New accounting pronouncements

6 Months Ended

Jun. 30, 2023

Accounting Changes and Error Corrections [Abstract]

New accounting pronouncements

Note 2. New accounting pronouncements

We adopted Accounting Standards Update 2018-12 “Targeted Improvements to the Accounting for Long-Duration Contracts” (“ASU 2018-12”) as of January 1, 2023, which modifies the accounting, reporting and disclosures related to long-duration insurance contracts, including the measurement of our long-duration life, annuity and health benefit liabilities. ASU 2018-12 was applied retrospectively to contracts in-force beginning as of January 1, 2021 (the “transition date”). As of the transition date, the after-tax impact of changes in cash flow assumptions were recorded in retained earnings and the after-tax effect of changes in discount rate assumptions were recorded in accumulated other comprehensive income. Our Consolidated Financial Statements for the years ending December 31, 2022 and 2021 and as of the January 1, 2021 transition date were revised for the effects of adopting ASU 2018-12. These effects were included in Part II, Item 5 to our Form 10-Q for the period ending March 31, 2023.

Beginning as of January 1, 2021, the cash flow assumptions used to measure benefit liabilities are reviewed at least annually, with the effects of assumption changes recorded in earnings. The discount rate assumptions used to measure benefit liabilities are revised each quarterly reporting period with the effects of changes reported in other comprehensive income. Discount rates are based on the prevailing upper-medium grade corporate bond yields (generally single A-rated credit ratings) that reflect the duration characteristics and currency attributes of the liabilities. In measuring benefit liabilities and amortizing capitalized acquisition costs under long-duration insurance contracts, we generally aggregate contracts by issuance year. See Note 16 for disclosures related to our long-duration insurance contracts.

A summary of the impacts of adopting ASU 2018-12 on our periodic payment annuity and life and health insurance benefits liabilities as of the January 1, 2021 transition date follows in millions.

	Periodic payment annuities			Life and health			Total
Balance at December 31, 2020, as previously reported	$	10,974		$	10,642		$	21,616
Reclassifications to other policyholder liabilities		(286	)		(929	)		(1,215	)
Balance at December 31, 2020 after reclassifications		10,688			9,713			20,401
Change in discount rate assumptions		6,553			1,447			8,000
Change in cash flow assumptions		(117	)		552			435
Balance as of January 1, 2021	$	17,124		$	11,712		$	28,836

Notes to Consolidated Financial Statements (Continued)

Note 2. New accounting pronouncements (Continued)

The reclassifications to other policyholder liabilities are primarily related to certain liabilities arising under our variable annuity guarantee reinsurance contracts. These liabilities are not classified as life, annuity and health insurance benefits liabilities under ASU 2018-12.

The effects of adopting ASU 2018-12 on our Consolidated Statements of Earnings and Comprehensive Income for the second quarter and first six months of 2022 follows in millions, except per share amounts.

	Second Quarter									First Six Months
	Previously reported			Increase (decrease)			As revised			Previously reported			Increase (decrease)			As revised
Revenues:
Insurance premiums earned	$	18,087		$	(6	)	$	18,081		$	35,579		$	(10	)	$	35,569
Costs and expenses:
Life, annuity and health insurance benefits		1,282			(96	)		1,186			2,605			(82	)		2,523
Insurance underwriting expenses		2,461			(84	)		2,377			5,228			(247	)		4,981
Earnings (loss) before income taxes		(55,482	)		174			(55,308	)		(48,670	)		319			(48,351	)
Income tax expense (benefit)		(12,106	)		40			(12,066	)		(10,879	)		65			(10,814	)
Net earnings (loss)		(43,376	)		134			(43,242	)		(37,791	)		254			(37,537	)
Net earnings (loss) attributable to Berkshire Hathaway shareholders	$	(43,755	)	$	134		$	(43,621	)	$	(38,295	)	$	254		$	(38,041	)
Other comprehensive income:
Foreign currency translation		(1,751	)		1			(1,750	)		(2,067	)		2			(2,065	)
Long-duration insurance contracts		—			2,147			2,147			—			4,566			4,566
Other comprehensive income, net		(1,776	)		2,148			372			(2,180	)		4,568			2,388
Comprehensive income attributable to Berkshire Hathaway shareholders	$	(45,502	)	$	2,282		$	(43,220	)	$	(40,443	)	$	4,822		$	(35,621	)
Net earnings (loss) per average equivalent Class A share	$	(29,754	)	$	91		$	(29,663	)	$	(26,005	)	$	173		$	(25,832	)
Net earnings (loss) per average equivalent Class B share	$	(19.84	)	$	0.06		$	(19.78	)	$	(17.34	)	$	0.12		$	(17.22	)

In March 2023, the FASB issued Accounting Standards Update 2023-02, “Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”). ASU 2023-02 permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Currently, the proportional amortization method is limited to certain affordable housing tax credit investments. ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, and is applied either on a retrospective basis beginning as of the earliest period presented or a modified retrospective basis in the period of adoption. We are evaluating the effects of this standard on our Consolidated Financial Statements.