1987-02-27 Warren Buffett.Purchase-Price Accounting Adjustments and the "Cash Flow" Fallacy
Purchase-Price Accounting Adjustments and the "Cash Flow" Fallacy
First a short quiz: below are abbreviated 1986 statements of earnings for two companies. Which business is the more valuable?
首先做个简短的测验：以下是两家公司 1986 年财报表的简要说明。哪种业务更有价值？
As you’ve probably guessed, Companies O and N are the same business - Scott Fetzer. In the “O” (for “old”) column we have shown what the company’s 1986 GAAP earnings would have been if we had not purchased it; in the “N” (for “new”) column we have shown Scott Fetzer’s GAAP earnings as actually reported by Berkshire.
正如你们可能已经猜到，Company O 和 Company N 指的都是同一项业务——Scott Fetzer。在“O”（代表“old”）这一栏，我们展示了如果我们未收购该公司，其 1986 年按 GAAP 口径的利润会是多少；在“N”（代表“new”）这一栏，我们展示了按 Berkshire 实际报告的 Scott Fetzer 的 GAAP 利润。
It should be emphasized that the two columns depict identical economics - i.e., the same sales, wages, taxes, etc. And both “companies” generate the same amount of cash for owners. Only the accounting is different.
需要强调的是，这两栏呈现的是完全相同的经济实质——也就是相同的销售、工资、税金等。而且这两家“公司”为所有者创造的现金金额也相同。唯一的差异在于会计处理。
So, fellow philosophers, which column presents truth? Upon which set of numbers should managers and investors focus?
那么，各位“哲学家”，哪一栏更接近真相？管理者与投资者应当聚焦哪一组数字？
Before we tackle those questions, let’s look at what produces the disparity between O and N. We will simplify our discussion in some respects, but the simplification should not produce any inaccuracies in analysis or conclusions.
在回答这些问题之前，先来看 O 与 N 之间差异的来源。我们在若干方面会作简化，但这种简化不应导致分析或结论上的不准确。
The contrast between O and N comes about because we paid an amount for Scott Fetzer that was different from its stated net worth. Under GAAP, such differences - such premiums or discounts - must be accounted for by “purchase-price adjustments.” In Scott Fetzer’s case, we paid $315 million for net assets that were carried on its books at $172.4 million. So we paid a premium of $142.6 million.
O 与 N 的差异之所以出现，是因为我们为 Scott Fetzer 支付的对价与其账面净资产不同。按 GAAP，这类差额——无论溢价还是折价——必须通过“purchase-price adjustments（购买价调整）”入账。在 Scott Fetzer 的案例中，我们为账面记录为 1.724 亿美元的净资产支付了 3.15 亿美元，因此我们支付了 1.426 亿美元的溢价。
The first step in accounting for any premium paid is to adjust the carrying value of current assets to current values. In practice, this requirement usually does not affect receivables, which are routinely carried at current value, but often affects inventories. Because of a $22.9 million LIFO reserve and other accounting intricacies, Scott Fetzer’s inventory account was carried at a $37.3 million discount from current value. So, making our first accounting move, we used $37.3 million of our $142.6 million premium to increase the carrying value of the inventory.
对任何已付溢价进行会计处理的第一步，是将流动资产的账面价值调整至当前价值。实践中，这一要求通常不影响应收款（其惯常以现值计量），但往往会影响存货。由于 2,290 万美元的 LIFO reserve（LIFO 备抵）以及其他会计复杂因素，Scott Fetzer 的存货账户较当前价值折让了 3,730 万美元。因此，作为我们的第一步会计处理，我们用 1.426 亿美元溢价中的 3,730 万美元来提高存货的账面价值。
Assuming any premium is left after current assets are adjusted, the next step is to adjust fixed assets to current value. In our case, this adjustment also required a few accounting acrobatics relating to deferred taxes. Since this has been billed as a simplified discussion, I will skip the details and give you the bottom line: $68.0 million was added to fixed assets and $13.0 million was eliminated from deferred tax liabilities. After making this $81.0 million adjustment, we were left with $24.3 million of premium to allocate.
