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

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Berkshire Hathaway Inc. and subsidiaries (the “Company”) as of December 31, 2017 and 2016, 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, 2017, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, 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, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

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 are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

February 23, 2018

We have served as the Company’s auditor since 1985.

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BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

		December 31,
	2017				2016
ASSETS
Insurance and Other:
Cash and cash equivalents		$	25,460			$	23,581
Short-term investments in U.S. Treasury Bills			78,515				47,338
Investments in fixed maturity securities			21,353				23,432
Investments in equity securities			164,026				134,835
Investments in The Kraft Heinz Company (Fair Value: 2017 – $25,306; 2016 – $28,418)			17,635				15,345
Receivables			28,578				27,097
Inventories			16,187				15,727
Property, plant and equipment			20,104				19,325
Goodwill			54,985				53,994
Other intangible assets			32,518				33,481
Deferred charges under retroactive reinsurance contracts			15,278				8,047
Other			11,158				7,126
			485,797				409,328
Railroad, Utilities and Energy:
Cash and cash equivalents			2,910				3,939
Property, plant and equipment			128,184				123,759
Goodwill			24,780				24,111
Regulatory assets			2,950				4,457
Other			15,589				13,550
			174,413				169,816
Finance and Financial Products:
Cash and cash equivalents			3,213				528
Short-term investments in U.S. Treasury Bills			5,856				10,984
Loans and finance receivables			13,748				13,300
Property, plant and equipment and assets held for lease			9,931				9,689
Goodwill			1,493				1,381
Other			7,644				5,828
			41,885				41,710
		$	702,095			$	620,854

See accompanying Notes to Consolidated Financial Statements

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BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

		December 31,
	2017				2016
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses		$	61,122			$	53,379
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts			42,937				24,972
Unearned premiums			16,040				14,245
Life, annuity and health insurance benefits			17,608				15,977
Other policyholder liabilities			7,654				6,714
Accounts payable, accruals and other liabilities			23,099				22,164
Notes payable and other borrowings			27,324				27,175
			195,784				164,626
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities			11,334				11,434
Regulatory liabilities			7,511				3,121
Notes payable and other borrowings			62,178				59,085
			81,023				73,640
Finance and Financial Products:
Accounts payable, accruals and other liabilities			1,470				1,444
Derivative contract liabilities			2,172				2,890
Notes payable and other borrowings			13,085				15,384
			16,727				19,718
Income taxes, principally deferred			56,607				77,442
Total liabilities			350,141				335,426
Shareholders’ equity:
Common stock			8				8
Capital in excess of par value			35,694				35,681
Accumulated other comprehensive income			58,571				37,298
Retained earnings			255,786				210,846
Treasury stock, at cost			(1,763	)			(1,763	)
Berkshire Hathaway shareholders’ equity			348,296				282,070
Noncontrolling interests			3,658				3,358
Total shareholders’ equity			351,954				285,428
		$	702,095			$	620,854

See accompanying Notes to Consolidated Financial Statements

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BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per-share amounts)

		Year Ended December 31,
	2017				2016				2015
Revenues:
Insurance and Other:
Insurance premiums earned			$ 60,597			$	45,881			$	41,294
Sales and service revenues			125,963				119,489				107,001
Interest, dividend and other investment income			5,144				4,725				5,357
Investment gains/losses			1,202				5,128				9,363
			192,906				175,223				163,015
Railroad, Utilities and Energy operating and other revenues			39,943				37,542				40,004
Finance and Financial Products:
Sales and service revenues			6,924				6,208				5,430
Interest, dividend and other investment income			1,438				1,455				1,510
Investment gains/losses			208				2,425				10
Derivative contract gains/losses			718				751				974
			9,288				10,839				7,924
Total revenues			242,137				223,604				210,943
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses			48,891				30,906				26,527
Life, annuity and health insurance benefits			5,618				5,131				5,413
Insurance underwriting expenses			9,321				7,713				7,517
Cost of sales and services			101,748				95,754				87,029
Selling, general and administrative expenses			16,241				16,478				13,723
Interest expense			1,740				445				460
			183,559				156,427				140,669
Railroad, Utilities and Energy:
Cost of sales and operating expenses			28,034				26,194				27,650
Interest expense			3,254				2,642				2,653
			31,288				28,836				30,303
Finance and Financial Products:
Cost of sales and services			4,050				3,448				2,915
Selling, general and administrative expenses			1,940				1,739				1,586
Interest expense			400				410				402
			6,390				5,597				4,903
Total costs and expenses			221,237				190,860				175,875
Earnings before income taxes and equity in earnings of The Kraft Heinz Company			20,900				32,744				35,068
Equity in earnings (loss) of The Kraft Heinz Company			2,938				923				(122	)
Earnings before income taxes			23,838				33,667				34,946
Income tax expense (benefit)			(21,515	)			9,240				10,532
Net earnings			45,353				24,427				24,414
Earnings attributable to noncontrolling interests			413				353				331
Net earnings attributable to Berkshire Hathaway shareholders			$ 44,940			$	24,074			$	24,083
Net earnings per average equivalent Class A share			$ 27,326			$	14,645			$	14,656
Net earnings per average equivalent Class B share*			$ 18.22			$	9.76			$	9.77
Average equivalent Class A shares outstanding			1,644,615				1,643,826				1,643,183
Average equivalent Class B shares outstanding			2,466,923,163				2,465,739,654				2,464,773,947

* Net earnings per average equivalent Class B share outstanding are one-fifteen-hundredth of the equivalent Class A amount.

See accompanying Notes to Consolidated Financial Statements

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BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in millions)

		Year Ended December 31,
		2017				2016				2015
Net earnings			$45,353			$	24,427			$	24,414
Other comprehensive income:
Net change in unrealized appreciation of investments			30,450				13,858				(8,520	)
Applicable income taxes			(10,566	)			(4,846	)			3,014
Reclassification of investment appreciation in net earnings			(1,399	)			(6,820	)			(2,332	)
Applicable income taxes			490				2,387				816
Foreign currency translation			2,364				(1,541	)			(1,931	)
Applicable income taxes			(95	)			66				(43	)
Prior service cost and actuarial gains/losses of defined benefit pension plans			225				354				424
Applicable income taxes			(45	)			(187	)			(140	)
Other, net			(9	)			(17	)			(94	)
Other comprehensive income, net			21,415				3,254				(8,806	)
Comprehensive income			66,768				27,681				15,608
Comprehensive income attributable to noncontrolling interests			555				291				275
Comprehensive income attributable to Berkshire Hathaway shareholders			$66,213			$	27,390			$	15,333

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, 2014			$ 35,581				$42,732				$ 162,689				$ (1,763	)			$ 2,857				$ 242,096
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				186,772				(1,763	)			3,077				257,696
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				210,846				(1,763	)			3,358				285,428
Net earnings			—				—				44,940				—				413				45,353
Other comprehensive income, net			—				21,273				—				—				142				21,415
Issuance of common stock			76				—				—				—				—				76
Transactions with noncontrolling interests			(63	)			—				—				—				(255	)			(318	)
Balance December 31, 2017			$ 35,702				$58,571				$ 255,786				$ (1,763	)			$ 3,658				$ 351,954

See accompanying Notes to Consolidated Financial Statements

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BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

		Year Ended December 31,
	2017				2016				2015
Cash flows from operating activities:
Net earnings		$	45,353			$	24,427			$	24,414
Adjustments to reconcile net earnings to operating cash flows:
Investment gains/losses			(1,410	)			(7,553	)			(9,373)
Depreciation and amortization			9,188				8,901				7,779
Other			458				(161	)			751
Changes in operating assets and liabilities:
Losses and loss adjustment expenses			25,027				4,372				2,262
Deferred charges reinsurance assumed			(7,231	)			(360	)			84
Unearned premiums			1,761				968				1,392
Receivables and originated loans			(1,990	)			(3,302	)			(1,650)
Derivative contract assets and liabilities			(775	)			(946	)			(974)
Income taxes			(24,957	)			4,044				5,718
Other			352				2,145				1,088
Net cash flows from operating activities			45,776				32,535				31,491
Cash flows from investing activities:
Purchases of U.S. Treasury Bills and fixed maturity securities			(158,492	)			(96,568	)			(17,891)
Purchases of equity securities			(20,326	)			(16,508	)			(10,220)
Purchase of Kraft Heinz common stock			—				—				(5,258)
Sales of U.S. Treasury Bills and fixed maturity securities			49,327				18,757				2,471
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities			86,727				26,177				14,656
Sales and redemptions of equity securities			19,512				28,464				8,747
Purchases of loans and finance receivables			(1,435	)			(307	)			(179)
Collections of loans and finance receivables			1,702				490				492
Acquisitions of businesses, net of cash acquired			(2,708	)			(31,399	)			(4,902)
Purchases of property, plant and equipment			(11,708	)			(12,954	)			(16,082)
Other			(3,690	)			(419	)			165
Net cash flows from investing activities			(41,091	)			(84,267	)			(28,001)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses			1,342				9,431				3,358
Proceeds from borrowings of railroad, utilities and energy businesses			3,013				3,077				5,479
Proceeds from borrowings of finance businesses			1,303				4,741				1,045
Repayments of borrowings of insurance and other businesses			(1,856	)			(1,264	)			(1,916)
Repayments of borrowings of railroad, utilities and energy businesses			(3,549	)			(2,123	)			(1,725)
Repayments of borrowings of finance businesses			(3,609	)			(1,313	)			(1,827)
Changes in short term borrowings, net			2,079				130				(378)
Other			(121	)			112				(233)
Net cash flows from financing activities			(1,398	)			12,791				3,803
Effects of foreign currency exchange rate changes			248				(172	)			(165)
Increase (decrease) in cash and cash equivalents			3,535				(39,113	)			7,128
Cash and cash equivalents at beginning of year			28,048				67,161				60,033
**Cash and cash equivalents at end of year ***		$	31,583			$	28,048			$	67,161
* Cash and cash equivalents at end of year are comprised of the following:
Insurance and Other		$	25,460			$	23,581			$	56,612
Railroad, Utilities and Energy			2,910				3,939				3,437
Finance and Financial Products			3,213				528				7,112
		$	31,583			$	28,048			$	67,161

See accompanying Notes to Consolidated Financial Statements

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BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(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.

