Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors 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, 2021 and 2020, 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, 2021, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 US 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.

K-67

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Unpaid Losses and Loss Adjustment Expenses— Refer to Notes 1 and 16 to the financial statements

Critical Audit Matter Description

The Company’s unpaid losses and loss adjustment expenses (“claim liabilities”) under short duration property and casualty insurance and reinsurance contracts are $86,664 million as of December 31, 2021. The key assumptions affecting certain claim liabilities include expected loss and expense (“loss”) ratios, expected claim count emergence patterns, expected loss payment emergence patterns and expected loss reporting emergence patterns.

Given the subjectivity of estimating these key assumptions, performing audit procedures to evaluate whether claim liabilities were appropriately recorded as of December 31, 2021, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the key assumptions affecting certain claim liabilities included the following, among others:

•	We tested the operating effectiveness of controls over claim liabilities, including those over the key assumptions.

•	We evaluated the methods and assumptions used by management to estimate the claim liabilities by:

	•	Testing the underlying data that served as the basis for the actuarial analysis, such as historical claims and earned premium, to test that the inputs to the actuarial estimate were reasonable.

	•	Comparing management’s prior-year claim liabilities to actual development during the current year to identify potential bias in the determination of the claim liabilities.

•	With the assistance of our actuarial specialists:

	•	We developed independent estimates of the claim liabilities, including loss data and industry claim development factors as needed, and compared our estimates to management’s estimates.

	•	We compared management’s change in ultimate loss and loss adjustment expense to prior year estimates to test the reasonableness of the prior year estimates and assessed unexpected development.

Unpaid Losses and Loss Adjustment Expenses Under Retroactive Reinsurance Contracts — Refer to Notes 1 and 17 to the financial statements

Critical Audit Matter Description

The Company’s unpaid losses and loss adjustment expenses (“claim liabilities”) for property and casualty retroactive reinsurance contracts are $38,256 million as of December 31, 2021. The key assumptions affecting certain claim liabilities and related deferred charge reinsurance assumed assets (“related assets”) include expected loss and expense (“loss”) ratios, expected loss payment emergence patterns and expected loss reporting emergence.

Given the subjectivity of estimating these key assumptions, performing audit procedures to evaluate whether claim liabilities were appropriately recorded as of December 31, 2021, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the key assumptions affecting claim liabilities and related assets included the following, among others:

•	We tested the operating effectiveness of controls over claim liabilities and related assets, including those over the key assumptions.

K-68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

•	We evaluated the methods and assumptions used by management to estimate the claim liabilities and related assets by:

	•	Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.

	•	Comparing management’s prior-year claim liabilities to actual development during the current year to identify potential bias in the determination of the claim liabilities and related assets.

•	With the assistance of our actuarial specialists:

	•	We developed independent claim liability estimates for certain retroactive reinsurance contracts and compared our estimates to management’s estimates. For other retroactive reinsurance contracts and related assets, we evaluated the process used by management to develop the estimated claim liabilities and related assets.

	•	We compared management’s change in ultimate loss and loss adjustment expense to prior year estimates, assessed unexpected development and assessed internal rates of return.

Goodwill and Indefinite-Lived Intangible Assets — Refer to Notes 1 and 13 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill and indefinite-lived intangible assets for impairment involves the comparison of the fair value of each reporting unit or asset to its carrying value. The Company evaluates goodwill and indefinite-lived intangible assets for impairment at least annually. When evaluating goodwill and indefinite-lived intangible assets for impairment, the fair value of each reporting unit or asset is estimated. Significant judgment is required in estimating fair values and performing impairment tests. The Company primarily uses discounted projected future net earnings or net cash flows and multiples of earnings to estimate fair value, which requires management to make significant estimates and assumptions related to forecasts of future revenue, earnings before interest and taxes (“EBIT”), and discount rates. Changes in these assumptions could have a significant impact on the fair value of reporting units and indefinite-lived intangible assets.

The Precision Castparts Corp. (“PCC”) reporting unit reported approximately $21 billion of goodwill and indefinite-lived intangible assets as of December 31, 2021. Given the significant judgments made by management to estimate the fair value of the PCC reporting unit and certain customer relationships with indefinite lives along with the difference between their fair values and carrying values, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenue and EBIT and the selection of the discount rate required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasts of future revenue and EBIT and the selection of the discount rate for the PCC reporting unit and certain customer relationships included the following, among others:

	•	We tested the effectiveness of controls over goodwill and indefinite-lived intangible assets, including those over the forecasts of future revenue and EBIT and the selection of the discount rate.

	•	We evaluated management’s ability to accurately forecast future revenue and EBIT by comparing prior year forecasts to actual results in the respective years.

	•	We evaluated the reasonableness of management’s current revenue and EBIT forecasts by comparing the forecasts to historical results and forecasted information included in analyst and industry reports and certain peer companies’ disclosures.

	•	With the assistance of our fair value specialists, we evaluated the valuation methodologies, the long-term growth rates and discount rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developed a range of independent estimates and compared those to the long-term growth rates and discount rate selected by management.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

February 26, 2022

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

K-69

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

		December 31,
		2021				2020
ASSETS
Insurance and Other:
Cash and cash equivalents*		$	85,319			$	44,714
Short-term investments in U.S. Treasury Bills			58,535				90,300
Investments in fixed maturity securities			16,434				20,410
Investments in equity securities			350,719				281,170
Equity method investments			17,375				17,303
Loans and finance receivables			20,751				19,201
Other receivables			35,388				32,310
Inventories			20,954				19,208
Property, plant and equipment			20,834				21,200
Equipment held for lease			14,918				14,601
Goodwill			47,117				47,121
Other intangible assets			28,486				29,462
Deferred charges - retroactive reinsurance			10,639				12,441
Other			15,854				14,580
			743,323				664,021
Railroad, Utilities and Energy:
Cash and cash equivalents*			2,865				3,276
Receivables			4,177				3,542
Property, plant and equipment			155,530				151,216
Goodwill			26,758				26,613
Regulatory assets			3,963				3,440
Other			22,168				21,621
			215,461				209,708
		$	958,784			$	873,729

***	Includes U.S. Treasury Bills with maturities of three months or less when purchased of $61.7 billion at December 31, 2021 and $23.2 billion at December 31, 2020.

See accompanying Notes to Consolidated Financial Statements

K-70

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(dollars in millions)

		December 31,
		2021				2020
LIABILITIES AND SHAREHOLDERS’ EQUITY
Insurance and Other:
Unpaid losses and loss adjustment expenses		$	86,664			$	79,854
Unpaid losses and loss adjustment expenses under retroactive reinsurance contracts			38,256				40,966
Unearned premiums			23,512				21,395
Life, annuity and health insurance benefits			22,452				21,616
Other policyholder liabilities			9,330				8,670
Accounts payable, accruals and other liabilities			30,376				30,344
Aircraft repurchase liabilities and unearned lease revenues			5,849				5,856
Notes payable and other borrowings			39,272				41,522
			255,711				250,223
Railroad, Utilities and Energy:
Accounts payable, accruals and other liabilities			15,696				15,224
Regulatory liabilities			7,214				7,475
Notes payable and other borrowings			74,990				75,373
			97,900				98,072
Income taxes, principally deferred			90,243				74,098
Total liabilities			443,854				422,393
Shareholders’ equity:
Common stock			8				8
Capital in excess of par value			35,592				35,626
Accumulated other comprehensive income			(4,027	)			(4,243	)
Retained earnings			534,421				444,626
Treasury stock, at cost			(59,795	)			(32,853	)
Berkshire Hathaway shareholders’ equity			506,199				443,164
Noncontrolling interests			8,731				8,172
Total shareholders’ equity			514,930				451,336
		$	958,784			$	873,729

See accompanying Notes to Consolidated Financial Statements

K-71

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions except per share amounts)

		Year Ended December 31,
		2021				2020				2019
Revenues:
Insurance and Other:
Insurance premiums earned		$	69,478			$	63,401			$	61,078
Sales and service revenues			145,043				127,044				134,989
Leasing revenues			5,988				5,209				5,856
Interest, dividend and other investment income			7,465				8,092				9,240
			227,974				203,746				211,163
Railroad, Utilities and Energy:
Freight rail transportation revenues			23,177				20,750				23,357
Energy operating revenues			18,891				15,540				15,353
Service revenues and other income			6,052				5,474				4,743
			48,120				41,764				43,453
Total revenues			276,094				245,510				254,616
Investment and derivative contract gains			78,542				40,746				72,607
Costs and expenses:
Insurance and Other:
Insurance losses and loss adjustment expenses			49,964				43,951				44,456
Life, annuity and health insurance benefits			6,007				5,812				4,986
Insurance underwriting expenses			12,569				12,798				11,200
Cost of sales and services			114,138				101,091				107,041
Cost of leasing			4,201				3,520				4,003
Selling, general and administrative expenses			18,843				19,809				19,226
Goodwill and intangible asset impairments			—				10,671				96
Interest expense			1,086				1,105				1,056
			206,808				198,757				192,064
Railroad, Utilities and Energy:
Freight rail transportation expenses			14,477				13,120				15,436
Utilities and energy cost of sales and other expenses			13,959				11,638				11,296
Other expenses			5,615				4,796				4,002
Interest expense			3,086				2,978				2,905
			37,137				32,532				33,639
Total costs and expenses			243,945				231,289				225,703
Earnings before income taxes and equity method earnings			110,691				54,967				101,520
Equity method earnings			995				726				1,176
Earnings before income taxes			111,686				55,693				102,696
Income tax expense			20,879				12,440				20,904
Net earnings			90,807				43,253				81,792
Earnings attributable to noncontrolling interests			1,012				732				375
Net earnings attributable to Berkshire Hathaway shareholders		$	89,795			$	42,521			$	81,417
Net earnings per average equivalent Class A share		$	59,460			$	26,668			$	49,828
Net earnings per average equivalent Class B share*		$	39.64			$	17.78			$	33.22
Average equivalent Class A shares outstanding			1,510,180				1,594,469				1,633,946
Average equivalent Class B shares outstanding			2,265,269,867				2,391,703,454				2,450,919,020

***	Class B shares are economically equivalent to one-fifteen-hundredth of a Class A share. Accordingly, net earnings per average equivalent Class B share outstanding is equal to one-fifteen-hundredth of the equivalent Class A amount. See Note 21.

See accompanying Notes to Consolidated Financial Statements

K-72

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in millions)

		Year Ended December 31,
		2021				2020				2019
Net earnings		$	90,807			$	43,253			$	81,792
Other comprehensive income:
Unrealized appreciation of fixed maturity securities			(217	)			74				142
Applicable income taxes			50				(19	)			(31	)
Foreign currency translation			(1,011	)			1,284				323
Applicable income taxes			(6	)			3				(28	)
Defined benefit pension plans			1,775				(355	)			(711	)
Applicable income taxes			(457	)			74				155
Other, net			100				(42	)			(48	)
Other comprehensive income, net			234				1,019				(198	)
Comprehensive income			91,041				44,272				81,594
Comprehensive income attributable to noncontrolling interests			1,030				751				405
Comprehensive income attributable to Berkshire Hathaway shareholders		$	90,011			$	43,521			$	81,189

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in millions)

		Berkshire Hathaway shareholders’ equity
		Common stock and capital in excess of par value				Accumulated other comprehensive income				Retained earnings				Treasury stock				Non- controlling interests				Total
Balance December 31, 2018		$	35,715			$	(5,015	)		$	321,112			$	(3,109	)		$	3,797			$	352,500
Net earnings			—				—				81,417				—				375				81,792
Other comprehensive income, net			—				(228	)			—				—				30				(198	)
Issuance (acquisition) of common stock			21				—				—				(5,016	)			—				(4,995	)
Transactions with noncontrolling interests			(70	)			—				(36	)			—				(430	)			(536	)
Balance December 31, 2019			35,666				(5,243	)			402,493				(8,125	)			3,772				428,563
Net earnings			—				—				42,521				—				732				43,253
Adoption of new accounting pronouncement			—				—				(388	)			—				—				(388	)
Other comprehensive income, net			—				1,000				—				—				19				1,019
Acquisition of common stock			—				—				—				(24,728	)			—				(24,728	)
Transactions with noncontrolling interests			(32	)			—				—				—				3,649				3,617
Balance December 31, 2020			35,634				(4,243	)			444,626				(32,853	)			8,172				451,336
Net earnings			—				—				89,795				—				1,012				90,807
Other comprehensive income, net			—				216				—				—				18				234
Acquisition of common stock			—				—				—				(26,942	)			—				(26,942	)
Transactions with noncontrolling interests			(34	)			—				—				—				(471	)			(505	)
Balance December 31, 2021		$	35,600			$	(4,027	)		$	534,421			$	(59,795	)		$	8,731			$	514,930

See accompanying Notes to Consolidated Financial Statements

K-73

BERKSHIRE HATHAWAY INC.

