"Consider a concept Buffett calls “look-through earnings.” [[GAAP]] investment accounting calls for using the consolidation method for majority-owned equity, which means full reporting of all line items from the investee's financial statements on the parent's. For equity investments from 20% to 50%, GAAP calls for reporting the investor's proportionate share of earnings of the investee on its statements; for investments of less than 20%, GAAP provides that only dividends actually received by the investor be recorded, rather than any share of the investee's earnings. **These accounting rules obscure a major factor in Berkshire's economic performance: the undistributed earnings of its investee companies are an enormous part of Berkshire's value, but would not be reported on its financial statements prepared using GAAP**. " ([Location 559](https://readwise.io/to_kindle?action=open&asin=B01J2SLA5O&location=559)) *** **Tags** — [[quotes]], , [[look-through-earnings]], [[operating-earnings]], [[retained-earnings]], **See Also** -- [[Warren Buffett]], [[Charlie Munger]] **Source** — [[202308141129 — B — The Essays of Warren Buffett]]