Prior to 2017, the liability for unpaid losses and loss adjustment expenses related to workers’ compensation claims assumed under certain workers’ compensation reinsurance contracts were discounted for the time-value-of-money consistent with insurance statutory accounting principles. Estimated claim liabilities assumed under all other insurance and reinsurance contracts, including other workers’ compensation contracts are not discounted. In the fourth quarter of 2017, we discontinued the practice of discounting workers’ compensation claims liabilities assumed under all reinsurance contracts to achieve full consistency. In connection with this change, we increased our unpaid losses and loss adjustment expenses by $1.43 billion and reduced our income tax liabilities by $502 million and our shareholders’ equity by $931 million. The effect of this change on net earnings in 2015 and 2016 was immaterial and the aforementioned adjustment to retained earnings was recorded as of December 31, 2014 in the accompanying Consolidated Financial Statements. As a result, retained earnings and shareholder’s equity for the years 2014-2016 have been restated from the amounts previously reported.

	(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 on unpaid losses 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 Short-term investments in U.S. Treasury Bills

Cash equivalents consist of demand deposit and money market accounts and investments with maturities of three months or less when purchased. Short-term investments in U.S. Treasury Bills have remaining maturities exceeding three months at the time of purchase and are stated at amortized cost. Our aggregate investments in U.S. Treasury Bills at December 31, 2017 were $90.1 billion, which consisted of $5.7 billion included in cash and cash equivalents and $84.4 billion included in short-term investments in U.S. Treasury Bills in our Consolidated Balance Sheet.

	(d)		Investments in fixed maturity and equity securities

We classify investments in fixed maturity and equity securities at the acquisition date and re-evaluate the classification at each balance sheet date. Investments classified as held-to-maturity 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 with changes in fair value reported in earnings. 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. As of December 31, 2017, substantially all of our investments in equity and fixed maturity securities were classified as available-for-sale.

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Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(d)		Investments in fixed maturity and equity securities (Continued)

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 the loss 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)		Investments under the equity method

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 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.

	(f)		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 of these 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.

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Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(g)		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, as applicable, when inclusion in regulated rates is probable.

	(h)		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.

	(i)		Inventories

Inventories consist of manufactured goods and goods acquired for resale. Manufactured inventory costs include raw materials, direct and indirect labor and factory overhead. As of December 31, 2017, approximately 41% of our consolidated inventory cost was determined using the last-in-first-out (“LIFO”) method, with the remainder determined under first-in-first-out and average cost methods. Non-LIFO inventories are stated at the lower of cost or net realizable value. The difference between costs determined under LIFO and current costs was not material as of December 31, 2017.

	(j)		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 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(r).

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.

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. Ranges of estimated useful lives of depreciable assets unique to our railroad business are as follows: track structure and other roadway – 9 to 100 years, locomotives, freight cars and other equipment – 6 to 41 years. Ranges of estimated useful lives of assets unique to our regulated utilities and energy businesses are as follows: utility generation, transmission and distribution systems – 5 to 80 years, interstate natural gas pipeline assets – 3 to 80 years and independent power plants and other assets – 3 to 30 years.

Property, plant and equipment and leased assets in use by our other businesses are depreciated to estimated salvage value primarily using the straight-line method over estimated useful lives. Ranges of estimated useful lives of depreciable assets used in our other businesses are as follows: buildings and improvements – 5 to 50 years, machinery and equipment – 3 to 25 years, furniture, fixtures and other – 3 to 15 years and assets held for lease – 6 to 35 years.

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.

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Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(k)		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.

	(l)		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, such 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 contracts are earned at the inception of the contracts, as all of the underlying loss events covered by these policies occurred prior to inception. Premiums for life reinsurance and annuity contracts are earned when due. Premiums earned are stated net of amounts ceded to reinsurers. Premiums earned on contracts containing experience rating provisions 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.

	(m)		Losses and loss adjustment expenses

We record liabilities for unpaid losses and loss adjustment expenses assumed under short duration property/casualty insurance and reinsurance contracts for loss events that have occurred on or before the balance sheet date. Such liabilities represent the estimated ultimate payment amounts without discounting for time value.

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Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(m)		Losses and loss adjustment expenses (Continued)

Liability estimates are based upon (1) reports of losses from policyholders, (2) individual case estimates and (3) estimates of incurred but not reported losses. Paid claims, claim settlement costs and changes in estimated claim liabilities are included in losses and loss adjustment expenses in the Consolidated Statements of Earnings. 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.

	(n)		Retroactive reinsurance contracts

We record liabilities for unpaid losses and loss adjustment expenses assumed under retroactive reinsurance of short duration contracts consistent with other short duration property/casualty insurance and reinsurance contracts discussed in Note 1(m). With respect to retroactive reinsurance contracts, we also record deferred charge assets at the inception of the contracts, representing the excess, if any, of the estimated ultimate claim liabilities over the premiums earned. We subsequently amortize the deferred charge assets 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 deferred charge balances. Changes in such estimates are applied retrospectively and the resulting changes in deferred charge balances, together with periodic amortization, are included in insurance losses and loss adjustment expenses in the Consolidated Statements of Earnings.

	(p)		Insurance policy acquisition costs

Incremental costs that are directly related to the successful sale 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 $2,529 million and $1,991 million at December 31, 2017 and 2016, respectively.

	(q)		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%.

	(r)		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.

	(s)		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 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.

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Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(t)		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 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.

	(u)		New accounting pronouncements to be adopted subsequent to December 31, 2017

The Financial Accounting Standards Board (“FASB”) issued ASU 2016-01 “Financial Instruments—Recognition and Measurement of Financial Assets and Financial Liabilities” in 2016, which requires that investments in equity securities (excluding equity method investments) be measured at fair value with changes in fair value recognized in net earnings. Under existing GAAP, changes in fair value of available-for-sale equity securities are recorded in other comprehensive income. Given the magnitude of our investments in equity securities and the inherent volatility of prices for equity securities, the adoption of ASU 2016-01 will have a significant impact on our future reported net earnings, although it will not affect our comprehensive income or total shareholders’ equity. We adopted ASU 2016-01 as of January 1, 2018. As of that date, we reclassified the accumulated net unrealized appreciation relating to our investments in equity securities at December 31, 2017 (approximately $61.5 billion) from accumulated other comprehensive income to retained earnings.

The FASB issued ASU 2014-09 “Revenue from Contracts with Customers” in 2014. ASU 2014-09 applies to contracts with customers, excluding, most notably, insurance, reinsurance and leasing contracts. Subsequently the FASB issued additional guidance that modified or clarified ASU 2014-09. All guidance is collectively referred to as Accounting Standard Codification (“ASC”) 606. The framework prescribed by ASC 606 includes a five-step process for recognizing revenue. A core principle is that revenues are recognized as the control of distinct goods or services are transferred to customers in amounts that reflect the consideration the seller expects to be entitled. Under ASC 606, revenues and related costs with respect to certain of our contracts with customers will be recognized over time rather than when the products or services are delivered. In addition, certain of our contracts will be treated as leases for accounting purposes, rather than contracts with customers subject to ASC 606. We adopted ASC 606 as of January 1, 2018, under the modified retrospective method. The principal impact of the initial adoption of ASC 606 resulted in an increase to both assets (primarily property, plant and equipment) and liabilities of approximately $3.5 billion.

In 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 and also requires 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.

In 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.

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Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(u)		New accounting pronouncements to be adopted subsequent to December 31, 2017 (Continued)

In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the requirement to determine the implied value of goodwill in measuring an impairment loss. Upon adoption, the measurement of a goodwill impairment will represent the excess of the reporting unit’s carrying value over fair value, limited to the carrying value of goodwill. ASU 2017-04 is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted.

(2)	Significant business acquisitions

Our long-held acquisition strategy is to acquire businesses 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 temporary credit facility. PCC is a worldwide, diversified manufacturer of complex metal components and products, serving the aerospace, power and general industrial markets. PCC manufactures 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 produces 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 a recapitalized Duracell Company (“Duracell”) from The Procter & Gamble Company (“P&G”) in exchange for shares of P&G common stock held by Berkshire subsidiaries, which had a fair value of approximately $4.2 billion. Duracell manufactures high-performance alkaline batteries and wireless charging technologies. Goodwill from these acquisitions is not amortizable for income tax purposes. The fair values of identified assets acquired and liabilities assumed and residual goodwill 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

In the first quarter of 2015, we acquired the Van Tuyl Group (now named Berkshire Hathaway Automotive), which included over 80 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. The goodwill related to Berkshire Hathaway Automotive is amortizable for income tax purposes.

Over the three years ending December 31, 2017, we completed several smaller-sized business acquisitions, most of which we consider as “bolt-on” acquisitions to several of our existing business operations. Aggregate consideration paid in 2017, 2016 and 2015 for bolt-on acquisitions was approximately $2.7 billion, $1.4 billion and $1.1 billion, respectively. We do not believe that these acquisitions are material, individually or in the aggregate to our Consolidated Financial Statements.

