Mind the GAAP: Buffett's guide to spotting real earnings

If you ever feel like corporate earnings announcements sound more like bedtime stories, you are not alone. Between "adjusted EBITDA," "one-time charges" and "normalised earnings," it's hard to tell whether you are analysing a company or decoding a creative writing assignment. In his letters from 2014 to 2019, Warren Buffett takes aim at this growing culture of financial storytelling, where numbers are tweaked, costs are waved away and investors are lulled into a false sense of clarity. He doesn't just critique bad accounting. He calls out the belief systems that enable it: that volatility equals risk, that buybacks are always good, and that retained earnings don't need defending. In this story, a part of our series on Buffett's annual letters, we decode how he tears into these myths. Depreciation is not an optional suggestion It's surprising how often CEOs pretend depreciation is not a real cost. Buffett doesn't buy it. And neither should we. "Every dime of depreciation expense we report is a real cost," he wrote. If a business requires inv

This article was originally published on April 29, 2025.