Is Berkshire Hathaway asking the SEC for special treatment?
The regulator questioned Buffett’s firm in May over a glaring absence in write-downs concerning losses worth $1.86 billion on Kraft and US Bancorp, Reuters reported today.
Berkshire denies any accounting malpractice despite the fact that the losses endured for at least 12 months and were clearly not temporary under SEC guidelines.
Here’s what Berkshire CFO Marc Hamburg wrote in a response letter (which can be viewed in full at Zero Hedge) to the SEC’s queries in May:
We believe it is reasonably possible that the market prices of Kraft Foods and U.S. Bancorp will recover to our cost within the next one to two years assuming that there are no material adverse events affecting these companies or the industries in which they operate.
We believe that our conclusions to not record other-than-temporary impairment charges on investments in an unrealized loss position for more than twelve consecutive months was appropriate and in accordance with ASC 320 and Topic 5M.
Hamburg then attempts to further justify Berkshire’s actions by arguing that the firm is pretty sure the losses are “recoverable through anticipated future investment income” (ok…) and that the firm has a talent for holding securities for long periods of time, so it can wait for the shares to bounce back (hmmm).
Is there any way the SEC can allow these excuses to make the cut without looking completely impotent? We don’t think so.