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Notes to Consolidated Financial Statements (Continued)

(3)	Investments in fixed maturity securities

Investments in fixed maturity securities as of December 31, 2017 and 2016 are summarized by type below (in millions).

		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value
December 31, 2017
U.S. Treasury, U.S. government corporations and agencies		$	3,975			$	4			$	(26	)		$	3,953
States, municipalities and political subdivisions			847				19				(12	)			854
Foreign governments			8,572				274				(24	)			8,822
Corporate bonds			6,279				588				(5	)			6,862
Mortgage-backed securities			772				92				(2	)			862
		$	20,445			$	977			$	(69	)		$	21,353
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			967				123				(6	)			1,084
		$	22,404			$	1,118			$	(90	)		$	23,432

Investments in foreign government securities were issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of December 31, 2017, approximately 92% of our 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 fixed maturity securities at December 31, 2017 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		$6,123		$ 11,020		$ 510		$	2,020			$ 772		$	20,445
Fair value		6,175		11,183		557			2,576			862			21,353

(4)	Investments in equity securities

Investments in equity securities as of December 31, 2017 and 2016 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, 2017 *
Banks, insurance and finance		$	27,318			$	53,491			$	—			$	80,809
Consumer products			24,855				26,088				(68)				50,875
Commercial, industrial and other			24,029				14,969				(142)				38,856
		$	76,202			$	94,548			$	(210)			$	170,540

*	Approximately 65% of the aggregate fair value was concentrated in five companies (American Express Company – $15.1 billion; Apple Inc. – $28.2 billion; Bank of America Corporation – $20.7 billion; The Coca-Cola Company – $18.4 billion and Wells Fargo & Company – $29.3 billion).

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Notes to Consolidated Financial Statements (Continued)

(4)	Investments in equity securities (Continued)

		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
Other investments			7,720				9,536				—				17,256
		$	74,097			$	65,901			$	(710	)		$	139,288

*	Approximately 60% of the aggregate fair value was concentrated in five companies (American Express Company – $11.2 billion; Bank of America Corporation – $14.5 billion; The Coca-Cola Company – $16.6 billion; International Business Machines Corporation – $13.5 billion and Wells Fargo & Company – $27.6 billion).

As of December 31, 2016, other investments included preferred stock and common stock warrants of Bank of America Corporation (“BAC”) and preferred stock of Restaurant Brands International, Inc. (“RBI”). In 2011, we acquired 50,000 shares of 6% Non-Cumulative Perpetual Preferred Stock of Bank of America Corporation (“BAC”) with a liquidation value of $100,000 per share (“BAC Preferred”) and warrants to purchase up to 700,000,000 shares of common stock of BAC (“BAC Warrants”) at $7.142857 per share (up to $5 billion in the aggregate). On August 24, 2017, we exercised all of our BAC Warrants and acquired 700,000,000 shares of BAC common stock. We also surrendered substantially all of our BAC Preferred as payment of the $5 billion cost to exercise the BAC Warrants and acquire the BAC common stock. Our investment in BAC is included in the banks, insurance and finance category at December 31, 2017 and in other investments at December 31, 2016.

On December 12, 2014, we acquired Class A 9% Cumulative Compounding Perpetual Preferred Shares of Restaurant Brands International, Inc. (“RBI”) having a stated value of $3 billion (“RBI Preferred”). RBI is domiciled in Canada. On December 12, 2017, RBI redeemed of all of our RBI Preferred investment. Prior to its redemption, we were entitled to dividends on the RBI Preferred at 9% per annum plus an additional amount, if necessary, to produce an after-tax yield as if the dividends were paid by a U.S.-based company.

As of December 31, 2017 and 2016, unrealized losses on equity securities in a continuous unrealized loss position for more than twelve consecutive months were $94 million and $551 million, respectively.

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

		December 31,
		2017				2016
Insurance and other		$	164,026			$	134,835
Railroad, utilities and energy *			1,961				1,186
Finance and financial products *			4,553				3,267
		$	170,540			$	139,288

*	Included in other assets.

(5)	Investments in The Kraft Heinz Company

In June 2013, Berkshire invested $12.25 billion in a newly-formed company, H.J. Heinz Holding Corporation (“Heinz Holding”). The investment consisted of 425,000,000 shares of common stock, warrants to acquire approximately 46,000,000 additional shares of common stock at $0.01 per share and cumulative compounding preferred stock (“Preferred Stock”) with a liquidation preference of $8 billion. An affiliate of the global investment firm 3G Capital (such affiliate, “3G”) also acquired 425,000,000 shares of Heinz Holding common stock for $4.25 billion. At that time, Berkshire and 3G each owned a 50% share of Heinz Holding common stock. Heinz Holding then acquired H.J. Heinz Company.

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Notes to Consolidated Financial Statements (Continued)

(5)	Investments in The Kraft Heinz Company (Continued)

In June 2015, Berkshire exercised the aforementioned common stock warrants. On July 1, 2015, Berkshire and 3G acquired new shares of Heinz Holding common stock for $5.26 billion and $4.74 billion, respectively. After these transactions, Berkshire owned approximately 52.5% of the outstanding shares of Heinz Holding. On July 2, 2015, Heinz Holding acquired all of the outstanding common stock of Kraft Foods Group, Inc. (“Kraft”), at which time Heinz Holding was renamed The Kraft Heinz Company (“Kraft Heinz”). In connection with its acquisition of Kraft, Kraft Heinz issued one new share of Kraft Heinz common stock for each share of Kraft common stock, which reduced Berkshire’s and 3G’s ownership interests in Kraft Heinz to 26.8% and 24.2%, respectively. 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.

Berkshire currently owns 26.7% of the outstanding shares of Kraft Heinz common stock. The carrying value of this investment was approximately $17.6 billion at December 31, 2017 and $15.3 billion at December 31, 2016. Our earnings determined under the equity method during 2017 were $2.9 billion, which includes certain one-time effects of the Tax Cuts and Jobs Act of 2017 on Kraft Heinz’s net earnings. We received dividends on the common stock of $797 million during 2017 and $952 million in 2016, which we recorded as reductions of our investment. During 2016, we also received dividends of $180 million on our Preferred Stock investment, which Kraft Heinz redeemed for cash of $8.32 billion on June 7, 2016.

Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Summarized consolidated financial information of Kraft Heinz follows (in millions).

		December 30, 2017				December 31, 2016
Assets			$120,232				$120,480
Liabilities			53,985				62,906

		Year ending December 30, 2017		Year ending December 31, 2016		Year ending January 3, 2016
Sales		$ 26,232		$ 26,487			$18,338
Net earnings attributable to Kraft Heinz		$ 10,999		$ 3,632			$634
Net earnings (loss) attributable to common shareholders		$ 10,999		$ 3,452			$(266)

(6)	Investment gains/losses

Investment gains/losses for each of the three years ending December 31, 2017 are summarized below (in millions).

		2017				2016				2015
Fixed maturity securities—
Gross gains		$	103			$	58			$	104
Gross losses			(22	)			(51	)			(171	)
Equity securities—
Gross gains			2,237				7,853				9,526
Gross losses			(919	)			(415	)			(129	)
Other			11				108				43
		$	1,410			$	7,553			$	9,373

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Notes to Consolidated Financial Statements (Continued)

(6)	Investment gains/losses (Continued)

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. We recognize investment gains and losses when we sell or otherwise dispose of such securities. Gross gains from equity securities of approximately $1.0 billion in 2017 related to the surrender of substantially all of our BAC Preferred as described in Note 4. Gross gains from equity securities in 2016 included approximately $4.2 billion from the redemptions of our investments in Wm. Wrigley Jr. Company and Kraft Heinz preferred stock and from the sale of Dow Chemical Company common stock received in the conversion of our Dow Chemical preferred stock investment. In 2016, we also recorded a non-cash holding gain of approximately $1.1 billion from the exchange of P&G common stock in connection with the acquisition of Duracell. See Note 2. Gross gains from 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 5.

(7)	Inventories

Inventories are comprised of the following (in millions).

		December 31,
		2017				2016
Raw materials		$	2,997			$	2,789
Work in process and other			2,315				2,506
Finished manufactured goods			4,179				4,033
Goods acquired for resale			6,696				6,399
		$	16,187			$	15,727

(8)	Receivables

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

		December 31,
		2017				2016
Insurance premiums receivable		$	11,058			$	10,462
Reinsurance recoverable on unpaid losses			3,201				3,338
Trade and other receivables			14,681				13,630
Allowances for uncollectible accounts			(362	)			(333	)
		$	28,578			$	27,097

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

		December 31,
		2017				2016
Loans and finance receivables before allowances and discounts		$	14,126			$	13,728
Allowances for uncollectible loans			(180	)			(182	)
Unamortized acquisition discounts			(198	)			(246	)
		$	13,748			$	13,300

Loans and finance receivables are predominantly installment loans originated or acquired by our manufactured housing business. Provisions for loan losses for 2017 and 2016 were $160 million and $144 million, respectively. Loan charge-offs, net of recoveries, were $162 million in 2017 and $144 million in 2016. At December 31, 2017, 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, 2017, we considered approximately 99% of the loan balances to be performing and approximately 95% of the loan balances to be current as to payment status. In June 2017, we agreed to provide a Canada-based financial institution with a C$2 billion (approximately $1.6 billion) one-year secured revolving credit facility. The agreement expires on June 29, 2018. There was no outstanding loan balance as of December 31, 2017.

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Notes to Consolidated Financial Statements (Continued)

(9)	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).