and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

		Year Ended December 31,
		2021				2020				2019
Cash flows from operating activities:
Net earnings		$	90,807			$	43,253			$	81,792
Adjustments to reconcile net earnings to operating cash flows:
Investment (gains) losses			(77,576	)			(40,905	)			(71,123	)
Depreciation and amortization			10,718				10,596				10,064
Other, including asset impairment charges			(3,397	)			11,263				(1,254	)
Changes in operating assets and liabilities:
Unpaid losses and loss adjustment expenses			4,595				4,819				6,087
Deferred charges - retroactive reinsurance			1,802				1,307				357
Unearned premiums			2,306				1,587				1,707
Receivables and originated loans			(5,834	)			(1,609	)			(2,303	)
Other assets			(1,686	)			(1,109	)			(2,011	)
Other liabilities			2,389				3,376				190
Income taxes			15,297				7,195				15,181
Net cash flows from operating activities			39,421				39,773				38,687
Cash flows from investing activities:
Purchases of equity securities			(8,448	)			(30,161	)			(18,642	)
Sales of equity securities			15,849				38,756				14,336
Purchases of U.S. Treasury Bills and fixed maturity securities			(152,637	)			(208,429	)			(136,123	)
Sales of U.S. Treasury Bills and fixed maturity securities			27,188				31,873				15,929
Redemptions and maturities of U.S. Treasury Bills and fixed maturity securities			160,402				149,709				137,767
Purchases of loans and finance receivables			(88	)			(772	)			(75	)
Collections of loans and finance receivables			561				393				345
Acquisitions of businesses, net of cash acquired			(456	)			(2,532	)			(1,683	)
Purchases of property, plant and equipment and equipment held for lease			(13,276	)			(13,012	)			(15,979	)
Other			297				(3,582	)			(1,496	)
Net cash flows from investing activities			29,392				(37,757	)			(5,621	)
Cash flows from financing activities:
Proceeds from borrowings of insurance and other businesses			2,961				5,925				8,144
Repayments of borrowings of insurance and other businesses			(3,032	)			(2,700	)			(5,095	)
Proceeds from borrowings of railroad, utilities and energy businesses			3,959				8,445				5,400
Repayments of borrowings of railroad, utilities and energy businesses			(4,016	)			(3,761	)			(2,638	)
Changes in short term borrowings, net			(624	)			(1,118	)			266
Acquisition of treasury stock			(27,061	)			(24,706	)			(4,850	)
Other			(695	)			(429	)			(497	)
Net cash flows from financing activities			(28,508	)			(18,344	)			730
Effects of foreign currency exchange rate changes			5				92				25
Increase (decrease) in cash and cash equivalents and restricted cash			40,310				(16,236	)			33,821
Cash and cash equivalents and restricted cash at beginning of year			48,396				64,632				30,811
Cash and cash equivalents and restricted cash at end of year *		$	88,706			$	48,396			$	64,632
* Cash and cash equivalents and restricted cash at end of year are comprised of:
Insurance and Other		$	85,319			$	44,714			$	61,151
Railroad, Utilities and Energy			2,865				3,276				3,024
Restricted cash included in other assets			522				406				457
		$	88,706			$	48,396			$	64,632

See accompanying Notes to Consolidated Financial Statements

K-74

BERKSHIRE HATHAWAY INC.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021

(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 and retailing. 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 25. Information concerning business acquisitions completed over the past three years appears in Note 2. We believe that reporting the Railroad, Utilities and Energy subsidiaries separately is appropriate given the relative significance of their long-lived assets, capital expenditures and debt, which is not guaranteed by Berkshire.

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 variable interest entities (“VIE”) when we possess both the power to direct the activities of the VIE that most significantly affect its economic performance, and we (a) are obligated to absorb the losses that could be significant to the VIE or (b) hold the right to receive benefits from the VIE that could be significant to the VIE. Intercompany accounts and transactions have been eliminated.

	(b)	Use of estimates in preparation of financial statements

We prepare our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States (“GAAP”) which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the period. Our estimates of unpaid losses and loss adjustment expenses 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 indefinite-lived intangible assets for impairment require considerable judgment. Actual results may differ from the estimates used in preparing our Consolidated Financial Statements.

The novel coronavirus (“COVID-19”) spread rapidly across the world in 2020 and was declared a pandemic by the World Health Organization. The government and private sector responses to contain its spread began to significantly affect our operating businesses in March of 2020. The COVID-19 pandemic adversely affected nearly all of our operations during 2020, although the effects varied significantly. The extent of the effects over longer terms on the demand for certain of our products and services cannot be reasonably estimated at this time. Accordingly, significant estimates used in the preparation of our financial statements including those associated with evaluations of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to us and the estimations of certain losses assumed under insurance and reinsurance contracts may be subject to significant adjustments in future periods.

	(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 consist of U.S. Treasury Bills with maturities exceeding three months at the time of purchase and are stated at amortized cost, which approximates fair value.

	(d)	Investments in fixed maturity securities

We classify investments in fixed maturity securities on the acquisition date and at each balance sheet date. Securities classified as held-to-maturity are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Securities classified as trading are 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. Substantially all of investments in fixed maturity securities are classified as available-for-sale. We amortize the difference between the original cost and maturity value of a fixed maturity security to earnings using the interest method.

K-75

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(d)	Investments in fixed maturity securities (Continued)

We record investment gains and losses on available-for-sale fixed maturity securities when the securities are sold, determined on a specific identification basis. For securities in an unrealized loss position, we recognize a loss in earnings for the excess of amortized cost over fair value if we intend to sell before the price recovers. As of the balance sheet date, we evaluate whether the other unrealized losses are attributable to credit losses or other factors. We consider the severity of the decline in value, creditworthiness of the issuer and other relevant factors. We record an allowance for credit losses, limited to the excess of amortized cost over fair value, with a corresponding charge to earnings if the present value of estimated cash flows is less than the present value of contractual cash flows. The allowance may be subsequently increased or decreased based on the prevailing facts and circumstances. The portion of the unrealized loss that we believe is not related to a credit loss is recognized in other comprehensive income.

	(e)	Investments in equity securities

We carry substantially all investments in equity securities at fair value and record the subsequent changes in fair values in the Consolidated Statements of Earnings as a component of investment gains or losses.

	(f)	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 the 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 other investments when such 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. If net losses reduce our 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.

	(g)	Loans and finance receivables

Loans and finance receivables are primarily manufactured home loans, and to a lesser extent, commercial loans and site-built home loans. We carry substantially all loans and finance receivables at amortized cost, net of allowances for expected credit losses, based on our ability and intent to hold such loans to maturity. Acquisition costs and loan origination and commitment costs paid and fees received, as well as acquisition premiums or discounts, are amortized as yield adjustments over the lives of the loans.

Prior to 2020, credit losses were measured when non-collection was considered probable based on the prevailing facts and circumstances. Beginning in 2020, measurements of expected credit losses include provisions for non-collection, whether the risk is probable or remote. Expected credit losses on manufactured home loans are based on the net present value of future principal payments less estimated expenses related to the charge-off and foreclosure of expected uncollectible loans and include provisions for loans that are not in foreclosure. Our principal credit quality indicator is whether the loans are performing. Expected credit loss estimates consider historical default rates, collateral recovery rates, historical runoff rates, interest rates, reductions of future cash flows for modified loans and the historical time elapsed from last payment until foreclosure, among other factors. In addition, our estimates consider current conditions and reasonable and supportable forecasts.

Loans are considered delinquent when payments are more than 30 days past due. We place loans over 90 days past due 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. We resume interest income accrual once a loan is less than 90 days delinquent.

Loans are considered non-performing when the foreclosure process has started. Once a loan is in the process of foreclosure, interest income is not recognized until 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.

K-76

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(h)	Other receivables

Other receivables include balances due from customers, insurance premiums receivable and reinsurance losses recoverable, as well as other receivables. Trade receivables, insurance premium receivables and other receivables are primarily short-term in nature with stated collection terms of less than one year from the date of origination. Reinsurance recoverables are comprised of amounts ceded under reinsurance contracts or pursuant to mandatory government-sponsored insurance programs. Reinsurance recoverables relate to unpaid losses and loss adjustment expenses arising from property and casualty contracts and benefits under life and health contracts. Receivables are stated net of estimated allowances for uncollectible balances. Prior to 2020, we recorded provisions for uncollectible balances when it was probable counterparties or customers would be unable to pay all amounts due based on the contractual terms and historical loss history.

Beginning in 2020, we adopted a new accounting pronouncement that affects the measurement of allowances for credit losses. In measuring credit loss allowances, we primarily utilize credit loss history, with adjustments to reflect current or expected future economic conditions when reasonable and supportable forecasts of losses deviate from historical experience. In evaluating expected credit losses of reinsurance recoverables on unpaid losses, we review the credit quality of the counterparty and consider right-of-offset provisions within reinsurance contracts and other forms of credit enhancement including collateral, guarantees and other available information. We charge-off receivables against the allowances after all reasonable collection efforts are exhausted.

	(i)	Derivatives

We carry derivative contracts in accounts payable, accruals and other liabilities in our Consolidated Balance Sheets at fair value, net of reductions permitted under master netting agreements with counterparties. We record the changes in fair value of derivative contracts that do not qualify as hedging instruments for financial reporting purposes in earnings or, if such contracts involve our regulated utilities subsidiaries, as regulatory assets or liabilities when inclusion in regulated rates is probable.

	(j)	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 estimating 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, and 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.

	(k)	Inventories

Inventories consist of manufactured goods, goods or products acquired for resale and homes constructed for sale. Manufactured inventory costs include materials, direct and indirect labor and factory overhead. At December 31, 2021, we used the last-in-first-out (“LIFO”) method to value approximately 31% of consolidated inventories with the remainder primarily 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 excess of current or replacement costs over costs determined under LIFO was approximately $1.9 billion as of December 31, 2021 and $1.1 billion as of December 31, 2020.

	(l)	Property, plant and equipment

We record additions to property, plant and equipment used in operations at cost, which includes asset additions, improvements and betterments. With respect to constructed assets, all materials, 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 utility and energy subsidiaries that are subject to authoritative guidance for regulated operations, capitalized costs also include an allowance for funds used during construction, which represents the cost of equity funds used to finance the construction of the regulated facilities. Normal repairs and maintenance and other costs that do not improve the property, extend its useful life or otherwise do not meet capitalization criteria are charged to expense as incurred.

K-77

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(l)	Property, plant and equipment (Continued)

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 composite 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 such assets are retired or sold, no gain or loss is recognized. Gains or losses on disposals of all other assets are recorded through earnings.

We depreciate property, plant and equipment used by our other businesses to the 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 and furniture, fixtures and other – 3 to 15 years. Ranges of estimated useful lives of depreciable assets unique to our railroad business are as follows: track structure and other roadway – 10 to 100 years and locomotives, freight cars and other equipment – 6 to 43 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 – 2 to 50 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 where the impacts of regulation are considered in evaluating the carrying value.

	(m)	Leases

We are party to contracts where we lease property to others (“lessor” contracts) and where we lease property from others (“lessee” contracts). We record acquisitions of and additions to equipment that we lease to others at cost. We depreciate equipment held for lease to estimated salvage value primarily using the straight-line method over estimated useful lives ranging from 3 to 35 years. We use declining balance depreciation methods for assets when the revenue-earning power of the asset is greater during the earlier years of its life. We also evaluate equipment held for lease for impairment consistent with policies for property, plant and equipment.

When we lease assets from others, we record right-of-use assets and lease liabilities. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. In this regard, lease payments include fixed payments and variable payments that depend on an index or rate. The lease term is generally considered the non-cancellable lease period. Certain lease contracts contain renewal options or other terms that provide for variable payments based on performance or usage. Options are not included in determining right-of-use assets or lease liabilities unless it is reasonably certain that options will be exercised. Generally, incremental borrowing rates are used in measuring lease liabilities. Right-of-use assets are subject to review for impairment. As permitted under GAAP, we do not separate lease components from non-lease components by class of asset and do not record assets or liabilities for leases with terms of one year or less.

	(n)	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. Several methods 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. When the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, the excess is charged to earnings as an impairment loss.

Intangible assets with indefinite lives are also tested for impairment at least annually and when events or changes in circumstances indicate that, more-likely-than-not, the asset is impaired. Significant judgment is required in estimating fair values and performing goodwill and indefinite-lived intangible asset impairment tests. We amortize intangible assets with finite lives in a pattern that reflects the expected consumption of related economic benefits or on a straight-line basis over the estimated economic useful 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.

K-78

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(o)	Revenue recognition

We earn insurance premiums on prospective property/casualty insurance and reinsurance contracts over the loss exposure or coverage period in proportion to the level of protection provided. Premiums are generally earned in proportion to the coverage provided, which is generally ratable over the term of the contract with unearned premiums computed on a monthly or daily pro-rata basis. Premiums on retroactive property/casualty reinsurance contracts are generally received in full and are earned at the inception of the contracts, as all underlying loss events covered by the policies occurred prior to contract inception. Premiums for life reinsurance and periodic payment annuity contracts are earned when due. Premiums for periodic payment annuity contracts are usually received in full at the inception of the contracts. Premiums earned are stated net of amounts ceded to reinsurers. Premiums earned on contracts with experience-rating provisions reflect estimated loss experience under such contracts.

Sales and service revenues are recognized when goods or services are transferred to a customer. A good or service is transferred when (or as) the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers.

We manufacture and/or distribute a wide variety of industrial, building and consumer products. Our sales contracts provide customers with these products through wholesale and retail channels in exchange for consideration specified under the contracts. Contracts generally represent customer orders for individual products at stated prices. Sales contracts may contain either single or multiple performance obligations. In instances where contracts contain multiple performance obligations, we allocate the revenue to each obligation based on the relative stand-alone selling prices of each product or service.

Sales revenue reflects reductions for returns, allowances, volume discounts and other incentives, some of which may be contingent on future events. In certain customer contracts, sales revenue includes certain state and local excise taxes billed to customers on specified products when those taxes are levied directly upon us by the taxing authorities. Sales revenue excludes sales taxes and value-added taxes collected on behalf of taxing authorities. Sales revenue includes consideration for shipping and other fulfillment activities performed prior to the customer obtaining control of the goods. We also elect to treat consideration for such services performed after control has passed to the customer as sales revenue.

Our product sales revenues are generally recognized at a point in time when control of the product transfers to the customer, which coincides with customer pickup or product delivery or acceptance, depending on terms of the arrangement. We recognize sales revenues and related costs with respect to certain contracts over time, primarily from certain castings, forgings and aerostructures contracts. Control of the product units under these contracts transfers continuously to the customer as the product is manufactured. These products generally have no alternative use and the contract requires the customer to provide reasonable compensation if terminated for reasons other than breach of contract.

