Buffett slams tricky accounting but defends share buybacks
NEW YORK: Billionaire investor Warren Buffett attacked what he saw as tricks used by US companies to boost earnings and stock prices, but he defended one oft-criticised practice - share buybacks.
"As the subject of repurchases has come to a boil, some people have come close to calling them un-American - characterising them as corporate misdeeds that divert funds needed for productive endeavours," he said in his annual letter to shareholders.
"That simply isn't the case: Both American corporations and private investors are today awash in funds looking to be sensibly deployed.
"I'm not aware of any enticing project that in recent years has died for lack of capital."
Some critics, including BlackRock Inc chief executive officer Larry Fink, think the practice of companies buying back their own shares to boost earnings has been used to excess. Repurchasing shares boosts earnings per share by reducing the shares remaining on the market.
Mr Buffett was less sanguine on other practices used by public companies to present better earnings numbers.
He said it "makes us nervous" that companies regularly leave out what they call "restructuring costs" and "stock-based compensation" from their expenses, boosting profits by deviating from standard accounting practices.