Item 8. Financial Statements and Supplementary Data

| --- | --- |

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Berkshire Hathaway Inc.

Omaha, Nebraska

We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of earnings, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. We also have audited the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Berkshire Hathaway Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

February 24, 2017

Table of Contents

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

		December 31,
	2016				2015
ASSETS
Insurance and Other:
Cash and cash equivalents and U.S. Treasury Bills:
Cash and cash equivalents		$	23,581			$	56,612
U.S. Treasury Bills			47,338				4,569
Total cash, cash equivalents and U.S. Treasury Bills			70,919				61,181
Investments:
Fixed maturity securities			23,432				25,988
Equity securities			120,471				110,527
Other			14,364				15,683
Investments in The Kraft Heinz Company (Fair Value: 2016 – $28,418, 2015 – $32,042)			15,345				23,424
Receivables			27,097				23,303
Inventories			15,727				11,916
Property, plant and equipment			19,325				15,540
Goodwill			53,994				37,188
Other intangible assets			33,481				9,148
Deferred charges reinsurance assumed			8,047				7,687
Other			7,126				6,697
			409,328				348,282
Railroad, Utilities and Energy:
Cash and cash equivalents			3,939				3,437
Property, plant and equipment			123,759				120,279
Goodwill			24,111				24,178
Regulatory assets			4,457				4,285
Other			13,550				12,833
			169,816				165,012
Finance and Financial Products:
Cash and cash equivalents and U.S. Treasury Bills:
Cash and cash equivalents			528				7,112
U.S. Treasury Bills			10,984				—
Total cash, cash equivalents and U.S. Treasury Bills			11,512				7,112
Investments in equity and fixed maturity securities			408				411
Other investments			2,892				5,719
Loans and finance receivables			13,300				12,772
Property, plant and equipment and assets held for lease			9,689				9,347
Goodwill			1,381				1,342
Other			2,528				2,260
			41,710				38,963
		$	620,854			$	552,257

See accompanying Notes to Consolidated Financial Statements

Table of Contents

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

		December 31,
	2016				2015
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Losses and loss adjustment expenses		$	76,918			$	73,144
Unearned premiums			14,245				13,311
Life, annuity and health insurance benefits			15,977				14,497
Other policyholder liabilities			6,714				7,123
Accounts payable, accruals and other liabilities			22,164				17,879
Notes payable and other borrowings			27,175				14,599
			163,193				140,553
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities			11,434				11,994
Regulatory liabilities			3,121				3,033
Notes payable and other borrowings			59,085				57,739
			73,640				72,766
Finance and Financial Products:
Accounts payable, accruals and other liabilities			1,444				1,398
Derivative contract liabilities			2,890				3,836
Notes payable and other borrowings			15,384				11,951
			19,718				17,185
Income taxes, principally deferred			77,944				63,126
Total liabilities			334,495				293,630
Shareholders’ equity:
Common stock			8				8
Capital in excess of par value			35,681				35,620
Accumulated other comprehensive income			37,298				33,982
Retained earnings			211,777				187,703
Treasury stock, at cost			(1,763	)			(1,763	)
Berkshire Hathaway shareholders’ equity			283,001				255,550
Noncontrolling interests			3,358				3,077
Total shareholders’ equity			286,359				258,627
		$	620,854			$	552,257

See accompanying Notes to Consolidated Financial Statements

Table of Contents

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per-share amounts)

		Year Ended December 31,
	2016				2015				2014
Revenues:
Insurance and Other:
Insurance premiums earned		$	45,881			$	41,294			$	41,253
Sales and service revenues			119,489				107,001				97,097
Interest, dividend and other investment income			4,725				5,357				5,052
Investment gains/losses			5,128				9,363				3,503
			175,223				163,015				146,905
Railroad, Utilities and Energy:
Revenues			37,542				40,004				40,690
Finance and Financial Products:
Sales and service revenues			6,208				5,430				5,094
Interest, dividend and other investment income			1,455				1,510				1,432
Investment gains/losses			2,425				10				72
Derivative gains/losses			751				974				506
			10,839				7,924				7,104
Total revenues			223,604				210,943				194,699
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses			30,906				26,527				26,406
Life, annuity and health insurance benefits			5,131				5,413				5,181
Insurance underwriting expenses			7,713				7,517				6,998
Cost of sales and services			95,754				87,029				78,873
Selling, general and administrative expenses			16,478				13,723				12,198
Interest expense			445				460				419
			156,427				140,669				130,075
Railroad, Utilities and Energy:
Cost of sales and operating expenses			26,194				27,650				29,378
Interest expense			2,642				2,653				2,378
			28,836				30,303				31,756
Finance and Financial Products:
Cost of sales and services			3,448				2,915				2,758
Selling, general and administrative expenses			1,739				1,586				1,523
Interest expense			410				402				456
			5,597				4,903				4,737
Total costs and expenses			190,860				175,875				166,568
Earnings before income taxes and equity in earnings of Kraft Heinz Company			32,744				35,068				28,131
Equity in earnings (losses) of Kraft Heinz Company			923				(122	)			(26	)
Earnings before income taxes			33,667				34,946				28,105
Income tax expense			9,240				10,532				7,935
Net earnings			24,427				24,414				20,170
Less: Earnings attributable to noncontrolling interests			353				331				298
Net earnings attributable to Berkshire Hathaway shareholders		$	24,074			$	24,083			$	19,872
Net earnings per equivalent Class A share outstanding*		$	14,645			$	14,656			$	12,092
Average equivalent Class A shares outstanding*			1,643,826				1,643,183				1,643,456

*	Equivalent Class B shares outstanding are 1,500 times the equivalent Class A amount. Net earnings per equivalent Class B share outstanding are one-fifteen-hundredth of the equivalent Class A amount or $9.76 for 2016, $9.77 for 2015 and $8.06 for 2014.

See accompanying Notes to Consolidated Financial Statements

Table of Contents

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in millions)

		Year Ended December 31,
		2016				2015				2014
Net earnings		$	24,427			$	24,414			$	20,170
Other comprehensive income:
Net change in unrealized appreciation of investments			13,858				(8,520	)			5,831
Applicable income taxes			(4,846	)			3,014				(2,062	)
Reclassification of investment appreciation in net earnings			(6,820	)			(2,332	)			(3,360	)
Applicable income taxes			2,387				816				1,176
Foreign currency translation			(1,541	)			(1,931	)			(2,032	)
Applicable income taxes			66				(43	)			183
Prior service cost and actuarial gains/losses of defined benefit pension plans			354				424				(1,703	)
Applicable income taxes			(187	)			(140	)			624
Other, net			(17	)			(94	)			8
Other comprehensive income, net			3,254				(8,806	)			(1,335	)
Comprehensive income			27,681				15,608				18,835
Comprehensive income attributable to noncontrolling interests			291				275				256
Comprehensive income attributable to Berkshire Hathaway shareholders		$	27,390			$	15,333			$	18,579

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in millions)

		Berkshire Hathaway shareholders’ equity																				Total
	Common stock and capital in excess of par value				Accumulated other comprehensive income				Retained earnings				Treasury stock				Non- controlling interests
Balance December 31, 2013		$	35,480			$	44,025			$	143,748			$	(1,363	)		$	2,595			$	224,485
Net earnings			—				—				19,872				—				298				20,170
Other comprehensive income, net			—				(1,293	)			—				—				(42	)			(1,335	)
Issuance (acquisition) of common stock			118				—				—				(400	)			—				(282	)
Transactions with noncontrolling interests			(17	)			—				—				—				6				(11	)
Balance December 31, 2014			35,581				42,732				163,620				(1,763	)			2,857				243,027
Net earnings			—				—				24,083				—				331				24,414
Other comprehensive income, net			—				(8,750	)			—				—				(56	)			(8,806	)
Issuance of common stock			53				—				—				—				—				53
Transactions with noncontrolling interests			(6	)			—				—				—				(55	)			(61	)
Balance December 31, 2015			35,628				33,982				187,703				(1,763	)			3,077				258,627
Net earnings			—				—				24,074				—				353				24,427
Other comprehensive income, net			—				3,316				—				—				(62	)			3,254
Issuance of common stock			119				—				—				—				—				119
Transactions with noncontrolling interests			(58	)			—				—				—				(10	)			(68	)
Balance December 31, 2016		$	35,689			$	37,298			$	211,777			$	(1,763	)		$	3,358			$	286,359

See accompanying Notes to Consolidated Financial Statements

Table of Contents

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

		Year Ended December 31,
	2016				2015				2014
Cash flows from operating activities:
Net earnings		$	24,427			$	24,414			$	20,170
Adjustments to reconcile net earnings to operating cash flows:
Investment gains/losses			(7,553	)			(9,373	)			(3,575	)
Depreciation and amortization			8,901				7,779				7,370
Other			(161	)			751				(341	)
Changes in operating assets and liabilities:
Losses and loss adjustment expenses			4,372				2,262				7,404
Deferred charges reinsurance assumed			(360	)			84				(3,413	)
Unearned premiums			968				1,392				1,159
Receivables and originated loans			(3,302	)			(1,650	)			(1,890	)
Derivative contract assets and liabilities			(946	)			(974	)			(520	)
Income taxes			4,044				5,718				4,905
Other			2,145				1,088				741
Net cash flows from operating activities			32,535				31,491				32,010
Cash flows from investing activities:
Purchases of U.S. Treasury Bills and fixed maturity securities			(96,568	)			(17,891	)			(12,562	)
Purchases of equity securities			(16,508	)			(10,220	)			(10,014	)
Purchase of Kraft Heinz common stock			—				(5,258	)			—
Sales of U.S. Treasury Bills and fixed maturity securities			18,757				2,471				2,038
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities			26,177				14,656				10,285
Sales and redemptions of equity securities			28,464				8,747				8,896
Purchases of loans and finance receivables			(307	)			(179	)			(181	)
Collections of loans and finance receivables			490				492				885
Acquisitions of businesses, net of cash acquired			(31,399	)			(4,902	)			(4,824	)
Purchases of property, plant and equipment			(12,954	)			(16,082	)			(15,185	)
Other			(419	)			165				336
Net cash flows from investing activities			(84,267	)			(28,001	)			(20,326	)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses			9,431				3,358				845
Proceeds from borrowings of railroad, utilities and energy businesses			3,077				5,479				5,765
Proceeds from borrowings of finance businesses			4,741				1,045				1,148
Repayments of borrowings of insurance and other businesses			(1,264	)			(1,916	)			(1,289	)
Repayments of borrowings of railroad, utilities and energy businesses			(2,123	)			(1,725	)			(1,862	)
Repayments of borrowings of finance businesses			(1,313	)			(1,827	)			(1,543	)
Changes in short term borrowings, net			130				(378	)			932
Acquisitions of noncontrolling interests and other			112				(233	)			(1,265	)
Net cash flows from financing activities			12,791				3,803				2,731
Effects of foreign currency exchange rate changes			(172	)			(165	)			(289	)
Increase (decrease) in cash and cash equivalents			(39,113	)			7,128				14,126
Cash and cash equivalents at beginning of year			67,161				60,033				45,907
**Cash and cash equivalents at end of year ***		$	28,048			$	67,161			$	60,033
* Cash and cash equivalents at end of year are comprised of the following:
Insurance and Other		$	23,581			$	56,612			$	54,738
Railroad, Utilities and Energy			3,939				3,437				3,001
Finance and Financial Products			528				7,112				2,294
		$	28,048			$	67,161			$	60,033

See accompanying Notes to Consolidated Financial Statements

Table of Contents

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

(1)	Significant accounting policies and practices

	(a)	Nature of operations and basis of consolidation

Berkshire Hathaway Inc. (“Berkshire”) is a holding company owning subsidiaries engaged in a number of diverse business activities, including insurance and reinsurance, freight rail transportation, utilities and energy, manufacturing, service, retailing and finance. In these notes the terms “us,” “we,” or “our” refer to Berkshire and its consolidated subsidiaries. Further information regarding our reportable business segments is contained in Note 23. Significant business acquisitions completed over the past three years are discussed in Note 2.

The accompanying Consolidated Financial Statements include the accounts of Berkshire consolidated with the accounts of all subsidiaries and affiliates in which we hold a controlling financial interest as of the financial statement date. Normally a controlling financial interest reflects ownership of a majority of the voting interests. We consolidate a variable interest entity (“VIE”) when we possess both the power to direct the activities of the VIE that most significantly impact its economic performance and we are either obligated to absorb the losses that could potentially be significant to the VIE or we hold the right to receive benefits from the VIE that could potentially be significant to the VIE.

Intercompany accounts and transactions have been eliminated.

	(b)	Use of estimates in preparation of financial statements

The preparation of our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. In particular, estimates of unpaid losses and loss adjustment expenses and related reinsurance recoverable are subject to considerable estimation error due to the inherent uncertainty in projecting ultimate claim costs. In addition, estimates and assumptions associated with the amortization of deferred charges on retroactive reinsurance contracts, determinations of fair values of certain financial instruments and evaluations of goodwill and identifiable intangible assets for impairment require considerable judgment. Actual results may differ from the estimates used in preparing our Consolidated Financial Statements.

	(c)	Cash and cash equivalents and U.S Treasury Bills

Cash equivalents consist of demand deposit and money market accounts, U.S. Treasury Bills with a maturity of three months or less when purchased and other investments with a maturity of three months or less when purchased. During 2016, we acquired significant amounts of U.S. Treasury Bills with maturity dates more than three months from their purchase dates. In prior years, such investments were not material and were classified as cash equivalents. We believe that in substance these U.S. Treasury Bills are like cash as they are readily convertible to known amounts of cash and present an insignificant risk of change in value because of changes in interest rates. In determining the appropriate accounting classification under GAAP, we considered the relevant accounting literature. We also consulted with our independent auditors who shared with us certain insights into commonly applied practice today. We have concluded that, notwithstanding our view of the substance of such instruments, these U.S. Treasury Bills technically do not meet a “bright line” definition of cash equivalents under GAAP. Accordingly, we are now presenting all U.S. Treasury Bills with maturity dates greater than three months from their purchase dates separately in the accompanying Consolidated Balance Sheets. Additionally, we have revised the 2014 and 2015 Consolidated Statements of Cash Flows to reflect this change. We believe that these changes have no effect whatsoever on our financial condition.

	(d)	Investments

We determine the appropriate classification of investments in fixed maturity and equity securities at the acquisition date and re-evaluate the classification at each balance sheet date. Held-to-maturity investments are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Trading investments are securities acquired with the intent to sell in the near term and are carried at fair value. All other securities are classified as available-for-sale and are carried at fair value with net unrealized gains or losses reported as a component of accumulated other comprehensive income. Substantially all of our investments in equity and fixed maturity securities are classified as available-for-sale.

We utilize the equity method to account for investments when we possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when an investor possesses more than 20% of the voting interests of the investee. This presumption may be

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(d)	Investments (Continued)

overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted. We apply the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock.