		December 31,
		2017				2016
Land		$	2,292			$	2,108
Buildings and improvements			8,810				8,360
Machinery and equipment			21,935				20,463
Furniture, fixtures and other			4,387				4,080
			37,424				35,011
Accumulated depreciation			(17,320	)			(15,686	)
		$	20,104			$	19,325

A summary of property, plant and equipment of our railroad and our utilities and energy businesses follows (in millions). The utility generation, transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries.

		December 31,
	2017				2016
Railroad:
Land		$	6,088			$	6,063
Track structure and other roadway			51,320				48,277
Locomotives, freight cars and other equipment			12,543				12,075
Construction in progress			989				965
			70,940				67,380
Accumulated depreciation			(8,627	)			(6,130	)
			62,313				61,250
Utilities and energy:
Utility generation, transmission and distribution systems			74,660				71,536
Interstate natural gas pipeline assets			7,176				6,942
Independent power plants and other assets			7,499				6,596
Construction in progress			2,556				2,098
			91,891				87,172
Accumulated depreciation			(26,020	)			(24,663	)
			65,871				62,509
		$	128,184			$	123,759

Assets held for lease and property, plant and equipment of our finance and financial products businesses are summarized below (in millions). Assets held for lease includes railcars, intermodal tank containers, cranes, over-the-road trailers, storage units and furniture. As of December 31, 2017, the minimum future lease rentals to be received on assets held for lease (including rail cars leased from others) were as follows (in millions): 2018 – $1,103; 2019 – $857; 2020 – $641; 2021 – $439; 2022 – $283; and thereafter – $407.

		December 31,
	2017				2016
Assets held for lease		$	12,318			$	11,902
Land			231				224
Buildings, machinery and other			1,444				1,302
			13,993				13,428
Accumulated depreciation			(4,062	)			(3,739	)
		$	9,931			$	9,689

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Notes to Consolidated Financial Statements (Continued)

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

Depreciation expense for each of the three years ending December 31, 2017 is summarized below (in millions).

		2017				2016				2015
Insurance and other		$	2,217			$	2,148			$	1,680
Railroad, utilities and energy			4,852				4,639				4,383
Finance and financial products			650				624				610
		$	7,719			$	7,411			$	6,673

(10)	Goodwill and other intangible assets

Reconciliations of the changes in the carrying value of goodwill during 2017 and 2016 follows (in millions).

		December 31,
		2017				2016
Balance at beginning of year		$	79,486			$	62,708
Acquisitions of businesses			1,545				17,650
Other, including foreign currency translation			227				(872	)
Balance at end of year		$	81,258			$	79,486

Our other intangible assets and related accumulated amortization are summarized as follows (in millions).

		December 31, 2017								December 31, 2016
		Gross carrying amount				Accumulated amortization				Gross carrying amount				Accumulated amortization
Insurance and other		$	40,225			$	7,707			$	39,976			$	6,495
Railroad, utilities and energy			988				324				898				293
		$	41,213			$	8,031			$	40,874			$	6,788
Trademarks and trade names		$	5,381			$	692			$	5,175			$	616
Patents and technology			4,341				2,493				4,341				2,328
Customer relationships			28,322				3,722				28,243				2,879
Other			3,169				1,124				3,115				965
		$	41,213			$	8,031			$	40,874			$	6,788

Intangible asset amortization expense was $1,469 million in 2017, $1,490 million in 2016 and $1,106 million in 2015. Estimated amortization expense over the next five years is as follows (in millions): 2018 – $1,400; 2019 – $1,270; 2020 – $1,175; 2021 – $1,086 and 2022 – $1,031. Intangible assets with indefinite lives as of December 31, 2017 and 2016 were $18,930 million and $18,705 million, respectively, and primarily related to certain customer relationships and trademarks and trade names.

(11)	Derivative contracts

We are party to derivative contracts primarily through our finance and financial products and our utilities and energy businesses. Currently, the derivative contracts of our finance and financial products businesses consist of equity index put option contracts written between 2004 and 2008. The liabilities and related notional values of such contracts follows (in millions).

		December 31, 2017								December 31, 2016
		Liabilities				Notional Value				Liabilities				Notional Value
Equity index put options		$	2,172			$	28,753	(1)		$	2,890			$	26,497	(1)

(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.

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Notes to Consolidated Financial Statements (Continued)

(11)	Derivative contracts (Continued)

We record derivative contract liabilities at fair value and include the changes in the fair values of such contracts in earnings as derivative gains/losses. A summary of the derivative gains/losses included in our Consolidated Statements of Earnings in each of the three years ending December 31, 2017 follows (in millions).

		2017				2016				2015
Equity index put options		$	718			$	662			$	1,008
Other			—				89				(34	)
		$	718			$	751			$	974

The equity index put option contracts are European style options written prior to March 2008 on four major equity indexes. The 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 aggregate premiums of $4.2 billion on these contracts at the contract inception dates and 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) was $789 million at December 31, 2017 and $1.0 billion at December 31, 2016. These contracts may not be unilaterally terminated or fully settled before the expiration dates and the ultimate amount of cash basis gains or losses on these contracts will not be determined until the contract expiration dates. The remaining weighted average life of all contracts was approximately 2.9 years at December 31, 2017.

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, 2017, 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, 2017 and 2016. Derivative contract liabilities are included in accounts payable, accruals and other liabilities and were $82 million as of December 31, 2017 and $145 million as of December 31, 2016. Most of the net derivative contract assets or liabilities of our regulated utilities are probable of recovery through rates and 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.

(12)	Supplemental cash flow information

A summary of supplemental cash flow information for each of the three years ending December 31, 2017 is presented in the following table (in millions).

		2017				2016				2015
Cash paid during the period for:
Income taxes		$	3,286			$	4,719			$	4,535
Interest:
Insurance and other businesses			871				555				346
Railroad, utilities and energy businesses			2,828				2,788				2,717
Finance and financial products businesses			389				389				403
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions			747				16,555				2,812
Equity securities exchanged in connection with business acquisitions			—				4,239				—
Conversions and other exchanges of investments			—				4,154				1,597
Equity securities surrendered in connection with warrant exercise			4,965				—				—

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Notes to Consolidated Financial Statements (Continued)

(13)	Unpaid losses and loss adjustment expenses

Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under 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, excluding liabilities under retroactive reinsurance contracts (see Note 14), for each of the three years ending December 31, 2017 is as follows (in millions).

		2017				2016				2015
Balances – beginning of year:
Gross liabilities		$	53,379			$	50,519			$	48,208
Reinsurance recoverable on unpaid losses			(3,338	)			(3,307	)			(3,116	)
Net liabilities			50,041				47,212				45,092
Incurred losses and loss adjustment expenses:
Current accident year events			37,702				30,636				27,829
Prior accident years’ events			(544	)			(1,523	)			(2,015	)
Discount accretion			—				80				82
Total incurred losses and loss adjustment expenses			37,158				29,193				25,896
Paid losses and loss adjustment expenses:
Current accident year events			(17,425	)			(14,898	)			(13,070	)
Prior accident years’ events			(12,507	)			(10,929	)			(10,229	)
Total payments			(29,932	)			(25,827	)			(23,299	)
Foreign currency translation adjustment			654				(537	)			(545	)
Business acquisition			—				—				68
Balances – end of year:
Net liabilities			57,921				50,041				47,212
Reinsurance recoverable on unpaid losses			3,201				3,338				3,307
Gross liabilities		$	61,122			$	53,379			$	50,519

Incurred losses and loss adjustment expenses in the preceding table were recorded in earnings in each period and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). We incurred current accident year losses of approximately $3 billion in 2017 with respect to hurricanes Harvey, Irma and Maria, an earthquake in Mexico, a cyclone in Australia and wildfires in California.

Incurred losses and loss adjustment expenses also included net reductions of estimated ultimate liabilities for prior accident years of $544 million, $1.5 billion and $2.0 billion in 2017, 2016 and 2015, respectively. Overall, we decreased estimated ultimate liabilities with respect to primary insurance by $249 million in 2017, $569 million in 2016 and $793 million in 2015. In each year, estimated ultimate claim liabilities for prior accident years were generally lower for medical malpractice and workers’ compensation insurance. For primary private passenger automobile insurance claims, we increased liabilities for prior years’ claims in 2017, primarily due to increased average claims severities, and decreased liabilities for prior years’ claims in 2016 and 2015. We decreased estimated ultimate liabilities with respect to property and casualty reinsurance by $295 million in 2017, $955 million in 2016 and $1.2 billion in 2015. The decrease in 2017 included increased losses from a United Kingdom government-mandated change to the computation of certain personal injury lump sum settlements and higher than expected property losses.

Estimated claim liabilities for environmental, asbestos and other latent injury exposures, net of reinsurance recoverables, were approximately $1.6 billion at December 31, 2017 and 2016. These liabilities are subject to change due to changes in the legal and regulatory environment as described in Note 14. We are unable to reliably estimate additional losses or a range of losses that are reasonably possible for these claims.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(13)	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, Berkshire Hathaway Reinsurance Group (“BHRG”, which includes the NICO Group and General Re Group) and Berkshire Hathaway Primary Group (“BH Primary”) to our consolidated unpaid losses and loss adjustment expenses as of December 31, 2017, along with a discussion regarding each group’s liability estimation processes, follows (in millions).

		GEICO				BHRG Property				BHRG Casualty				BH Primary				Total
Unpaid losses and ALAE, net		$	15,655			$	8,838			$	19,219			$	11,867			$	55,579
Reinsurance recoverable			859				289				1,028				1,025				3,201
Unpaid unallocated loss adjustment expenses																			2,342
Unpaid losses and loss adjustment expenses																		$	61,122

GEICO

GEICO’s claim liabilities predominantly relate to various types of private passenger auto liability and physical damage claims. 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. Claim liabilities include average, case, case development and IBNR estimates.

