In 2019, Berkshire Hathaway repurchased $5 billion of its own shares. Or did it?
There was a difference of $166 million between what the statement of shareholders’ equity said the company repurchased and what the statement of cash flows said.
The answer turned out to be a difference between the date Berkshire made the purchase of its treasury shares and when the cash went out of the checkbook to pay for them.
Berkshire’s Q1 2020 results confirmed the cash flow discrepancy. In the first quarter, there is a $166 million difference in the other direction (the cash flow statement was higher than the statement of changes in shareholders’ equity).
The mystery was solved!
Investigating differences like these is important. On the one hand you’re likely to learn something new, as was the case here. On the otherhand, you might uncover a financial fraud or a mistake in the financial statements. Knowing Berkshire’s accounting and the company’s long history of truthful reporting, I wasn’t worried the company was suddenly slipping. Rather, it was an opportunity to dig deeper and understand the language of business (accounting) a little better.
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