In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee. We record dividends or other equity distributions as reductions in the carrying value of the investment. In the event that net losses of the investee reduce the carrying amount to zero, additional net losses may be recorded if other investments in the investee are at-risk, even if we have not committed to provide financial support to the investee. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value.

Investment gains and losses arise when investments are sold (as determined on a specific identification basis) or are other-than-temporarily impaired. If a decline in the value of an investment below cost is deemed other than temporary, the cost of the investment is written down to fair value, with a corresponding charge to earnings. Factors considered in determining whether an impairment is other than temporary include: the financial condition, business prospects and creditworthiness of the issuer, the relative amount of the decline, our ability and intent to hold the investment until the fair value recovers and the length of time that fair value has been less than cost. With respect to an investment in a fixed maturity security, we recognize an other-than-temporary impairment if we (a) intend to sell or expect to be required to sell the security before its amortized cost is recovered or (b) do not expect to ultimately recover the amortized cost basis even if we do not intend to sell the security. Under scenario (a), we recognize losses in earnings and under scenario (b), we recognize the credit loss component in earnings and the difference between fair value and the amortized cost basis net of the credit loss in other comprehensive income.

	(e)	Receivables, loans and finance receivables

Receivables of the insurance and other businesses are stated net of estimated allowances for uncollectible balances. Allowances for uncollectible balances are provided when it is probable counterparties or customers will be unable to pay all amounts due based on the contractual terms. Receivables are generally written off against allowances after all reasonable collection efforts are exhausted.

Loans and finance receivables of the finance and financial products businesses are predominantly manufactured housing installment loans. These loans are stated at amortized cost based on our ability and intent to hold such loans to maturity and are stated net of allowances for uncollectible accounts. The carrying value of acquired loans represents acquisition costs, plus or minus origination and commitment costs paid or fees received, which together with acquisition premiums or discounts, are deferred and amortized as yield adjustments over the life of the loans. Substantially all loans are secured by real or personal property or other assets of the borrower.

Allowances for credit losses on loans include estimates of losses on loans currently in foreclosure and losses on loans not currently in foreclosure. Estimates of losses on loans in foreclosure are based on historical experience and collateral recovery rates. Estimates of losses on loans not currently in foreclosure consider historical default rates, collateral recovery rates and prevailing economic conditions. Allowances for credit losses also incorporate the historical average time elapsed from the last payment until foreclosure.

Loans are considered delinquent when payments are more than 30 days past due. Loans over 90 days past due are placed on nonaccrual status and accrued but uncollected interest is reversed. Subsequent collections on the loans are first applied to the principal and interest owed for the most delinquent amount. Interest income accruals resume once a loan is less than 90 days delinquent.

Loans in the foreclosure process are considered non-performing. Once a loan is in foreclosure, interest income is not recognized unless the foreclosure is cured or the loan is modified. Once a modification is complete, interest income is recognized based on the terms of the new loan. Foreclosed loans are charged off when the collateral is sold. Loans not in foreclosure are evaluated for charge off based on individual circumstances concerning the future collectability of the loan and the condition of the collateral securing the loan.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(f)	Derivatives

We carry derivative contracts in our Consolidated Balance Sheets at fair value, net of reductions permitted under master netting agreements with counterparties. The changes in fair value of derivative contracts that do not qualify as hedging instruments for financial reporting purposes are recorded in earnings or by our regulated utilities businesses as regulatory assets or liabilities when recovery through regulated rates is probable.

	(g)	Fair value measurements

As defined under GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or in the most advantageous market when no principal market exists. Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value. Alternative valuation techniques may be appropriate under the circumstances to determine the value that would be received to sell an asset or paid to transfer a liability in an orderly transaction. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Our nonperformance or credit risk is considered in determining the fair value of liabilities. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange.

	(h)	Inventories

Inventories consist of manufactured goods and goods acquired for resale. Manufactured inventory costs include raw materials, direct and indirect labor and factory overhead. Inventories are stated at the lower of cost or market. As of December 31, 2016, approximately 55% of our consolidated inventory cost was determined using the last-in-first-out (“LIFO”) method, 28% using the first-in-first-out (“FIFO”) method, and the remainder primarily using the average cost method. The difference between costs determined under LIFO and current costs was not significant as of December 31, 2016.

	(i)	Property, plant and equipment and leased assets

Additions to property, plant and equipment used in operations and leased assets are recorded at cost and consist of major additions, improvements and betterments. With respect to constructed assets, all construction related material, direct labor and contract services as well as certain indirect costs are capitalized. Indirect costs include interest over the construction period. With respect to constructed assets of our regulated utility and energy subsidiaries that are subject to authoritative guidance for regulated operations, capitalized costs also include an equity allowance for funds used during construction, which represents the cost of equity funds used to finance the construction of the regulated facilities. Also see Note 1(q).

Normal repairs and maintenance and other costs that do not improve the property, extend the useful life or otherwise do not meet capitalization criteria are charged to expense as incurred. Rail grinding costs related to our railroad properties are expensed as incurred.

Property, plant and equipment and leased assets are depreciated to estimated salvage value primarily using the straight-line method over estimated useful lives or mandated recovery periods as prescribed by regulatory authorities. Depreciation of assets of our regulated utilities and railroad is generally determined using group depreciation methods where rates are based on periodic depreciation studies approved by the applicable regulator. Under group depreciation, a single depreciation rate is applied to the gross investment in a particular class of property, despite differences in the service life or salvage value of individual property units within the same class. When our regulated utilities or railroad retires or sells a component of the assets accounted for using group depreciation methods, no gain or loss is recognized. Gains or losses on disposals of all other assets are recorded through earnings.

We evaluate property, plant and equipment for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable or when the assets are held for sale. Upon the occurrence of a triggering event, we assess whether the estimated undiscounted cash flows expected from the use of the asset and the residual value from the ultimate disposal of the asset exceeds the carrying value. If the carrying value exceeds the estimated recoverable amounts, we reduce the carrying value to fair value and record an impairment loss in earnings, except with respect to impairment of assets of our regulated utility and energy subsidiaries when the impacts of regulation are considered in evaluating the carrying value of regulated assets.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(j)	Goodwill and other intangible assets

Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of that business. We evaluate goodwill for impairment at least annually. When evaluating goodwill for impairment, we estimate the fair value of the reporting unit. There are several methods that may be used to estimate a reporting unit’s fair value, including market quotations, asset and liability fair values and other valuation techniques, including, but not limited to, discounted projected future net earnings or net cash flows and multiples of earnings. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, then the identifiable assets and liabilities of the reporting unit are estimated at fair value as of the current testing date. The excess of the estimated fair value of the reporting unit over the current estimated fair value of net assets establishes the implied value of goodwill. The excess of the recorded goodwill over the implied goodwill value is charged to earnings as an impairment loss. Significant judgment is required in estimating the fair value of the reporting unit and performing goodwill impairment tests.

Intangible assets with finite lives are amortized based on the estimated pattern in which the economic benefits are expected to be consumed or on a straight-line basis over their estimated economic lives. Intangible assets with finite lives are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets with indefinite lives are tested for impairment at least annually and when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

	(k)	Revenue recognition

Insurance premiums for prospective property/casualty insurance and reinsurance are earned over the loss exposure or coverage period in proportion to the level of protection provided. In most cases, premiums are recognized as revenues ratably over the term of the contract with unearned premiums computed on a monthly or daily pro-rata basis. Premiums for retroactive property/casualty reinsurance policies are earned at the inception of the contracts, as all of the underlying loss events covered by these policies occurred in the past. Premiums for life reinsurance and annuity contracts are earned when due. Premiums earned are stated net of amounts ceded to reinsurers. For contracts containing experience rating provisions, premiums earned reflect estimated loss experience under contracts.

Sales revenues derive from the sales of manufactured products and goods acquired for resale. Revenues from sales are recognized upon passage of title to the customer, which generally coincides with customer pickup, product delivery or acceptance, depending on terms of the sales arrangement.

Service revenues are recognized as the services are performed. Services provided pursuant to a contract are either recognized over the contract period or upon completion of the elements specified in the contract depending on the terms of the contract. Revenues related to the sales of fractional ownership interests in aircraft are recognized ratably over the term of the related management services agreement, as the transfer of ownership interest in the aircraft is inseparable from the management services agreement.

Leasing revenue is generally recognized ratably over the term of the lease. A substantial portion of our leases are classified as operating leases.

Operating revenues from the distribution and sale of electricity and natural gas to customers are recognized when the services are rendered or the energy is delivered. Revenues include unbilled as well as billed amounts. Rates charged are generally subject to federal and state regulation or established under contractual arrangements. When preliminary rates are permitted to be billed prior to final approval by the applicable regulator, certain revenue collected may be subject to refund and a liability for estimated refunds is recorded.

Railroad transportation revenues are recognized based upon the proportion of service provided as of the balance sheet date. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specific locations, are recorded as pro-rata reductions to revenue based on actual or projected future customer shipments. When using projected shipments, we rely on historic trends as well as economic and other indicators to estimate the recorded liability for customer incentives.

	(l)	Losses and loss adjustment expenses

Liabilities for losses and loss adjustment expenses are established under property/casualty insurance and reinsurance contracts issued by our insurance subsidiaries for loss events that have occurred as of the balance sheet date. The liabilities for losses and loss adjustment expenses are recorded at the estimated ultimate payment amounts, except that

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(l)	Losses and loss adjustment expenses (Continued)

amounts arising from certain workers’ compensation reinsurance contracts are discounted. Estimated ultimate payment amounts are based upon (1) reports of losses from policyholders, (2) individual case estimates and (3) estimates of incurred but not reported losses.

Provisions for losses and loss adjustment expenses are charged to earnings after deducting amounts recovered and estimates of recoverable amounts under ceded reinsurance contracts. Reinsurance contracts do not relieve the ceding company of its obligations to indemnify policyholders with respect to the underlying insurance and reinsurance contracts.

The estimated liabilities of workers’ compensation claims assumed under certain reinsurance contracts are discounted based upon an annual discount rate of 4.5% for claims arising prior to January 1, 2003 and 1% for claims arising thereafter, consistent with insurance statutory accounting principles. The change in such discounts, including the periodic discount accretion is included in earnings as a component of losses and loss adjustment expenses.

	(m)	Deferred charges reinsurance assumed

The excess, if any, of the estimated ultimate liabilities for claims and claim settlement costs over the premiums earned with respect to retroactive property/casualty reinsurance contracts is recorded as a deferred charge at inception of the contract. Deferred charges are subsequently amortized using the interest method over the expected claim settlement periods. Changes to the estimated timing or amount of future loss payments also produce changes in unamortized deferred charges. Changes in such estimates are applied retrospectively and the resulting changes in deferred charge balances are included in insurance losses and loss adjustment expenses in the period of the change.

	(n)	Insurance policy acquisition costs

Incremental costs that are directly related to the successful acquisition of insurance contracts are capitalized, subject to ultimate recoverability, and are subsequently amortized to underwriting expenses as the related premiums are earned. Direct incremental acquisition costs include commissions, premium taxes, and certain other costs associated with successful efforts. All other underwriting costs are expensed as incurred. The recoverability of capitalized insurance policy acquisition costs generally reflects anticipation of investment income. The unamortized balances are included in other assets and were $1,991 million and $1,920 million at December 31, 2016 and 2015, respectively.

	(p)	Life and annuity insurance benefits

Liabilities for insurance benefits under life contracts are computed based upon estimated future investment yields, expected mortality, morbidity, and lapse or withdrawal rates and reflect estimates for future premiums and expenses under the contracts. These assumptions, as applicable, also include a margin for adverse deviation and may vary with the characteristics of the contract’s date of issuance, policy duration and country of risk. The interest rate assumptions used may vary by contract or jurisdiction. Periodic payment annuity liabilities are discounted based on the implicit rate as of the inception of the contracts such that the present value of the liabilities equals the premiums. Discount rates range from less than 1% to 7%.

	(q)	Regulated utilities and energy businesses

Certain energy subsidiaries prepare their financial statements in accordance with authoritative guidance for regulated operations, reflecting the economic effects of regulation from the ability to recover certain costs from customers and the requirement to return revenues to customers in the future through the regulated rate-setting process. Accordingly, certain costs are deferred as regulatory assets and certain income is accrued as regulatory liabilities. Regulatory assets and liabilities will be amortized into operating expenses and revenues over various future periods.

Regulatory assets and liabilities are continually assessed for probable future inclusion in regulatory rates by considering factors such as applicable regulatory or legislative changes and recent rate orders received by other regulated entities. If future inclusion in regulatory rates ceases to be probable, the amount no longer probable of inclusion in regulatory rates is charged or credited to earnings (or other comprehensive income, if applicable) or returned to customers.

	(r)	Foreign currency

The accounts of our non-U.S. based subsidiaries are measured, in most instances, using functional currencies other than the U.S. Dollar. Revenues and expenses of these subsidiaries are translated into U.S. Dollars at the average exchange rate for the period and assets and liabilities are translated at the exchange rate as of the end of the reporting

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(r)	Foreign currency (Continued)

period. Gains or losses from translating the financial statements of these subsidiaries are included in shareholders’ equity as a component of accumulated other comprehensive income. Gains and losses arising from transactions denominated in a currency other than the functional currency of the reporting entity, including gains and losses from the remeasurement of assets and liabilities due to changes in exchange rates, are included in earnings.

	(s)	Income taxes

Berkshire files a consolidated federal income tax return in the United States, which includes eligible subsidiaries. In addition, we file income tax returns in state, local and foreign jurisdictions as applicable. Provisions for current income tax liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings also include deferred income tax provisions.

Deferred income tax assets and liabilities are computed on differences between the financial statement bases and tax bases of assets and liabilities at the enacted tax rates. Changes in deferred income tax assets and liabilities that are associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets when realization is not likely.

Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions, in our judgment, do not meet a “more-likely-than-not” threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of income tax expense.

	(t)	New accounting pronouncements to be adopted subsequent to December 31, 2016

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers.” ASU 2014-09 applies to contracts with customers, excluding, most notably, insurance and leasing contracts. ASU 2014-09 prescribes a framework in accounting for revenues from contracts within its scope, including (a) identifying the contract, (b) identifying the performance obligations under the contract, (c) determining the transaction price, (d) allocating the transaction price to the identified performance obligations and (e) recognizing revenues as the identified performance obligations are satisfied. ASU 2014-09 also prescribes additional financial statement presentations and disclosures. We currently expect to adopt ASU 2014-09 as of January 1, 2018, under the modified retrospective method where the cumulative effect is recognized at the date of initial application. Our evaluation of ASU 2014-09 is ongoing and not complete. The FASB has issued and may issue in the future, interpretative guidance, which may cause our evaluation to change. While we anticipate some changes to revenue recognition for certain customer contracts, we do not currently believe the adoption of ASU 2014-09 will have a material effect on our Consolidated Financial Statements.