The primary performance obligation under our freight rail transportation service contracts is to move freight from a point of origin to a point of destination. The performance obligations are represented by bills of lading which create a series of distinct services that have a similar pattern of transfer to the customer. The revenues for each performance obligation are based on various factors including the product being shipped, the origin and destination pair and contract incentives, which are outlined in various private rate agreements, common carrier public tariffs, interline foreign road agreements and pricing quotes. The transaction price is generally a per car/unit amount to transport railcars from a specified origin to a specified destination. Freight revenues are recognized over time as the service is performed because the customer simultaneously receives and consumes the benefits of the service. Revenues recognized represent the proportion of the service completed as of the balance sheet date. Invoices for freight transportation services are generally issued to customers and paid within 30 days or less. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specific locations, are recorded as a reduction to revenue on a pro-rata basis based on actual or projected future customer shipments.

K-79

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(o)	Revenue recognition (Continued)

Our energy revenue derives primarily from tariff-based sales arrangements approved by various regulatory commissions. These tariff-based revenues are mainly comprised of energy, transmission, distribution and natural gas and have performance obligations to deliver energy products and services to customers which are satisfied over time as energy is delivered or services are provided. Our nonregulated energy revenue primarily relates to our renewable energy business. Energy revenues are equivalent to the amounts we have the right to invoice and correspond directly with the value to the customer of the performance to date and include billed and unbilled amounts. Payments from customers are generally due within 30 days of billing. Rates charged for energy products and services are established by regulators or contractual arrangements that establish the transaction price, as well as the allocation of price among the separate performance obligations. When preliminary regulated 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 accrued. Other service revenues derive from contracts with customers in which performance obligations are satisfied over time, where customers receive and consume benefits as we perform the services or at a point in time when the services are provided. Other service revenues primarily derive from real estate brokerage, automotive repair, aircraft management, aviation training, franchising and news distribution.

Leasing revenue is generally recognized ratably over the term of the lease or based on usage, if applicable under the terms of the contract. A substantial portion of our lessor contracts are classified as operating leases.

	(p)	Losses and loss adjustment expenses

We record liabilities for unpaid losses and loss adjustment expenses under 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.

We base liability estimates on (1) loss reports from policyholders and cedents, (2) individual case estimates and (3) estimates of incurred but not reported losses. Losses and loss adjustment expenses in the Consolidated Statements of Earnings include paid claims, claim settlement costs and changes in estimated claim liabilities. Losses and loss adjustment expenses charged to earnings are net of amounts recovered and estimates of amounts recoverable 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.

	(q)	Retroactive reinsurance contracts

We record liabilities for unpaid losses and loss adjustment expenses under short duration retroactive reinsurance contracts consistent with property/casualty insurance and reinsurance contracts described in Note 1(p). 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 over the expected claim settlement periods using the interest method. Changes to the estimated timing or amount of future loss payments also produce changes in deferred charge balances. We apply changes in such estimates 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.

	(r)	Insurance policy acquisition costs

We capitalize the incremental costs that directly relate to the successful sale of insurance contracts, subject to ultimate recoverability. For short duration contracts, we subsequently amortize such costs to underwriting expenses as the related premiums are earned. Acquisition costs related to long duration life insurance contracts are amortized over the expected premium-paying period in proportion to the anticipated premiums over the life of the policy. Such anticipated premiums are estimated using the same assumptions used for computing liabilities for future policy benefits. Direct incremental acquisition costs include commissions, premium taxes and certain other costs associated with successful efforts. We expense all other underwriting costs 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 approximately $3.4 billion and $3.25 billion at December 31, 2021 and 2020, respectively.

K-80

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(s)	Life and annuity insurance benefits

We compute liabilities for benefits under life insurance contracts based upon estimated future investment yields, expected mortality, morbidity and lapse or withdrawal rates, as well as estimates of premiums we expect to receive and expenses we expect to incur in the future. 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. We discount periodic payment annuity liabilities 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 for most contracts range from 3% to 7%.

	(t)	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.

	(u)	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 in the financial statements 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. The net effects of 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 currency exchange rates, are included in earnings.

	(v)	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.

K-81

Notes to Consolidated Financial Statements (Continued)

(1)	Significant accounting policies and practices (Continued)

	(w)	New accounting pronouncements adopted in 2020

We adopted Accounting Standards Codification (“ASC”) 326 “Financial Instruments-Credit Losses” on January 1, 2020. ASC 326 provides for the measurement of expected credit losses on financial assets that are carried at amortized cost based on the net amounts expected to be collected. Measurements of expected credit losses therefore include provisions for non-collection, whether the risk is probable or remote. Prior to the adoption of ASC 326, credit losses were measured when non-collection was considered probable. Upon adoption of ASC 326, we recorded a charge to retained earnings of $388 million representing the cumulative after-tax increase in our allowances for credit losses.

	(x)	New accounting pronouncements adopted in 2019

Berkshire adopted ASC 842 “Leases” on January 1, 2019 with respect to contracts in effect as of the adoption and elected to not restate prior period financial statements. Most significantly, ASC 842 requires a lessee to recognize a liability to make operating lease payments and an asset with respect to its right to use the underlying asset for the lease term. Upon adoption, we recorded operating lease right-of-use assets of approximately $6.2 billion, lease liabilities of $5.9 billion and reduced other assets by approximately $300 million.

	(y)	New accounting pronouncements to be adopted subsequent to December 31, 2021

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-12 “Targeted Improvements to the Accounting for Long-Duration Contracts” (“ASU 2018-12”). ASU 2018-12 requires reassessment of cash flow assumptions at least annually and revision of discount rate assumptions each reporting period in valuing policyholder liabilities and related deferred acquisition costs of long-duration insurance and reinsurance contracts. The effects from changes in cash flow assumptions are reflected in earnings and the effects from changes in discount rate assumptions are reflected in other comprehensive income. Currently, the cash flow and discount rate assumptions are set at the contract inception date and not subsequently changed, except under limited circumstances. ASU 2018-12 is to be applied retrospectively to the earliest period presented in the financial statements, requires new disclosures and is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

We currently intend to adopt ASU 2018-12 as of January 1, 2023 using the modified retrospective method, which provides that the revised cash flow and discount rate assumptions as of January 1, 2021 (the transition date) be applied to contracts then in-force, with liabilities then remeasured as provided under the standard. The cumulative effects from discount rate assumption changes as of the transition date will be reflected in accumulated other comprehensive income and the cumulative effect from cash flow assumption changes will be included in retained earnings. While we have not finalized our assessment of the impact of the adoption as of the transition date, we currently believe that the changes in discount rate assumptions will have a greater effect on our recorded liabilities than changes in cash flow assumptions. We also preliminarily estimate that the changes in discount rate assumptions as of January 1, 2021 will increase our life, health and annuity benefit liabilities from the amounts previously reported due to the historically low interest rate environment at that time. However, the ultimate impact of adopting ASU 2018-12 will be based on the discount rate and cash flow assumptions determined as of the January 1, 2023 adoption date. We, therefore, continue to evaluate the effect this standard will have on our Consolidated Financial Statements.

(2)	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.

Berkshire Hathaway Energy (“BHE”) acquired certain businesses of Dominion Energy, Inc. (“Dominion”) on November 1, 2020, pursuant to a definitive agreement with Dominion in July 2020. The acquired businesses included natural gas transmission, gathering and storage pipelines, natural gas storage capacity and partial ownership of a liquefied natural gas export, import and storage facility (“Cove Point”). In October 2020, BHE and Dominion also agreed to provide for the exclusion of certain pipeline businesses from the initial agreement and entered into a second acquisition agreement with respect to the excluded pipeline businesses. The closing of the second agreement was subject to regulatory and customary closing conditions; however, in July 2021, BHE and Dominion agreed to terminate the second agreement.

K-82

Notes to Consolidated Financial Statements (Continued)

(2)	Business acquisitions (Continued)

The cost of the acquisition was approximately $2.5 billion after post-closing adjustments as provided in the agreement. The fair values of identified assets acquired and liabilities assumed and residual goodwill are summarized as follows (in millions).

Property, plant and equipment	$	9,264
Goodwill		1,741
Other		2,398
Assets acquired	$	13,403
Notes payable and other borrowings	$	5,615
Other		1,358
Liabilities assumed		6,973
Noncontrolling interests		3,916
Net assets	$	2,514

As part of this acquisition, BHE acquired an indirect 25% economic interest in Cove Point, consisting of 100% of the general partnership interest and 25% of the limited partnership interests. We concluded that Cove Point is a VIE and that we have the power to direct the activities that most significantly impact its economic performance as well as the obligation to absorb losses and receive benefits which could be significant to Cove Point. Therefore, we treat Cove Point as a consolidated subsidiary. The noncontrolling interests are attributable to the limited partner interests held by third parties.

In each of the past three years, we also completed several smaller-sized business acquisitions, which we consider as “bolt-ons” to several of our existing business operations. We do not believe that these acquisitions are material, individually or in the aggregate to our Consolidated Financial Statements.

(3)	Investments in fixed maturity securities

Investments in fixed maturity securities as of December 31, 2021 and 2020 are summarized by type below (in millions).

		Amortized Cost				Unrealized Gains				Unrealized Losses				Fair Value
December 31, 2021
U.S. Treasury, U.S. government corporations and agencies		$	3,286			$	22			$	(5	)		$	3,303
Foreign governments			10,998				29				(33	)			10,994
Corporate bonds			1,363				412				(1	)			1,774
Other			317				47				(1	)			363
		$	15,964			$	510			$	(40	)		$	16,434
December 31, 2020
U.S. Treasury, U.S. government corporations and agencies		$	3,348			$	55			$	—			$	3,403
Foreign governments			11,233				110				(5	)			11,338
Corporate bonds			4,729				464				(2	)			5,191
Other			414				66				(2	)			478
		$	19,724			$	695			$	(9	)		$	20,410

Investments in foreign governments include securities issued by national and provincial government entities as well as instruments that are unconditionally guaranteed by such entities. As of December 31, 2021, approximately 93% of our foreign government holdings were rated AA or higher by at least one of the major rating agencies. The amortized cost and estimated fair value of fixed maturity securities at December 31, 2021 are summarized below by contractual maturity dates. Amounts are in millions. Actual maturities may differ from contractual maturities due to prepayment rights held by issuers.

		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		$	9,171			$	6,044			$	307			$	207			$	235			$	15,964
Fair value			9,165				6,086				559				347				277				16,434

K-83

Notes to Consolidated Financial Statements (Continued)

(4)	Investments in equity securities

Investments in equity securities as of December 31, 2021 and 2020 are summarized based on the primary industry of the investee in the table below (in millions).

		Cost Basis				Net Unrealized Gains				Fair Value
December 31, 2021 *
Banks, insurance and finance		$	26,822			$	62,236			$	89,058
Consumer products			36,076				154,945				191,021
Commercial, industrial and other			41,707				28,933				70,640
		$	104,605			$	246,114			$	350,719

***	Approximately 73% of the aggregate fair value was concentrated in four companies (American Express Company – $24.8 billion; Apple Inc. – $161.2 billion; Bank of America Corporation – $46.0 billion and The Coca-Cola Company – $23.7 billion).

		Cost Basis				Net Unrealized Gains				Fair Value
December 31, 2020 *
Banks, insurance and finance		$	26,312			$	40,167			$	66,479
Consumer products			34,747				111,583				146,330
Commercial, industrial and other			47,561				20,800				68,361
		$	108,620			$	172,550			$	281,170

***	Approximately 68% of the aggregate fair value was concentrated in four companies (American Express Company – $18.3 billion; Apple Inc. – $120.4 billion; Bank of America Corporation – $31.3 billion and The Coca-Cola Company – $21.9 billion).

Investments in commercial, industrial and other equity securities include our investments in Occidental Corporation (“Occidental”), which we acquired in 2019. These investments were acquired for a total of $10 billion and consist of Occidental Cumulative Perpetual Preferred Stock with an aggregate liquidation value of $10 billion and warrants, which currently permit us to purchase up to 83.86 million shares of Occidental common stock at an exercise price of $59.62 per share. The preferred stock accrues dividends at 8% per annum and is redeemable at the option of Occidental commencing in 2029 at a redemption price equal to 105% of the liquidation preference plus any accumulated and unpaid dividends and is mandatorily redeemable under certain specified events. The warrants are exercisable in whole or in part until one year after the redemption of the preferred stock.

**(**5)	Equity method investments

Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 26.6% of the outstanding shares of Kraft Heinz common stock.

We recorded equity method earnings from our investment in Kraft Heinz of $269 million in 2021, $95 million in 2020 and $493 million in 2019. Equity method earnings included the effects of goodwill and identifiable intangible asset impairment charges recorded by Kraft Heinz. Our share of such charges was approximately $350 million in 2021, $850 million in 2020 and $450 million in 2019. We received dividends from Kraft Heinz of $521 million in each of 2021, 2020 and 2019, which we recorded as reductions in our carrying value.

Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $11.7 billion at December 31, 2021 and $11.3 billion at December 31, 2020. The carrying value of our investment was approximately $13.1 billion at December 31, 2021 and $13.3 billion at December 31, 2020. As of December 31, 2021, the carrying value of our investment exceeded the fair value based on the quoted market price by approximately 11% of the carrying value. We evaluated our investment in Kraft Heinz for impairment. Based on the prevailing facts and circumstances, we concluded recognition of an impairment charge in earnings was not required as of December 31, 2021.

