BERKSHIRE HATHAWAY INC. 1997 Annual Report
Commodity Price Risk
As of December 31, 1997, Berkshire was party to derivative contracts with respect to crude oil and had commitments to purchase silver at future dates. Such contracts provide that Berkshire acquire the commodity at a fixed price at fixed future dates. At expiration, the derivative crude oil contracts are settled by a net amount equal to the difference between the then current price of crude oil and the fixed contract price. The silver contracts are settled by the delivery of silver to Berkshire in exchange for cash payments. These contracts were not entered into to offset any specific underlying commodity price risks associated with Berkshire's business activities.
Berkshire is subject to commodity price risk to the extent that crude oil and/or silver market prices deviate from the fixed contract settlement prices. As of December 31, 1997, the aggregate contract or notional amounts of these commitments were less than 3% of Berkshire's consolidated shareholders' equity. Therefore, any significant change in price in either of these commodities would not have a material impact on Berkshire's financial condition. |