In January 2016, the FASB issued ASU 2016-01 “Financial Instruments—Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 generally requires that equity investments (excluding equity method investments) be measured at fair value with changes in fair value recognized in net income. Under existing GAAP, changes in fair value of available-for-sale equity investments are recorded in other comprehensive income. Given the current magnitude of our equity investments, the adoption of ASU 2016-01 will likely have a significant impact on the periodic net earnings reported in our Consolidated Statement of Earnings, although it will not significantly impact our comprehensive income or shareholders’ equity. ASU 2016-01 is effective for reporting periods beginning after December 15, 2017, with the cumulative effect of the adoption made to the balance sheet as of the date of adoption. Thus, the adoption will result in a reclassification of the related accumulated unrealized appreciation currently included in accumulated other comprehensive income to retained earnings, with no impact on Berkshire’s shareholders’ equity.

In February 2016, the FASB issued ASU 2016-02 “Leases.” ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the effect this standard will have on our Consolidated Financial Statements.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(t)	New accounting pronouncements to be adopted subsequent to December 31, 2016 (Continued)

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments—Credit Losses,” which provides for the recognition and measurement at the reporting date of all expected credit losses for financial assets held at amortized cost and available-for-sale debt securities. Currently credit losses are recognized and measured when such losses become probable based on the prevailing facts and circumstances. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019. We are currently evaluating the effect this standard will have on our Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the requirement to determine implied goodwill in measuring an impairment loss. Upon adoption, a goodwill impairment will be measured as the excess of the reporting unit’s carrying value over fair value, limited to the amount of goodwill. ASU 2017-04 is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted. We are currently evaluating the effect this standard will have on our Consolidated Financial Statements.

(2)	Significant business acquisitions

Our long-held acquisition strategy is to acquire businesses at sensible prices that have consistent earning power, good returns on equity and able and honest management. Financial results attributable to business acquisitions are included in our Consolidated Financial Statements beginning on their respective acquisition dates.

On January 29, 2016, Berkshire acquired all outstanding common stock of Precision Castparts Corp. (“PCC”) for $235 per share in cash pursuant to a definitive merger agreement dated August 8, 2015. The aggregate consideration paid was approximately $32.7 billion, which included the value of PCC shares we already owned. We funded the acquisition with a combination of existing cash balances and proceeds from a short-term credit facility. PCC is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power and general industrial markets. PCC is a market leader in manufacturing complex structural investment castings and forged components for aerospace markets, machined airframe components and highly engineered critical fasteners for aerospace applications, and in manufacturing airfoil castings for the aerospace and industrial gas turbine markets. PCC also is a leading producer of titanium and nickel superalloy melted and mill products for the aerospace, chemical processing, oil and gas and pollution control industries, and manufactures extruded seamless pipe, fittings and forgings for power generation and oil and gas applications.

On February 29, 2016, we acquired the Duracell business from The Procter & Gamble Company (“P&G”) pursuant to a definitive agreement entered into in November 2014. Duracell is a leading manufacturer of high-performance alkaline batteries and is an innovator in wireless charging technologies. Pursuant to the agreement, we received a recapitalized Duracell Company in exchange for shares of P&G common stock held by Berkshire subsidiaries, which had a fair value of approximately $4.2 billion.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(2)	Significant business acquisitions (Continued)

During the fourth quarter of 2016, we revised the previously reported acquisition date fair values of certain identified assets and liabilities of PCC and Duracell, which primarily resulted in decreases in the amounts of identified intangible assets and deferred income tax liabilities, offset by increases in the amounts of goodwill. These revisions were immaterial to our Consolidated Financial Statements. Goodwill from these acquisitions is not amortizable for income tax purposes. The fair values of identified assets acquired and liabilities assumed and residual goodwill of PCC and Duracell at their respective acquisition dates are summarized as follows (in millions).

		PCC				Duracell
Cash and cash equivalents		$	250			$	1,807
Inventories			3,430				319
Property, plant and equipment			2,765				359
Goodwill			16,011				866
Other intangible assets			23,527				1,550
Other assets			1,916				242
Assets acquired		$	47,899			$	5,143
Accounts payable, accruals and other liabilities		$	2,442			$	410
Notes payable and other borrowings			5,251				—
Income taxes, principally deferred			7,548				494
Liabilities assumed		$	15,241			$	904
Net assets		$	32,658			$	4,239

The following table sets forth certain unaudited pro forma consolidated earnings data for the year ending December 31, 2015 as if the PCC and Duracell acquisitions were consummated on the same terms at the beginning of 2015 (in millions, except per share amount). Pro forma data for 2016 was not materially different from the amounts reflected in the accompanying Consolidated Financial Statements.

		2015
Revenues		$	221,897
Net earnings attributable to Berkshire Hathaway shareholders			24,575
Net earnings per equivalent Class A common share			14,956

In the first quarter of 2015, we acquired the Van Tuyl Group (now named Berkshire Hathaway Automotive), which included 81 automotive dealerships and two related insurance businesses, two auto auctions and a distributor of automotive fluid maintenance products. In addition to selling new and pre-owned automobiles, the Berkshire Hathaway Automotive group offers repair and other services and products, including extended warranty services and other automotive protection plans. Consideration paid for the acquisition was $4.1 billion. On December 1, 2014, we acquired AltaLink, L.P. (“AltaLink”) for a cash purchase price of C$3.1 billion (approximately $2.7 billion). AltaLink is a regulated electric transmission-only business, headquartered in Calgary, Alberta. The goodwill related to the AltaLink acquisition is not amortizable for income tax purposes, while substantially all of the goodwill related to Berkshire Hathaway Automotive is amortizable for income tax purposes.

The fair values of identified assets acquired and liabilities assumed and residual goodwill of Berkshire Hathaway Automotive and AltaLink at their respective acquisition dates are summarized as follows (in millions).

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(2)	Significant business acquisitions (Continued)

		Berkshire Hathaway Automotive				AltaLink
Cash and investments		$	1,274			$	15
Property, plant and equipment			1,045				5,610
Goodwill			1,833				1,744
Other assets			2,488				300
Assets acquired		$	6,640			$	7,669
Accounts payable, accruals and other liabilities		$	1,399			$	1,090
Notes payable and other borrowings			1,129				3,851
Liabilities assumed		$	2,528			$	4,941
Net assets		$	4,112			$	2,728

On January 1, 2014, we acquired the beverage dispensing equipment manufacturing and merchandising business of British engineering company, IMI plc for approximately $1.12 billion. On February 25, 2014, we acquired 100% of the outstanding common stock of Phillips Specialty Products Inc. (“PSPI”), a company providing oil flow improvement products to customers worldwide, from Phillips 66 (“PSX”) in exchange for 17,422,615 shares of PSX common stock with an aggregate fair value of $1.35 billion. On June 30, 2014, we acquired WPLG, Inc. (“WPLG”) from Graham Holding Company (“GHC”) in exchange for 1,620,190 shares of GHC common stock with an aggregate fair value of $1.13 billion. WPLG operates a Miami, Florida, ABC affiliated television station. At their respective acquisition dates, assets of PSPI and WPLG included cash of $778 million. WPLG assets also included 2,107 shares of Berkshire Hathaway Class A and 1,278 shares of Class B common stock. The aggregate fair value of the identified net assets related to these acquisitions was approximately $2.2 billion and the residual goodwill was approximately $1.4 billion.

During the last three years, we also completed several smaller-sized business acquisitions, primarily “bolt-on” acquisitions by our existing business operations. Aggregate consideration paid for these other business acquisitions was approximately $1.4 billion in 2016, $1.1 billion in 2015 and $1.8 billion in 2014. We do not believe that these acquisitions were material to our Consolidated Financial Statements.

(3)	Investments in fixed maturity securities

Investments in securities with fixed maturities as of December 31, 2016 and 2015 are summarized by type below (in millions).

		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value
December 31, 2016
U.S. Treasury, U.S. government corporations and agencies		$	4,519			$	16			$	(8	)		$	4,527
States, municipalities and political subdivisions			1,159				58				(1	)			1,216
Foreign governments			8,860				207				(66	)			9,001
Corporate bonds			6,899				714				(9	)			7,604
Mortgage-backed securities			997				126				(6	)			1,117
		$	22,434			$	1,121			$	(90	)		$	23,465
December 31, 2015
U.S. Treasury, U.S. government corporations and agencies		$	3,425			$	10			$	(8	)		$	3,427
States, municipalities and political subdivisions			1,695				71				(2	)			1,764
Foreign governments			11,327				226				(85	)			11,468
Corporate bonds			7,323				632				(29	)			7,926
Mortgage-backed securities			1,279				168				(5	)			1,442
		$	25,049			$	1,107			$	(129	)		$	26,027

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(3)	Investments in fixed maturity securities (Continued)

Investments in fixed maturity securities are reflected in our Consolidated Balance Sheets as follows (in millions).

		December 31,
		2016				2015
Insurance and other		$	23,432			$	25,988
Finance and financial products			33				39
		$	23,465			$	26,027

Investments in foreign government securities include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of December 31, 2016, approximately 92% of foreign government holdings were rated AA or higher by at least one of the major rating agencies. Approximately 81% of foreign government holdings were issued or guaranteed by the United Kingdom, Germany, Australia or Canada.

The amortized cost and estimated fair value of securities with fixed maturities at December 31, 2016 are summarized below by contractual maturity dates. Actual maturities may differ from contractual maturities due to early call or prepayment rights held by issuers. Amounts are in millions.

		Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years				Mortgage- backed securities				Total
Amortized cost		$	8,508			$	9,886			$	805			$	2,238			$	997			$	22,434
Fair value			8,573				10,219				872				2,684				1,117				23,465

(4)	Investments in equity securities

Investments in equity securities as of December 31, 2016 and 2015 are summarized based on the primary industry of the investee in the table below (in millions).

		Cost Basis				Unrealized Gains				Unrealized Losses				Fair Value
December 31, 2016*
Banks, insurance and finance		$	19,852			$	30,572			$	—			$	50,424
Consumer products			10,657				16,760				(9	)			27,408
Commercial, industrial and other			35,868				9,033				(701	)			44,200
		$	66,377			$	56,365			$	(710	)		$	122,032

*	Approximately 56% of the aggregate fair value was concentrated in the equity securities of four companies (American Express Company—$11.2 billion; Wells Fargo & Company—$27.6 billion; International Business Machines Corporation (“IBM”)—$13.5 billion; and The Coca-Cola Company—$16.6 billion).

		Cost Basis				Unrealized Gains				Unrealized Losses				Fair Value
December 31, 2015*
Banks, insurance and finance		$	20,026			$	27,965			$	(21	)		$	47,970
Consumer products			7,147				18,057				(1	)			25,203
Commercial, industrial and other			35,417				6,785				(3,238	)			38,964
		$	62,590			$	52,807			$	(3,260	)		$	112,137

*	Approximately 59% of the aggregate fair value was concentrated in the equity securities of four companies (American Express Company—$10.5 billion; Wells Fargo & Company—$27.2 billion; IBM—$11.2 billion; and The Coca-Cola Company—$17.2 billion).

As of December 31, 2016 and 2015, we concluded that the unrealized losses shown in the tables above were temporary. Our conclusions were based on: (a) our ability and intent to hold the securities to recovery; (b) our assessment that the

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(4)	Investments in equity securities (Continued)

underlying business and financial condition of each of these issuers was favorable; (c) our opinion that the relative price declines were not significant; and (d) our belief that market prices will increase to and exceed our cost. As of December 31, 2016 and 2015, unrealized losses on equity securities in a continuous unrealized loss position for more than twelve consecutive months were $551 million and $989 million, respectively.

Investments in equity securities are reflected in our Consolidated Balance Sheets as follows (in millions).

		December 31,
		2016				2015
Insurance and other		$	120,471			$	110,527
Railroad, utilities and energy *			1,186				1,238
Finance and financial products			375				372
		$	122,032			$	112,137

*	Included in other assets.

(5)	Other investments

Other investments include preferred stock of Bank of America Corporation (“BAC”), warrants to purchase common stock of BAC and preferred stock of Restaurant Brands International, Inc. (“RBI”) and in 2015 also included preferred stock of Wm. Wrigley Jr. Company (“Wrigley”) and The Dow Chemical Company (“Dow”). Other investments are classified as available-for-sale and carried at fair value and are shown in our Consolidated Balance Sheets as follows (in millions).

		Cost								Fair Value
		December 31,								December 31,
		2016				2015				2016				2015
Insurance and other		$	6,720			$	9,690			$	14,364			$	15,683
Finance and financial products			1,000				3,052				2,892				5,719
		$	7,720			$	12,742			$	17,256			$	21,402

In 2008, we purchased $2.1 billion of Wrigley preferred stock pursuant to a shareholder agreement in conjunction with Mars Incorporated’s (“Mars”) acquisition of Wrigley. Pursuant to certain put and call provisions in the shareholder agreement, up to 50% of our original investment was redeemable over a 90-day period scheduled to begin on October 6, 2016. In September 2016, pursuant to an agreement entered into in August 2016, Mars acquired all of our Wrigley preferred stock for approximately $4.56 billion, which included a prorated dividend that would have otherwise been payable in October 2016.

In 2009, we acquired 3,000,000 shares of Series A Cumulative Convertible Perpetual Preferred Stock of Dow (“Dow Preferred”) for approximately $3 billion. In December 2016, Dow exercised its option to convert the Dow Preferred into 72.6 million shares of common stock. As of December 31, 2016, all shares of common stock received upon the conversion had been sold. The Dow Preferred was entitled to dividends at a rate of 8.5% per annum.

We currently own 50,000 shares of 6% Non-Cumulative Perpetual Preferred Stock of BAC (“BAC Preferred”) with a liquidation value of $100,000 per share and warrants to purchase 700,000,000 shares of common stock of BAC (“BAC Warrants”). The BAC Preferred is redeemable at the option of BAC beginning on May 7, 2019 at a redemption price of $105,000 per share (or $5.25 billion in aggregate). The BAC Warrants expire in 2021 and are exercisable for an additional aggregate cost of $5 billion ($7.142857/share).