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.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

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

GEICO’s 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, 2017. Claim counts are established 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” includes the combined number of reported claims for all policy coverages and excludes projected IBNR claims. 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)
	2013*				2014*				2015*				2016*								2017
2013		$	13,085			$	12,900			$	12,943			$	12,920							$	12,961				$ 105				7,105
2014							14,680				14,572				14,559								14,589				236				7,972
2015											16,887				16,875								16,993				682				8,915
2016															19,106								19,390				1,806				9,601
2017																							22,675				4,343				10,513
			Incurred losses and ALAE																			$	86,608

Accident Year		Cumulative Paid Losses and ALAE through December 31,
	2013*				2014*				2015*				2016*								2017
2013		$	8,006			$	10,573			$	11,650			$	12,256							$	12,618
2014							9,199				12,036				13,140								13,850
2015											10,606				13,858								15,285
2016															12,020								15,862
2017																							13,878
			Paid losses and ALAE																				71,493
Net unpaid losses and ALAE for 2013 – 2017 accident years																							15,115
Net unpaid losses and ALAE for accident years before 2013																							540
Net unpaid losses and ALAE																						$	15,655

• Unaudited supplemental information

BHRG

We use a variety of actuarial methodologies to establish BHRG’s property and casualty claims liabilities. We use certain methodologies, such as paid and incurred loss development techniques, incurred and paid loss Bornhuetter-Ferguson techniques and frequency and severity techniques, as well as ground-up techniques when appropriate.

Our claims liabilities are principally a function of reported losses from ceding companies, case development and IBNR liability estimates. Case loss estimates are reported under our contracts either individually or in bulk as provided under the terms of the contracts. We may independently evaluate case losses reported by the ceding company, and if deemed appropriate, we may establish case liabilities based on our estimates. Estimated IBNR liabilities are driven by expected case loss emergence patterns and expected loss ratios, which may be evaluated as groups or portfolios of contracts with similar exposures, or on an individual contract-by-contract basis. Case and IBNR liability estimates for major catastrophe events may be based on a per-contract assessment of the ultimate cost associated with the individual loss event. Claim count data is not provided, as such information is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

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

We disaggregated net losses and ALAE for BHRG based on losses that are expected to have shorter claim-tails (property) and those expected to have longer claim-tails (casualty). Under certain contracts, the coverage can apply to multiple lines of business written by the ceding company, whether property, casualty or combined, and the ceding company may not report loss data by such lines consistently, if at all. In those instances, we allocated losses to property and casualty coverages based on internal estimates. In the following tables, BHRG’s incurred and paid loss and ALAE data is separately presented for property and casualty coverage by accident year, net of reinsurance. IBNR and case development liabilities are as of December 31, 2017. Dollars are in millions.

BHRG Property

Accident Year		Incurred Losses and ALAE through December 31,																																								IBNR and Case Development Liabilities
	2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016*				2017
2008		$	3,030			$	2,720			$	2,773			$	2,483			$	2,392			$	2,432			$	2,386			$	2,353				$2,344				$2,336				$ 6
2009							2,385				2,057				2,250				2,171				2,075				2,048				2,006				2,001				2,000				8
2010											2,545				2,538				2,424				2,289				2,200				2,164				2,146				2,126				32
2011															4,192				4,127				3,850				3,764				3,761				3,729				3,706				84
2012																			3,153				2,851				2,645				2,404				2,351				2,347				95
2013																							3,230				3,074				2,727				2,636				2,614				172
2014																											2,646				2,458				2,344				2,199				223
2015																															3,268				3,115				2,557				232
2016																																			3,294				3,938				1,072
2017																																							5,276				1,993
Incurred losses and ALAE																																						$	29,099
Accident Year		Cumulative Paid Losses and ALAE through December 31,
	2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016*				2017
2008			$ 481			$	1,449			$	1,825			$	2,055			$	2,159			$	2,205			$	2,240			$	2,296			$	2,307			$	2,308
2009							405				1,122				1,627				1,792				1,861				1,931				1,965				1,975				1,977
2010											339				1,081				1,520				1,789				1,950				2,007				2,054				2,079
2011															661				2,308				2,963				3,233				3,344				3,433				3,475
2012																			265				1,232				1,813				1,952				2,041				2,116
2013																							522				1,447				1,892				2,090				2,211
2014																											467				1,259				1,591				1,731
2015																															571				1,604				1,959
2016																																			706				1,807
2017																																							1,028
Paid losses and ALAE																																							20,691
Net unpaid losses and ALAE for 2008 – 2017 accident years																																							8,408
Net unpaid losses and ALAE for accident years before 2008																																							430
Net unpaid losses and ALAE																																						$	8,838

*	Unaudited supplemental information

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

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

BHRG Casualty

Accident Year		Incurred Losses and ALAE through December 31,																																								IBNR and Case Development Liabilities
	2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016*				2017
2008		$	2,448			$	2,602			$	2,279			$	2,358			$	2,309			$	2,161			$	2,101			$	2,042			$	2,009			$	2,010			$	226
2009							2,393				2,711				2,571				2,500				2,437				2,362				2,315				2,252				2,213				225
2010											2,320				2,413				2,345				2,282				2,162				2,111				2,066				1,903				166
2011															2,628				2,720				2,589				2,529				2,440				2,348				2,340				419
2012																			2,811				2,995				2,829				2,892				2,819				2,705				663
2013																							2,152				2,290				2,320				2,162				2,107				644
2014																											1,891				2,090				2,059				2,021				736
2015																															1,895				2,102				2,130				803
2016																																			1,923				2,132				1,012
2017																																							2,209				1,428
Incurred losses and ALAE																																						$	21,770

Accident Year		Cumulative Paid Losses and ALAE through December 31,
	2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016*				2017
2008			$ 253				$664				$959				$ 1,067				$ 1,168				$ 1,250				$ 1,325				$ 1,367				$ 1,405			$	1,442
2009							249				858				947				1,219				1,439				1,596				1,632				1,669				1,695
2010											120				553				846				1,035				1,288				1,384				1,448				1,493
2011															293				822				1,167				1,409				1,498				1,591				1,670
2012																			311				754				1,147				1,378				1,535				1,660
2013																							293				527				814				943				1,048
2014																											152				485				651				761
2015																															198				497				722
2016																																			254				561
2017																																							232
Paid losses and ALAE																																							11,284
							Net unpaid losses and ALAE for 2008 – 2017 accident years																																10,486
							Net unpaid losses and ALAE for accident years before 2008																																8,733
							Net unpaid losses and ALAE																															$	19,219

*	Unaudited supplemental information

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 claims that ultimately result in no liability or payment.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(13)	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, 2017. Dollars are in millions.

		Incurred Losses and ALAE through December 31,																																								IBNR and Case Development Liabilities				Cumulative Number of Reported Claims (in thousands)
Accident Year		2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016*				2017
2008		$	1,573			$	1,503			$	1,448			$	1,369			$	1,250			$	1,182			$	1,135			$	1,103			$	1,073			$	1,063			$	69				71
2009							1,528				1,435				1,392				1,322				1,229				1,164				1,109				1,073				1,047				75				60
2010											1,516				1,437				1,378				1,321				1,234				1,163				1,119				1,068				107				61
2011															1,563				1,461				1,446				1,359				1,290				1,249				1,189				168				67
2012																			1,710				1,675				1,631				1,559				1,518				1,423				250				79
2013																							2,199				2,127				2,052				1,977				1,900				424				100
2014																											2,906				2,737				2,687				2,580				736				138
2015																															3,519				3,406				3,266				1,095				163
2016																																			4,149				4,024				1,917				171
2017																																							5,024				3,161				166
											Incurred losses and ALAE																											$	22,584
		Cumulative Paid Losses and ALAE through December 31,
Accident Year		2008*				2009*				2010*				2011*				2012*				2013*				2014*				2015*				2016*				2017
2008			$181				$369				$535				$676				$771				$852				$903				$932			$	950			$	968
2009							136				335				507				643				752				838				891				921				933
2010											153				366				522				661				768				846				889				916
2011															167				331				533				682				824				903				946
2012																			165				444				642				820				956				1,049
2013																							279				621				903				1,118				1,272
2014																											387				833				1,192				1,504
2015																															499				1,060				1,498
2016																																			634				1,302
2017																																							761
											Paid losses and ALAE																												11,149
							Net unpaid losses and ALAE for 2008 – 2017 accident years																																11,435
							Net unpaid losses and ALAE for accident years before 2008																																432
							Net unpaid losses and ALAE																															$	11,867

*	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			61.9%				19.6%				8.1%				4.9%				2.8%
BHRG Property			18.7%				37.5%				18.8%				8.3%				4.5%				2.7%				1.6%				1.4%				0.3%				0.0%
BHRG Casualty			10.7%				18.4%				12.0%				8.3%				7.1%				5.0%				3.0%				2.0%				1.5%				1.8%
BH Primary			14.6%				17.7%				15.0%				12.5%				9.8%				7.3%				4.4%				2.7%				1.4%				1.7%

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Retroactive reinsurance contracts

Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date. Claims payments may commence immediately after the contract date or, if applicable, once a contractual retention amount has been reached. Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses (“claim liabilities”) and related deferred charge reinsurance assumed assets for each of the three years ended December 31, 2017 follows (in millions).