K-84

Notes to Consolidated Financial Statements (Continued)

**(**5)	Equity method investments (Continued)

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

		December 25, 2021				December 26, 2020
Assets		$	93,394			$	99,830
Liabilities			43,942				49,587

		Year ending December 25, 2021				Year ending December 26, 2020				Year ending December 28, 2019
Sales		$	26,042			$	26,185			$	24,977
Net earnings attributable to Kraft Heinz common shareholders		$	1,012			$	356			$	1,935

Other investments accounted for pursuant to the equity method include our investments in Berkadia Commercial Mortgage LLC (“Berkadia”), Pilot Travel Centers LLC (“Pilot”), Electric Transmission Texas, LLC (“ETT”) and beginning in 2021, Iroquois Gas Transmission System L.P. (“Iroquois”). The aggregate carrying value of our investments in these entities was $4.3 billion as of December 31, 2021 and $4.0 billion as of December 31, 2020. Our equity method earnings in these entities were $726 million in 2021, $631 million in 2020 and $683 million in 2019. During 2021, we received distributions of approximately $1.2 billion from these investees. Additional information concerning these investments follows.

We own a 50% interest in Berkadia, with Jefferies Financial Group Inc. (“Jefferies”) 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. Berkadia funds a portion of its operations through commercial paper borrowings, which are currently limited to $1.5 billion. On December 31, 2021, Berkadia’s commercial paper outstanding was $1.47 billion. Berkadia’s commercial paper is supported by a surety policy issued by a Berkshire insurance subsidiary. Jefferies is obligated to indemnify us for one-half of any losses incurred under the policy. BHE subsidiaries own a 50% noncontrolling interest in ETT, an owner and operator of electric transmission assets in Texas and a 50% noncontrolling interest in Iroquois, which owns and operates a natural gas pipeline located in New York and Connecticut.

We own a 38.6% interest in Pilot, headquartered in Knoxville, Tennessee. Pilot is the largest operator of travel centers in North America with more than 800 retail locations across 44 U.S. states and six Canadian provinces and through wholesale distribution. Pilot’s revenues in 2021 were approximately $45 billion. The Haslam family currently owns a 50.1% interest in Pilot and a third party owns the remaining 11.3% interest. We have an agreement to acquire in 2023 an additional 41.4% interest in Pilot with the Haslam family retaining a 20% interest. As a result, Berkshire will become the majority owner of Pilot in 2023.

(6)	Investment and derivative contract gains/losses

Investment and derivative contract gains/losses for each of the three years ending December 31, 2021 are summarized as follows (in millions).

		2021				2020				2019
Investment gains (losses):
Equity securities:
Change in unrealized investment gains (losses) during the year on securities held at the end of the year		$	76,375			$	54,951			$	69,581
Investment gains (losses) during the year on securities sold			997				(14,036	)			1,585
			77,372				40,915				71,166
Fixed maturity securities:
Gross realized gains			85				56				87
Gross realized losses			(29	)			(27	)			(25	)
Other			148				(39	)			(105	)
Investment gains (losses)			77,576				40,905				71,123
Derivative contract gains (losses)			966				(159	)			1,484
		$	78,542			$	40,746			$	72,607

K-85

Notes to Consolidated Financial Statements (Continued)

(6)	Investment and derivative contract gains/losses (Continued)

Equity securities gains and losses include unrealized gains and losses from changes in fair values during the year on equity securities we still owned at the end of the year, as well as gains and losses on securities we sold during the year. As reflected in the Consolidated Statements of Cash Flows, we received proceeds of approximately $15.8 billion in 2021, $38.8 billion in 2020 and $14.3 billion in 2019 from sales of equity securities. In the preceding table, investment gains and losses on equity securities sold during the year represent the difference between the sales proceeds and the fair value of the equity securities sold at the beginning of the applicable year or, if later, the purchase date. Our taxable gains and losses on equity securities sold are generally the difference between the proceeds from sales and original cost. Taxable gains were $3.6 billion in 2021, $6.2 billion in 2020 and $3.2 billion in 2019.

The derivative contract gains and losses derive from equity index put option contracts written prior to March 2008 on four major equity indexes. Information related to these contracts follows (dollars in millions).

		December 31,
		2021				2020
Balance sheet liabilities - at fair value		$	99			$	1,065
Notional value			6,992				10,991
Intrinsic value			—				727
Weighted average remaining life (in years)			0.5				1.2

Notional value in the preceding table represents the aggregate undiscounted amounts payable assuming the value of each index is zero on each contract’s expiration date. Intrinsic value is the undiscounted liability assuming the contracts are settled based on the index values and foreign currency exchange rates as of the balance sheet date. Contracts comprising 63% of the notional value as of December 31, 2021 will expire in the first quarter of 2022. Future payments, if any, under any given contract will be required if the index value is below the contract strike price at the contract expiration date. We received aggregate premiums on the contract inception dates of $1.3 billion with respect to unexpired contracts as of December 31, 2021 and we have no counterparty credit risk.

(7)	Loans and finance receivables

Loans and finance receivables are summarized as follows (in millions).

		December 31,
		2021				2020
Loans and finance receivables before allowances and discounts		$	22,065			$	20,436
Allowances for credit losses			(765	)			(712	)
Unamortized acquisition discounts and points			(549	)			(523	)
		$	20,751			$	19,201

Loans and finance receivables are principally manufactured home loans, and to a lesser extent, commercial loans and site-built home loans. Reconciliations of the allowance for credit losses on loans and finance receivables for 2021, 2020 and 2019 follow (in millions).

		2021				2020				2019
Balance at beginning of year		$	712			$	167			$	177
Adoption of ASC 326			—				486				—
Provision for credit losses			88				177				125
Charge-offs, net of recoveries			(35	)			(118	)			(135	)
Balance at December 31		$	765			$	712			$	167

At December 31, 2021, approximately 99% of manufactured and site-built home loan balances were evaluated collectively for impairment. At December 31, 2021, we considered approximately 97% of the loan balances to be current as to payment status. A summary of performing and non-performing home loans before discounts and allowances by year of loan origination as of December 31, 2021 follows (in millions).

		Origination Year
		2021				2020				2019				2018				2017				Prior				Total
Performing		$	4,898			$	3,164			$	2,238			$	1,694			$	1,259			$	6,842			$	20,095
Non-performing			4				5				6				7				5				40				67
Total		$	4,902			$	3,169			$	2,244			$	1,701			$	1,264			$	6,882			$	20,162

K-86

Notes to Consolidated Financial Statements (Continued)

(7)	Loans and finance receivables (Continued)

We are also party to commercial loan agreements with Seritage Growth Properties (“Seritage”) and Lee Enterprises, Inc, (“Lee”), in which loan balances aggregated $1.9 billion at December 31, 2021 and $2.1 billion at December 31, 2020. The Seritage loan is pursuant to a $2.0 billion term loan facility and the outstanding loan is secured by mortgages on its real estate properties. During the fourth quarter of 2021, the loan agreement with Seritage was amended to allow optional loan prepayments without penalty and on December 31, 2021, Seritage made a loan prepayment of $160 million. The amendments further provide Seritage with the option to extend the maturity of the loan to July 31, 2025, if the outstanding principal has been reduced to $800 million by the original expiration date of July 31, 2023. The loan to Lee matures in 2045 and was made in connection with its acquisition of our newspaper operations and the repayment by Lee of its then outstanding credit facilities. We are the sole lender to each of these entities and each of these loans is current as to payment status.

(8)	Other receivables

Other receivables are comprised of the following (in millions).

	December 31, 2021				December 31, 2020
Insurance and other:
Insurance premiums receivable	$	15,050			$	14,025
Reinsurance recoverables		4,900				4,805
Trade receivables		12,971				11,521
Other		3,146				2,637
Allowances for credit losses		(679	)			(678	)
	$	35,388			$	32,310
Railroad, utilities and energy:
Trade receivables	$	3,678			$	3,235
Other		650				438
Allowances for credit losses		(151	)			(131	)
	$	4,177			$	3,542

Provisions for credit losses with respect to receivables summarized above were $441 million in 2021, $564 million in 2020 and $363 million in 2019. Charge-offs, net of recoveries, were $420 million in 2021, $401 million in 2020 and $350 million in 2019.

(9)	Inventories

Inventories are comprised of the following (in millions).

		December 31,
		2021				2020
Raw materials		$	5,743			$	4,821
Work in process and other			3,192				2,541
Finished manufactured goods			4,530				4,412
Goods acquired for resale			7,489				7,434
		$	20,954			$	19,208

(10)	Property, plant and equipment

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

		December 31,
		2021				2020
Land, buildings and improvements		$	14,070			$	13,799
Machinery and equipment			26,063				25,488
Furniture, fixtures and other			4,640				4,530
			44,773				43,817
Accumulated depreciation			(23,939	)			(22,617	)
		$	20,834			$	21,200

K-87

Notes to Consolidated Financial Statements (Continued)

(10)	Property, plant and equipment (Continued)

A summary of property, plant and equipment of railroad and 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,
		2021				2020
Railroad:
Land, track structure and other roadway		$	65,843			$	63,824
Locomotives, freight cars and other equipment			13,822				13,523
Construction in progress			1,027				916
			80,692				78,263
Accumulated depreciation			(14,978	)			(13,175	)
			65,714				65,088
Utilities and energy:
Utility generation, transmission and distribution systems			90,223				86,730
Interstate natural gas pipeline assets			17,423				16,667
Independent power plants and other assets			13,695				12,671
Construction in progress			4,196				3,308
			125,537				119,376
Accumulated depreciation			(35,721	)			(33,248	)
			89,816				86,128
		$	155,530			$	151,216

Depreciation expense for each of the three years ending December 31, 2021 is summarized below (in millions).

		2021				2020				2019
Insurance and other		$	2,318			$	2,320			$	2,269
Railroad, utilities and energy			5,990				5,799				5,297
		$	8,308			$	8,119			$	7,566

(11)	Equipment held for lease

Equipment held for lease includes railcars, aircraft, over-the-road trailers, intermodal tank containers, cranes, storage units and furniture. Equipment held for lease is summarized below (in millions).

		December 31,
		2021				2020
Railcars		$	9,448			$	9,402
Aircraft			9,234				8,204
Other			5,053				4,868
			23,735				22,474
Accumulated depreciation			(8,817	)			(7,873	)
		$	14,918			$	14,601

Depreciation expense for equipment held for lease was $1,158 million in 2021, $1,200 million in 2020 and $1,181 million in 2019. Fixed and variable operating lease revenues for each of the three years ending December 31, 2021 are summarized below (in millions).

		2021				2020				2019
Fixed lease revenue		$	4,482			$	4,262			$	4,415
Variable lease revenue			1,506				947				1,441
		$	5,988			$	5,209			$	5,856

K-88

Notes to Consolidated Financial Statements (Continued)

(11)	Equipment held for lease (Continued)

A summary of future operating lease receipts as of December 31, 2021 follows (in millions).

2022				2023				2024				2025				2026				Thereafter				Total
$	2,922			$	2,233			$	1,623			$	1,009			$	536			$	392			$	8,715

(12)	Leases

We are party to contracts where we lease property from others under contracts classified as operating leases. We primarily lease office and operating facilities, locomotives, freight cars, energy generation facilities and transmission assets. The weighted average remaining term of our operating leases was approximately 7.2 years at December 31, 2021 and 7.3 years at December 31, 2020. Operating lease right-of-use assets are included in other assets and were $5,091 million at December 31, 2021 and $5,579 million at December 31, 2020. Our lease liabilities are included in accounts payable, accruals and other liabilities and were $4,991 million at December 31, 2021 and $5,469 million at December 31, 2020. The weighted average discount rate used to measure lease liabilities was approximately 3.5% at December 31, 2021 and 3.6% at December 31, 2020. A summary of our remaining future operating lease payments reconciled to lease liabilities as of December 31, 2021 and December 31, 2020 follows (in millions).

		Year 1				Year 2				Year 3				Year 4				Year 5				Thereafter				Total lease payments				Amount representing interest				Lease liabilities
December 31:
2021		$	1,238			$	1,038			$	835			$	631			$	418			$	1,571			$	5,731			$	(740	)		$	4,991
2020			1,342				1,111				905				725				544				1,691				6,318				(849	)			5,469

Components of operating lease costs for the three years ending December 31, 2021, by type, are summarized in the following table (in millions).

		2021				2020				2019
Operating lease cost		$	1,426			$	1,413			$	1,459
Short-term lease cost			154				145				178
Variable lease cost			223				228				276
Sublease income			(10	)			(10	)			(24	)
Total lease cost		$	1,793			$	1,776			$	1,889

(13)	Goodwill and other intangible assets

Reconciliations of the changes in the carrying value of goodwill during 2021 and 2020 follow (in millions).

		December 31,
		2021				2020
Balance at beginning of year		$	73,734			$	81,882
Business acquisitions			353				1,758
Impairment charges			—				(10,033	)
Other, including foreign currency translation			(212	)			127
Balance at end of year*		$	73,875			$	73,734

***	Net of accumulated goodwill impairments of $11.0 billion as of December 31, 2021 and 2020.

During 2020, we reevaluated goodwill and indefinite-lived intangible assets of certain of our reporting units for impairment due to the disruptions arising from the COVID-19 pandemic, which we believed most significantly affected the air travel, commercial aerospace and supporting industries. We recorded goodwill impairment charges of approximately $10 billion and indefinite-lived intangible asset impairment charges of $638 million in the second quarter of 2020. Approximately $10 billion of these charges pertained to Precision Castparts Corp. (“PCC”), one of the largest businesses within Berkshire’s manufacturing segment. The carrying values of PCC-related goodwill and indefinite-lived intangible assets prior to the impairment charges were approximately $31 billion. The impairment charges were determined based on discounted cash flow methods and reflected our assessments of the risks and uncertainties associated with the aerospace industry. Significant judgment is required in estimating the fair value of a reporting unit and in performing impairment tests. Due to the inherent uncertainty in forecasting future cash flows and earnings, actual results in the future may vary significantly from the forecasts.

