MidAmerican Energy's reported earnings should increase considerably in 2002 because the goodwill amortization charge will disappear under new GAAP rules.

Test: MidAmerican Energy Holdings' reported net income for 2002 compared with 2001, from its 2002 Form 10-K or Berkshire's 2002 annual report. True: earnings rose by at least 15%. Mostly true: earnings rose by 10–15%, or rose by at least 15% mainly for reasons other than the end of goodwill amortization. Mostly false: earnings rose by less than 10%. False: earnings were flat or fell.

Set before the research began.

1. E1 2002ar.pdf Berkshire Hathaway Inc. Own record

   “Goodwill amortization for the years ending December 31, 2001 and 2000 includes $78 million and $65 million, respectively, related to Berkshire’s equity method investment in MidAmerican Energy Holdings Company.”

2. E2 2002ar.pdf Berkshire Hathaway Inc. Own record

   ““Purchase-Accounting Adjustments” dropped sharply in 2002, the reason being that GAAP rules changed then, no longer requiring the amortization of goodwill. This change increases our reported earnings, but has no effect on our economic earnings.”

3. E3 2002ar.pdf Berkshire Hathaway Inc. Own record

   “Net earnings ....................................................................................... $ 4,286”

4. E4 Berkshire Hathaway Inc. 2002 Annual Report Berkshire Hathaway Inc. · 2003 Own record

   “MidAmerican Energy’s earnings grew in 2002 and will likely do so again this year.”

5. E5 Berkshire Hathaway Inc. 2002 Annual Report Berkshire Hathaway Inc. · 2003 Own record

   “Most of the increase, both present and expected, results from the acquisitions described earlier.”

6. E6 Berkshire Hathaway Inc. 2002 Annual Report Berkshire Hathaway Inc. · 2003 Own record

   “Goodwill amortization for the years ending December 31, 2001 and 2000 includes $78 million and $65 million, respectively, related to Berkshire’s equity method investment in MidAmerican Energy Holdings Company.”

7. E7 midamerican energy holdings company U.S. Securities and Exchange Commission (Form 10-K filed by MidAmerican Energy Holdings Company)

   “Reported net income available to common and preferred stockholders | | | | $ | 415,618 | | | $ | 380,043 | | | $ | 142,669 |”

8. E8 midamerican energy holdings company U.S. Securities and Exchange Commission (Form 10-K filed by MidAmerican Energy Holdings Company)

   “Adjusted net income available to common and preferred stockholders | | | | $ | 415,618 | | | $ | 380,043 | | | $ | 237,069 |”

9. E9 midamerican energy holdings company U.S. Securities and Exchange Commission (Form 10-K filed by MidAmerican Energy Holdings Company)

   “On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which establishes the accounting for acquired goodwill and other intangible assets, and provides that goodwill and indefinite-lived intangible assets will not be amortized”

The MidAmerican 10-K adopted SFAS 142 on January 1, 2002 and stopped amortizing goodwill (E10). Its reported net income row shows $380.0M and $142.7M in the columns that, going by the adjusted-income row, are 2002 and 2001 (E7, E8). The only column that changes when goodwill amortization is added back is the earlier one, where the 2001 figure becomes $237.1M. If the columns are read as 2003, 2002 and 2001, the reported 2002 increase is well above 15%. About $94M of the roughly $237M rise comes from removing goodwill amortization, so most of it came from other causes; Berkshire's annual report says most of the growth came from acquisitions (E4, E5). Under the criteria, a rise of at least 15% mainly for reasons other than the end of goodwill amortization is mostly true. The verdict relies on reading the unlabelled year columns this way.