		2017								2016								2015
		Unpaid losses and loss adjustment expenses				Deferred charges reinsurance assumed				Unpaid losses and loss adjustment expenses				Deferred charges reinsurance assumed				Unpaid losses and loss adjustment expenses				Deferred charges reinsurance assumed
Balances – beginning of year		$	24,972			$	(8,047)			$	24,058			$	(7,687)			$	24,702			$	(7,772)
Incurred losses and loss adjustment expenses
Current year contracts			19,005				(7,730)				2,136				(874)				—				—
Prior years’ contracts			(41)				499				(63)				514				546				85
Total			18,964				(7,231)				2,073				(360)				546				85
Paid losses and loss adjustment expenses			(999)				—				(1,159)				—				(1,190)				—
Balances – end of year		$	42,937			$	(15,278)			$	24,972			$	(8,047)			$	24,058			$	(7,687)
Incurred losses and loss adjustment expenses, net of deferred charges		$	11,733							$	1,713							$	631

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts. We do 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 little or no practical analytical value.

In 2017, we entered into an agreement through a Berkshire subsidiary, National Indemnity Company (“NICO”), with various subsidiaries of American International Group, Inc. (collectively, “AIG”), which became effective on February 2, 2017. Under this agreement, NICO agreed to indemnify AIG for 80% of up to $25 billion of losses and allocated loss adjustment expenses in excess of $25 billion retained by AIG, with respect to certain commercial insurance loss events occurring prior to 2016. As of the effective date, we recorded premiums earned of $10.2 billion, and we also recorded a liability for unpaid losses and loss adjustment expenses of $16.4 billion and a deferred charge reinsurance assumed asset of $6.2 billion. Berkshire agreed to guarantee the timely payment of all amounts due to AIG under the agreement.

In the fourth quarter of 2017, we increased our estimated ultimate claim liabilities under the aforementioned AIG contract by approximately $1.8 billion based on higher than expected loss payments reported by AIG under the contractual retention. We also increased the related deferred charge asset by $1.7 billion based on our re-estimation of the amounts and timing of future claim payments. As of yearend 2017, our net liability from this contract was approximately $10.7 billion, representing the excess of the estimated ultimate claim liabilities of approximately $18.2 billion over the remaining deferred charge asset balance of approximately $7.5 billion.

Incurred losses and loss adjustment expenses related to contracts written in prior years were $458 million in 2017, $451 million in 2016 and $631 million in 2015, which included recurring amortization of deferred charges and the effect of changes in the timing and amount of expected future loss payments.

In establishing retroactive reinsurance claim liabilities, we analyze historical aggregate loss payment patterns and project losses into the future under various probability-weighted scenarios. We expect the claim-tail to be very long for many contracts, with some lasting several decades. We monitor claim payment activity and review ceding company reports and other information concerning the underlying losses. 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.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(14)	Retroactive reinsurance contracts (Continued)

Our retroactive reinsurance claim liabilities include estimated liabilities for environmental, asbestos and other latent injury exposures of approximately $14.0 billion at December 31, 2017 and $13.7 billion at December 31, 2016. 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, which 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.

(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, 2017.

		Weighted Average Interest Rate				December 31,
		2017				2016
Insurance and other:
Issued by Berkshire:
U.S. Dollar denominated borrowings due 2018-2047			2.8%			$	10,603			$	11,709
Euro denominated borrowings due 2020-2035			1.1%				8,164				5,994
Short-term subsidiary borrowings			3.4%				1,832				2,094
Other subsidiary borrowings due 2018-2045			3.6%				6,725				7,378
						$	27,324			$	27,175

In January 2017, Berkshire issued €1.1 billion in senior unsecured notes. The notes consisted of €550 million of 0.25% notes due in 2021 and €550 million of 0.625% notes due in 2023. In January 2017, senior notes of $1.1 billion matured. In 2017, the carrying value of Berkshire’s Euro denominated senior notes increased $990 million due to changes in the Euro/U.S. Dollar exchange rates. This increase produced a corresponding charge to pre-tax earnings of $990 million which was recorded as additional non-cash interest expense.

		Weighted Average Interest Rate				December 31,
		2017				2016
Railroad, utilities and energy:
Issued by Berkshire Hathaway Energy Company (“BHE”) and its subsidiaries:
BHE senior unsecured debt due 2018-2045			5.1%			$	6,452			$	7,818
Subsidiary and other debt due 2018-2064			4.8%				28,739				27,354
Short-term debt			2.0%				4,488				1,869
Issued by BNSF due 2018-2097			4.8%				22,499				22,044
						$	62,178			$	59,085

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 service coverage ratios, among other covenants. During 2017, BHE and its subsidiaries issued approximately $1.9 billion of term debt with maturity dates ranging from 2022 to 2057 with a weighted average interest rate of 3.2%.

BHE’s short-term debt outstanding increased, in part to fund the prepayment of approximately $1.0 billion of BHE senior unsecured debt in connection with a tender offer in December 2017. BHE recognized a pre-tax loss of $410 million, which was included in interest expense in the Consolidated Statement of Earnings. In January 2018, BHE issued $2.2 billion of senior notes with maturity dates ranging from 2021 to 2048 with a weighted average interest rate of 3.2%. Proceeds from this debt issuance were used to repay short-term debt and for general corporate purposes.

BNSF’s borrowings are primarily senior unsecured debentures. In March 2017, BNSF issued $1.25 billion of senior unsecured debentures consisting of $500 million of 3.25% debentures due in 2027 and $750 million of 4.125% debentures due in 2047. As of December 31, 2017, 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.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(15)	Notes payable and other borrowings (Continued)

		Weighted Average Interest Rate				December 31,
		2017				2016
Finance and financial products:
Issued by Berkshire Hathaway Finance Corporation (“BHFC”) due 2018-2043			2.8%			$	12,926			$	14,423
Issued by other subsidiaries due 2018-2036			4.5%				159				961
						$	13,085			$	15,384

In January 2017, BHFC issued $1.3 billion of senior notes consisting of $950 million of floating rate notes due in 2019 and $350 million of floating rate notes due in 2020. During 2017, senior notes of $2.8 billion matured. The borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, are fully and unconditionally guaranteed by Berkshire.

As of December 31, 2017, our subsidiaries had unused lines of credit and commercial paper capacity aggregating approximately $7.7 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, 2017, Berkshire guaranteed approximately $1.9 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).

		2018				2019				2020				2021				2022
Insurance and other		$	4,741			$	844			$	1,800			$	2,527			$	850
Railroad, utilities and energy			8,659				2,939				2,245				1,804				3,395
Finance and financial products			4,661				4,016				931				750				775
		$	18,061			$	7,799			$	4,976			$	5,081			$	5,020

(16)	Income taxes

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

		December 31,
		2017				2016
Currently payable (receivable)		$	(129	)		$	500
Deferred			56,182				76,457
Other			554				485
		$	56,607			$	77,442

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017 (“TCJA”). Among its provisions, the TCJA reduces the statutory U.S. Corporate income tax rate from 35% to 21% effective January 1, 2018. The TCJA also provides for a one-time tax on certain accumulated undistributed post-1986 earnings of foreign subsidiaries. Further, the TCJA includes provisions that, in certain instances, impose U.S. income tax liabilities on future earnings of foreign subsidiaries and limit the deductibility of future interest expenses. The TCJA also provides for accelerated deductions of certain capital expenditures made after September 27, 2017 through bonus depreciation. The application of the TCJA may change due to regulations subsequently issued by the U.S. Treasury Department.

Upon the enactment of the TCJA, we recorded a reduction in our deferred income tax liabilities of approximately $35.6 billion for the effect of the aforementioned change in the U.S. statutory income tax rate. As a result, we recorded an income tax benefit of approximately $29.6 billion and we increased regulatory liabilities of our regulated utility subsidiaries by approximately $6.0 billion for the portion of the deferred income tax liability reduction that we will be required to, effectively, refund to customers in the rate setting process. We also recognized an income tax charge of approximately $1.4 billion with respect to the deemed repatriation of the accumulated undistributed post-1986 earnings of our foreign subsidiaries. Thus, upon the enactment of the TCJA, we included a net income tax benefit in our 2017 earnings of approximately $28.2 billion.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(16)	Income taxes (Continued)

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin 118 (“SAB 118”) to provide clarification in implementing the TCJA when registrants do not have the necessary information available to complete the accounting for an element of the TCJA in the period of its enactment. SAB 118 provides for tax amounts to be classified as provisional and subject to remeasurement for up to one year from the enactment date for such elements when the accounting effect is not complete, but can be reasonably estimated.

We consider our estimate of the tax on accumulated undistributed earnings of foreign subsidiaries to be provisional and subject to remeasurement when we obtain the necessary additional information to complete the accounting. While we believe our estimate to be reasonable, it will take additional time to validate the inputs to the foreign earnings and profits calculations, the basis on which the repatriation tax is determined, and how the applicable states will address the U.S. repatriation tax. We currently expect that our accounting for the repatriation tax under the TCJA will be completed by the end of 2018.

We have not established deferred income taxes on accumulated undistributed earnings of certain foreign subsidiaries, which are expected to be reinvested indefinitely. Repatriation of all accumulated earnings of foreign subsidiaries would be impracticable to the extent that such earnings represent capital to support normal business operations. Although no U.S. federal taxes will be imposed on future distributions of foreign earnings, in certain jurisdictions the distributions could be subject to withholding and other local taxes.

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,
		2017				2016
Deferred tax liabilities:
Investments – unrealized appreciation and cost basis differences		$	24,251			$	27,669
Deferred charges reinsurance assumed			3,226				2,876
Property, plant and equipment			26,671				39,345
Goodwill and other intangible assets			7,204				11,344
Other			3,216				5,550
			64,568				86,784
Deferred tax assets:
Unpaid losses and loss adjustment expenses			(1,231	)			(1,363	)
Unearned premiums			(345	)			(1,021	)
Accrued liabilities			(2,501	)			(3,821	)
Other			(4,309	)			(4,122	)
			(8,386	)			(10,327	)
Net deferred tax liability		$	56,182			$	76,457

Income tax expense reflected in our Consolidated Statements of Earnings for each of the three years ending December 31, 2017 is as follows (in millions).