K-89

Notes to Consolidated Financial Statements (Continued)

(13)	Goodwill and other intangible assets (Continued)

The gross carrying amounts and related accumulated amortization of other intangible assets are summarized as follows (in millions).

		December 31, 2021												December 31, 2020
		Gross carrying amount				Accumulated amortization				Net carrying value				Gross carrying amount				Accumulated amortization				Net carrying value
Insurance and other:
Customer relationships		$	27,335			$	6,450			$	20,885			$	27,374			$	5,756			$	21,618
Trademarks and trade names			5,176				802				4,374				5,206				779				4,427
Patents and technology			4,763				3,484				1,279				4,766				3,313				1,453
Other			3,390				1,442				1,948				3,339				1,375				1,964
		$	40,664			$	12,178			$	28,486			$	40,685			$	11,223			$	29,462
Railroad, utilities and energy:
Customer relationships		$	678			$	396			$	282			$	678			$	361			$	317
Trademarks, trade names and other			1,015				146				869				1,003				98				905
		$	1,693			$	542			$	1,151			$	1,681			$	459			$	1,222

Intangible asset amortization expense was $1,252 million in 2021, $1,277 million in 2020 and $1,317 million in 2019. Estimated amortization expense over the next five years is as follows (in millions): 2022 – $1,189; 2023 – $1,120; 2024 – $1,023; 2025 – $939 and 2026 – $846. Intangible assets with indefinite lives were $18.5 billion as of December 31, 2021 and $18.3 billion as of December 31, 2020 and primarily related to certain customer relationships and trademarks and trade names.

(14)	Supplemental cash flow information

A summary of supplemental cash flow information for each of the three years ending December 31, 2021 is presented in the following table (in millions).

		2021				2020				2019
Cash paid during the year for:
Income taxes		$	5,412			$	5,001			$	5,415
Interest:
Insurance and other			1,227				1,001				1,011
Railroad, utilities and energy			3,162				3,006				2,879
Non-cash investing and financing activities:
Liabilities assumed in connection with business acquisitions			102				6,981				766
Operating lease liabilities arising from obtaining right-of-use assets			687				729				782

(15)	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 $30 billion as ordinary dividends during 2022. Investments in fixed maturity and equity securities and short-term investments on deposit with U.S. state insurance authorities in accordance with state insurance regulations were approximately $6.4 billion at December 31, 2021 and $5.5 billion at December 31, 2020.

Combined shareholders’ equity of U.S. based insurance subsidiaries determined pursuant to statutory accounting rules (Surplus as Regards Policyholders) was approximately $301 billion at December 31, 2021 and $237 billion at December 31, 2020. 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 non-insurance entities owned by our insurance subsidiaries, are not fully recognized for statutory reporting purposes.

K-90

Notes to Consolidated Financial Statements (Continued)

(16)	Unpaid losses and loss adjustment expenses

Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under 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 17), for each of the three years ending December 31, 2021 is as follows (in millions).

		2021				2020				2019
Balances at beginning of year:
Gross liabilities		$	79,854			$	73,019			$	68,458
Reinsurance recoverable on unpaid losses			(2,912	)			(2,855	)			(3,060	)
Net liabilities			76,942				70,164				65,398
Incurred losses and loss adjustment expenses:
Current accident year			52,099				43,400				43,335
Prior accident years			(3,116	)			(356	)			(752	)
Total			48,983				43,044				42,583
Paid losses and loss adjustment expenses:
Current accident year			(22,897	)			(17,884	)			(19,482	)
Prior accident years			(18,904	)			(18,862	)			(17,642	)
Total			(41,801	)			(36,746	)			(37,124	)
Foreign currency effect			(420	)			480				(23	)
Business acquisition (disposition)			—				—				(670	)
Balances at December 31:
Net liabilities			83,704				76,942				70,164
Reinsurance recoverable on unpaid losses			2,960				2,912				2,855
Gross liabilities		$	86,664			$	79,854			$	73,019

Incurred losses and loss adjustment expenses shown in the preceding table were recorded in earnings and related to insured events occurring in the current year (“current accident year”) and events occurring in all prior years (“prior accident years”). Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries. Current accident year incurred losses included approximately $2.9 billion in 2021, $950 million in 2020 and $1.0 billion in 2019 from significant catastrophe events (losses in excess of $100 million per event) occurring in the respective year. Current accident year incurred losses from private passenger auto insurance also increased significantly in 2021 as compared to 2020, primarily due to increased claims frequencies and severities. In 2020, current accident year incurred losses reflected low private passenger auto claims frequencies and increased loss estimates for certain commercial insurance and reinsurance business attributable to the COVID-19 pandemic.

We recorded net reductions of estimated ultimate liabilities for prior accident years of $3.1 billion in 2021, $356 million in 2020 and $752 million in 2019, which produced corresponding reductions in incurred losses and loss adjustment expenses in those periods. These reductions, as percentages of the net liabilities at the beginning of each year, were 4.0% in 2021, 0.5% in 2020 and 1.1% in 2019.

Estimated ultimate liabilities for prior accident years from primary insurance were reduced by $2.4 billion in 2021, $518 million in 2020 and $457 million in 2019. The reductions in 2021 and 2020 derived primarily from private passenger auto and medical professional liability claims. In both 2021 and 2020, we also lowered estimated ultimate liabilities for prior accident years with respect to workers’ compensation claims, which were largely offset by increases in ultimate liabilities for other casualty claims. The decrease in incurred losses for prior accident years in 2019 reflected reductions in medical professional liability and workers’ compensation estimates partially offset by higher other casualty estimates. Estimated ultimate liabilities for prior accident years related to property and casualty reinsurance decreased $718 million in 2021, increased $162 million in 2020 and decreased $295 million in 2019. The increase in 2020 included increased claims estimates for legacy casualty exposures.

K-91

Notes to Consolidated Financial Statements (Continued)

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

Estimated net claim liabilities for environmental, asbestos and other latent injury exposures were approximately $2.1 billion at December 31, 2021 and 2020. These liabilities are subject to change due to changes in the legal and regulatory environment. We are unable to reliably estimate additional losses or a range of losses that are reasonably possible for these claims.

Disaggregated information concerning our claims liabilities is provided below and in the pages that follow. The effects of businesses acquired or disposed during the year are reflected in the data presented on a retrospective basis. A reconciliation of the disaggregated net unpaid losses and allocated loss adjustment expenses (the latter referred to as “ALAE”) of GEICO, Berkshire Hathaway Primary Group (“BH Primary”) and Berkshire Hathaway Reinsurance Group (“BHRG”) to our consolidated unpaid losses and loss adjustment expenses as of December 31, 2021 follows (in millions).

		GEICO Physical Damage				GEICO Auto Liability				BH Primary Medical Professional Liability				BH Primary Workers’ Compensation and Other Casualty			BHRG Property				BHRG Casualty				Total
Unpaid losses and ALAE, net		$	729			$	19,768			$	8,506			$	13,579		$	13,119			$	23,611			$	79,312
Reinsurance recoverable			11				1,085				28				639			181				892				2,836
Unpaid unallocated loss adjustment expenses																										2,448
Other unpaid losses and loss adjustment expenses																										2,068
Unpaid losses and loss adjustment expenses																									$	86,664

GEICO

GEICO’s claim liabilities predominantly relate to various types of private passenger auto liability and physical damage claims. For such claims, 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 individual case reserves when insufficient time or information is available for specific claim estimates and for large volumes of minor physical damage claims that once reported are quickly settled. We establish case loss estimates for liability claims, including estimates for loss adjustment expenses, as the facts and merits of the claim are evaluated.

Claim estimates for liability coverages normally reflect greater uncertainty than physical damage coverages, primarily due to the longer claim-tails, the greater chance of litigation and the time needed to evaluate facts at the time the case estimate is first established. The “claim-tail” is the period between the claim occurrence date and claim settlement or payment date. Consequently, 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.

K-92

Notes to Consolidated Financial Statements (Continued)

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

GEICO’s net incurred and paid auto physical damage and liability losses and ALAE are summarized by accident year below. IBNR and case development liabilities are as of December 31, 2021. 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 auto policy coverages. Dollars are in millions.

Physical Damage

		Incurred Losses and ALAE through December 31,														Cumulative Number of
Accident Year				2020*				2021				IBNR and Case Development Liabilities				Reported Claims (in thousands)
2020				$	8,603			$	8,396			$	64				7,935
2021									12,135				420				8,967
		Incurred losses and ALAE						$	20,531
		Cumulative Paid Losses and ALAE through December 31,
Accident Year				2020*				2021
2020				$	8,118			$	8,385
2021									11,427
		Paid losses and ALAE							19,812
		Net unpaid losses and ALAE for 2020 – 2021 accident years							719
		Net unpaid losses and ALAE for accident years before 2020							10
		Net unpaid losses and ALAE						$	729

Auto Liability

		Incurred Losses and ALAE through December 31,																								Cumulative Number of
Accident Year		2017*				2018*				2019*				2020*				2021				IBNR and Case Development Liabilities				Reported Claims (in thousands)
2017		$	14,095			$	13,864			$	13,888			$	13,824			$	13,777			$	232				2,646
2018							15,383				15,226				14,985				14,838				495				2,713
2019											16,901				16,678				16,191				1,202				2,778
2020															14,637				14,024				2,564				2,087
2021																			17,481				5,541				2,216
		Incurred losses and ALAE																$	76,311
		Cumulative Paid Losses and ALAE through December 31,
Accident Year		2017*				2018*				2019*				2020*				2021
2017		$	5,806			$	9,944			$	11,799			$	12,729			$	13,260
2018							6,218				10,772				12,658				13,757
2019											6,742				11,671				13,851
2020															5,395				9,839
2021																			6,450
		Paid losses and ALAE																	57,157
		Net unpaid losses and ALAE for 2017 – 2021 accident years																	19,154
		Net unpaid losses and ALAE for accident years before 2017																	614
		Net unpaid losses and ALAE																$	19,768

***	Unaudited required supplemental information

K-93

Notes to Consolidated Financial Statements (Continued)

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

BH Primary

BH Primary’s liabilities for unpaid losses and loss adjustment expenses primarily derive from medical professional liability and workers’ compensation and other casualty insurance, which includes commercial auto and general liability insurance. Net incurred and paid losses and ALAE are summarized by accident year in the following tables, disaggregated by medical professional liability coverages and workers’ compensation and other casualty coverages. IBNR and case development liabilities are as of December 31, 2021. The cumulative number of reported claims reflects the number of individual claimants and includes claims that ultimately resulted in no liability or payment. Dollars are in millions.

Medical Professional Liability

We estimate the ultimate expected incurred losses and loss adjustment expenses for medical professional claim liabilities using a variety of commonly accepted actuarial methodologies, such as the paid and incurred development method and Bornhuetter-Ferguson based methods, as well as other techniques that consider insured loss exposures and historical and expected loss trends, among other factors. These methodologies produce loss estimates from which we determine our best estimate. In addition, we study developments in older accident years and adjust initial loss estimates to reflect recent developments based upon claim age, coverage and litigation experience.

		Incurred Losses and ALAE through December 31,																																												Cumulative Number of
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021				IBNR and Case Development Liabilities				Reported Claims (in thousands)
2012		$	1,336			$	1,306			$	1,277			$	1,223			$	1,168			$	1,078			$	1,035			$	998			$	988			$	971			$	51				11
2013							1,328				1,296				1,261				1,195				1,127				1,086				1,019				985				978				62				11
2014											1,370				1,375				1,305				1,246				1,218				1,127				1,061				1,033				108				11
2015															1,374				1,342				1,269				1,290				1,218				1,157				1,093				136				12
2016																			1,392				1,416				1,414				1,394				1,341				1,288				213				15
2017																							1,466				1,499				1,495				1,474				1,382				328				21
2018																											1,602				1,650				1,659				1,580				495				23
2019																															1,670				1,691				1,663				869				20
2020																																			1,704				1,751				1,319				27
2021																																							1,852				1,672				15
		Incurred losses and ALAE																																				$	13,591
		Cumulative Paid Losses and ALAE through December 31,
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021
2012		$	15			$	93			$	218			$	377			$	522			$	642			$	725			$	789			$	830			$	848
2013							15				90				219				368				518				635				743				793				821
2014											21				106				238				396				540				671				752				788
2015															23				108				218				382				543				663				719
2016																			22				115				274				461				620				712
2017																							27				128				300				457				582
2018																											35				166				367				543
2019																															39				160				314
2020																																			34				148
2021																																							36
		Paid losses and ALAE																																					5,511
		Net unpaid losses and ALAE for 2012 – 2021 accident years																																					8,080
		Net unpaid losses and ALAE for accident years before 2012																																					426
		Net unpaid losses and ALAE																																				$	8,506

***	Unaudited required supplemental information

K-94

Notes to Consolidated Financial Statements (Continued)

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

Workers’ Compensation and Other Casualty

We periodically evaluate ultimate loss and loss adjustment expense estimates for the workers’ compensation and other casualty claims 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 and analyzed by state due to the different state regulatory frameworks that may impact certain factors, including the duration and amount of loss payments. We also separately study the various components of liabilities, such as employee lost wages, medical expenses and the costs of claims investigations and administration. 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.

