The Best Collections of Warren Buffett & Charlie Munger – Accounting

How to learn accounting
00:00:00 Learning accounting by absorbing real life examples (1999)
00:04:49 Buffett didn’t learn accounting from books (2003)
00:07:33 Accounting is a starting point, but it doesn’t always reflect reality (2002)

Generally Bad Accounting Practices
00:09:13 When a company’s accounting is confusing, stay away (1995)
00:12:20 Deceptive accounting at many companies (1999)
00:16:50 Frauds, crooks, and accounting (2013)
00:26:15 Accounting “shenanigans” and “gamesmanship” (2001)
00:32:23 Arthur Andersen as Enron’s collateral damage (2002)
00:36:50 Creative accounting is an absolute curse (2002)
00:38:46 Coca-cola and its bottlers are not using creative accounting (2002)
00:41:24 Operating problems cannot be solved by accounting maneuvers (2003)
00:43:47 Putting business value into income account could be quite deceptive (2018)

Income/Expenses
00:49:07 Detecting fraud and the evils of EBITDA (2002)
00:54:31 Munger on recognizing “bullshit earnings” (2003)
01:00:26 Teaching the delusion of EBITDA is horror squared (2017)
01:03:48 Good companies do not need to inflating earnings (2016)
01:06:05 Inventory writeoff (2001)
01:07:06 Excess tax benefits from share-based compensation is not material (2017)
01:10:18 A really stupid accounting rule change (2017)
01:13:40 Accounting-rule net loss not representative of the business (2018)
01:16:50 Berkshire’s earnings distorted by new accounting rule (2019)
01:20:05 Pension fund expectation distorting accounting numbers (2001)
01:25:49 Real lollapallooza is the pension fund accounting (2003)

Stock Options
01:26:35 Stock options are real expenses
01:29:05 Stock option accounting rule failed (1995)
01:34:31 Stock options and inflated earnings (1998)
01:36:45 Corporations hooked on corrupt stock option accounting (1999)
01:43:36 Powerful forces don’t want to expense stock options (2001)
01:49:34 Expensing stock options is not double-counting (2002)
01:56:06 The Final Four finally (suddenly) recognized options as expense (2003)
01:57:51 Options rule shows Congress shouldn’t make (immoral) accounting rules (2004)

Derivatives
02:03:13 Must look very carefully at derivatives accounting (1999)
02:05:52 Quality of accounting in America for derivative transactions is still terrible (2003)
02:08:13 Bad accounting contributes to creation of financial weapons (2005)
02:12:19 On accounting of derivatives lead to risks (2007)

Equity/Reserves
02:16:54 Nothing magic about a positive shareholders’ equity (1995)
02:20:39 On Discounting reserves (2005)
02:22:51 On LIFO adjustment (2006)
02:25:03 How to look at deferred taxes (2015)

Goodwill
02:28:20 How should you look at goodwill when evaluating a business (2011)
02:33:28 What is the appropriate method for goodwill accounting (1999)
02:38:39 New goodwill accounting is making sense (2002)
02:40:18 Goodwill impairment charge not needed for Gen Re (2003)

Merger-Acqusition
02:42:53 Economics of a transaction more important than accounting treatment (1994)
02:46:12 Accounting treatment plays no part in determining attractiveness of a deal (1995)
02:47:27 Walt Disney-Capital Cities accounting (1998)
02:51:37 Equity method to report Kraft Heinz earnings (2019)