		2017				2016				2015
Federal		$	(23,427	)		$	7,796			$	9,253
State			894				556				578
Foreign			1,018				888				701
		$	(21,515	)		$	9,240			$	10,532
Current		$	3,299			$	6,565			$	5,426
Deferred			(24,814	)			2,675				5,106
		$	(21,515	)		$	9,240			$	10,532

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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, 2017 in the table below (in millions).

		2017				2016				2015
Earnings before income taxes		$	23,838			$	33,667			$	34,946
Hypothetical income tax expense computed at the U.S. federal statutory rate		$	8,343			$	11,783			$	12,231
Dividends received deduction and tax exempt interest			(905	)			(789	)			(1,146	)
State income taxes, less U.S. federal income tax benefit			465				361				374
Foreign tax rate differences			(339	)			(421	)			(459	)
U.S. income tax credits			(636	)			(518	)			(461	)
Non-taxable exchange of investments			—				(1,143	)			—
Net benefit from the enactment of the TCJA			(28,200	)			—				—
Other differences, net			(243	)			(33	)			(7	)
		$	(21,515	)		$	9,240			$	10,532

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 (the “IRS”) 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 and we currently believe it is reasonably possible that these examinations will be settled during 2018. 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 of these 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, 2017 and 2016, net unrecognized tax benefits were $554 million and $485 million, respectively. Included in the balance at December 31, 2017, were $445 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 income 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, 2017, 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 $16 billion as ordinary dividends during 2018.

Combined shareholders’ equity of U.S. based insurance subsidiaries determined pursuant to statutory accounting rules (Surplus as Regards Policyholders) was approximately $170 billion at December 31, 2017 and $136 billion at December 31, 2016. 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 carrying values of non-insurance entities owned by our insurance subsidiaries, are not fully recognized for statutory reporting purposes.

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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, 2017 and December 31, 2016 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, 2017
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies			$	3,953				$	3,953				$	2,360				$	1,593				$	—
States, municipalities and political subdivisions				854					854					—					854					—
Foreign governments				8,822					8,822					6,946					1,876					—
Corporate bonds				6,862					6,862					—					6,856					6
Mortgage-backed securities				862					862					—					862					—
Investments in equity securities				170,540					170,540					170,494					46					—
Investment in Kraft Heinz common stock				17,635					25,306					25,306					—					—
Loans and finance receivables				13,748					14,136					—					17					14,119
Derivative contract assets (1)				142					142					1					28					113
Derivative contract liabilities:
Railroad, utilities and energy (1)				82					82					3					69					10
Equity index put options				2,172					2,172					—					—					2,172
Notes payable and other borrowings:
Insurance and other				27,324					28,180					—					28,180					—
Railroad, utilities and energy				62,178					70,538					—					70,538					—
Finance and financial products				13,085					13,582					—					13,577					5
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				1,084					1,084					—					1,084					—
Investments in equity securities				139,288					139,288					122,031					—					17,257
Investment in Kraft Heinz common stock				15,345					28,418					28,418					—					—
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

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

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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. 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, 2017 follow (in millions).

		Investments in fixed maturity securities				Investments in equity securities				**Net derivative contract liabilities **
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	)
Gains (losses) included in:
Earnings			—				—				888
Other comprehensive income			1				1,156				(3	)
Regulatory assets and liabilities			—				—				(1	)
Dispositions and settlements			(59	)			—				(129	)
Transfers into/out of Level 3			—				(18,413	)			—
Balance December 31, 2017		$	6			$	—			$	(2,069	)

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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.

As disclosed in Note 4, we exercised our BAC Warrants to acquire BAC common stock on August 24, 2017. As payment of the cost to acquire the BAC common stock, we surrendered substantially all of our BAC Preferred. Additionally, RBI redeemed our RBI Preferred investment on December 12, 2017. In the second quarter of 2017, we concluded the Level 3 inputs used in the previous fair value determinations of the BAC Warrants, BAC Preferred Stock and RBI Preferred were not significant and we transferred these measurements from Level 3 to Level 2. 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, 2017, 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
Derivative liabilities:
Equity index put options		$	2,172				Option pricing model				Volatility				17%

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.

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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, 2017 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, 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
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options issued in a business acquisition			(25,303	)			—				(25,303	)			38,742,822				—				38,742,822
Balance December 31, 2017			762,755				(11,680	)			751,075				1,342,066,749				(1,409,762	)			1,340,656,987

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 1,644,846 shares outstanding as of December 31, 2017 and 1,644,321 shares outstanding as of December 31, 2016. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but none are issued.

Berkshire’s Board of Directors has approved a common stock repurchase program permitting Berkshire to repurchase its Class A and Class B shares at prices no higher than a 20% premium over the book value of the shares. The program allows share repurchases in the open market or through privately negotiated transactions and 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 specific 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.

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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 from accumulated other comprehensive income into net earnings for each of the three years ending December 31, 2017 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, 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 into net earnings			(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 into net earnings			(4,433	)			—				75				29				(4,329	)
Balance December 31, 2016			43,176				(5,268	)			(593	)			(17	)			37,298
Other comprehensive income, net before reclassifications			19,826				2,151				65				16				22,058
Reclassifications into net earnings			(909	)			3				108				13				(785	)
Balance December 31, 2017		$	62,093			$	(3,114	)		$	(420	)		$	12			$	58,571
Reclassifications into net earnings:
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	)
Year ending December 31, 2017:
Investment gains/losses		$	(1,399	)		$	—			$	—			$	—			$	(1,399	)
Other			—				3				155				19				177
Reclassifications before income taxes			(1,399	)			3				155				19				(1,222	)
Applicable income taxes			(490	)			—				47				6				(437	)
		$	(909	)		$	3			$	108			$	13			$	(785	)

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(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. The components of our net periodic pension expense for each of the three years ending December 31, 2017 were as follows (in millions).

		2017				2016				2015
Service cost		$	273			$	282			$	266
Interest cost			635				691				591
Expected return on plan assets			(939	)			(908	)			(782	)
Amortization of actuarial losses and other			157				148				179
Net periodic pension expense		$	126			$	213			$	254

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 PBOs of such plans were approximately $1.3 billion and $1.2 billion as of December 31, 2017 and 2016, respectively.

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, 2017 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.

		2017												2016
		BHE				All other				Consolidated				BHE				All other				Consolidated
Benefit obligations
Accumulated benefit obligation end of year		$	4,920			$	12,604			$	17,524			$	4,787			$	11,912			$	16,699
PBO beginning of year		$	5,077			$	12,673			$	17,750			$	5,076			$	10,183			$	15,259
Service cost			47				226				273				49				233				282
Interest cost			174				461				635				198				493				691
Benefits paid			(271	)			(626	)			(897	)			(309	)			(705	)			(1,014	)
Business acquisitions			—				—				—				—				2,684				2,684
Actuarial (gains) or losses and other			180				883				1,063				63				(215	)			(152	)
PBO end of year		$	5,207			$	13,617			$	18,824			$	5,077			$	12,673			$	17,750
Plan assets
Plan assets beginning of year		$	4,694			$	10,703			$	15,397			$	4,765			$	8,066			$	12,831
Employer contributions			122				159				281				133				214				347
Benefits paid			(271	)			(626	)			(897	)			(309	)			(705	)			(1,014	)
Actual return on plan assets			535				1,601				2,136				512				1,083				1,595
Business acquisitions			—				—				—				—				2,314				2,314
Other			49				48				97				(407	)			(269	)			(676	)
Plan assets end of year		$	5,129			$	11,885			$	17,014			$	4,694			$	10,703			$	15,397
Funded status – net liability		$	78			$	1,732			$	1,810			$	383			$	1,970			$	2,353

The funded status of our defined benefit pension plans at December 31, 2017 reflected in assets was $1,176 million and in liabilities was $2,986 million. At December 31, 2016, the funded status included in assets was $644 million and in liabilities was $2,997 million.

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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.

		2017				2016				2015
Applicable to pension benefit obligations:
Discount rate			3.3%				3.8%				4.1%
Expected long-term rate of return on plan assets			6.4				6.1				6.5
Rate of compensation increase			2.8				3.0				3.4
Discount rate applicable to net periodic pension expense			3.9				4.2				3.8

Benefits payments expected over the next ten years are as follows (in millions): 2018 – $1,058; 2019 – $1,004; 2020 – $1,024; 2021 – $1,019; 2022 – $1,019; and 2023 to 2027 – $5,095. Sponsoring subsidiaries expect to contribute $251 million to defined benefit pension plans in 2018.

Fair value measurements of plan assets as of December 31, 2017 and 2016 follow (in millions).

		Fair Value																Investment funds and partnerships at net asset value
		Total				Level 1				Level 2				Level 3
December 31, 2017
Cash and equivalents		$	738			$	594			$	144			$	—				$ —
Equity securities			9,824				9,641				23				160				—
Government obligations			1,536				1,497				39				—				—
Other fixed maturity securities			799				148				619				32				—
Investment funds and other			4,117				150				1,501				274				2,192
		$	17,014			$	12,030			$	2,326			$	466				$2,192
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

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, 2017 follows (in millions).

		2017				2016
Balance beginning of year		$	(839	)		$	(1,193	)
Amount included in net periodic pension expense			155				104
Actuarial gains and other			70				250
Balance end of year		$	(614	)		$	(839	)

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(21)	Pension plans (Continued)

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 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 $1,001 million in 2017, $912 million in 2016 and $739 million in 2015.

