Buffett’s ‘Nightmare’ Begins as Earnings Include Stock Swings
- Unrealized gains and losses will affect Berkshire bottom line
- Obscure accounting change could jolt the quarterly results
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An accounting change is about to have a big effect on Warren Buffett’s conglomerate because swings in the value of its stock portfolio will soon be included in earnings.
The new rules from the Financial Accounting Standards Board took effect in December and will start cropping up in earnings reports at U.S. companies this year. There’s plenty in the pronouncement, but one significant change requires businesses to report their equity investments at fair value. Any gains or losses for the period will be recognized in net income.