Warren Buffett tells Bloomberg today that more information about Berkshire Hathaway's derivative positions will be included in the company's annual report early next year.
In an email sent by his assistant, Buffett says investors will be told about "all aspects of valuation" for the contracts. In addition, the report will discuss "deficiencies in the formula" for pricing the derivatives, "which we nevertheless use."
Berkshire received almost $5 billion for writing the put option contracts. They act as a form of insurance for buyers who want to limit their potential long-term losses on stocks.
Berkshire would have to pay money to the holders of the contracts if, on certain dates well in the future, four stock market indexes from around the world, including the S&P 500, are below where they were when the deals were made in the last few years.
Berkshire wouldn't have to make any payouts for any of the contracts until at least 2019.
In the meantime, however, Berkshire is required to determine the current value of the contracts and include any "gains" or "losses" in its earnings report. With stocks plunging in recent months, the current value of the derivatives has also been falling.
Some investors have questioned how Berkshire determines the current value, and that process is what Buffett is promising to address in the annual report.
