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New accounting pronouncements (Policies)
9 Months Ended
Sep. 30, 2023
Accounting Changes and Error Corrections [Abstract]  
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 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.

A summary of the effects of adopting ASU 2018-12 on our periodic payment annuity and life and health insurance benefits liabilities as of the transition date follows (in millions). 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.

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

)

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)

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 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 other disclosures related to our long-duration insurance contracts.

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

 

Third Quarter

 

 

First Nine Months

 

 

Previously reported

 

 

Increase (decrease)

 

 

As revised

 

 

Previously reported

 

 

Increase (decrease)

 

 

As revised

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance premiums earned

$

18,810

 

 

$

(56

)

 

$

18,754

 

 

$

54,389

 

 

$

(66

)

 

$

54,323

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life, annuity and health insurance benefits

 

1,450

 

 

 

(22

)

 

 

1,428

 

 

 

4,055

 

 

 

(104

)

 

 

3,951

 

Insurance underwriting expenses

 

2,506

 

 

 

107

 

 

 

2,613

 

 

 

7,734

 

 

 

(140

)

 

 

7,594

 

Earnings (loss) before income taxes

 

(4,117

)

 

 

(141

)

 

 

(4,258

)

 

 

(52,787

)

 

 

178

 

 

 

(52,609

)

Income tax expense (benefit)

 

(1,529

)

 

 

(31

)

 

 

(1,560

)

 

 

(12,408

)

 

 

34

 

 

 

(12,374

)

Net earnings (loss)

 

(2,588

)

 

 

(110

)

 

 

(2,698

)

 

 

(40,379

)

 

 

144

 

 

 

(40,235

)

Net earnings (loss) attributable to Berkshire Hathaway shareholders

$

(2,688

)

 

$

(110

)

 

$

(2,798

)

 

$

(40,983

)

 

$

144

 

 

$

(40,839

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, pre-tax

 

(1,727

)

 

 

 

 

 

(1,727

)

 

 

(3,794

)

 

 

2

 

 

 

(3,792

)

Long-duration insurance contracts, pre-tax

 

 

 

 

1,782

 

 

 

1,782

 

 

 

 

 

 

7,594

 

 

 

7,594

 

Applicable income taxes

 

 

 

 

(380

)

 

 

(380

)

 

 

 

 

 

(1,626

)

 

 

(1,626

)

Other comprehensive income, net

 

(2,113

)

 

 

1,402

 

 

 

(711

)

 

 

(4,293

)

 

 

5,970

 

 

 

1,677

 

Comprehensive income attributable to Berkshire Hathaway shareholders

$

(4,747

)

 

$

1,292

 

 

$

(3,455

)

 

$

(45,190

)

 

$

6,114

 

 

$

(39,076

)

Net earnings (loss) per average equivalent Class A share

$

(1,832

)

 

$

(75

)

 

$

(1,907

)

 

$

(27,866

)

 

$

98

 

 

$

(27,768

)

Net earnings (loss) per average equivalent Class B share

$

(1.22

)

 

$

(0.05

)

 

$

(1.27

)

 

$

(18.58

)

 

$

0.07

 

 

$

(18.51

)

In March 2023, the Financial Accounting Standards Board (“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 this standard could have on our Consolidated Financial Statements.