<<<The only "big" change in US accounting in recent decades is the elimination of mandatory purchase goodwill amortization. This has the effect of making GAAP reported profits higher than they would have been under the old rules. Not only because "valid" worthwhile goodwill never goes away as it used to, but also because most firms are quite skilled at avoiding necessary impairments...you need only move an impaired business into a reporting division with some successful operations, since impairment tests are required only a the reporting unit level.>>>

Quoting from Jim’s post in this thread. This is exactly correct and great insight into modern day accounting.

I believe this new accounting regime was born in the wake of Enron. In addition to avoiding necessary impairments, I believe that there’re more loopholes. If an acquirer buys a four-legged animal (say, an Ass), and said acquirer finds out a few years down that the Ass didn’t meet expectations, under the new accounting regime, the test of impairment could be done against another four legged animal (say, a mule, donkey or another ass). Well, you get to pick the one that did worse than your ass. I’m no accountant, so please feel free to correct this. The motivation to goose up earnings can be assigned to the “primacy of the income statement” paradigm prevalent in the corporate world. All incentives are tied to putting a shine on the income statement versus the balance sheet.

We should be proud of owning Berkshire. Take the impairments taken for the PCP division. Painful as it was, it was the correct thing to do. Warren was also keen on not kicking the can down the road, so he took the write down immediately. Sort of not burdening Greg with his mistake. Now, that’s fiduciary.

Munger often called out the sewer of modern accounting. In fact, every time one could see Charlie seething as he spoke on the subject. Where are the new Mungers when the world needs them? Sad.