Berkshire Hathaway's $1.14-Billion Loss, Explained

Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) reported its first loss in nearly a decade in its first-quarter print Saturday. 

What Happened

Berkshire's $1.14-billion loss in Q1 could be attributed to an accounting rule change which the billionaire investor described as a "nightmare," Bloomberg reported. As part of a new accounting rule, companies like Berkshire must report unrealized gains or losses in equity investments in net income. The company's net income a year ago was $4.06 billion.

Berkshire's Class A earnings per share came in at a $692 loss versus a positive $2,469 last year. Class B shares also lost 46 cents per share versus a positive $1.65 a year ago.

Why It's Important

The accounting rule changes resulted in "truly wild and capricious swings in our GAAP bottom line," Buffett said in an annual shareholder letter earlier this year. The changes will "severely distort Berkshire's net income figures and very often mislead commentators and investors," the 87-year-old CEO said. 

What's Next

Investors looking to value Berkshire's stock as an investment opportunity could instead focus on the operating profit metric. This figure doesn't include the accounting changes and rose 49 percent from the same quarter one year ago to $5.29 billion.

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Photo: Berkshire Hathaway CEO with former President Barack Obama in 2011. Photo from The White House via Wikimedia.