We currently own Class A 9% Cumulative Compounding Perpetual Preferred Shares of RBI (“RBI Preferred”) having a stated value of $3 billion. RBI, domiciled in Canada, is the ultimate parent company of Burger King and Tim Hortons. The RBI Preferred is entitled to dividends on a cumulative basis of 9% per annum plus an additional amount, if necessary, to produce an after-tax yield to Berkshire as if the dividends were paid by a U.S.-based company. The RBI Preferred is redeemable at the option of RBI beginning on December 12, 2017. If not redeemed prior to December 12, 2024, we can cause RBI to redeem the RBI Preferred. In either case, the redemption price will be 109.9% of the stated value of such shares.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(6)	Investments in The Kraft Heinz Company

On June 7, 2013, Berkshire and an affiliate of the global investment firm 3G Capital (such affiliate, “3G”), each made equity investments in H.J. Heinz Holding Corporation (“Heinz Holding”), which, together with debt financing obtained by Heinz Holding, was used to acquire H. J. Heinz Company (“Heinz”). Berkshire’s initial investments consisted of 425 million shares of Heinz Holding common stock; warrants, which we exercised in June 2015, to acquire approximately 46 million additional shares of common stock at one cent per share; and cumulative compounding preferred stock (“Preferred Stock”) with a liquidation preference of $8 billion. The aggregate cost of our investments was $12.25 billion. 3G also acquired 425 million shares of Heinz Holding common stock for $4.25 billion. On June 7, 2016, our Preferred Stock investment was redeemed for cash of $8.32 billion. Prior to its redemption, the Preferred Stock was entitled to dividends at 9% per annum. Dividends earned on the Preferred Stock were $180 million in 2016, $852 million in 2015 and $720 million in 2014 and are included in interest, dividends and other investment income.

On July 1, 2015, Berkshire acquired 262.9 million shares of newly issued common stock of Heinz Holding for $5.26 billion and 3G acquired 237.1 million shares of newly issued common stock of Heinz Holding for $4.74 billion. Immediately thereafter, Heinz Holding executed a reverse stock split at a rate of 0.443332 of a share for each share. As of that date, Berkshire owned 52.5% of Heinz Holding’s outstanding common stock.

On July 2, 2015, Heinz Holding acquired Kraft Foods Group, Inc. (“Kraft”). Upon completion of the acquisition, Heinz Holding was renamed The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy products, meats, refreshment beverages, coffee, and other grocery products. Kraft Heinz’s leading brands include Kraft, Heinz, ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.

In connection with the acquisition of Kraft, its shareholders received one share of newly issued Kraft Heinz common stock for each share of Kraft common stock and a special cash dividend of $16.50 per share. Following the issuance of these additional shares, Berkshire and 3G together owned approximately 51% of the outstanding Kraft Heinz common stock, with Berkshire owning approximately 26.8% and 3G owning 24.2%. We accounted for our investment in Heinz Holding common stock and continue to account for our investment in Kraft Heinz common stock on the equity method. In applying the equity method, the investor treats an investee’s issuance of shares as if the investor had sold a proportionate share of its investment. As a result, we recorded a non-cash pre-tax holding gain of approximately $6.8 billion in 2015, representing the excess of the fair value of Kraft Heinz common stock at the date of the merger over the carrying value associated with the reduction in our ownership.

A summary of our investments in Kraft Heinz follows (in millions).

		Carrying Value
		December 31, 2016				December 31, 2015
Common stock		$	15,345			$	15,714
Preferred Stock			—				7,710
		$	15,345			$	23,424

Our equity method earnings (losses) on the common stock were $923 million in 2016, $(122) million in 2015 and $(26) million in 2014. Common stock dividends received were $952 million in 2016 and $366 million in 2015.

Summarized consolidated financial information of Kraft Heinz follows (in millions).

		December 31, 2016				January 3, 2016
Assets		$	120,480			$	122,973
Liabilities			62,906				56,737

		Year ending December 31, 2016				Year ending January 3, 2016				Year ending December 28, 2014
Sales		$	26,487			$	18,338			$	10,922
Net earnings		$	3,632			$	634			$	657
Net earnings (loss) attributable to common shareholders		$	3,452			$	(266	)		$	(63	)

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(7)	Investment gains/losses

Investment gains/losses, including other-than-temporary impairment (“OTTI”) losses, for each of the three years ending December 31, 2016 are summarized below (in millions).

		2016				2015				2014
Fixed maturity securities—
Gross gains from sales and other disposals		$	58			$	104			$	360
Gross losses from sales and other disposals			(50	)			(171	)			(89	)
Equity securities—
Gross gains from sales and redemptions			7,853				9,526				4,016
Gross losses from sales and redemptions			(334	)			(103	)			(125	)
OTTI losses			(82	)			(26	)			(697	)
Other			108				43				110
		$	7,553			$	9,373			$	3,575

Gains from sales and redemptions of equity securities in 2016 included approximately $2.4 billion from the disposition of our investment in Wrigley preferred stock, $610 million from the redemption of our investment in Kraft Heinz Preferred Stock, $1.2 billion upon the conversion of our investment in Dow Preferred and a non-cash holding gain of approximately $1.1 billion from the exchange of our P&G common stock in the acquisition of Duracell. The non-cash gain from the P&G/Duracell exchange represented the excess of the fair value of net assets of Duracell over the cost basis of the P&G stock exchanged.

Gains from sales and redemptions of equity securities in 2015 included a non-cash holding gain of approximately $6.8 billion in connection with our investment in Kraft Heinz common stock (see Note 6). Gains from sales and redemptions of equity securities during 2014 included non-cash holding gains of approximately $2.1 billion from the exchange of Phillips 66 (“PSX”) common stock in connection with the acquisition of Phillips Specialty Products Inc. (currently named LiquidPower Specialty Products Inc. (“LSPI”)) and the exchange of Graham Holding Company (“GHC”) common stock for WPLG, Inc. (“WPLG”). These holding gains represented the excess of the respective fair value of the net assets of LSPI and WPLG received over the respective cost basis of the PSX and GHC shares exchanged.

We record investments in equity and fixed maturity securities classified as available-for-sale at fair value and record the difference between fair value and cost in other comprehensive income. OTTI losses recognized in earnings represent reductions in the cost basis of the investment, but not the fair value. Accordingly, such losses that are included in earnings are generally offset by a credit to other comprehensive income, producing no net effect on shareholders’ equity as of the balance sheet date. In 2014, we recorded an OTTI charge of $678 million related to our investment in equity securities of Tesco PLC.

(8)	Inventories

Inventories are comprised of the following (in millions).

		December 31,
		2016				2015
Raw materials		$	2,789			$	1,852
Work in process and other			2,506				778
Finished manufactured goods			4,033				3,369
Goods acquired for resale			6,399				5,917
		$	15,727			$	11,916

Inventories at December 31, 2016 included approximately $3.5 billion related to PCC and Duracell.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(9)	Receivables

Receivables of insurance and other businesses are comprised of the following (in millions).

		December 31,
		2016				2015
Insurance premiums receivable		$	10,462			$	8,843
Reinsurance recoverable on unpaid losses			3,338				3,307
Trade and other receivables			13,630				11,521
Allowances for uncollectible accounts			(333	)			(368	)
		$	27,097			$	23,303

Trade and other receivables at December 31, 2016 included approximately $1.8 billion related to PCC and Duracell.

Loans and finance receivables of finance and financial products businesses are summarized as follows (in millions).

		December 31,
		2016				2015
Loans and finance receivables before allowances and discounts		$	13,728			$	13,186
Allowances for uncollectible loans			(182	)			(182	)
Unamortized acquisition discounts			(246	)			(232	)
		$	13,300			$	12,772

Loans and finance receivables are predominantly installment loans originated or acquired by our manufactured housing business. Provisions for loan losses for 2016 and 2015 were $144 million and $148 million, respectively. Loan charge-offs, net of recoveries, were $144 million in 2016 and $177 million in 2015. At December 31, 2016, approximately 98% of the loan balances were evaluated collectively for impairment. As part of the evaluation process, credit quality indicators are reviewed and loans are designated as performing or non-performing. At December 31, 2016, approximately 98% of the loan balances were determined to be performing and approximately 94% of the loan balances were current as to payment status.

(10)	Property, plant and equipment and assets held for lease

A summary of property, plant and equipment of our insurance and other businesses follows (in millions).

		Ranges of estimated useful life				December 31,
			2016				2015
Land			—			$	2,108			$	1,689
Buildings and improvements			5 – 40 years				8,360				7,329
Machinery and equipment			3 – 25 years				20,463				17,054
Furniture, fixtures and other			2 – 15 years				4,080				3,545
							35,011				29,617
Accumulated depreciation							(15,686	)			(14,077	)
						$	19,325			$	15,540

Property, plant and equipment at December 31, 2016 included approximately $3.3 billion related to PCC and Duracell.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(10)	Property, plant and equipment and assets held for lease (Continued)

A summary of property, plant and equipment of our railroad and our utilities and energy businesses follows (in millions).

		Ranges of estimated useful life				December 31,
		2016				2015
Railroad:
Land			—			$	6,063			$	6,037
Track structure and other roadway			7 – 100 years				48,277				45,967
Locomotives, freight cars and other equipment			6 – 40 years				12,075				11,320
Construction in progress			—				965				1,031
							67,380				64,355
Accumulated depreciation							(6,130	)			(4,845	)
							61,250				59,510
Utilities and energy:
Utility generation, transmission and distribution systems			5 – 80 years				71,536				69,248
Interstate natural gas pipeline assets			3 – 80 years				6,942				6,755
Independent power plants and other assets			3 – 30 years				6,596				5,626
Construction in progress			—				2,098				2,627
							87,172				84,256
Accumulated depreciation							(24,663	)			(23,487	)
							62,509				60,769
						$	123,759			$	120,279

The utility generation, transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries.

Assets held for lease and property, plant and equipment of our finance and financial products businesses are summarized below (in millions).

		Ranges of estimated useful life				December 31,
		2016				2015
Assets held for lease			5 – 35 years			$	11,902			$	11,317
Land			—				224				220
Buildings, machinery and other			3 – 50 years				1,302				1,207
							13,428				12,744
Accumulated depreciation							(3,739	)			(3,397	)
						$	9,689			$	9,347

Assets held for lease includes railcars, intermodal tank containers, cranes, over-the-road trailers, storage units and furniture. As of December 31, 2016, the minimum future lease rentals to be received on assets held for lease (including rail cars leased from others) were as follows (in millions): 2017 – $1,251; 2018 – $992; 2019 – $744; 2020 – $543; 2021 – $358; and thereafter – $525.

Depreciation expense for each of the three years ending December 31, 2016 is summarized below (in millions).

		2016				2015				2014
Insurance and other		$	2,148			$	1,680			$	1,632
Railroad, utilities and energy			4,639				4,383				3,981
Finance and financial products			624				610				602
		$	7,411			$	6,673			$	6,215

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(11)	Goodwill and other intangible assets

A reconciliation of the change in the carrying value of goodwill is as follows (in millions).

		December 31,
		2016				2015
Balance at beginning of year		$	62,708			$	60,714
Acquisitions of businesses			17,650				2,563
Other, including foreign currency translation			(872	)			(569	)
Balance at end of year		$	79,486			$	62,708

Other intangible assets are summarized as follows (in millions).

		December 31, 2016								December 31, 2015
		Gross carrying amount				Accumulated amortization				Gross carrying amount				Accumulated amortization
Insurance and other		$	39,976			$	6,495			$	14,610			$	5,462
Railroad, utilities and energy			898				293				888				239
		$	40,874			$	6,788			$	15,498			$	5,701
Trademarks and trade names		$	5,175			$	616			$	3,041			$	765
Patents and technology			4,341				2,328				4,252				2,050
Customer relationships			28,243				2,879				5,474				2,131
Other			3,115				965				2,731				755
		$	40,874			$	6,788			$	15,498			$	5,701

Amortization expense was $1,490 million in 2016, $1,106 million in 2015 and $1,155 million in 2014. Estimated amortization expense over the next five years is as follows (in millions): 2017 – $1,383; 2018 – $1,349; 2019 – $1,229; 2020 – $1,131 and 2021 – $1,042. Intangible assets with indefinite lives as of December 31, 2016 and 2015 were $18,705 million and $2,964 million, respectively. Other intangible assets at December 31, 2016 included assets of PCC and Duracell of approximately $24.8 billion, which included approximately $13.6 billion in customer relationships and $2.3 billion in trade names that were determined to have indefinite lives.

(12)	Derivative contracts

Derivative contracts have been entered into primarily through our finance and financial products and our utilities and energy businesses. A summary of the liabilities and related notional values of derivative contracts of our finance and financial products businesses follows (in millions).

		December 31, 2016								December 31, 2015
		Liabilities				Notional Value				Liabilities				Notional Value
Equity index put options		$	2,890			$	26,497	(1)		$	3,552			$	27,722	(1)
Credit default (2)			—				—				284				7,792
		$	2,890							$	3,836

(1)	Represents the aggregate undiscounted amounts payable assuming that the value of each index is zero at each contract’s expiration date. Certain of these contracts are denominated in foreign currencies. Notional amounts are based on the foreign currency exchange rates as of each balance sheet date.

(2)	In July 2016, our remaining credit default contract was terminated by mutual agreement with the counterparty. We no longer have any exposure to losses under credit default contracts.

The derivative contract liabilities of our finance and financial products businesses are recorded at fair value and the changes in the fair values of such contracts are reported in earnings as derivative gains/losses. We entered into these contracts

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(12)	Derivative contracts (Continued)

with the expectation that the premiums received would exceed the amounts ultimately paid to counterparties. A summary of the derivative gains/losses included in our Consolidated Statements of Earnings in each of the three years ending December 31, 2016 follows (in millions).

		2016				2015				2014
Equity index put options		$	662			$	1,008			$	108
Credit default and other			89				(34	)			398
		$	751			$	974			$	506

The equity index put option contracts are European style options written between 2004 and 2008 on four major equity indexes. These contracts expire between June 2018 and January 2026. Future payments, if any, under any given contract will be required if the prevailing index value is below the contract strike price at the expiration date. We received the premiums on these contracts at the inception dates and therefore we have no counterparty credit risk.

The aggregate intrinsic value (the undiscounted liability assuming the contracts are settled based on the index values and foreign currency exchange rates as of the balance sheet date) of our equity index put option contracts was approximately $1.0 billion at December 31, 2016 and $1.1 billion at December 31, 2015. However, these contracts may not be unilaterally terminated or fully settled before the expiration dates. Therefore, the ultimate amount of cash basis gains or losses on these contracts will not be determined for several years. The remaining weighted average life of all contracts was approximately four years at December 31, 2016.

A limited number of our equity index put option contracts contain collateral posting requirements with respect to changes in the fair value or intrinsic value of the contracts and/or a downgrade of Berkshire’s credit ratings. As of December 31, 2016, we did not have any collateral posting requirements. If Berkshire’s credit ratings (currently AA from Standard & Poor’s and Aa2 from Moody’s) are downgraded below either A- by Standard & Poor’s or A3 by Moody’s, collateral of up to $1.1 billion could be required to be posted.

Our regulated utility subsidiaries are exposed to variations in the prices of fuel required to generate electricity, wholesale electricity purchased and sold and natural gas supplied for customers. Derivative instruments, including forward purchases and sales, futures, swaps and options, are used to manage a portion of these price risks. Derivative contract assets are included in other assets and were $142 million as of December 31, 2016 and $103 million as of December 31, 2015. Derivative contract liabilities are included in accounts payable, accruals and other liabilities and were $145 million as of December 31, 2016 and $237 million as of December 31, 2015. Net derivative contract assets or liabilities of our regulated utilities that are probable of recovery through rates, are offset by regulatory liabilities or assets. Unrealized gains or losses on contracts accounted for as cash flow or fair value hedges are recorded in other comprehensive income or in net earnings, as appropriate.

