Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) reported a first-quarter net loss of $1.138 billion, a sharp contrast to the net profit of more than $4 billion it reported in the same quarter last year.

At first, this may seem like cause for alarm. However, a closer look shows that the loss isn't really a loss at all. Here's a rundown of Berkshire's earnings, and why the company's first quarter was actually quite good.

Warren Buffett speaking to the media.

Image source: The Motley Fool.

One big accounting change caused the loss

The short explanation is that Berkshire's first-quarter loss is due to a change in Generally Accepted Accounting Principles (GAAP) that requires unrealized gains and losses to be included in reported earnings.

In Berkshire's case, this means that the change in market value in the company's massive stock portfolio is now a component of the company's earnings.

As most investors know, the first quarter wasn't exactly a good one for the stock market. The S&P 500 fell by 1.2%, and some of Berkshire's largest investments did much worse. Coca-Cola, American Express, and Wells Fargo -- three of Berkshire's largest stock positions -- were down by 5%, 6%, and 14%, respectively.

In all, Berkshire's investment and derivative "losses" totaled more than $6.4 billion during the quarter. This was the reason for the loss, even though it's not an actual loss until Berkshire sells its stocks.

Operating earnings soared

Here's the good news. Despite a rough quarter for Berkshire's stock portfolio, the company's operating earnings -- that is, the portion of its reported earnings that came from its businesses -- soared.

In fact, the company's operating earnings of nearly $5.3 billion was 49% higher than the first quarter of last year. Berkshire's insurance operations produced an underwriting profit, and operating earnings grew in all of Berkshire's key business segments:

Segment

1Q 2018

1Q 2017

Insurance-Underwriting

$407

($267)

Insurance-Investment Income

$1,012

$908

Railroad, Utilities, and Energy

$1,730

$1,318

Other Businesses

$2,196

$1,608

Data source: Berkshire Hathaway earnings report. All figures are in millions, and parenthesis denote negative numbers.

Furthermore, Berkshire's book value at the end of the quarter was $211,184 per Class A share and $140.79 per Class B share. This translates to a price-to-book value of about 1.4 to 1, the lowest valuation since late 2016. So, not only did Berkshire generate 49% earnings growth in its operating businesses, the company is trading rather cheaply right now.

Keep this in mind going forward

The bottom line is that Berkshire's quarterly earnings figures from this point on are likely to be rather volatile, and not necessarily indicative of how the company is performing. In this quarter, the need to account for unrealized investment losses more than offset a 49% rise in operating profits. Conversely, in a quarter where Berkshire's stock portfolio performs especially well, the earnings could be distorted in the positive direction.

Now, more than ever, it is important for Berkshire's shareholders to look beyond the headline numbers when evaluating the company's performance.

Matthew Frankel owns shares of American Express and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.