		Incurred Losses and ALAE through December 31,																																												Cumulative Number of
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021				IBNR and Case Development Liabilities				Reported Claims (in thousands)
2012		$	873			$	850			$	837			$	791			$	780			$	762			$	750			$	736			$	718			$	709			$	39				53
2013							1,258				1,228				1,178				1,127				1,096				1,072				1,050				1,028				1,008				96				67
2014											1,743				1,638				1,614				1,548				1,482				1,497				1,477				1,460				163				90
2015															2,169				2,127				2,042				2,014				2,025				1,997				2,006				242				111
2016																			2,511				2,422				2,359				2,325				2,365				2,370				396				115
2017																							3,044				2,907				2,842				2,843				2,852				503				139
2018																											3,544				3,412				3,480				3,536				908				160
2019																															4,074				4,102				4,175				1,278				173
2020																																			4,421				4,278				2,089				141
2021																																							5,197				3,545				218
		Incurred losses and ALAE																																				$	27,591
		Cumulative Paid Losses and ALAE through December 31,
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021
2012		$	116			$	299			$	414			$	501			$	560			$	592			$	611			$	626			$	634			$	640
2013							177				422				609				725				793				835				858				874				884
2014											239				557				800				1,007				1,111				1,176				1,214				1,245
2015															289				700				1,017				1,289				1,488				1,570				1,648
2016																			329				775				1,148				1,461				1,661				1,778
2017																							441				1,003				1,434				1,771				1,956
2018																											538				1,198				1,683				2,028
2019																															682				1,478				2,022
2020																																			695				1,391
2021																																							833
		Paid losses and ALAE																																					14,425
		Net unpaid losses and ALAE for 2012 – 2021 accident years																																					13,166
		Net unpaid losses and ALAE for accident years before 2012																																					413
		Net unpaid losses and ALAE																																				$	13,579

***	Unaudited required supplemental information

BHRG

We use a variety of methodologies to establish BHRG’s estimates for property and casualty claims liabilities. These methodologies include 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.

K-95

Notes to Consolidated Financial Statements (Continued)

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

Estimated IBNR liabilities are affected by expected case loss emergence patterns and expected loss ratios, which are evaluated as groups of contracts with similar exposures or on a contract-by-contract basis. Estimated case and IBNR liabilities for major catastrophe events are generally based on a per-contract assessment of the ultimate cost associated with the individual loss event. Claim count data is not provided consistently by ceding companies under our contracts or is otherwise considered unreliable.

Net incurred and paid losses and ALAE of BHRG are disaggregated based on losses that are expected to have shorter claim-tails (property) and losses 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. BHRG’s disaggregated incurred and paid losses and ALAE are summarized by accident year. IBNR and case development liabilities are as of December 31, 2021. Dollars are in millions.

Property

		Incurred Losses and ALAE through December 31,
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021				IBNR and Case Development Liabilities
2012		$	3,129			$	2,822			$	2,621			$	2,382			$	2,330			$	2,327			$	2,309			$	2,294			$	2,285			$	2,305			$	31
2013							3,198				3,035				2,690				2,600				2,579				2,520				2,469				2,455				2,453				29
2014											2,619				2,408				2,297				2,154				2,100				2,028				1,999				1,996				33
2015															3,256				3,103				2,546				2,950				2,948				2,971				2,975				154
2016																			3,261				3,890				3,616				3,585				3,589				3,578				112
2017																							5,253				4,953				4,806				4,698				4,631				141
2018																											4,375				4,467				4,344				4,227				461
2019																															4,065				4,234				3,992				541
2020																																			5,795				6,048				1,504
2021																																							6,669				3,405
Incurred losses and ALAE																																						$	38,874
		Cumulative Paid Losses and ALAE through December 31,
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021
2012		$	259			$	1,218			$	1,796			$	1,934			$	2,022			$	2,097			$	2,117			$	2,162			$	2,180			$	2,201
2013							515				1,424				1,863				2,060				2,180				2,260				2,300				2,328				2,352
2014											465				1,234				1,555				1,693				1,758				1,808				1,838				1,860
2015															577				1,596				1,946				2,141				2,245				2,427				2,510
2016																			705				1,794				2,186				2,647				2,899				3,083
2017																							1,025				2,712				3,633				3,944				4,163
2018																											907				2,310				2,831				3,061
2019																															748				2,247				2,830
2020																																			956				2,882
2021																																							1,214
Paid losses and ALAE																																							26,156
Net unpaid losses and ALAE for 2012 – 2021 accident years																																							12,718
Net unpaid losses and ALAE for accident years before 2012																																						401
Net unpaid losses and ALAE																																						$	13,119

***	Unaudited required supplemental information

K-96

Notes to Consolidated Financial Statements (Continued)

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

Casualty

		Incurred Losses and ALAE through December 31,
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021				IBNR and Case Development Liabilities
2012		$	2,792			$	2,974			$	2,808			$	2,871			$	2,799			$	2,686			$	2,619			$	2,562			$	2,556			$	2,557			$	372
2013							2,132				2,268				2,298				2,141				2,086				2,032				1,937				1,865				1,837				331
2014											1,872				2,069				2,038				2,001				1,915				1,952				1,942				1,847				431
2015															1,877				2,082				2,109				2,008				1,882				1,844				1,817				395
2016																			1,906				2,115				2,023				1,980				1,900				1,843				451
2017																							2,193				2,685				2,563				2,470				2,383				582
2018																											2,924				3,559				3,482				3,340				904
2019																															3,429				3,901				3,780				1,521
2020																																			3,861				3,987				2,147
2021																																							3,744				2,584
		Incurred losses and ALAE																																				$	27,135
		Cumulative Paid Losses and ALAE through December 31,
Accident Year		2012*				2013*				2014*				2015*				2016*				2017*				2018*				2019*				2020*				2021
2012		$	308			$	747			$	1,139			$	1,368			$	1,525			$	1,650			$	1,750			$	1,810			$	1,868			$	1,906
2013							290				519				805				933				1,037				1,139				1,199				1,256				1,290
2014											149				477				642				752				874				959				1,103				1,147
2015															196				489				713				833				924				1,014				1,088
2016																			253				555				732				862				960				1,043
2017																							230				564				819				1,269				1,376
2018																											265				867				1,639				1,909
2019																															353				896				1,176
2020																																			404				970
2021																																							307
		Paid losses and ALAE																																					12,212
		Net unpaid losses and ALAE for 2012 – 2021 accident years																																					14,923
		Net unpaid losses and ALAE for accident years before 2012																																					8,688
		Net unpaid losses and ALAE																																				$	23,611

***	Unaudited required supplemental information

Required 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 Year		1		2		3		4		5		6		7		8		9		10
GEICO Physical Damage		97%		3%
GEICO Auto Liability		41%		30%		13%		8%		4%
BH Primary Medical Professional Liability		2%		8%		12%		14%		13%		11%		8%		5%		4%		2%
BH Primary Workers’ Compensation and Other Casualty		16%		21%		16%		12%		8%		4%		3%		2%		1%		1%
BHRG Property		19%		36%		16%		8%		5%		4%		2%		1%		1%		1%
BHRG Casualty		11%		16%		13%		9%		6%		5%		5%		3%		2%		2%

K-97

Notes to Consolidated Financial Statements (Continued)

(17)	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, when applicable, after 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, 2021 follow (in millions).

		2021								2020								2019
		Unpaid losses and loss adjustment expenses				Deferred charges - retroactive reinsurance				Unpaid losses and loss adjustment expenses				Deferred charges - retroactive reinsurance				Unpaid losses and loss adjustment expenses				Deferred charges - retroactive reinsurance
Balances at beginning of year		$	40,966			$	(12,441	)		$	42,441			$	(13,747	)		$	41,834			$	(14,104	)
Incurred losses and loss adjustment expenses:
Current year contracts			153				(17	)			—				—				1,138				(453	)
Prior years’ contracts			(974	)			1,819				(399	)			1,306				378				810
Total			(821	)			1,802				(399	)			1,306				1,516				357
Paid losses and loss adjustment expenses			(1,889	)			—				(1,076	)			—				(909	)			—
Balances at December 31		$	38,256			$	(10,639	)		$	40,966			$	(12,441	)		$	42,441			$	(13,747	)
Incurred losses and loss adjustment expenses, net of deferred charges		$	981							$	907							$	1,873

In the preceding table, classifications of incurred losses and loss adjustment expenses are based on the inception dates of the contracts, which reflect when our exposures to losses began. 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 have little or no practical analytical value.

Currently, our largest retroactive reinsurance contract is between our subsidiary, National Indemnity Company, and certain subsidiaries of American International Group, Inc. (collectively, “AIG”). Our estimated unpaid claim liabilities with regard to the AIG contract were approximately $15.8 billion at December 31, 2021 and $17.7 billion at December 31, 2020. Claim payments under this contract commenced in 2021 and were $1.2 billion during 2021. Deferred charges related to the AIG contract were approximately $4.5 billion at December 31, 2021 and $5.4 billion at December 31, 2020.

Incurred losses and loss adjustment expenses related to contracts written in prior years were $845 million in 2021, $907 million in 2020 and $1,188 million in 2019, 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.

Estimated claim liabilities for retroactive reinsurance included estimates for environmental, asbestos and other latent injury exposures of approximately $12.3 billion at December 31, 2021 and $12.5 billion at December 31, 2020. 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 laws or 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.

K-98

Notes to Consolidated Financial Statements (Continued)

(18)	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, 2021.

		Weighted Average				December 31,
		Interest Rate				2021				2020
Insurance and other:
Berkshire Hathaway Inc. (“Berkshire”):
U.S. Dollar denominated due 2022-2047			3.3	%		$	6,820			$	8,308
Euro denominated due 2023-2041			1.0	%			7,792				8,326
Japanese Yen denominated due 2023-2060			0.6	%			6,797				6,031
Berkshire Hathaway Finance Corporation (“BHFC”):
U.S. Dollar denominated due 2022-2051			3.6	%			10,758				10,766
Great Britain Pound denominated due 2039-2059			2.5	%			2,325				2,347
Other subsidiary borrowings due 2022-2045			4.0	%			4,438				4,682
Short-term subsidiary borrowings			2.9	%			342				1,062
						$	39,272			$	41,522

During 2021, Berkshire repaid €550 million and $1.5 billion of maturing senior notes and issued €600 million of 0.5% senior notes due in 2041 and ¥160 billion (approximately $1.5 billion) of senior notes with maturity dates ranging from 2026 to 2041 and a weighted average interest rate of 0.5%. In January 2022, Berkshire repaid $600 million of maturing debt and issued ¥128.5 billion (approximately $1.1 billion) of senior notes with maturity dates ranging from 2027 to 2052 and a weighted average interest rate of 0.5%.

Borrowings of BHFC, a wholly owned finance subsidiary of Berkshire, consist of senior unsecured notes used to fund manufactured housing loans originated or acquired and equipment held for lease of certain subsidiaries. BHFC borrowings are fully and unconditionally guaranteed by Berkshire. In 2021, BHFC repaid $750 million of maturing senior notes and issued $750 million of 2.5% senior notes due in 2051.

The carrying values of Berkshire and BHFC non-U.S. Dollar denominated senior notes (€6.9 billion, £1.75 billion and ¥785.5 billion par) reflect the applicable exchange rates as of the balance sheet dates. The effects of changes in foreign currency exchange rates during the period are recorded in earnings as a component of selling, general and administrative expenses. Changes in the exchange rates resulted in pre-tax gains of $1.3 billion in 2021, pre-tax losses of $1.0 billion in 2020 and pre-tax gains of $192 million in 2019.

Berkshire also guarantees debt of other subsidiaries, aggregating approximately $3.8 billion at December 31, 2021. 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.

	Weighted Average				December 31,
	Interest Rate				2021			2020
Railroad, utilities and energy:
Berkshire Hathaway Energy Company (“BHE”) and subsidiaries:
BHE senior unsecured debt due 2023-2051		4.3	%		$	13,003		$	13,447
Subsidiary and other debt due 2022-2064		4.1	%			36,759			36,420
Short-term borrowings		1.4	%			2,009			2,286
Burlington Northern Santa Fe (“BNSF”) and subsidiaries due 2022-2097		4.5	%			23,219			23,220
					$	74,990		$	75,373

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 covenants which pertain to leverage ratios, interest coverage ratios and/or debt service coverage ratios. During 2021, BHE and its subsidiaries issued term debt of approximately $2.2 billion with maturity dates ranging from 2028 to 2052 and a weighted average interest rate of 3.2% and repaid $2.5 billion of term debt.

K-99

Notes to Consolidated Financial Statements (Continued)

(18)	Notes payable and other borrowings (Continued)

BNSF’s borrowings are primarily senior unsecured debentures. During 2021, BNSF issued $1.55 billion of term debt with maturity dates in 2051 and 2052 and a weighted average interest rate of 3.1% and repaid debt of $1.54 billion. As of December 31, 2021, 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.

Our subsidiaries had unused lines of credit and commercial paper capacity to support short-term borrowing programs and provide additional liquidity. Unused lines of credit were approximately $10.4 billion at December 31, 2021, which included approximately $8.7 billion related to BHE and its subsidiaries.

Debt principal repayments expected during each of the next five years are as follows (in millions). Amounts in 2022 include short-term borrowings.

		2022				2023				2024				2025				2026
Insurance and other		$	1,933			$	5,879			$	2,154			$	2,703			$	3,422
Railroad, utilities and energy			4,206				4,832				3,991				3,792				2,033
		$	6,139			$	10,711			$	6,145			$	6,495			$	5,455

(19)	Income taxes

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

		December 31,
		2021				2020
Currently payable (receivable)		$	(482	)		$	(276	)
Deferred			89,679				73,261
Other			1,046				1,113
		$	90,243			$	74,098

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,
		2021				2020
Deferred tax liabilities:
Investments – unrealized appreciation		$	55,437			$	40,181
Deferred charges reinsurance assumed			2,234				2,613
Property, plant and equipment and equipment held for lease			31,323				30,203
Goodwill and other intangible assets			6,748				6,753
Other			4,094				3,736
			99,836				83,486
Deferred tax assets:
Unpaid losses and loss adjustment expenses			(1,091	)			(1,135	)
Unearned premiums			(990	)			(900	)
Accrued liabilities			(1,868	)			(2,193	)
Regulatory liabilities			(1,349	)			(1,421	)
Other			(4,859	)			(4,576	)
			(10,157	)			(10,225	)
Net deferred tax liability		$	89,679			$	73,261

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. Generally, no U.S. federal income taxes will be imposed on future distributions of foreign earnings under current law. However, distributions to the U.S. or other foreign jurisdictions could be subject to withholding and other local taxes.

