is from the Consolidated Statements of Earnings, and the balance sheet data is from the Consolidated Balance Sheets. Operating Earnings figures are from Buffett's annual shareholder letters, which report this non-GAAP metric separately.

The data has been simplified for this exercise: row labels use plain English instead of technical GAAP terminology, and all figures are in millions of dollars.