(13)	Supplemental cash flow information

A summary of supplemental cash flow information for each of the three years ending December 31, 2016 is presented in the following table (in millions).

		2016				2015				2014
Cash paid during the period for:
Income taxes		$	4,719			$	4,535			$	4,014
Interest:
Insurance and other businesses			555				346				360
Railroad, utilities and energy businesses			2,788				2,717				2,487
Finance and financial products businesses			389				403				465
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions			16,555				2,812				6,334
Equity securities exchanged in connection with business acquisitions			4,239				—				2,478
Treasury stock acquired in connection with business acquisition			—				—				400
Conversions and other exchanges of investments			4,154				1,597				—

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Unpaid losses and loss adjustment expenses

The liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under our short duration property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. A reconciliation of the changes in claim liabilities for each of the three years ending December 31, 2016 is as follows (in millions).

		2016				2015				2014
Unpaid losses and loss adjustment expenses—beginning of year:
Gross liabilities		$	73,144			$	71,477			$	64,866
Reinsurance recoverable and deferred charges			(10,994	)			(10,888	)			(7,414	)
Net balance			62,150				60,589				57,452
Incurred losses and loss adjustment expenses recorded during the year:
Current accident year events			30,636				27,829				24,335
Prior accident years’ events			(1,512	)			(2,014	)			(2,280	)
Retroactive reinsurance and discount accretion			1,782				712				4,351
Total incurred losses and loss adjustment expenses			30,906				26,527				26,406
Paid losses and loss adjustment expenses during the year with respect to:
Current accident year events			(14,898	)			(13,070	)			(11,291	)
Prior accident years’ events			(10,958	)			(10,268	)			(10,297	)
Retroactive reinsurance			(1,130	)			(1,151	)			(1,082	)
Total payments			(26,986	)			(24,489	)			(22,670	)
Foreign currency translation adjustment			(537	)			(545	)			(666	)
Business acquisitions			—				68				67
Unpaid losses and loss adjustment expenses—end of year:
Net balance			65,533				62,150				60,589
Reinsurance recoverable and deferred charges			11,385				10,994				10,888
Gross liabilities		$	76,918			$	73,144			$	71,477

Incurred losses and loss adjustment expenses in the preceding table reflect the losses and loss adjustment expenses recorded in earnings in each year related to insured events occurring in the current year and in prior years. We present incurred and paid losses under retroactive reinsurance contracts and discount accretion separately. Such amounts relate to prior years’ underlying loss events. Additionally, we discount unpaid losses from certain workers’ compensation reinsurance contracts. Discounted workers’ compensation liabilities at December 31, 2016 and 2015 were approximately $1.9 billion and $2.0 billion, respectively, reflecting net discounts of $1.4 billion and $1.6 billion.

Incurred losses and loss adjustment expenses reflected reductions for prior years’ insured events of approximately $1.5 billion in 2016, $2.0 billion in 2015 and $2.3 billion in 2014. In each year, these reductions derived from our direct insurance business (including private passenger automobile and medical malpractice and workers’ compensation coverages), as well as from reinsurance business. The reductions for our reinsurance business were primarily attributable to lower than expected reported losses from ceding companies with respect to property coverages.

Estimated claim liabilities for environmental, asbestos and other latent injury exposures, net of reinsurance recoverables, were approximately $15.3 billion at December 31, 2016 and $14.0 billion at December 31, 2015, and included approximately $13.7 billion at December 31, 2016 and $12.4 billion at December 31, 2015 from retroactive reinsurance contracts. Retroactive reinsurance contracts are generally subject to aggregate policy limits and thus, our exposure to such claims under these contracts is likewise limited. We monitor evolving case law and its effect on environmental and other latent injury claims. Changing government regulations, newly identified toxins, newly reported claims, new theories of liability, new contract interpretations and other factors could result in increases in these liabilities. Such development could be material to our results of operations. We are unable to reliably estimate the amount of additional net loss or the range of net loss that is reasonably possible.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Unpaid losses and loss adjustment expenses (Continued)

A reconciliation of certain net unpaid losses and allocated loss adjustment expenses (the latter referred to as “ALAE”) of GEICO, General Re, Berkshire Hathaway Reinsurance Group (“BHRG”) and Berkshire Hathaway Primary Group (“BH Primary”) to our consolidated unpaid losses and loss adjustment expenses as of December 31, 2016, along with a discussion regarding each group’s liability estimation processes, follows.

		December 31, 2016
		(in millions)
Unpaid losses and ALAE, net of reinsurance recoverable:
GEICO		$	12,981
General Re			13,973
BHRG			10,172
BH Primary			10,173			$	47,299
Reinsurance recoverable:
GEICO			1,084
General Re			611
BHRG			121
BH Primary			1,099				2,915
Retroactive reinsurance, unpaid losses and loss adjustment expenses							24,675
Other short-duration contracts, unpaid losses and loss adjustment expenses							1,390
Discount on workers’ compensation reinsurance liabilities							(1,433	)
Unpaid unallocated loss adjustment expenses							2,072
Unpaid losses and loss adjustment expenses						$	76,918

GEICO

For GEICO, we establish and evaluate unpaid claim liabilities using standard actuarial loss development methods and techniques. The actuarial methods utilize historical claims data, adjusted when deemed appropriate to reflect perceived changes in loss patterns.

We establish average liabilities based on expected severities for newly reported physical damage and liability claims prior to establishing an individual case reserve when we have insufficient time and information to make specific claim estimates and for a large number of minor physical damage claims that are paid shortly after being reported. We establish liability case loss estimates, which includes loss adjustment expenses, once the facts and merits of the claim are evaluated.

Estimates for liability coverages are more uncertain primarily due to the longer claim-tails, the greater chance of protracted litigation and the incompleteness of facts at the time the case estimate is first established. The “claim-tail” is the time period between the claim occurrence date and settlement date. As a result, we establish additional case development liabilities, which are usually percentages of the case liabilities. For unreported claims, IBNR liabilities are estimated by projecting the ultimate number of claims expected (reported and unreported) for each significant coverage and deducting reported claims to produce estimated unreported claims. The product of the average cost per unreported claim and the number of unreported claims produces the IBNR liability estimate. We may record supplemental IBNR liabilities in certain situations when actuarial techniques are difficult to apply.

GEICO’s claims are counted when accidents that may result in a liability are reported and are based on policy coverage. Each claim event may generate claims under multiple coverages, and thus may result in multiple counts. The “Cumulative Number of Reported Claims” in the table which follows includes the combined number of reported claims for all policy coverages and excludes projected IBNR claims.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Unpaid losses and loss adjustment expenses (Continued)

GEICO’s claim liabilities predominantly relate to various types of private passenger auto liability and physical damage claims. Aggregate incurred and paid loss and ALAE data by accident year for these claims, net of reinsurance, follows. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.

Accident Year		Incurred Losses and ALAE through December 31,																				IBNR and Case Development Liabilities				Cumulative Number of Reported Claims (in thousands)
	2012*				2013*				2014*				2015*				2016
2012		$	12,034			$	11,904			$	11,893			$	11,906			$	11,900			$	79				6,459
2013							12,990				12,815				12,859				12,837				184				7,102
2014											14,597				14,488				14,477				539				7,965
2015															16,807				16,798				1,394				8,891
2016																			18,982				3,132				9,336
			Incurred losses and ALAE															$	74,994

Accident Year		Cumulative Paid Losses and ALAE through December 31,
	2012*				2013*				2014*				2015*				2016
2012		$	7,550			$	9,832			$	10,744			$	11,311			$	11,609
2013							7,944				10,494				11,569				12,174
2014											9,133				11,956				13,060
2015															10,543				13,785
2016																			11,927
			Paid losses and ALAE																62,555
Net unpaid losses and ALAE for 2012—2016 accident years																			12,439
Net unpaid losses and ALAE for accident years before 2012*																			542
Net unpaid losses and ALAE																		$	12,981

*	Unaudited supplemental information

General Re

General Re’s liabilities for unpaid losses and loss adjustment expenses include case and IBNR estimates and primarily relate to casualty and workers’ compensation coverages. Case losses are reported under reinsurance contracts either individually or in bulk as provided under the terms of the contracts. We independently evaluate reported loss amounts and if deemed appropriate, we establish case liabilities based on our estimates.

We primarily use Bornhuetter—Ferguson methods to estimate IBNR amounts for claims liabilities. The expected case loss emergence patterns and expected loss ratios are the critical assumptions applicable to these estimates. Once the annual IBNR liabilities are determined, we estimate the expected case loss emergence for the next calendar year based on the prior year-end expected loss emergence patterns and expected loss ratios. Liability estimates also include estimates of the impact of major catastrophe events as they become known, which rely more on a per-policy assessment of the ultimate cost associated with the individual loss event. Claim count data is excluded, as such information is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Unpaid losses and loss adjustment expenses (Continued)

General Re’s incurred and paid loss and ALAE data by accident year, net of reinsurance, is presented in the following tables. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.

Accident Year		Incurred Losses and ALAE through December 31,																																								IBNR and Case Development Liabilities
	2007*				2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016
2007		$	1,857			$	1,915			$	1,852			$	1,746			$	1,673			$	1,619			$	1,574			$	1,559			$	1,535			$	1,512			$	73
2008							1,920				2,011				1,903				1,818				1,746				1,713				1,669				1,648				1,635				93
2009											1,703				1,790				1,704				1,601				1,523				1,490				1,471				1,431				125
2010															1,881				2,055				1,939				1,845				1,757				1,712				1,674				156
2011																			2,102				2,126				1,897				1,792				1,744				1,669				208
2012																							1,810				1,850				1,707				1,603				1,535				335
2013																											1,945				2,095				1,994				1,854				417
2014																															1,740				1,843				1,794				578
2015																																			1,811				1,999				777
2016																																							1,715				1,173
											Incurred losses and ALAE																											$	16,818

Accident Year		Cumulative Paid Losses and ALAE through December 31,
	2007*				2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016
2007		$	282			$	821			$	1,020			$	1,132			$	1,195			$	1,238			$	1,291			$	1,309			$	1,322			$	1,335
2008							330				894				1,074				1,187				1,246				1,289				1,315				1,330				1,354
2009											264				734				897				994				1,065				1,115				1,145				1,161
2010															247				782				997				1,147				1,243				1,304				1,359
2011																			302				841				1,086				1,190				1,259				1,317
2012																							199				664				829				916				991
2013																											275				829				1,060				1,162
2014																															171				666				864
2015																																			207				693
2016																																							171
											Paid losses and ALAE																												10,407
							Net unpaid losses and ALAE for 2007—2016 accident years																																6,411
							Net unpaid losses and ALAE for accident years before 2007*																																7,562
							Net unpaid losses and ALAE																															$	13,973

*	Unaudited supplemental information

BHRG

BHRG’s liabilities for losses and ALAE are principally a function of reported losses from ceding companies and IBNR and case development liability estimates which are based on expected loss ratios established on a portfolio basis. Liability estimates also include estimates of the impact of major catastrophe events, as they become known, which rely more on a per-policy assessment of the ultimate cost associated with the individual loss event. The expected loss ratios are based upon management’s judgment considering the type of business covered, analysis of each ceding company’s loss history and evaluation of the portion of the underlying contracts that we reinsure. Claim count data is excluded, as such information is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Unpaid losses and loss adjustment expenses (Continued)

BHRG’s incurred and paid loss and ALAE data by accident year, net of reinsurance, is presented in the following tables. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.

Accident Year		Incurred Losses and ALAE through December 31,**																																								IBNR and Case Development Liabilities
	2007*				2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016
2007		$	1,810			$	1,756			$	1,659			$	1,658			$	1,652			$	1,590			$	1,583			$	1,560			$	1,500			$	1,471			$	133
2008							3,388				3,130				2,988				2,903				2,835				2,748				2,683				2,605				2,578				244
2009											2,974				2,858				2,989				2,926				2,847				2,759				2,691				2,668				215
2010															2,876				2,974				2,883				2,771				2,610				2,575				2,551				238
2011																			4,418				4,544				4,358				4,440				4,389				4,365				452
2012																							4,054				3,878				3,648				3,583				3,531				694
2013																											3,326				3,144				2,935				2,832				733
2014																															2,688				2,585				2,492				736
2015																																			3,207				3,070				1,113
2016																																							3,390				1,907
											Incurred losses and ALAE																											$	28,948

Accident Year		Cumulative Paid Losses and ALAE through December 31,**
	2007*				2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016
2007		$	171			$	677			$	891			$	993			$	1,055			$	1,120			$	1,170			$	1,196			$	1,211			$	1,221
2008							364				1,146				1,617				1,836				1,976				2,056				2,131				2,205				2,228
2009											372				1,182				1,605				1,937				2,147				2,306				2,336				2,363
2010															193				889				1,414				1,736				2,041				2,119				2,177
2011																			552				2,130				2,872				3,315				3,475				3,600
2012																							360				1,279				2,080				2,350				2,519
2013																											516				1,070				1,555				1,774
2014																															437				1,031				1,319
2015																																			550				1,354
2016																																							778
											Paid losses and ALAE																												19,333
							Net unpaid losses and ALAE for 2007—2016 accident years																																9,615
							Net unpaid losses and ALAE for accident years before 2007*																																557
							Net unpaid losses and ALAE																															$	10,172

*	Unaudited supplemental information

**	Excludes retroactive reinsurance losses and ALAE

BH Primary

BH Primary’s liabilities for unpaid losses and ALAE primarily derive from workers’ compensation, medical professional and other liability insurance. Other liability insurance includes commercial auto and general liability policies. We periodically evaluate ultimate unpaid loss and ALAE estimates for the workers’ compensation and general liability lines using a combination of commonly accepted actuarial methodologies, such as the Bornhuetter—Ferguson and chain-ladder approaches using paid and incurred loss data. Paid and incurred loss data is segregated into groups such as coverages, territories or other characteristics. We establish case liabilities for reported claims based upon the facts and circumstances of the claim. The excess of the ultimate projected losses, including the expected development of case estimates, and the case-basis liabilities is included in IBNR liabilities. For medical professional liabilities, we use a combination of the aforementioned methods, as well as other loss severity based methods. From these estimates, we determine our best estimate. Periodically, we study developments in older accident years and adjust initial loss estimates to reflect recent development based upon claim age, coverage and litigation experience. The cumulative number of reported claims reflects the number of individual claimants, and includes claim that ultimately result in no liability or payment.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Unpaid losses and loss adjustment expenses (Continued)

BH Primary’s incurred and paid loss and ALAE data by accident year, net of reinsurance, is presented in the following tables. IBNR and case development liabilities are as of December 31, 2016. Dollars are in millions.