K-100

Notes to Consolidated Financial Statements (Continued)

(19)	Income taxes (Continued)

Income tax expense reflected in our Consolidated Statements of Earnings for each of the three years ending December 31, 2021 was as follows (in millions).

		2021				2020				2019
Federal		$	20,345			$	10,596			$	19,069
State			(527	)			1,086				625
Foreign			1,061				758				1,210
		$	20,879			$	12,440			$	20,904
Current		$	5,326			$	5,052			$	5,818
Deferred			15,553				7,388				15,086
		$	20,879			$	12,440			$	20,904

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, 2021 in the table below (in millions).

		2021				2020				2019
Earnings before income taxes		$	111,686			$	55,693			$	102,696
Hypothetical income tax expense computed at the U.S. federal statutory rate		$	23,454			$	11,696			$	21,566
Dividends received deduction and tax-exempt interest			(457	)			(448	)			(433	)
State income taxes, less U.S. federal income tax benefit			(417	)			858				494
U.S. income tax credits			(1,860	)			(1,519	)			(942	)
Goodwill impairments			—				1,977				20
Other differences, net			159				(124	)			199
		$	20,879			$	12,440			$	20,904
Effective income tax rate			18.7	%			22.3	%			20.4	%

We file income tax returns in the United States and in state, local and foreign jurisdictions. We have settled income tax liabilities with the U.S. federal taxing authority (“IRS”) for tax years through 2011. The U.S. federal income tax returns from 2012 through 2019 remain open, and tax years 2014 through 2019 are under audit. 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 in 2022. We currently do not believe that the outcome of unresolved issues or claims will be material to our Consolidated Financial Statements.

At December 31, 2021 and 2020, net unrecognized tax benefits were $1,046 million and $1,113 million, respectively. Included in the balance at December 31, 2021, were $878 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 recognition. Because of the impact of deferred income tax accounting, these positions, when recognized, would not affect the annual effective income tax rate. Other differences, net included expense of $60 million in 2020 and $377 million in 2019 for uncertain tax positions related to investments by a subsidiary in certain tax equity investment funds that generated income tax benefits from 2015 through 2018. We concluded it was more likely than not those income tax benefits are not valid. We do not expect any material increases to the estimated amount of unrecognized tax benefits during 2022.

K-101

Notes to Consolidated Financial Statements (Continued)

(20**)**	Fair value measurements

Our financial assets and liabilities are summarized below as of December 31, 2021 and December 31, 2020, with fair values shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills, other 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, 2021
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	3,303			$	3,303			$	3,261			$	42			$	—
Foreign governments			10,994				10,994				10,286				708				—
Corporate bonds			1,774				1,774				—				1,774				—
Other			363				363				—				363				—
Investments in equity securities			350,719				350,719				339,225				8				11,486
Investment in Kraft Heinz common stock			13,112				11,683				11,683				—				—
Loans and finance receivables			20,751				22,174				—				2,178				19,996
Derivative contract assets (1)			329				329				6				230				93
Derivative contract liabilities:
Railroad, utilities and energy (1)			277				277				2				51				224
Equity index put options (1)			99				99				—				—				99
Notes payable and other borrowings:
Insurance and other			39,272				42,339				—				42,292				47
Railroad, utilities and energy			74,990				87,065				—				87,065				—
December 31, 2020
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations and agencies		$	3,403			$	3,403			$	3,358			$	45			$	—
Foreign governments			11,338				11,338				9,259				2,079				—
Corporate bonds			5,191				5,191				—				5,191				—
Other			478				478				—				478				—
Investments in equity securities			281,170				281,170				271,848				38				9,284
Investment in Kraft Heinz common stock			13,336				11,280				11,280				—				—
Loans and finance receivables			19,201				20,554				—				2,692				17,862
Derivative contract assets (1)			270				270				1				72				197
Derivative contract liabilities:
Railroad, utilities and energy (1)			121				121				6				96				19
Equity index put options (1)			1,065				1,065				—				—				1,065
Notes payable and other borrowings:
Insurance and other			41,522				46,676				—				46,665				11
Railroad, utilities and energy			75,373				92,593				—				92,593				—

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

K-102

Notes to Consolidated Financial Statements (Continued)

(20**)**	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, 2021 follow (in millions).

		Balance at beginning of year				Gains (losses) included in earnings				Acquisitions, dispositions and settlements				Transfers out of Level 3				Balance at December 31,
Investments in equity securities:
2021		$	8,978			$	1,902			$	1,100			$	(500	)		$	11,480
2020			10,405				(1,426	)			—				(1	)			8,978
2019			1				404				10,000				—				10,405
Equity index put option contract liabilities:
2021		$	(1,065	)		$	966			$	—			$	99			$	—
2020			(968	)			(159	)			62				—				(1,065	)
2019			(2,452	)			1,484				—				—				(968	)

We acquired investments in Occidental Cumulative Perpetual Preferred Stock (“Occidental Preferred”) and Occidental common stock warrants in August 2019 at an aggregate cost of $10 billion. We currently consider the related fair value measurements to contain Level 3 inputs. See Note 4 for information regarding these investments.

Quantitative information as of December 31, 2021 for 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
Investments in equity securities:
Preferred stock		$	10,864			Discounted cash flow		Expected duration		7 years
								Discount for transferability restrictions and subordination		372 bps
Common stock warrants			616			Warrant pricing model		Expected duration		7 years
								Volatility		37%

K-103

Notes to Consolidated Financial Statements (Continued)

(20**)**	Fair value measurements (Continued)

Investments in equity securities in the preceding table include our investments in certain preferred and common stock warrants that do not have readily determinable market values as defined under GAAP. These investments are subject to contractual restrictions on transferability and contain provisions that currently prevent us from economically hedging our investments. We applied discounted cash flow techniques in valuing the preferred stock and we made assumptions regarding the expected duration of the investment and the effects of subordination in liquidation. In valuing the common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we made assumptions regarding the expected duration and volatility of the warrants.

(21)	Common stock

Changes in Berkshire’s issued, treasury and outstanding common stock during the three years ending December 31, 2021 are shown in the table below. In addition to our common stock, 1,000,000 shares of preferred stock are authorized, but none are issued.

		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, 2018			742,213				(12,897	)			729,316				1,373,558,983				(6,138,909	)			1,367,420,074
Conversions of Class A common stock to Class B common stock and exercises of replacement stock options			(22,906	)			—				(22,906	)			34,624,869				—				34,624,869
Treasury stock acquired			—				(4,440	)			(4,440	)			—				(17,563,410	)			(17,563,410	)
Balance December 31, 2019			719,307				(17,337	)			701,970				1,408,183,852				(23,702,319	)			1,384,481,533
Conversions of Class A common stock to Class B common stock			(40,784	)			—				(40,784	)			61,176,000				—				61,176,000
Treasury stock acquired			—				(17,255	)			(17,255	)			—				(95,614,062	)			(95,614,062	)
Balance December 31, 2020			678,523				(34,592	)			643,931				1,469,359,852				(119,316,381	)			1,350,043,471
Conversions of Class A common stock to Class B common stock			(12,622	)			—				(12,622	)			18,933,000				—				18,933,000
Treasury stock acquired			—				(14,196	)			(14,196	)			—				(78,501,968	)			(78,501,968	)
Balance December 31, 2021			665,901				(48,788	)			617,113				1,488,292,852				(197,818,349	)			1,290,474,503

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 equal 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 1,477,429 shares outstanding as of December 31, 2021 and 1,543,960 shares outstanding as of December 31, 2020.

Since we have two classes of common stock, we provide earnings per share data on the Consolidated Statements of Earnings for average equivalent Class A shares outstanding and average equivalent Class B shares outstanding. Class B shares are economically equivalent to one-fifteen-hundredth (1/1,500) of a Class A share. Average equivalent Class A shares outstanding represents average Class A shares outstanding plus one-fifteen-hundredth (1/1,500) of the average Class B shares outstanding. Average equivalent Class B shares outstanding represents average Class B shares outstanding plus 1,500 times average Class A shares outstanding.

Berkshire’s common stock repurchase program, as amended, permits Berkshire to repurchase shares any time that Warren Buffett, Berkshire’s Chairman of the Board and Chief Executive Officer, and Charlie Munger, Vice Chairman of the Board, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined. The program continues to allow 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 Bill holdings below $30 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.

K-104

Notes to Consolidated Financial Statements (Continued)

(22)	Revenues from contracts with customers

We recognize revenue when a good or service is transferred to a customer. A good or service is transferred when or as the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers. The following tables summarize customer contract revenues disaggregated by reportable segment and the source of the revenue for each of the three years ended December 31, 2021 (in millions). Other revenues, which are not considered to be revenues from contracts with customers under GAAP, are primarily insurance premiums earned, interest, dividend and other investment income and leasing revenues.

2021		Manufacturing				McLane				Service and retailing				BNSF				Berkshire Hathaway Energy				Insurance, Corporate and other				Total
Manufactured products:
Industrial and commercial products		$	22,184			$	—			$	159			$	—			$	—			$	—			$	22,343
Building products			19,604				—				—				—				—				—				19,604
Consumer products			18,540				—				—				—				—				—				18,540
Grocery and convenience store distribution			—				31,245				—				—				—				—				31,245
Food and beverage distribution			—				17,332				—				—				—				—				17,332
Auto sales			—				—				9,966				—				—				—				9,966
Other retail and wholesale distribution			2,997				—				15,898				—				—				—				18,895
Service			1,486				751				4,123				23,120				5,583				—				35,063
Electricity and natural gas			—				—				—				—				18,264				—				18,264
Total			64,811				49,328				30,146				23,120				23,847				—				191,252
Other revenues			3,766				122				4,601				57				1,096				75,200				84,842
		$	68,577			$	49,450			$	34,747			$	23,177			$	24,943			$	75,200			$	276,094

2020
Manufactured products:
Industrial and commercial products		$	20,772			$	—			$	192			$	—			$	—			$	—			$	20,964
Building products			15,943				—				—				—				—				—				15,943
Consumer products			14,757				—				—				—				—				—				14,757
Grocery and convenience store distribution			—				30,795				—				—				—				—				30,795
Food and beverage distribution			—				15,368				—				—				—				—				15,368
Auto sales			—				—				8,258				—				—				—				8,258
Other retail and wholesale distribution			2,452				—				12,470				—				—				—				14,922
Service			1,456				584				3,332				20,693				4,595				—				30,660
Electricity and natural gas			—				—				—				—				15,066				—				15,066
Total			55,380				46,747				24,252				20,693				19,661				—				166,733
Other revenues			3,598				93				3,859				57				1,353				69,817				78,777
		$	58,978			$	46,840			$	28,111			$	20,750			$	21,014			$	69,817			$	245,510

2019
Manufactured products:
Industrial and commercial products		$	25,311			$	—			$	184			$	—			$	—			$	—			$	25,495
Building products			15,620				—				—				—				—				—				15,620
Consumer products			14,120				—				—				—				—				—				14,120
Grocery and convenience store distribution			—				33,057				—				—				—				—				33,057
Food and beverage distribution			—				16,767				—				—				—				—				16,767
Auto sales			—				—				8,481				—				—				—				8,481
Other retail and wholesale distribution			2,299				—				12,213				—				—				—				14,512
Service			1,642				539				4,062				23,302				4,096				—				33,641
Electricity and natural gas			—				—				—				—				14,819				—				14,819
Total			58,992				50,363				24,940				23,302				18,915				—				176,512
Other revenues			3,632				95				4,459				55				1,181				68,682				78,104
		$	62,624			$	50,458			$	29,399			$	23,357			$	20,096			$	68,682			$	254,616

K-105

Notes to Consolidated Financial Statements (Continued)

(22)	Revenues from contracts with customers (Continued)

A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in excess of one year as of December 31, 2021 and the timing of when the performance obligations are expected to be satisfied follows (in millions).

		Less than 12 months				Greater than 12 months				Total
Electricity and natural gas		$	2,607			$	21,038			$	23,645
Other sales and service contracts			1,411				2,236				3,647

(23)	Pension plans

Certain of our subsidiaries sponsor defined benefit pension plans. Benefits under the plans are generally based on years of service and compensation or fixed benefit rates. Plan sponsors 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, 2021 follow (in millions).

		2021				2020				2019
Service cost		$	257			$	235			$	224
Interest cost			410				510				618
Expected return on plan assets			(1,008	)			(955	)			(936	)
Amortization of actuarial losses and other			203				171				26
Net periodic pension expense		$	(138	)		$	(39	)		$	(68	)

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 $1.4 billion and $1.6 billion as of December 31, 2021 and 2020, respectively. The cost of certain BHE pension plans are expected to be recoverable through the regulated rate making process.

The funded status at year end 2021 and 2020 and reconciliations of the changes in PBOs and plan assets related to BHE’s pension plans and all other pension plans for each of the two years ending December 31, 2021 follow (in millions).

