Value in 60 Seconds: Financial Models have to evolve to handle accounting rule changes

Models have to evolve. Everything that you're doing in any business has to evolve. Accounting rules change too. The accountants are updating their models. When they update their models, that means companies disclose data in different ways, which means we got to make sure that we're using the data and interpreting it in the correct way. That means you got to pay attention to what's going on with accounting rules. And when that happens, we've got to update our models because The accountants decided that it made sense to change an old rule, which used to disallow the recognition of unrealized gains on the income statement. You don't really want somebody's profitability to be going up and down, especially a non-financial company, because the stock market's going up and down. Same is true with the invested capital. For companies like Berkshire Hathaway, it's ridiculous because they've got so much of their business in the stock market. They're showing huge gains and all this stuff that they haven't realized, and their balance sheet is looking different. We just, we reverse all that out. We fix it. That's the takeaway.