若在调整流动资产后仍有溢价余额，下一步是将固定资产调整至当前价值。在我们的案例中，这一调整还需要做一些与递延税相关的会计“杂技”。既然这是简化讨论，我就跳过细节，直接给出结论：固定资产增加 6,800 万美元，递延所得税负债减少 1,300 万美元。完成这笔合计 8,100 万美元的调整后，我们还剩下 2,430 万美元的溢价待分配。
Had our situation called for them two steps would next have been required: the adjustment of intangible assets other than Goodwill to current fair values, and the restatement of liabilities to current fair values, a requirement that typically affects only long-term debt and unfunded pension liabilities. In Scott Fetzer’s case, however, neither of these steps was necessary.
若我们的情形需要，接下来还应进行两步：其一，将除 Goodwill 之外的无形资产调整至当前公允价值；其二，将负债重述为当前公允价值（这一要求通常只影响长期债务与未提存的养老金负债）。但在 Scott Fetzer 的案例中，这两步都无须进行。
The final accounting adjustment we needed to make, after recording fair market values for all assets and liabilities, was the assignment of the residual premium to Goodwill (technically known as “excess of cost over the fair value of net assets acquired”). This residual amounted to $24.3 million. Thus, the balance sheet of Scott Fetzer immediately before the acquisition, which is summarized below in column O, was transformed by the purchase into the balance sheet shown in column N. In real terms, both balance sheets depict the same assets and liabilities - but, as you can see, certain figures differ significantly.
在为所有资产与负债确认公允市场价值之后，我们需要做的最后一项会计调整，是将剩余溢价分配至 Goodwill（技术上称为“excess of cost over the fair value of net assets acquired”，即购买成本超过所收购净资产公允价值的差额）。该剩余金额为 2,430 万美元。于是，收购前 Scott Fetzer 的资产负债表（下文 O 栏概括所示）经此次收购被转化为 N 栏所示的资产负债表。从经济实质上看，两份资产负债表描绘的是同样的资产与负债——但正如你所见，某些数字存在显著差异。
The higher balance sheet figures shown in column N produce the lower income figures shown in column N of the earnings statement presented earlier. This is the result of the asset write-ups and of the fact that some of the written-up assets must be depreciated or amortized. The higher the asset figure, the higher the annual depreciation or amortization charge to earnings must be. The charges that flowed to the earnings statement because of the balance sheet write-ups were numbered in the statement of earnings shown earlier:
在资产负债表中 N 栏较高的数字，带来了先前利润表 N 栏中较低的收益。这是资产重估入账以及被重估资产需计提折旧或摊销所致。资产数额越高，计入收益表的年度折旧或摊销费用就越高。由于资产负债表重估而流入利润表的费用在先前的利润表中已编号如下：
1、$4,979,000 for non-cash inventory costs resulting, primarily, from reductions that Scott Fetzer made in its inventories during 1986; charges of this kind are apt to be small or non-existent in future years.
$4,979,000：非现金的存货成本，主要源于 Scott Fetzer 在 1986 年的存货减少；此类费用在未来几年可能很小，甚至不存在。
2、$5,054,000 for extra depreciation attributable to the write-up of fixed assets; a charge approximating this amount will probably be made annually for 12 more years.
$5,054,000：由于固定资产重估产生的额外折旧；未来大概还将每年计提类似金额，持续约 12 年。
3、$595,000 for amortization of Goodwill; this charge will be made annually for 39 more years in a slightly larger amount because our purchase was made on January 6 and, therefore, the 1986 figure applies to only 98% of the year.
$595,000：Goodwill 的摊销；由于我们的收购发生在 1 月 6 日，1986 年的金额仅覆盖全年 98%，因此未来 39 年每年的摊销额会略高于此数。
4、$998,000 for deferred-tax acrobatics that are beyond my ability to explain briefly (or perhaps even non-briefly); a charge approximating this amount will probably be made annually for 12 more years.
$998,000：与递延税相关的“会计杂技”（我难以简要解释，甚至难以不简要地解释）；未来大概还将每年计提类似金额，持续约 12 年。
It is important to understand that none of these newly-created accounting costs, totaling $11.6 million, are deductible for income tax purposes. The “new” Scott Fetzer pays exactly the same tax as the “old” Scott Fetzer would have, even though the GAAP earnings of the two entities differ greatly. And, in respect to operating earnings, that would be true in the future also. However, in the unlikely event that Scott Fetzer sells one of its businesses, the tax consequences to the “old” and “new” company might differ widely.