		2021												2020
		BHE				Other				Total				BHE				Other				Total
Benefit obligations
PBO beginning of year		$	5,282			$	15,147			$	20,429			$	4,898			$	13,808			$	18,706
Service cost			46				211				257				33				202				235
Interest cost			109				301				410				133				377				510
Benefits paid			(214	)			(795	)			(1,009	)			(285	)			(709	)			(994	)
Settlements			(185	)			(22	)			(207	)			(63	)			(12	)			(75	)
Actuarial (gains) losses and other			(258	)			(830	)			(1,088	)			566				1,481				2,047
PBO end of year		$	4,780			$	14,012			$	18,792			$	5,282			$	15,147			$	20,429
Plan assets
Plan assets beginning of year		$	5,158			$	12,780			$	17,938			$	4,808			$	11,688			$	16,496
Employer contributions			41				124				165				69				127				196
Benefits paid			(214	)			(795	)			(1,009	)			(285	)			(709	)			(994	)
Actual return on plan assets			382				1,401				1,783				554				1,820				2,374
Settlements			(185	)			(22	)			(207	)			(63	)			(12	)			(75	)
Other			(24	)			(26	)			(50	)			75				(134	)			(59	)
Plan assets end of year		$	5,158			$	13,462			$	18,620			$	5,158			$	12,780			$	17,938
Funded status – net (asset) liability		$	(378	)		$	550			$	172			$	124			$	2,367			$	2,491

K-106

Notes to Consolidated Financial Statements (Continued)

(23)	Pension plans (Continued)

The funded status reflected in assets was $1,954 million and in liabilities was $2,126 million at December 31, 2021. The funded status included in assets was $1,351 million and in liabilities was $3,842 million at December 31, 2020.

The accumulated benefit obligation (“ABO”) is the actuarial present value of benefits earned based on service and compensation prior to the valuation date. The ABO was $17.9 billion at December 31, 2021 and $19.4 billion at December 31, 2020. Information for plans with PBOs and ABOs in excess of plan assets as of December 31, 2021 and 2020 follows (in millions).

	2021			2020
PBOs	$	9,643		$	12,775
Plan assets		7,518			9,018
ABOs		9,111			10,875
Plan assets		7,429			7,820

Weighted average assumptions used in determining PBOs and net periodic pension expense follow.

		2021				2020				2019
Discount rate applicable to PBOs			2.7	%			2.3	%			3.1	%
Expected long-term rate of return on plan assets		6.1				6.2				6.4
Rate of compensation increase		2.6				2.6				2.5
Discount rate applicable to net periodic pension expense			2.4				3.1				4.0

Pension benefit payments expected over the next ten years are as follows (in millions): in 2022 – $1,048; in 2023 – $1,006; in 2024 – $1,007; in 2025 – $1,013; in 2026 – $1,014; and in 2027 to 2031 – $4,948. Sponsoring subsidiaries expect to contribute $149 million to the plans in 2022.

Fair value measurements of plan assets as of December 31, 2021 and 2020 follow (in millions).

		Fair Value																Investment funds and partnerships
		Total				Level 1				Level 2				Level 3				at net asset value
December 31, 2021
Cash and cash equivalents		$	992			$	901			$	91			$	—			$	—
Equity securities			11,343				10,358				660				325				—
Fixed maturity securities			3,422				2,226				1,168				28				—
Investment funds and other			2,863				180				361				57				2,265
		$	18,620			$	13,665			$	2,280			$	410			$	2,265
December 31, 2020
Cash and cash equivalents		$	383			$	243			$	140			$	—			$	—
Equity securities			11,383				10,123				851				409				—
Fixed maturity securities			3,173				2,214				926				33				—
Investment funds and other			2,999				198				398				56				2,347
		$	17,938			$	12,778			$	2,315			$	498			$	2,347

See Note 20 for a discussion of the three levels of fair value measurements. 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 due to changing market conditions and investment opportunities. The expected rates of return on plan assets reflect subjective assessments of expected long-term investment returns. 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 of return.

K-107

Notes to Consolidated Financial Statements (Continued)

(23)	Pension plans (Continued)

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, 2021 follows (in millions).

		2021				2020
Balance beginning of year		$	(2,251	)		$	(1,896	)
Amount included in net periodic pension expense			170				141
Actuarial gains (losses) and other			1,596				(496	)
Balance end of year		$	(485	)		$	(2,251	)

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. Our defined contribution plan expense was approximately $1.0 billion in 2021, $1.4 billion in 2020 and $1.2 billion in 2019.

(24)	Accumulated other comprehensive income

A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders for each of the three years ending December 31, 2021 follows (in millions).

		Unrealized appreciation of fixed maturity securities, net				Foreign currency translation				Defined benefit pension plans				Other				Accumulated other comprehensive income
Balance December 31, 2018		$	370			$	(4,603	)		$	(816	)		$	34			$	(5,015	)
Other comprehensive income			160				257				(644	)			(48	)			(275	)
Reclassifications into net earnings			(49	)			—				91				5				47
Balance December 31, 2019			481				(4,346	)			(1,369	)			(9	)			(5,243	)
Other comprehensive income			78				1,264				(385	)			(52	)			905
Reclassifications into net earnings			(23	)			—				109				9				95
Balance December 31, 2020			536				(3,082	)			(1,645	)			(52	)			(4,243	)
Other comprehensive income			(123	)			(1,021	)			1,163				80				99
Reclassifications into net earnings			(44	)			11				135				15				117
Balance December 31, 2021		$	369			$	(4,092	)		$	(347	)		$	43			$	(4,027	)

K-108

Notes to Consolidated Financial Statements (Continued)

(25)	Business segment data

Our operating businesses include a large and diverse group of insurance, 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, impairments or amortization of certain business acquisition 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.

Berkshire’s operating segments are as follows.

Business Identity		Business Activity
Insurance:
GEICO		Underwriting private passenger automobile insurance mainly by direct response methods
Berkshire Hathaway Primary Group		Underwriting multiple lines of property and casualty insurance policies for primarily commercial accounts
Berkshire Hathaway Reinsurance Group		Underwriting excess-of-loss, quota-share and facultative reinsurance worldwide
Railroad (“BNSF”)		Operation of one of the largest railroad systems in North America through Burlington Northern Santa Fe LLC
Utilities and energy (“BHE”)		Regulated electric and gas utility, including power generation and distribution activities and real estate brokerage activities through Berkshire Hathaway Energy Company and affiliates
Manufacturing		Manufacturers of numerous products including industrial, consumer and building products, including home building and related financial services
McLane Company (“McLane”)		Wholesale distribution of groceries and non-food items
Service and retailing		Providers of numerous services including shared aircraft ownership programs, aviation pilot training, electronic components distribution, various retailing businesses, including automobile dealerships and trailer and furniture leasing

K-109

Notes to Consolidated Financial Statements (Continued)

(25)	Business segment data (Continued)

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

		Revenues												Earnings before income taxes
		2021				2020				2019				2021				2020				2019
Operating Businesses
Insurance:
Underwriting:
GEICO		$	37,706			$	35,093			$	35,572			$	1,259			$	3,428			$	1,506
Berkshire Hathaway Primary Group			11,575				9,615				9,165				607				110				383
Berkshire Hathaway Reinsurance Group			20,197				18,693				16,341				(930	)			(2,700	)			(1,472	)
Insurance underwriting			69,478				63,401				61,078				936				838				417
Investment income			5,662				5,960				6,615				5,649				5,949				6,600
Total insurance			75,140				69,361				67,693				6,585				6,787				7,017
BNSF			23,282				20,869				23,515				7,861				6,792				7,250
BHE			24,987				21,031				20,114				3,184				2,479				2,618
Manufacturing			68,730				59,079				62,730				9,841				8,010				9,522
McLane			49,450				46,840				50,458				230				251				288
Service and retailing			34,832				28,178				29,487				4,481				2,628				2,555
			276,421				245,358				253,997				32,182				26,947				29,250
Reconciliation to consolidated amount
Investment and derivative gains (losses)			—				—				—				78,542				40,746				72,607
Interest expense, not allocated to segments			—				—				—				(455	)			(483	)			(416	)
Equity method investments			—				—				—				995				726				1,176
Goodwill and intangible asset impairments			—				—				—				—				(10,671	)			(96	)
Corporate, eliminations and other			(327	)			152				619				422				(1,572	)			175
		$	276,094			$	245,510			$	254,616			$	111,686			$	55,693			$	102,696

		Interest expense												Income tax expense
		2021				2020				2019				2021				2020				2019
Operating Businesses
Insurance		$	—			$	—			$	—			$	1,050			$	1,089			$	1,166
BNSF			1,032				1,037				1,070				1,871				1,631				1,769
BHE			2,054				1,941				1,835				(1,177	)			(1,010	)			(526	)
Manufacturing			704				737				752				2,193				1,795				2,253
McLane			—				—				—				61				71				71
Service and retailing			38				61				86				1,086				669				603
			3,828				3,776				3,743				5,084				4,245				5,336
Reconciliation to consolidated amount
Investment and derivative gains			—				—				—				16,025				8,855				15,159
Interest expense, not allocated to segments			455				483				416				(96	)			(102	)			(88	)
Equity method investments			—				—				—				106				57				148
Corporate, eliminations and other			(111	)			(176	)			(198	)			(240	)			(615	)			349
		$	4,172			$	4,083			$	3,961			$	20,879			$	12,440			$	20,904

K-110

Notes to Consolidated Financial Statements (Continued)

(25)	Business segment data (Continued)

		Capital expenditures												Depreciation of tangible assets
		2021				2020				2019				2021				2020				2019
Operating Businesses
Insurance		$	62			$	50			$	108			$	72			$	74			$	82
BNSF			2,910				3,063				3,608				2,406				2,423				2,350
BHE			6,611				6,765				7,364				3,584				3,376				2,947
Manufacturing			2,100				2,133				2,981				2,037				2,026				1,951
McLane			106				98				158				189				204				225
Service and retailing			1,487				903				1,760				1,177				1,216				1,192
		$	13,276			$	13,012			$	15,979			$	9,465			$	9,319			$	8,747

		Goodwill at year-end												Identifiable assets at year-end
		2021				2020				2019				2021				2020				2019
Operating Businesses
Insurance		$	15,181			$	15,224			$	15,289			$	482,813			$	399,169			$	364,550
BNSF			14,852				14,851				14,851				76,586				73,809				73,699
BHE			11,906				11,763				9,979				112,117				109,286				88,651
Manufacturing			25,463				25,512				34,800				107,231				104,318				104,437
McLane			232				232				734				6,841				6,771				6,872
Service and retailing			6,241				6,152				6,229				28,221				26,173				26,494
		$	73,875			$	73,734			$	81,882				813,809				719,526				664,703
Reconciliation to consolidated amount
Corporate and other															71,100				80,469				71,144
Goodwill															73,875				73,734				81,882
														$	958,784			$	873,729			$	817,729

Property/casualty and life/health insurance premiums written and earned are summarized below (in millions).

		Property/Casualty												Life/Health
		2021				2020				2019				2021				2020				2019
Premiums Written:
Direct		$	53,829			$	47,838			$	47,578			$	649			$	510			$	839
Assumed			12,461				11,533				10,214				5,685				5,960				5,046
Ceded			(1,015	)			(898	)			(821	)			(40	)			(42	)			(45	)
		$	65,275			$	58,473			$	56,971			$	6,294			$	6,428			$	5,840
Premiums Earned:
Direct		$	52,139			$	46,418			$	46,540			$	649			$	510			$	839
Assumed			12,072				11,449				9,643				5,713				5,973				4,952
Ceded			(1,054	)			(907	)			(851	)			(41	)			(42	)			(45	)
		$	63,157			$	56,960			$	55,332			$	6,321			$	6,441			$	5,746

K-111

Notes to Consolidated Financial Statements (Continued)

(25)	Business segment data (Continued)

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

	Property/Casualty										Life/Health
	2021			2020			2019				2021			2020			2019
United States	$	55,451		$	50,250		$	50,529			$	2,161		$	2,820		$	2,553
Western Europe		4,613			3,751			2,535				1,298			1,120			908
Asia Pacific		3,822			3,410			3,114				2,030			1,652			1,582
All other		1,389			1,062			793				805			836			797
	$	65,275		$	58,473		$	56,971			$	6,294		$	6,428		$	5,840

Consolidated sales, service and leasing revenues were $151.0 billion in 2021, $132.3 billion in 2020 and $140.8 billion in 2019. Sales, service and leasing revenues attributable to the United States were 85% in 2021, 86% in 2020 and 85% in 2019 of such amounts. The remainder of sales, service and leasing revenues were primarily in Europe, Canada and the Asia Pacific region. Railroad, utilities and energy revenues were $48.1 billion in 2021, $41.8 billion in 2020 and $43.5 billion in 2019. In each of the three years, approximately 96% of such revenues were attributable to the United States. At December 31, 2021, approximately 89% of our consolidated net property, plant and equipment and equipment held for lease was located in the United States with the remainder primarily in Canada and the United Kingdom.

(26)	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.

Our subsidiaries regularly make commitments in the ordinary course of business for the future purchase of goods and services used in their businesses, which are not yet reflected in our Consolidated Financial Statements. The most significant of our long-term commitments relate to our railroad, utilities and energy businesses and our shared aircraft ownership and leasing business. As of December 31, 2021, estimated future payments under those arrangements were as follows: $8 billion in 2022, $4 billion in 2023, $3 billion in 2024, $2 billion in 2025, $2 billion in 2026 and $15 billion after 2026.

As indicated in Note 5, we have an agreement to acquire an additional 41.4% ownership interest in Pilot in 2023. At that time, Pilot will become a consolidated subsidiary. Additionally, we may be obligated to acquire certain noncontrolling interests in less-than-wholly-owned subsidiaries in the future, pursuant to the terms of agreements with the noncontrolling shareholders. The timing and the amount of any future payments that might be required to such noncontrolling shareholders are contingent on future actions of the noncontrolling owners and the value of the interest being acquired. If we had acquired the additional interest in Pilot and all outstanding noncontrolling interests as of December 31, 2021, we estimate the aggregate cost of these acquisitions would approximate $11 billion.

K-112