Accident Year		Incurred Losses and ALAE through December 31,																																								IBNR and Case Development Liabilities				Cumulative Number of Reported Claims (in thousands)
	2007*				2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016
2007		$	1,328			$	1,233			$	1,174			$	1,090			$	955			$	901			$	852			$	817			$	788			$	775			$	46				137
2008							1,349				1,273				1,228				1,168				1,081				1,015				979				948				920				80				136
2009											1,298				1,211				1,180				1,159				1,068				1,020				966				936				99				117
2010															1,268				1,186				1,191				1,129				1,062				994				956				150				111
2011																			1,888				1,633				1,605				1,452				1,375				1,297				223				109
2012																							2,129				2,079				2,017				1,944				1,903				453				135
2013																											2,294				2,213				2,133				2,060				595				150
2014																															2,967				2,780				2,730				1,027				177
2015																																			3,575				3,458				1,631				188
2016																																							4,149				2,682				135
											Incurred losses and ALAE																											$	19,184

Accident Year		Cumulative Paid Losses and ALAE through December 31,
	2007*				2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016
2007		$	128			$	284			$	409			$	510			$	578			$	628			$	660			$	679			$	696			$	705
2008							174				333				464				578				662				728				772				795				810
2009											147				305				445				569				655				726				771				798
2010															146				313				458				570				657				722				758
2011																			163				396				602				753				898				973
2012																							211				598				844				1,053				1,208
2013																											350				706				985				1,197
2014																															453				896				1,247
2015																																			502				1,078
2016																																							634
											Paid losses and ALAE																												9,408
							Net unpaid losses and ALAE for 2007—2016 accident years																																9,776
							Net unpaid losses and ALAE for accident years before 2007*																																397
							Net unpaid losses and ALAE																															$	10,173

*	Unaudited supplemental information

Supplemental unaudited average historical claims duration information based on the net losses and ALAE incurred and paid accident year data in the preceding tables follows. The percentages show the average portions of net losses and ALAE paid by each succeeding year, with year 1 representing the current accident year.

		Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance
In Years		1				2				3				4				5				6				7				8				9				10
GEICO			62.2	%			19.6	%			8.0	%			4.8	%			2.7	%
Gen Re			14.8	%			31.0	%			12.2	%			6.8	%			4.6	%			3.2	%			2.6	%			1.1	%			1.2	%			0.9	%
BHRG			14.7	%			28.2	%			17.2	%			9.4	%			6.3	%			3.9	%			2.4	%			1.9	%			1.0	%			0.7	%
BH Primary			15.4	%			17.8	%			14.5	%			11.9	%			9.2	%			6.8	%			4.3	%			2.6	%			1.9	%			1.2	%

Retroactive Reinsurance

BHRG’s retroactive reinsurance contracts cover underlying loss events that occurred prior to the contract inception date, which are paid immediately after the contract date or once a contractual retention amount has been reached. As of December 31, 2016 approximately 83% of gross unpaid losses pertained to underlying loss events that occurred prior to January 2007. We do

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Unpaid losses and loss adjustment expenses (Continued)

not believe that analysis of losses incurred and paid by accident year of the underlying event is relevant or meaningful given that our exposure to losses incepts when the contract incepts. Further, we believe the classifications of reported claims and case development liabilities has no practical analytical value.

In establishing retroactive reinsurance liabilities, we often analyze historical aggregate loss payment patterns and project losses into the future under various scenarios. We expect the claim-tail to be very long for many contracts, with some lasting several decades. We assign judgmental probability factors to these aggregate loss payment scenarios and an expectancy outcome is determined. We monitor claim payment activity and review ceding company reports and other information concerning the underlying losses. Since the expected claim-tails are often very long, we reassess and revise the expected timing and amounts of ultimate losses periodically or when significant events are revealed through our monitoring and review processes.

Incurred losses and loss adjustment expenses attributable to retroactive reinsurance contracts included $1.26 billion in 2016 and $3.43 billion in 2014 from new contracts written in those years. Incurred losses related to retroactive reinsurance contracts written in prior years were $440 million in 2016, $631 million in 2015 and $831 million in 2014, which included recurring amortization of deferred charges and the effect of changes in the timing and amount of expected future loss payments.

(15)	Notes payable and other borrowings

Notes payable and other borrowings are summarized below (in millions). The weighted average interest rates and maturity date ranges shown in the following tables are based on borrowings as of December 31, 2016.

		Weighted Average Interest Rate				December 31,
		2016				2015
Insurance and other:
Issued by Berkshire due 2017-2047			2.2	%		$	17,703			$	9,799
Short-term subsidiary borrowings			2.5	%			2,094				1,989
Other subsidiary borrowings due 2017-2045			4.0	%			7,378				2,811
						$	27,175			$	14,599

In January 2016, Berkshire entered into a $10 billion 364-day revolving credit agreement and, in connection with the PCC acquisition, borrowed $10 billion. In March 2016, Berkshire issued €2.75 billion and $5.5 billion in senior unsecured notes. The notes consisted of €1.0 billion of 0.50% notes due in 2020, €1.0 billion of 1.30% notes due in 2024, €750 million of 2.15% notes due in 2028, $1.0 billion of 2.20% notes due in 2021, $2.0 billion of 2.75% notes due in 2023 and $2.5 billion of 3.125% notes due in 2026. The proceeds from these debt issues were used in the repayment of all outstanding borrowings under the aforementioned credit agreement, which was subsequently terminated. In August 2016, Berkshire issued $750 million in senior unsecured notes consisting of $500 million of 1.15% notes due in 2018 and $250 million of floating rate notes due in 2018, to replace $750 million of maturing debt. Other subsidiary borrowings at December 31, 2016 included $4.5 billion attributable to PCC.

		Weighted Average Interest Rate				December 31,
		2016				2015
Railroad, utilities and energy:
Issued by Berkshire Hathaway Energy Company (“BHE”) and its subsidiaries:
BHE senior unsecured debt due 2017-2045			5.1	%		$	7,818			$	7,814
Subsidiary and other debt due 2017-2064			4.7	%			29,223				28,188
Issued by BNSF due 2017-2097			4.8	%			22,044				21,737
						$	59,085			$	57,739

BHE subsidiary debt represents amounts issued pursuant to separate financing agreements. Substantially all of the assets of certain BHE subsidiaries are, or may be, pledged or encumbered to support or otherwise secure debt. These borrowing arrangements generally contain various covenants including, but not limited to, leverage ratios, interest coverage ratios and debt

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(15)	Notes payable and other borrowings (Continued)

service coverage ratios. In 2016, BHE subsidiaries issued approximately $1.8 billion of debt with maturity dates ranging from 2025 to 2046 and a weighted average interest rate of 3.0%.

BNSF’s borrowings are primarily senior unsecured debentures. In 2016, BNSF issued $750 million of senior unsecured 3.9% debentures due in 2046. As of December 31, 2016, BNSF, BHE and their subsidiaries were in compliance with all applicable debt covenants. Berkshire does not guarantee any debt, borrowings or lines of credit of BNSF, BHE or their subsidiaries.

		Weighted Average Interest Rate				December 31,
		2016				2015
Finance and financial products:
Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2017-2043			2.5	%		$	14,423			$	10,679
Issued by other subsidiaries due 2017-2036			4.9	%			961				1,272
						$	15,384			$	11,951

In March 2016, BHFC issued $3.5 billion of senior notes consisting of $750 million of 1.45% notes due in 2018, $1.0 billion of floating rate notes due in 2018, $1.25 billion of 1.70% notes due in 2019 and $500 million of floating rate notes due in 2019. In August 2016, BHFC issued $1.25 billion of senior notes consisting of $1 billion of 1.30% notes due in 2019 and $250 million of floating rate notes due in 2019, primarily to replace $1 billion of maturing debt. The borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, are fully and unconditionally guaranteed by Berkshire.

As of December 31, 2016, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $7.6 billion to support short-term borrowing programs and provide additional liquidity. Such unused lines of credit included about $4.0 billion related to BHE and its subsidiaries. In addition to BHFC’s borrowings, at December 31, 2016, Berkshire guaranteed approximately $3.3 billion of other subsidiary borrowings. Generally, Berkshire’s guarantee of a subsidiary’s debt obligation is an absolute, unconditional and irrevocable guarantee for the full and prompt payment when due of all payment obligations.

Principal repayments expected during each of the next five years are as follows (in millions).

		2017				2018				2019				2020				2021
Insurance and other		$	3,329			$	3,022			$	1,362			$	1,650			$	1,824
Railroad, utilities and energy			3,610				4,283				2,935				2,123				1,741
Finance and financial products			3,317				4,706				3,099				616				777
		$	10,256			$	12,011			$	7,396			$	4,389			$	4,342

(16)	Income taxes

The liabilities for income taxes reflected in our Consolidated Balance Sheets are as follows (in millions).

		December 31,
		2016				2015
Currently payable (receivable)		$	500			$	(643	)
Deferred			76,959				63,199
Other			485				570
		$	77,944			$	63,126

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(16)	Income taxes (Continued)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are shown below (in millions).

		December 31,
		2016				2015
Deferred tax liabilities:
Investments—unrealized appreciation and cost basis differences		$	27,669			$	25,117
Deferred charges reinsurance assumed			2,876				2,798
Property, plant and equipment			39,345				36,770
Goodwill and other intangible assets			11,344				2,770
Other			5,550				4,555
			86,784				72,010
Deferred tax assets:
Unpaid losses and loss adjustment expenses			(861	)			(887	)
Unearned premiums			(1,021	)			(927	)
Accrued liabilities			(3,821	)			(3,487	)
Other			(4,122	)			(3,510	)
			(9,825	)			(8,811	)
Net deferred tax liability		$	76,959			$	63,199

We have not established deferred income taxes on accumulated undistributed earnings of certain foreign subsidiaries. Such earnings were approximately $12.4 billion as of December 31, 2016 and are expected to remain reinvested indefinitely. Upon distribution as dividends or otherwise, such amounts would be subject to taxation in the U.S. and potentially in other countries. However, U.S. income tax liabilities would be offset, in whole or in part, by allowable tax credits deriving from income taxes previously paid to foreign jurisdictions. Further, repatriation of all accumulated earnings of foreign subsidiaries would be impracticable to the extent that such earnings represent capital needed to support normal business operations. As a result, we currently believe that any incremental U.S. income tax liabilities arising from the repatriation of distributable earnings of foreign subsidiaries would not be material.

Income tax expense reflected in our Consolidated Statements of Earnings for each of the three years ending December 31, 2016 is as follows (in millions).

		2016				2015				2014
Federal		$	7,796			$	9,253			$	6,447
State			556				578				560
Foreign			888				701				928
		$	9,240			$	10,532			$	7,935
Current		$	6,565			$	5,426			$	3,302
Deferred			2,675				5,106				4,633
		$	9,240			$	10,532			$	7,935

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(16)	Income taxes (Continued)

Income tax expense is reconciled to hypothetical amounts computed at the U.S. federal statutory rate for each of the three years ending December 31, 2016 in the table below (in millions).

		2016				2015				2014
Earnings before income taxes		$	33,667			$	34,946			$	28,105
Hypothetical income tax expense computed at the U.S. federal statutory rate		$	11,783			$	12,231			$	9,837
Dividends received deduction and tax exempt interest			(789	)			(1,146	)			(820	)
State income taxes, less U.S. federal income tax benefit			361				374				364
Foreign tax rate differences			(421	)			(459	)			(252	)
U.S. income tax credits			(518	)			(461	)			(333	)
Non-taxable exchange of investments			(1,143	)			—				(679	)
Other differences, net			(33	)			(7	)			(182	)
		$	9,240			$	10,532			$	7,935

We file income tax returns in the United States and in state, local and foreign jurisdictions. We are under examination by the taxing authorities in many of these jurisdictions. We have settled income tax liabilities with U.S. federal taxing authorities for years before 2010. The IRS continues to audit Berkshire’s consolidated U.S. federal income tax returns for the 2010 through 2013 tax years. We are also under audit or subject to audit with respect to income taxes in many state and foreign jurisdictions. It is reasonably possible that certain income tax examinations will be settled within the next twelve months. We currently do not believe that the outcome of unresolved issues or claims will be material to our Consolidated Financial Statements.

At December 31, 2016 and 2015, net unrecognized tax benefits were $485 million and $570 million, respectively. Included in the balance at December 31, 2016, were $369 million of tax positions that, if recognized, would impact the effective tax rate. The remaining balance in net unrecognized tax benefits principally relates to tax positions where the ultimate recognition is highly certain but there is uncertainty about the timing of such recognition. Because of the impact of deferred tax accounting, the differences in recognition periods would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. As of December 31, 2016, we do not expect any material changes to the estimated amount of unrecognized tax benefits in the next twelve months.

(17)	Dividend restrictions—Insurance subsidiaries

Payments of dividends by our insurance subsidiaries are restricted by insurance statutes and regulations. Without prior regulatory approval, our principal insurance subsidiaries may declare up to approximately $13 billion as ordinary dividends during 2017.

Combined shareholders’ equity of U.S. based insurance subsidiaries determined pursuant to statutory accounting rules (Surplus as Regards Policyholders) was approximately $136 billion at December 31, 2016 and $124 billion at December 31, 2015. Statutory surplus differs from the corresponding amount based on GAAP due to differences in accounting for certain assets and liabilities. For instance, deferred charges reinsurance assumed, deferred policy acquisition costs, unrealized gains on certain investments and related deferred income taxes are recognized for GAAP but not for statutory reporting purposes. In addition, the carrying values of certain assets, such as goodwill and the values of non-insurance entities owned by our insurance subsidiaries, are not fully recognized for statutory reporting purposes.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(18)	Fair value measurements

Our financial assets and liabilities are summarized below as of December 31, 2016 and December 31, 2015 with fair values shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills, receivables and accounts payable, accruals and other liabilities are considered to be reasonable estimates of their fair values.