需要明确的是，这些新产生的会计成本合计 $11.6 million，在所得税口径下均不可抵扣。尽管两套 GAAP 利润数字差异很大，“new” Scott Fetzer 与 “old” Scott Fetzer 实际缴纳的税额完全相同。就经营利润而言，未来也将如此。不过，若发生极不可能的情形——Scott Fetzer 出售其某项业务——“old” 与 “new” 公司的税务后果可能会大相径庭。
By the end of 1986 the difference between the net worth of the “old” and “new” Scott Fetzer had been reduced from $142.6 million to $131.0 million by means of the extra $11.6 million that was charged to earnings of the new entity. As the years go by, similar charges to earnings will cause most of the premium to disappear, and the two balance sheets will converge. However, the higher land values and most of the higher inventory values that were established on the new balance sheet will remain unless land is disposed of or inventory levels are further reduced.
到 1986 年末，“old” 与 “new” Scott Fetzer 的净资产差额已因新实体计入收益的额外 $11.6 million 从 $142.6 million 降至 $131.0 million。随着岁月推移，类似的费用计提将使大部分溢价逐步消失，两份资产负债表将逐步趋同。不过，新资产负债表上确立的较高土地价值以及大部分较高的存货价值将会保留，除非处置土地或进一步降低存货水平。
* * *
What does all this mean for owners? Did the shareholders of Berkshire buy a business that earned $40.2 million in 1986 or did they buy one earning $28.6 million? Were those $11.6 million of new charges a real economic cost to us? Should investors pay more for the stock of Company O than of Company N? And, if a business is worth some given multiple of earnings, was Scott Fetzer worth considerably more the day before we bought it than it was worth the following day?
这一切对所有者意味着什么？Berkshire 的股东买到的是一家在 1986 年赚了 4,020 万美元的企业，还是一家赚了 2,860 万美元的企业？那 1,160 万美元的新产生费用对我们而言是否是真正的经济成本？投资者是否应该为 Company O 的股票支付比 Company N 更高的价格？如果一家企业的价值等于某个盈利倍数，那么我们收购的前一天，Scott Fetzer 是否远比次日更有价值？
If we think through these questions, we can gain some insights about what may be called “owner earnings.” These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges such as Company N’s items (1) and (4) less ( c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume. (If the business requires additional working capital to maintain its competitive position and unit volume, the increment also should be included in ( c) . However, businesses following the LIFO inventory method usually do not require additional working capital if unit volume does not change.)
如果我们认真思考这些问题，就能对所谓的“所有者收益（owner earnings）”获得一些洞见。其定义为：(a) 报告利润，外加 (b) 折旧、耗竭、摊销以及某些其他非现金费用（如 Company N 的第(1)与第(4)项），再减去 (c) 为使企业充分维持其长期竞争地位与单位销量所必须资本化的厂房、设备等支出的年均额。（如果为了维持竞争地位与单位销量需要追加营运资本，则该增量也应计入 (c)。不过，采用 LIFO 存货法的企业在单位销量不变时通常不需要追加营运资本。）
Our owner-earnings equation does not yield the deceptively precise figures provided by GAAP, since( c) must be a guess - and one sometimes very difficult to make. Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes - both for investors in buying stocks and for managers in buying entire businesses. We agree with Keynes’s observation: “I would rather be vaguely right than precisely wrong.”
我们的所有者收益公式不会像 GAAP 那样给出“看似精确”的数字，因为 (c) 必然是一个估计——而且有时很难估计。尽管如此，我们认为用于估值的相关指标是所有者收益而非 GAAP 利润——无论是投资者买股票，还是管理者收购整家公司。我们赞同 Keynes 的话：“我宁愿含糊其辞地正确，也不愿精确地错误。”
The approach we have outlined produces “owner earnings” for Company O and Company N that are identical, which means valuations are also identical, just as common sense would tell you should be the case. This result is reached because the sum of (a) and (b) is the same in both columns O and N, and because( c) is necessarily the same in both cases.
我们所述的方法会得到 Company O 与 Company N 完全相同的“所有者收益”，这意味着估值也应完全相同——这与常识一致。之所以如此，是因为在 O 与 N 两栏中，(a)+(b) 的和相同，而 (c) 在两种情况下也必然相同。
And what do Charlie and I, as owners and managers, believe is the correct figure for the owner earnings of Scott Fetzer? Under current circumstances, we believe ( c) is very close to the “old” company’s (b) number of $8.3 million and much below the “new” company’s (b) number of $19.9 million. Therefore, we believe that owner earnings are far better depicted by the reported earnings in the O column than by those in the N column. In other words, we feel owner earnings of Scott Fetzer are considerably larger than the GAAP figures that we report.
