…because of the limitations of conventional accounting, consolidated reported earnings may reveal relatively little about our true economic performance. Charlie [Munger, Buffett’s business partner] and I, both as owners and managers, virtually ignore such consolidated numbers.…
Accounting consequences do not influence our operating or capital-allocation process.9 Accounting reality was conservative, backward-looking, and governed by generally accepted accounting principles (GAAP). Investment decisions, on the other hand, should be based on the economic reality of a business. In economic reality, intangible assets such as patents,