BERKSHIRE HATHAWAY

Notes to Consolidated Financial Statements (Continued)
(1) Significant accounting policies and practices (Continued)
(i) Property, plant and equipment (Continued)
occurrence of a triggering event, we review the asset to assess whether the estimated undiscounted cash flows expected
from the use of the asset plus residual value from the ultimate disposal exceeds the carrying value of the asset. If the
carrying value exceeds the estimated recoverable amounts, we write down the asset to the estimated fair value.
Impairment losses are included in earnings, except with respect to impairment of assets of our regulated utility and
energy subsidiaries when such impairment losses are offset by the establishment of a regulatory asset to the extent
recovery in future rates is probable.
(j) Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business
acquisitions. We evaluate goodwill for impairment at least annually. When evaluating goodwill for impairment we
estimate the fair value of the reporting unit. There are several methods that may be used to estimate a reporting unit’s
fair value, including market quotations, asset and liability fair values and other valuation techniques, including, but not
limited to, discounted projected future net earnings or net cash flows and multiples of earnings. If the carrying amount
of a reporting unit, including goodwill, exceeds the estimated fair value, then the identifiable assets and liabilities of
the reporting unit are estimated at fair value as of the current testing date. The excess of the estimated fair value of the
reporting unit over the current estimated fair value of net assets establishes the implied value of goodwill. The excess
of the recorded goodwill over the implied goodwill value is charged to earnings as an impairment loss. A significant
amount of judgment is required in estimating the fair value of the reporting unit and performing goodwill impairment
tests.
(k) Revenue recognition
Insurance premiums for prospective property/casualty and health insurance and reinsurance are earned over the loss
exposure or coverage period, in proportion to the level of protection provided. In most cases, premiums are recognized
as revenues ratably over the term of the contract with unearned premiums computed on a monthly or daily pro rata
basis. Premiums for retroactive property/casualty reinsurance policies are earned at the inception of the contracts, as all
of the underlying loss events covered by these policies occurred in the past. Premiums for life reinsurance contracts are
earned when due. Premiums earned are stated net of amounts ceded to reinsurers. For contracts containing experience
rating provisions, premiums are based upon estimated loss experience under the contracts.
Sales revenues derive from the sales of manufactured products and goods acquired for resale. Revenues from sales are
recognized upon passage of title to the customer, which generally coincides with customer pickup, product delivery or
acceptance, depending on terms of the sales arrangement.
Service revenues are recognized as the services are performed. Services provided pursuant to a contract are either
recognized over the contract period or upon completion of the elements specified in the contract depending on the
terms of the contract. Revenues related to the sales of fractional ownership interests in aircraft are recognized ratably
over the term of the related management services agreement as the transfer of ownership interest in the aircraft is
inseparable from the management services agreement.
Operating revenues of utilities and energy businesses resulting from the distribution and sale of natural gas and electricity
to customers is recognized when the service is rendered or the energy is delivered. Amounts recognized include unbilled
as well as billed amounts. Rates charged are generally subject to federal and state regulation or established under
contractual arrangements. When preliminary rates are permitted to be billed prior to final approval by the applicable
regulator, certain revenue collected may be subject to refund and a liability for estimated refunds is accrued.
Railroad transportation revenues are recognized based upon the proportion of service provided as of the balance sheet
date. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/
from specific locations, are recorded as a pro-rata reduction to revenue based on actual or projected future customer
shipments. When using projected shipments, we rely on historic trends as well as economic and other indicators to
estimate the liability for customer incentives.
Interest income from investments in fixed maturity securities and loans is earned under the constant yield method and
includes accrual of interest due under terms of the agreement as well as amortization of acquisition premiums, accruable
discounts and capitalized loan origination fees, as applicable. In determining the constant yield for mortgage-backed
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