作为所有者与管理者，Charlie 和我认为 Scott Fetzer 的所有者收益应取何值？在当前情况下，我们认为 (c) 非常接近“old” 公司 (b) 的 830 万美元，远低于“new” 公司 (b) 的 1,990 万美元。因此，我们认为用 O 栏中的报告利润要比用 N 栏更能刻画所有者收益。换言之，Scott Fetzer 的所有者收益显著高于我们按 GAAP 报告的数字。
That is obviously a happy state of affairs. But calculations of this sort usually do not provide such pleasant news. Most managers probably will acknowledge that they need to spend something more than (b) on their businesses over the longer term just to hold their ground in terms of both unit volume and competitive position. When this imperative exists - that is, when ( c) exceeds (b) - GAAP earnings overstate owner earnings. Frequently this overstatement is substantial. The oil industry has in recent years provided a conspicuous example of this phenomenon. Had most major oil companies spent only (b) each year, they would have guaranteed their shrinkage in real terms.
这当然是令人愉快的状况。但此类测算通常不会给出如此美好的消息。大多数管理者大概都会承认：从长期看，仅为保持单位销量与竞争地位，就需要支出超过 (b) 的金额。一旦出现这种刚性要求——也就是 (c) 超过 (b)——GAAP 利润就会高估所有者收益，而且这种高估往往相当可观。近年来石油行业就提供了一个显著例证：若多数大型石油公司每年只花费 (b)，它们在实际价值上收缩几乎是板上钉钉。
通胀导致重置成本的增加。
All of this points up the absurdity of the “cash flow” numbers that are often set forth in Wall Street reports. These numbers routinely include (a) plus (b) - but do not subtract ( c) . Most sales brochures of investment bankers also feature deceptive presentations of this kind. These imply that the business being offered is the commercial counterpart of the Pyramids - forever state-of-the-art, never needing to be replaced, improved or refurbished. Indeed, if all U.S. corporations were to be offered simultaneously for sale through our leading investment bankers - and if the sales brochures describing them were to be believed - governmental projections of national plant and equipment spending would have to be slashed by 90%.
上述一切都凸显了 Wall Street 报告中常见“现金流（cash flow）”数字的荒谬：这些数字常规地计算 (a)+(b)，却不扣除 (c)。多数投行的售卖手册也充斥这种误导性的呈现，它们暗示被出售的企业就像商业版的 Pyramids——永远最先进、永不需要替换、改进或整修。事实上，倘若全体美国公司同时通过顶尖投行挂牌出售——而且你还相信了那些推介手册的描述——那么政府对全国厂房与设备开支的预测恐怕要下调 90%。
“Cash Flow”, true, may serve as a shorthand of some utility in descriptions of certain real estate businesses or other enterprises that make huge initial outlays and only tiny outlays thereafter. A company whose only holding is a bridge or an extremely long-lived gas field would be an example. But “cash flow” is meaningless in such businesses as manufacturing, retailing, extractive companies, and utilities because, for them, ( c) is always significant. To be sure, businesses of this kind may in a given year be able to defer capital spending. But over a five- or ten-year period, they must make the investment - or the business decays.
诚然，“Cash Flow”在某些房地产或其他类型企业的描述中可作有用的速记——这类企业前期投入巨大，此后仅需极小投入。比如只持有一座桥或一个超长寿命气田的公司。但对制造业、零售业、采掘业与公共事业等企业，“cash flow”毫无意义，因为对它们而言，(c) 永远是重要项。固然，这类企业在某一年也许可以延后资本支出，但在五到十年的维度上必须投入，否则业务就会衰败。
不需要折旧甚至有可能增值的项目。
Why, then, are “cash flow” numbers so popular today? In answer, we confess our cynicism: we believe these numbers are frequently used by marketers of businesses and securities in attempts to justify the unjustifiable (and thereby to sell what should be the unsalable). When (a) - that is, GAAP earnings - looks by itself inadequate to service debt of a junk bond or justify a foolish stock price, how convenient it becomes for salesmen to focus on (a) + (b). But you shouldn’t add (b) without subtracting ( c) : though dentists correctly claim that if you ignore your teeth they’ll go away, the same is not true for ( c) . The company or investor believing that the debt-servicing ability or the equity valuation of an enterprise can be measured by totaling (a) and (b) while ignoring ( c) is headed for certain trouble.