		Carrying Value				Fair Value				Quoted Prices (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
December 31, 2016
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	4,527			$	4,527			$	3,099			$	1,428			$	—
States, municipalities and political subdivisions			1,216				1,216				—				1,216				—
Foreign governments			9,001				9,001				7,237				1,764				—
Corporate bonds			7,604				7,604				—				7,540				64
Mortgage-backed securities			1,117				1,117				—				1,117				—
Investments in equity securities			122,032				122,032				122,031				—				1
Investment in Kraft Heinz common stock			15,345				28,418				28,418				—				—
Other investments			17,256				17,256				—				—				17,256
Loans and finance receivables			13,300				13,717				—				13				13,704
Derivative contract assets (1)			142				142				5				43				94
Derivative contract liabilities:
Railroad, utilities and energy (1)			145				145				3				114				28
Equity index put options			2,890				2,890				—				—				2,890
Notes payable and other borrowings:
Insurance and other			27,175				27,712				—				27,712				—
Railroad, utilities and energy			59,085				65,774				—				65,774				—
Finance and financial products			15,384				15,825				—				15,469				356
December 31, 2015
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	3,427			$	3,427			$	2,485			$	942			$	—
States, municipalities and political subdivisions			1,764				1,764				—				1,764				—
Foreign governments			11,468				11,468				9,188				2,280				—
Corporate bonds			7,926				7,926				—				7,826				100
Mortgage-backed securities			1,442				1,442				—				1,442				—
Investments in equity securities			112,137				112,137				112,101				35				1
Investment in Kraft Heinz common stock			15,714				23,679				23,679				—				—
Investment in Kraft Heinz Preferred Stock			7,710				8,363				—				—				8,363
Other investments			21,402				21,402				—				—				21,402
Loans and finance receivables			12,772				13,112				—				16				13,096
Derivative contract assets (1)			103				103				—				5				98
Derivative contract liabilities:
Railroad, utilities and energy (1)			237				237				13				177				47
Finance and financial products:
Equity index put options			3,552				3,552				—				—				3,552
Credit default			284				284				—				—				284
Notes payable and other borrowings:
Insurance and other			14,599				14,773				—				14,773				—
Railroad, utilities and energy			57,739				62,471				—				62,471				—
Finance and financial products			11,951				12,363				—				11,887				476

(1)	Assets are included in other assets and liabilities are included in accounts payable, accruals and other liabilities.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(18)	Fair value measurements (Continued)

The fair values of substantially all of our financial instruments were measured using market or income approaches. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the fair values presented are not necessarily indicative of the amounts that could be realized in an actual current market exchange. The use of alternative market assumptions and/or estimation methodologies may have a material effect on the estimated fair value. The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.

Level 1—Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

Level 2—Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.

Level 3—Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities.

Reconciliations of assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for each of the three years ending December 31, 2016 follow (in millions).

		Investments in fixed maturity securities				Investments in equity securities and other investments				Net derivative contract liabilities
Balance December 31, 2013		$	372			$	17,958			$	(5,255	)
Gains (losses) included in:
Earnings			—				—				524
Other comprehensive income			13				1,373				—
Regulatory assets and liabilities			—				—				5
Acquisitions			—				3,000				1
Dispositions and settlements			(2	)			—				1
Transfers into/out of Level 3			(375	)			(335	)			(35	)
Balance December 31, 2014			8				21,996				(4,759	)
Gains (losses) included in:
Earnings			—				—				1,080
Other comprehensive income			(2	)			(593	)			(7	)
Regulatory assets and liabilities			—				—				(19	)
Acquisitions			101				—				—
Dispositions and settlements			(7	)			—				(83	)
Transfers into/out of Level 3			—				—				3
Balance December 31, 2015			100				21,403				(3,785	)
Gains (losses) included in:
Earnings			—				3,593				880
Other comprehensive income			(4	)			876				(2	)
Regulatory assets and liabilities			—				—				(11	)
Acquisitions			10				—				—
Dispositions and settlements			(41	)			(8,615	)			(101	)
Transfers into/out of Level 3			(1	)			—				195
Balance December 31, 2016		$	64			$	17,257			$	(2,824	)

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(18)	Fair value measurements (Continued)

Gains and losses included in earnings are included as components of investment gains/losses, derivative gains/losses and other revenues, as appropriate and are primarily related to changes in the values of derivative contracts and settlement transactions. Gains and losses included in other comprehensive income are primarily the net change in unrealized appreciation of investments and the reclassification of investment appreciation in net earnings, as appropriate in our Consolidated Statements of Comprehensive Income. In 2016, our Wrigley preferred stock investment was disposed and our Dow preferred stock investment was converted into Dow common stock.

Quantitative information as of December 31, 2016, with respect to assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) follows (in millions).

		Fair Value				Principal Valuation Techniques				Unobservable Inputs				Weighted Average
Other investments:
Preferred stocks		$	7,659				Discounted cash flow				Expected duration				7 years
											Discount for transferability restrictions and subordination				145 basis points
Common stock warrants			9,597				Warrant pricing model				Discount for transferability and hedging restrictions				5%
Derivative liabilities:
Equity index put options			2,890				Option pricing model				Volatility				20%

Our other investments currently include preferred stocks and common stock warrants that we acquired in private placement transactions. These investments are subject to contractual restrictions on transferability and may contain provisions that prevent us from economically hedging our investments. In applying discounted estimated cash flow techniques in valuing the preferred stocks, we made assumptions regarding the expected durations of the investments, as the issuers may have redemption rights. We also made estimates regarding the impact of subordination, as the preferred stocks have a lower priority in liquidation than debt instruments of the issuers. In valuing the common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we are subject to the aforementioned contractual restrictions and we have applied discounts with respect to such restrictions. Increases or decreases to these inputs would result in decreases or increases to the fair values of the investments.

Our equity index put option contracts are illiquid and contain contract terms that are not standard in derivatives markets. For example, we are not required to post collateral under most of our contracts and certain of the contracts have relatively long durations. For these and other reasons, we classified these contracts as Level 3. The methods we use to value these contracts are those that we believe market participants would use in determining exchange prices with respect to our contracts.

We value equity index put option contracts based on the Black-Scholes option valuation model. Inputs to this model include index price, contract duration and dividend and interest rate inputs (including a Berkshire non-performance input) which are observable. However, we believe that the valuation of long-duration options using any model is inherently subjective and, given the lack of observable transactions and prices, acceptable values may be subject to wide ranges. Volatility inputs represent our expectations, which consider the remaining duration of each contract and assume that the contracts will remain outstanding until the expiration dates. Increases or decreases in the volatility inputs will produce increases or decreases in the fair values of the liabilities.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(19)	Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the three years ending December 31, 2016 are shown in the table below.

		Class A, $5 Par Value (1,650,000 shares authorized)												Class B, $0.0033 Par Value (3,225,000,000 shares authorized)
		Issued				Treasury				Outstanding				Issued				Treasury				Outstanding
Balance December 31, 2013			868,616				(9,573	)			859,043				1,178,775,092				(1,408,484	)			1,177,366,608
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition			(30,597	)			—				(30,597	)			47,490,158				—				47,490,158
Treasury shares acquired			—				(2,107	)			(2,107	)			—				(1,278	)			(1,278	)
Balance December 31, 2014			838,019				(11,680	)			826,339				1,226,265,250				(1,409,762	)			1,224,855,488
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition			(17,917	)			—				(17,917	)			27,601,348				—				27,601,348
Balance December 31, 2015			820,102				(11,680	)			808,422				1,253,866,598				(1,409,762	)			1,252,456,836
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition			(32,044	)			—				(32,044	)			49,457,329				—				49,457,329
Balance December 31, 2016			788,058				(11,680	)			776,378				1,303,323,927				(1,409,762	)			1,301,914,165

Each Class A common share is entitled to one vote per share. Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth (1/1,500) of such rights of Class A common stock. Each Class B common share possesses voting rights equivalent to one-ten-thousandth (1/10,000) of the voting rights of a Class A share. Unless otherwise required under Delaware General Corporation Law, Class A and Class B common shares vote as a single class. Each share of Class A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock. On an equivalent Class A common stock basis, there were 1,644,321 shares outstanding as of December 31, 2016 and 1,643,393 shares outstanding as of December 31, 2015. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but none are issued.

Berkshire’s Board of Directors (“Berkshire’s Board”) has approved a common stock repurchase program under which Berkshire may repurchase its Class A and Class B shares at prices no higher than a 20% premium over the book value of the shares. Berkshire may repurchase shares in the open market or through privately negotiated transactions. Berkshire’s Board authorization does not specify a maximum number of shares to be repurchased. However, repurchases will not be made if they would reduce the total value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion. The repurchase program does not obligate Berkshire to repurchase any dollar amount or number of Class A or Class B shares and there is no expiration date to the program. There were no share repurchases under the program over the last three years. In 2014, we acquired WPLG, whose assets included 2,107 shares of Berkshire Hathaway Class A Common Stock and 1,278 shares of Class B Common Stock, which are included in treasury stock.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(20)	Accumulated other comprehensive income

A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders and significant amounts reclassified out of accumulated other comprehensive income for each of the three years ending December 31, 2016 follows (in millions).

		Unrealized appreciation of investments, net				Foreign currency translation				Prior service and actuarial gains/losses of defined benefit pension plans				Other				Accumulated other comprehensive income
Balance December 31, 2013		$	44,042			$	(146	)		$	46			$	83			$	44,025
Other comprehensive income, net before reclassifications			3,778				(1,877	)			(1,130	)			31				802
Reclassifications from accumulated other comprehensive income			(2,184	)			66				45				(22	)			(2,095	)
Balance December 31, 2014			45,636				(1,957	)			(1,039	)			92				42,732
Other comprehensive income, net before reclassifications			(5,522	)			(2,027	)			191				(112	)			(7,470	)
Reclassifications from accumulated other comprehensive income			(1,516	)			128				86				22				(1,280	)
Balance December 31, 2015			38,598				(3,856	)			(762	)			2				33,982
Other comprehensive income, net before reclassifications			9,011				(1,412	)			94				(48	)			7,645
Reclassifications from accumulated other comprehensive income			(4,433	)			—				75				29				(4,329	)
Balance December 31, 2016		$	43,176			$	(5,268	)		$	(593	)		$	(17	)		$	37,298
Reclassifications from other comprehensive income into net earnings:
Year ending December 31, 2014:
Investment gains/losses		$	(3,360	)		$	—			$	—			$	—			$	(3,360	)
Other			—				75				58				(39	)			94
Reclassifications before income taxes			(3,360	)			75				58				(39	)			(3,266	)
Applicable income taxes			(1,176	)			9				13				(17	)			(1,171	)
		$	(2,184	)		$	66			$	45			$	(22	)		$	(2,095	)
Year ending December 31, 2015:
Investment gains/losses		$	(2,332	)		$	197			$	—			$	—			$	(2,135	)
Other			—				—				129				35				164
Reclassifications before income taxes			(2,332	)			197				129				35				(1,971	)
Applicable income taxes			(816	)			69				43				13				(691	)
		$	(1,516	)		$	128			$	86			$	22			$	(1,280	)
Year ending December 31, 2016:
Investment gains/losses		$	(6,820	)		$	—			$	—			$	—			$	(6,820	)
Other			—				—				104				51				155
Reclassifications before income taxes			(6,820	)			—				104				51				(6,665	)
Applicable income taxes			(2,387	)			—				29				22				(2,336	)
		$	(4,433	)		$	—			$	75			$	29			$	(4,329	)

(21)	Pension plans

Several of our subsidiaries sponsor defined benefit pension plans covering certain employees. Benefits under the plans are generally based on years of service and compensation, although benefits under certain plans are based on years of service and fixed benefit rates. Our subsidiaries may make contributions to the plans to meet regulatory requirements and may also make discretionary contributions.

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(21)	Pension plans (Continued)

The components of net periodic pension expense for each of the three years ending December 31, 2016 are as follows (in millions).

		2016				2015				2014
Service cost		$	282			$	266			$	230
Interest cost			691				591				629
Expected return on plan assets			(908	)			(782	)			(772	)
Amortization of actuarial losses and other			148				179				102
Net periodic pension expense		$	213			$	254			$	189

The accumulated benefit obligation is the actuarial present value of benefits earned based on service and compensation prior to the valuation date. The projected benefit obligation (“PBO”) is the actuarial present value of benefits earned based upon service and compensation prior to the valuation date and, if applicable, includes assumptions regarding future compensation levels. Benefit obligations under qualified U.S. defined benefit pension plans are funded through assets held in trusts. Pension obligations under certain non-U.S. plans and non-qualified U.S. plans are unfunded and the aggregate PBO of such plans was approximately $1.2 billion as of December 31, 2016 and 2015.

Reconciliations of the changes in plan assets and PBOs related to BHE’s pension plans and all other pension plans for each of the two years ending December 31, 2016 are in the following tables (in millions). The costs of pension plans covering employees of certain regulated subsidiaries of BHE are generally recoverable through the regulated rate making process.

		2016												2015
		BHE				All other				Consolidated				BHE				All other				Consolidated
Benefit obligations
Accumulated benefit obligation end of year		$	4,787			$	11,912			$	16,699			$	4,797			$	9,264			$	14,061
PBO beginning of year		$	5,076			$	10,183			$	15,259			$	5,398			$	10,489			$	15,887
Service cost			49				233				282				57				209				266
Interest cost			198				493				691				200				391				591
Benefits paid			(309	)			(705	)			(1,014	)			(316	)			(518	)			(834	)
Business acquisitions			—				2,684				2,684				—				165				165
Actuarial (gains) or losses and other			63				(215	)			(152	)			(263	)			(553	)			(816	)
PBO end of year		$	5,077			$	12,673			$	17,750			$	5,076			$	10,183			$	15,259
Plan assets
Plan assets beginning of year		$	4,765			$	8,066			$	12,831			$	5,086			$	8,280			$	13,366
Employer contributions			133				214				347				90				116				206
Benefits paid			(309	)			(705	)			(1,014	)			(316	)			(518	)			(834	)
Actual return on plan assets			512				1,083				1,595				31				80				111
Business acquisitions			—				2,314				2,314				—				167				167
Other			(407	)			(269	)			(676	)			(126	)			(59	)			(185	)
Plan assets end of year		$	4,694			$	10,703			$	15,397			$	4,765			$	8,066			$	12,831
Funded status—net liability		$	383			$	1,970			$	2,353			$	311			$	2,117			$	2,428

The funded status of our defined benefit pension plans at December 31, 2016 was reflected in other assets ($644 million) and liabilities ($2,997 million). At December 31, 2015, the funded status was included in other assets ($456 million) and liabilities ($2,884 million).

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(21)	Pension plans (Continued)

Weighted average interest rate assumptions used in determining PBOs and net periodic pension expense were as follows.

		2016				2015				2014
Applicable to pension benefit obligations:
Discount rate			3.8	%			4.1	%			3.8	%
Expected long-term rate of return on plan assets			6.1				6.5				6.7
Rate of compensation increase			3.0				3.4				3.4
Discount rate applicable to net periodic pension expense			4.2				3.8				4.6

Benefits payments expected over the next ten years are as follows (in millions): 2017—$992; 2018—$1,007; 2019—$987; 2020—$1,003; 2021—$994; and 2022 to 2026—$5,043. Sponsoring subsidiaries expect to contribute $224 million to defined benefit pension plans in 2017.

Fair value measurements of plan assets as of December 31, 2016 and 2015 follow (in millions).

