ACC250: Intro to Financial Accounting
Accounting in the News: Berkshire Buybacks
Jaeyoon Yu, Ph.D.
Central Michigan University
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Berkshire Hathaway, Warren Buffett and Greg Abel
- Berkshire Hathaway (Omaha, Nebraska): owns whole businesses such as GEICO, BNSF railroad and Berkshire Hathaway Energy, and large stakes in Apple, Coca-Cola, American Express, …
- Warren Buffett ran Berkshire for six decades; stepped down as CEO at the end of 2025 and is still chairman.
- Greg Abel: CEO since January 2026.
Photos via Wikimedia Commons.
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Berkshire’s Stock Portfolio
Besides the businesses it owns, Berkshire holds shares of other public companies. Five stocks make up about 72%.
As of June 30, 2026 (Form 13F, U.S.-listed stocks). “All others” (incl. Chevron) = total minus the five largest. Logos via Wikimedia Commons; trademarks of their owners.
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The News: Q3 2026 Results
Q3 2026 (reported Nov 7, 2026)
| Item | Amount | Change |
|---|---|---|
| Revenue | $105.6B | +11% |
| Operating earnings | $12.7B | −6% |
| Cash on hand | $377.4B | +3% vs Q2 |
| Stock buybacks | $9.6B | Q2: $4.5B |
- Operating earnings fell, dragged down by weaker insurance underwriting.
- Buybacks more than doubled from the previous quarter.
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What Can a Company Do with Extra Cash?
- Invest outside: buy another company, build new plants.
- Pay dividends: cash to all shareholders. (Berkshire pays none.)
- Buy back its own shares: cash to the shareholders who choose to sell.
With $377B of cash and few large deals at good prices, option 1 is hard. → Option 3.
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When Does a Buyback Make Sense?
- No better investment outside
Idle cash earns little. - Own stock looks cheap
Management believes the shares are worth more than their price and will rise.
Berkshire’s rule: buy back only when the price is below a conservative estimate of intrinsic value, and keep at least $30B of cash.
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Effect: Fewer Shares Outstanding
EX. Net income $100; the company buys back 10 of its 100 shares.
| Before | After | |
|---|---|---|
| Net income | $100 | $100 |
| Shares outstanding | 100 | 90 |
| EPS = NI ÷ shares outstanding | $1.00 | $1.11 |
- Same profit, fewer owners → each remaining share owns a bigger slice.
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Accounting for a Buyback: Treasury Stock (Ch11)
EX. Berkshire buys back $9.6B of its own stock.
| Q3: | Treasury Stock (+xSE, −SE) | 9.6B | |
| Cash (−A) | 9.6B |
- Treasury stock: a contra-equity account (xSE) → reduces stockholders’ equity.
- Assets ↓ and SE ↓ by the same amount. No expense → net income unchanged.
- Shares issued: unchanged. Shares outstanding: ↓.
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The Catch: Price Matters
| Buyback price | Remaining shareholders |
|---|---|
| Below value | Gain: $1 of value bought for less than $1 |
| Above value | Lose: the company overpaid for its own shares |
- Berkshire’s shares hit record highs this fall → analysts question whether the pace can continue.
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Questions
- A company earns $500 with 250 shares outstanding, then buys back 50 shares. EPS before and after?
- After a $9.6B buyback, what happens to total assets, total SE, and net income?
- Berkshire has $377B of cash. Why buy back shares instead of paying a dividend?
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Sources
- CNBC, Nov 7, 2026: Berkshire more than doubles buybacks in Q3 as earnings decline
- Insurance Journal, Nov 9, 2026: Berkshire boosts buybacks as operating income slips
- Motley Fool, Nov 13, 2026: Abel bought back a record $9.6B of stock
- CNBC, Aug 15, 2026: Berkshire adds $17 billion to Alphabet stake (Q2 13F)
- Berkshire Hathaway quarterly reports
Operating earnings: $12.7B, down 5.8% from $13.5B a year earlier. The EPS example uses made-up numbers.
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