那么，为何“cash flow”数字如今如此受欢迎？对此我们承认自己带着些许犬儒：这些数字经常被企业与证券的销售者用来为不合理之事强作辩护（从而把不该卖的东西卖出去）。当 (a)——即 GAAP 利润——单看之下不足以覆盖垃圾债券的债务服务或支撑一个愚蠢的股价时，销售人员把焦点转向 (a)+(b) 就变得“恰到好处”。但你不应在不扣除 (c) 的情况下加上 (b)：牙医说“如果你忽视你的牙，它们会消失”，这话没错；但 (c) 并不如此。任何把企业的偿债能力或股票估值等同于 (a)+(b) 而忽视 (c) 的公司或投资者，都必然走向麻烦。
* * *
To sum up: in the case of both Scott Fetzer and our other businesses, we feel that (b) on an historical-cost basis - i.e., with both amortization of intangibles and other purchase-price adjustments excluded - is quite close in amount to ( c) . (The two items are not identical, of course. For example, at See’s we annually make capitalized expenditures that exceed depreciation by $500,000 to $1 million, simply to hold our ground competitively.) Our conviction about this point is the reason we show our amortization and other purchase-price adjustment items separately in the table on page 8 and is also our reason for viewing the earnings of the individual businesses as reported there as much more closely approximating owner earnings than the GAAP figures.
总而言之：就 Scott Fetzer 及我们其他业务而言，在历史成本口径下（即不计入无形资产摊销与其他购买价调整），我们认为 (b) 与 (c) 的金额相当接近。（当然两者并非完全一致。举例来说，在 See’s，我们每年为保持竞争地位而进行的资本化支出会比折旧多 50 万至 100 万美元。）基于此判断，我们在第 8 页的表格中单列了摊销与其他购买价调整项目；同样基于此，我们认为该表所列各业务的盈利比 GAAP 数字更接近所有者收益。
前面已有描述，没有增长的资本投入就是费用。
Questioning GAAP figures may seem impious to some. After all, what are we paying the accountants for if it is not to deliver us the “truth” about our business. But the accountants’ job is to record, not to evaluate. The evaluation job falls to investors and managers.
质疑 GAAP 数字在一些人看来或许“不够虔敬”。毕竟，我们付钱给会计师，不就是为了让他们告诉我们关于业务的“真相”吗？但会计师的工作是记录，而不是评估；评估的职责落在投资者与管理者身上。
Accounting numbers, of course, are the language of business and as such are of enormous help to anyone evaluating the worth of a business and tracking its progress. Charlie and I would be lost without these numbers: they invariably are the starting point for us in evaluating our own businesses and those of others. Managers and owners need to remember, however, that accounting is but an aid to business thinking, never a substitute for it.
当然，会计数字是商业的语言，对评估企业价值与追踪其进展大有裨益。若没有这些数字，Charlie 和我也会无所适从：它们总是我们评估自有业务与他人业务的起点。不过，管理者与所有者需要记住：会计只是商业思考的辅助，而绝非其替代品。
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Refer To：《1987-02-27 Warren Buffett's Letters to Berkshire Shareholders》。 Purchase-Price Accounting Adjustments and the "Cash Flow" Fallacy First a short quiz: below are abbreviated 1986 statements of earnings for two companies. Which business is the ...1987-02-27 Warren Buffett.The Fechheimer Bros. Co.
Refer To：《1987-02-27 Warren Buffett's Letters to Berkshire Shareholders》。 The Fechheimer Bros. Co. Every year in Berkshire’s annual report I include a description of the kind of business that we would like to buy. This "ad" paid off in 1986. 每年我都会在 ...1987-02-27 Warren Buffett.The Buffalo News
Refer To：《1987-02-27 Warren Buffett's Letters to Berkshire Shareholders》。 o Operating results at The Buffalo News continue to reflect a truly superb managerial job by Stan Lipsey. For the third year in a row, man-hours worked fell significantly and ...