The Essays of Warren Buffett: Lessons for Corporate America - Accounting Policy and Tax Matters Summary & Analysis

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Accounting Policy and Tax Matters Summary and Analysis

Despite Buffett's frustration with GAAP, he recognizes the purpose of accounting data is valuable to his own and Munger's decision-making. Information that must be reported helps an investor determine how much a company is worth, the likelihood of a company meeting future obligations, and how well managers are doing. Buffett notes several issues related to handling business transactions from an accounting viewpoint. A purchase and pooling transaction are different in that pooling allows only stock be paid compared to a purchase in which cash or stock and cash or other valuable consideration may be paid. Buffett agrees amortization is spurious compared to depreciation charges for deteriorating assets, inventory obsolescence, unpaid debt charge-offs, and warranty accruals. Pooling overcomes deficiency of goodwill amortization in a merger, which is really a purchase.

Many executives argue the...

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This section contains 520 words
(approx. 2 pages at 400 words per page)
Buy The Essays of Warren Buffett: Lessons for Corporate America Study Guide
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