		Fair Value																Investment funds and partnerships at net asset value
		Total				Level 1				Level 2				Level 3
December 31, 2016
Cash and equivalents		$	847			$	637			$	210			$	—			$	—
Equity securities			8,645				8,476				27				142				—
Government obligations			1,291				1,076				215				—				—
Other fixed maturity securities			770				144				595				31				—
Investment funds and other			3,844				233				1,434				153				2,024
		$	15,397			$	10,566			$	2,481			$	326			$	2,024
December 31, 2015
Cash and equivalents		$	839			$	544			$	295			$	—			$	—
Equity securities			7,319				7,305				14				—				—
Government obligations			786				726				60				—				—
Other fixed maturity securities			990				87				903				—				—
Investment funds and other			2,897				272				1,446				228				951
		$	12,831			$	8,934			$	2,718			$	228			$	951

Refer to Note 18 for a discussion of the three levels in the hierarchy of fair values. Plan assets are generally invested with the long-term objective of producing earnings to adequately cover expected benefit obligations, while assuming a prudent level of risk. Allocations may change as a result of changing market conditions and investment opportunities. The expected rates of return on plan assets reflect subjective assessments of expected invested asset returns over a period of several years. Generally, past investment returns are not given significant consideration when establishing assumptions for expected long-term rates of return on plan assets. Actual experience will differ from the assumed rates.

A reconciliation of the pre-tax accumulated other comprehensive income (loss) related to defined benefit pension plans for each of the two years ending December 31, 2016 follows (in millions).

		2016				2015
Balance beginning of year		$	(1,193	)		$	(1,617	)
Amount included in net periodic pension expense			101				129
Actuarial gains and other			253				295
Balance end of year		$	(839	)		$	(1,193	)

Several of our subsidiaries also sponsor defined contribution retirement plans, such as 401(k) or profit sharing plans. Employee contributions are subject to regulatory limitations and the specific plan provisions. Several plans provide for

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(21)	Pension plans (Continued)

employer matching contributions up to levels specified in the plans and provide for additional discretionary contributions as determined by management. Employer contributions expensed with respect to our defined contribution plans were $944 million in 2016, $739 million in 2015 and $737 million in 2014.

(22)	Contingencies and Commitments

We are parties in a variety of legal actions that routinely arise out of the normal course of business, including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries. Plaintiffs occasionally seek punitive or exemplary damages. We do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations. Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines and penalties. We believe that any liability that may arise as a result of other pending legal actions will not have a material effect on our consolidated financial condition or results of operations.

We lease certain manufacturing, warehouse, retail and office facilities as well as certain equipment. Rent expense under operating leases was $1,573 million in 2016, $1,516 million in 2015 and $1,484 million in 2014. Future minimum rental payments for operating leases having non-cancellable terms in excess of one year are as follows (in millions).

2017		2018				2019				2020				2021				After 2021				Total
$1,337		$	1,162			$	1,005			$	885			$	725			$	3,171			$	8,285

Our subsidiaries regularly make commitments in the ordinary course of business to purchase goods and services used in their businesses. The most significant of these relate to our railroad, utilities and energy businesses and our fractional aircraft ownership business. As of December 31, 2016, estimated future payments under such arrangements are as follows: $11.1 billion in 2017, $4.1 billion in 2018, $3.5 billion in 2019, $2.9 billion in 2020, $2.0 billion in 2021 and $14.6 billion after 2021.

We own a 50% interest in a joint venture, Berkadia Commercial Mortgage LLC (“Berkadia”), with Leucadia National Corporation (“Leucadia”) owning the other 50% interest. Berkadia is a servicer of commercial real estate loans in the U.S., performing primary, master and special servicing functions for U.S. government agency programs, commercial mortgage-backed securities transactions, banks, insurance companies and other financial institutions. A significant source of funding for Berkadia’s operations is through the issuance of commercial paper, which is supported by a surety policy issued by a Berkshire insurance subsidiary. Leucadia is obligated to indemnify us for one-half of any losses incurred under the policy. Berkadia’s maximum outstanding balance of commercial paper borrowings is currently limited to $1.5 billion. On December 31, 2016, Berkadia’s commercial paper outstanding was $1.47 billion.

In the third quarter of 2016, our wholly-owned subsidiary, National Indemnity Company (“NICO”) entered into a definitive agreement to acquire Medical Liability Mutual Insurance Company (“MLMIC”), a writer of medical professional liability insurance domiciled in New York. MLMIC’s assets and policyholders’ surplus determined under statutory accounting principles as of June 30, 2016 were approximately $5.5 billion and $1.9 billion, respectively. The acquisition price will be an amount equal to the sum of: (i) the tangible book value of MLMIC at the closing date (determined under U.S. GAAP); plus (ii) $100 million. The acquisition will involve the conversion of MLMIC from a mutual company to a stock company. The closing of the transaction is subject to various regulatory approvals, customary closing conditions and the approval of the MLMIC policyholders eligible to vote on the proposed demutualization and sale. The transaction is expected to be completed in late 2017.

Pursuant to the terms of agreements with noncontrolling shareholders in our less than wholly-owned subsidiaries, we may be obligated to acquire their equity ownership interests. If we had acquired all outstanding noncontrolling interests as of December 31, 2016, we estimate the cost would have been approximately $5.0 billion. However, the timing and the amount of any such future payments that might be required are contingent on future actions of the noncontrolling owners.

(23)	Business segment data

Our operating businesses include a large and diverse group of insurance, finance, manufacturing, service and retailing businesses. Our reportable business segments are organized in a manner that reflects how management views those business

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(23)	Business segment data (Continued)

activities. Certain businesses have been grouped together for segment reporting based upon similar products or product lines, marketing, selling and distribution characteristics, even though those business units are operated under separate local management.

The tabular information that follows shows data of reportable segments reconciled to amounts reflected in our Consolidated Financial Statements. Intersegment transactions are not eliminated from segment results when management considers those transactions in assessing the results of the respective segments. Furthermore, our management does not consider investment and derivative gains/losses or amortization of certain purchase accounting adjustments related to Berkshire’s business acquisitions in assessing the performance of reporting units. Collectively, these items are included in reconciliations of segment amounts to consolidated amounts.

Business Identity		Business Activity
Insurance:
GEICO		Underwriting private passenger automobile insurance mainly by direct response methods
Berkshire Hathaway Primary Group		Underwriting multiple lines of property and casualty insurance policies for primarily commercial accounts
General Re		Underwriting excess-of-loss, quota-share and facultative reinsurance worldwide
Berkshire Hathaway Reinsurance Group		Underwriting excess-of-loss and quota-share reinsurance for insurers and reinsurers worldwide
BNSF		Operation of one of the largest railroad systems in North America
Berkshire Hathaway Energy		Regulated electric and gas utility, including power generation and distribution activities and real estate brokerage activities
Manufacturing		Manufacturers of numerous products including industrial, consumer and building products
McLane Company		Wholesale distribution of groceries and non-food items
Service and retailing		Providers of numerous services including fractional aircraft ownership programs, aviation pilot training, electronic components distribution and various retailing businesses, including automotive dealerships
Finance and financial products		Manufactured housing and related consumer financing, transportation equipment, manufacturing and leasing, and furniture leasing

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(23)	Business segment data (Continued)

A disaggregation of our consolidated data for each of the three most recent years is presented in the tables which follow (in millions).

		Revenues												Earnings before income taxes
	2016				2015				2014				2016				2015				2014
Operating Businesses:
Insurance:
Underwriting:
GEICO		$	25,483			$	22,718			$	20,496			$	462			$	460			$	1,159
BH Primary			6,257				5,394				4,377				657				824				626
General Re			5,637				5,975				6,264				190				132				277
BHRG			8,504				7,207				10,116				822				421				606
Total underwriting			45,881				41,294				41,253				2,131				1,837				2,668
Investment income			4,522				4,562				4,370				4,482				4,550				4,357
Total insurance			50,403				45,856				45,623				6,613				6,387				7,025
BNSF			19,829				21,967				23,239				5,693				6,775				6,169
Berkshire Hathaway Energy			17,859				18,231				17,614				2,973				2,851				2,711
Manufacturing			46,506				36,136				36,773				6,211				4,893				4,811
McLane Company			48,075				48,223				46,640				431				502				435
Service and retailing			25,478				23,466				14,276				1,820				1,720				1,546
Finance and financial products			7,675				6,964				6,526				2,130				2,086				1,839
			215,825				200,843				190,691				25,871				25,214				24,536
Reconciliation to consolidated amount:
Investment and derivative gains/losses			8,304				10,347				4,081				8,304				10,347				4,081
Interest expense, not allocated to segments			—				—				—				(230	)			(374	)			(313	)
Investments in Kraft Heinz			180				852				720				1,103				730				694
Corporate, eliminations and other			(705	)			(1,099	)			(793	)			(1,381	)			(971	)			(893	)
		$	223,604			$	210,943			$	194,699			$	33,667			$	34,946			$	28,105

		Interest expense												Income tax expense
	2016				2015				2014				2016				2015				2014
Operating Businesses:
Insurance		$	—			$	—			$	—			$	1,585			$	1,475			$	1,768
BNSF			992				928				833				2,124				2,527				2,300
Berkshire Hathaway Energy			1,715				1,830				1,623				403				450				589
Manufacturing			164				50				69				1,945				1,548				1,544
McLane Company			—				13				14				169				195				169
Service and retailing			50				40				11				669				651				576
Finance and financial products			411				384				463				702				708				597
			3,332				3,245				3,013				7,597				7,554				7,543
Reconciliation to consolidated amount:
Investment and derivative gains/losses			—				—				—				1,807				3,622				760
Interest expense, not allocated to segments			230				374				313				(81	)			(131	)			(110	)
Investments in Kraft Heinz			—				—				—				397				(111	)			41
Corporate, eliminations and other			(65	)			(104	)			(73	)			(480	)			(402	)			(299	)
		$	3,497			$	3,515			$	3,253			$	9,240			$	10,532			$	7,935

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(23)	Business segment data (Continued)

		Capital expenditures												Depreciation of tangible assets
	2016				2015				2014				2016				2015				2014
Operating Businesses:
Insurance		$	128			$	115			$	94			$	85			$	77			$	69
BNSF			3,819				5,651				5,243				2,079				1,932				1,804
Berkshire Hathaway Energy			5,090				5,875				6,555				2,560				2,451				2,177
Manufacturing			1,813				1,292				1,324				1,287				938				943
McLane Company			258				338				241				165				161				159
Service and retailing			804				574				591				611				504				461
Finance and financial products			1,042				2,237				1,137				624				610				602
		$	12,954			$	16,082			$	15,185			$	7,411			$	6,673			$	6,215

		Goodwill at year-end								Identifiable assets at year-end
	2016				2015				2016				2015				2014
Operating Businesses:
Insurance:
GEICO		$	1,471			$	1,471			$	55,041			$	48,291			$	45,439
General Re			13,494				13,527				30,321				26,478				28,692
BHRG and BH Primary			509				538				148,675				144,682				151,301
Total insurance			15,474				15,536				234,037				219,451				225,432
BNSF			14,845				14,845				69,277				66,613				62,840
Berkshire Hathaway Energy			9,266				9,333				76,428				74,221				71,285
Manufacturing			32,041				14,833				69,900				34,141				34,509
McLane Company			734				656				5,896				5,871				5,419
Service and retailing			5,745				6,163				17,450				16,299				11,303
Finance and financial products			1,381				1,342				40,329				37,621				32,158
		$	79,486			$	62,708				513,317				454,217				442,946
Reconciliation to consolidated amount:
Corporate and other											28,051				35,332				22,207
Goodwill											79,486				62,708				60,714
										$	620,854			$	552,257			$	525,867

Premiums written and earned by the property/casualty and life/health insurance businesses are summarized below (in millions).

		Property/Casualty												Life/Health
	2016				2015				2014				2016				2015				2014
Premiums Written:
Direct		$	34,001			$	30,544			$	27,541			$	1,060			$	821			$	879
Assumed			8,037				7,049				9,889				4,672				5,187				5,030
Ceded			(798	)			(877	)			(839	)			(62	)			(57	)			(67	)
		$	41,240			$	36,716			$	36,591			$	5,670			$	5,951			$	5,842
Premiums Earned:
Direct		$	33,207			$	29,608			$	26,389			$	1,060			$	821			$	879
Assumed			7,848				6,584				9,872				4,671				5,192				5,030
Ceded			(843	)			(854	)			(850	)			(62	)			(57	)			(67	)
		$	40,212			$	35,338			$	35,411			$	5,669			$	5,956			$	5,842

Table of Contents

Notes to Consolidated Financial Statements (Continued)

(23)	Business segment data (Continued)

Insurance premiums written by geographic region (based upon the domicile of the insured or reinsured) are summarized below. Dollars are in millions.

		Property/Casualty												Life/Health
	2016				2015				2014				2016				2015				2014
United States		$	35,878			$	31,171			$	31,362			$	3,473			$	3,247			$	3,402
Asia Pacific			3,616				3,472				1,953				715				673				651
Western Europe			1,406				1,638				2,424				822				1,263				1,135
All other			340				435				852				660				768				654
		$	41,240			$	36,716			$	36,591			$	5,670			$	5,951			$	5,842

Consolidated sales and service revenues were $125.7 billion in 2016, $112.4 billion in 2015 and $102.2 billion in 2014. In 2016, 85% of such revenues were attributable to the United States compared to 87% in 2015 and 85% in 2014. The remainder of sales and service revenues were primarily in Europe, Canada and the Asia Pacific. Consolidated sales and service revenues included sales to Wal-Mart Stores, Inc. of approximately $14 billion in 2016 and $13 billion in 2015 and 2014. Approximately 95% of our revenues for each of the last three years from railroad, utilities and energy businesses were in the United States. At December 31, 2016, approximately 89% of our consolidated net property, plant and equipment was located in the United States with the remainder primarily in Canada and Europe.

(24)	Quarterly data

A summary of revenues and earnings by quarter for each of the last two years is presented in the following table. This information is unaudited. Dollars are in millions, except per share amounts.

		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
2016
Revenues		$	52,163			$	54,254			$	58,843			$	58,344
Net earnings attributable to Berkshire shareholders *			5,589				5,001				7,198				6,286
Net earnings attributable to Berkshire shareholders per equivalent Class A common share			3,401				3,042				4,379				3,823
2015
Revenues		$	48,593			$	51,549			$	59,070			$	51,731
Net earnings attributable to Berkshire shareholders *			5,164				4,013				9,428				5,478
Net earnings attributable to Berkshire shareholders per equivalent Class A common share			3,143				2,442				5,737				3,333

*	Includes investment and derivative gains/losses. After-tax investment and derivative gains/losses for the periods presented above are as follows (in millions):

		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
Investment and derivative gains/losses—2016		$	1,852			$	394			$	2,347			$	1,904
Investment and derivative gains/losses—2015			920				123				4,877				805

(25)	Subsequent event

In January 2017, NICO entered into a retroactive reinsurance agreement with various subsidiaries of American International Group, Inc. (collectively, “AIG”). Under the agreement, NICO agreed to indemnify AIG for 80% of up to $25 billion, excess of $25 billion retained by AIG, of losses and allocated loss adjustment expenses with respect to certain commercial insurance loss events occurring in years prior to 2016 for a premium of about $10 billion. Berkshire has agreed to guarantee all amounts due to AIG under the agreement.

Table of Contents