(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 $1,579 million in 2017, $1,573 million in 2016 and $1,516 million in 2015. Future minimum rental payments for operating leases having non-cancellable terms in excess of one year are as follows (in millions).

2018		2019		2020		2021		2022		After 2022		Total
$1,330		$1,192		$1,067		$872		$709		$3,316		$8,486

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, 2017, estimated future payments under such arrangements were as follows: $13.0 billion in 2018, $3.8 billion in 2019, $3.1 billion in 2020, $2.6 billion in 2021, $2.4 billion in 2022 and $15.0 billion after 2022.

In 2016, 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 reported assets and policyholders’ surplus determined under statutory accounting principles as of September 30, 2017 were approximately $5.8 billion and $2.2 billion, respectively. The acquisition price will be approximately $2.5 billion. 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 and customary closing conditions and the approval of the MLMIC policyholders eligible to vote on the proposed demutualization and sale. We currently expect this acquisition will be completed in the third quarter of 2018.

On October 3, 2017, we entered into an investment agreement and an equity purchase agreement whereby we acquired a 38.6% interest in Pilot Travel Centers LLC, d/b/a Pilot Flying J (“Pilot Flying J”). Pilot Flying J, headquartered in Knoxville, Tennessee, is one of the largest operators of travel centers in North America, with more than 27,000 team members, 750 locations across the U.S. and Canada, and approximately $20 billion in annual revenues. The Haslam family currently owns a 50.1% interest in Pilot Flying J and a third party owns the remaining 11.3% interest. We also entered into an agreement to acquire in 2023 an additional 41.4% interest in Pilot Flying J with the Haslam family retaining a 20% interest. As a result, Berkshire will become the majority owner of Pilot Flying J in 2023.

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, 2017, Berkadia’s commercial paper outstanding was $1.47 billion.

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(22)	Contingencies and Commitments (Continued)

Pursuant to the terms of agreements with noncontrolling shareholders in our less than wholly-owned subsidiaries, we may be obligated to acquire their equity interests. If we acquired all outstanding noncontrolling interests as of December 31, 2017, we estimate the cost would have been approximately $5.3 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. We organize our reportable business segments in a manner that reflects how management views those business activities. Certain businesses are 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, amortization of certain purchase accounting adjustments related to Berkshire’s business acquisitions or certain other corporate income and expense items in assessing the financial performance of operating 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 Reinsurance Group		Underwriting excess-of-loss, quota-share and facultative reinsurance worldwide (General Re Group and NICO Group)
Berkshire Hathaway Primary Group		Underwriting multiple lines of property and casualty insurance policies for primarily commercial accounts
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

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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
	2017				2016				2015				2017				2016				2015
Operating Businesses:
Insurance:
Underwriting:
GEICO		$	29,441			$	25,483			$	22,718			$	(310	)		$	462			$	460
Berkshire Hathaway Reinsurance Group			24,013				14,141				13,182				(3,648	)			1,012				553
Berkshire Hathaway Primary Group			7,143				6,257				5,394				719				657				824
Insurance underwriting			60,597				45,881				41,294				(3,239	)			2,131				1,837
Investment income			4,911				4,522				4,562				4,902				4,482				4,550
Total insurance			65,508				50,403				45,856				1,663				6,613				6,387
BNSF			21,387				19,829				21,967				6,328				5,693				6,775
Berkshire Hathaway Energy			18,939				17,859				18,231				2,584				2,973				2,851
Manufacturing			50,445				46,506				36,136				6,861				6,211				4,893
McLane Company			49,775				48,075				48,223				299				431				502
Service and retailing			26,313				25,478				23,466				2,083				1,820				1,720
Finance and financial products			8,376				7,675				6,964				2,058				2,130				2,086
			240,743				215,825				200,843				21,876				25,871				25,214
Reconciliation to consolidated amount:
Investment and derivative gains/losses			2,128				8,304				10,347				2,128				8,304				10,347
Interest expense, not allocated to segments			—				—				—				(1,494	)			(230	)			(374	)
Investments in Kraft Heinz			—				180				852				2,938				1,103				730
Corporate, eliminations and other			(734	)			(705	)			(1,099	)			(1,610	)			(1,381	)			(971	)
		$	242,137			$	223,604			$	210,943			$	23,838			$	33,667			$	34,946

		Interest expense												Income tax expense
	2017				2016				2015				2017				2016				2015
Operating Businesses:
Insurance		$	—			$	—			$	—			$	(55)			$	1,585			$	1,475
BNSF			1,016				992				928				2,369				2,124				2,527
Berkshire Hathaway Energy			2,254				1,715				1,830				178				403				450
Manufacturing			189				164				50				2,155				1,945				1,548
McLane Company			19				—				13				94				169				195
Service and retailing			56				50				40				726				669				651
Finance and financial products			397				411				384				723				702				708
			3,931				3,332				3,245				6,190				7,597				7,554
Reconciliation to consolidated amount:
Investment and derivative gains/losses			—				—				—				742				1,807				3,622
Interest expense, not allocated to segments			1,494				230				374				(523)				(81)				(131)
Investments in Kraft Heinz			—				—				—				832				397				(111)
Income tax net benefit – Tax Cuts and Jobs Act of 2017			—				—				—				(28,200)				—				—
Corporate, eliminations and other			(31)				(65)				(104)				(556)				(480)				(402)
		$	5,394			$	3,497			$	3,515			$	(21,515)			$	9,240			$	10,532

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Table of Contents

Notes to Consolidated Financial Statements (Continued)

(23)	Business segment data (Continued)

		Capital expenditures												Depreciation of tangible assets
	2017				2016				2015				2017				2016				2015
Operating Businesses:
Insurance		$	170			$	128			$	115			$	84			$	85			$	77
BNSF			3,256				3,819				5,651				2,304				2,079				1,932
Berkshire Hathaway Energy			4,571				5,090				5,875				2,548				2,560				2,451
Manufacturing			1,905				1,813				1,292				1,357				1,287				938
McLane Company			289				258				338				193				165				161
Service and retailing			587				804				574				583				611				504
Finance and financial products			930				1,042				2,237				650				624				610
		$	11,708			$	12,954			$	16,082			$	7,719			$	7,411			$	6,673

		Goodwill at year-end								Identifiable assets at year-end
	2017				2016				2017				2016				2015
Operating Businesses:
Insurance		$	15,499			$	15,474			$	297,048			$	234,037			$	219,451
BNSF			14,845				14,845				69,438				69,277				66,613
Berkshire Hathaway Energy			9,935				9,266				80,195				76,428				74,221
Manufacturing			32,981				32,041				72,630				69,900				34,141
McLane Company			734				734				6,090				5,896				5,871
Service and retailing			5,771				5,745				18,215				17,450				16,299
Finance and financial products			1,493				1,381				40,392				40,329				37,621
		$	81,258			$	79,486				584,008				513,317				454,217
Reconciliation to consolidated amount:
Corporate and other											36,829				28,051				35,332
Goodwill											81,258				79,486				62,708
										$	702,095			$	620,854			$	552,257

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

		Property/Casualty												Life/Health
	2017				2016				2015				2017				2016				2015
Premiums Written:
Direct		$	39,377			$	34,001			$	30,544			$	866			$	1,060			$	821
Assumed			17,815				8,037				7,049				4,925				4,672				5,187
Ceded			(694	)			(798	)			(877	)			(47	)			(62	)			(57	)
		$	56,498			$	41,240			$	36,716			$	5,744			$	5,670			$	5,951
Premiums Earned:
Direct		$	37,755			$	33,207			$	29,608			$	866			$	1,060			$	821
Assumed			17,813				7,848				6,584				4,866				4,671				5,192
Ceded			(677	)			(843	)			(854	)			(26	)			(62	)			(57	)
		$	54,891			$	40,212			$	35,338			$	5,706			$	5,669			$	5,956

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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
					2017				2016				2015								2017				2016				2015
United States						$	50,604			$	35,878			$	31,171							$	3,320			$	3,473			$	3,247
Asia Pacific							3,307				3,616				3,472								879				715				673
Western Europe							1,516				1,406				1,638								909				822				1,263
All other							1,071				340				435								636				660				768
						$	56,498			$	41,240			$	36,716							$	5,744			$	5,670			$	5,951

Consolidated sales and service revenues were $132.9 billion in 2017, $125.7 billion in 2016 and $112.4 billion in 2015. In 2017 and 2016, 85% of such revenues were attributable to the United States compared to 87% in 2015. The remainder of sales and service revenues were primarily in Europe, Canada and the Asia Pacific. Consolidated sales and service revenues included sales to Walmart Stores, Inc. of approximately $14 billion in 2017 and 2016 and $13 billion in 2015. 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, 2017, 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 net earnings by quarter for each of the last two years follows. This information is unaudited. Amounts are in millions, except per share amounts.

		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
2017
Revenues		$	65,187			$	57,518			$	60,525			$	58,907
Net earnings attributable to Berkshire shareholders *			4,060				4,262				4,067				32,551
Net earnings attributable to Berkshire shareholders per equivalent Class A common share			2,469				2,592				2,473				19,790
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

*	Includes after-tax investment and derivative gains/losses and a one-time income tax net benefit attributable to the enactment of the Tax Cuts and Jobs Act of 2017 as follows:

		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
Investment and derivative gains/losses – 2017		$	504			$	143			$	623			$	107
Investment and derivative gains/losses – 2016			1,852				394				2,347				1,904
Income tax net benefit – Tax Cuts and Jobs Act of 2017			—				—				—				28,200

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