Exhibit 4.5

 

CONSOLIDATED FINANCIAL STATEMENTS

 

CONSOLIDATED BALANCE SHEETS

 

 

	
(UNAUDITED)

(MILLIONS)
    	
 
    	
 Note
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    
	
Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash   and cash equivalents
    	
 
    	
 
    	
 
    	
 $
    	
4,372
    	
 
    	
 $
    	
2,774
    
	
Other   financial assets
    	
 
    	
5, 6
    	
 
    	
5,096
    	
 
    	
6,156
    
	
Accounts   receivable and other
    	
 
    	
6
    	
 
    	
8,882
    	
 
    	
7,044
    
	
Inventory
    	
 
    	
6
    	
 
    	
5,869
    	
 
    	
5,281
    
	
Assets   classified as held for sale
    	
 
    	
7
    	
 
    	
3,760
    	
 
    	
1,397
    
	
Equity   accounted investments
    	
 
    	
 
    	
 
    	
24,453
    	
 
    	
23,216
    
	
Investment   properties
    	
 
    	
 
    	
 
    	
50,374
    	
 
    	
47,164
    
	
Property,   plant and equipment
    	
 
    	
8
    	
 
    	
45,203
    	
 
    	
37,273
    
	
Intangible   assets
    	
 
    	
 
    	
 
    	
6,294
    	
 
    	
5,170
    
	
Goodwill
    	
 
    	
 
    	
 
    	
3,932
    	
 
    	
2,543
    
	
Deferred   income tax assets
    	
 
    	
 
    	
 
    	
1,602
    	
 
    	
1,496
    
	
Total   Assets
    	
 
    	
 
    	
 
    	
 $
    	
159,837
    	
 
    	
 $
    	
139,514
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liabilities   and Equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts   payable and other
    	
 
    	
6
    	
 
    	
 $
    	
12,478
    	
 
    	
 $
    	
11,366
    
	
Liabilities   associated with assets classified as held for sale
    	
 
    	
7
    	
 
    	
1,985
    	
 
    	
522
    
	
Corporate   borrowings
    	
 
    	
 
    	
 
    	
4,674
    	
 
    	
3,936
    
	
Non-recourse   borrowings
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Property-specific mortgages
    	
 
    	
6
    	
 
    	
50,910
    	
 
    	
46,044
    
	
Subsidiary borrowings
    	
 
    	
6
    	
 
    	
9,663
    	
 
    	
8,303
    
	
Deferred   income tax liabilities
    	
 
    	
 
    	
 
    	
9,465
    	
 
    	
8,785
    
	
Subsidiary   equity obligations
    	
 
    	
 
    	
 
    	
3,543
    	
 
    	
3,331
    
	
Equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Preferred equity
    	
 
    	
 
    	
 
    	
3,732
    	
 
    	
3,739
    
	
Non-controlling interests
    	
 
    	
 
    	
 
    	
40,955
    	
 
    	
31,920
    
	
Common equity
    	
 
    	
10
    	
 
    	
22,432
    	
 
    	
21,568
    
	
Total equity
    	
 
    	
 
    	
 
    	
67,119
    	
 
    	
57,227
    
	
Total   Liabilities and Equity
    	
 
    	
 
    	
 
    	
 $
    	
159,837
    	
 
    	
 $
    	
139,514
    


 

BROOKFIELD ASSET MANAGEMENT

 











 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

	
 
    	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine   Months Ended
    
	
(UNAUDITED)
   FOR THE PERIODS ENDED SEP. 30
   (MILLIONS, EXCEPT PER SHARE AMOUNTS)
    	
 Note
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Revenues
    	
 
    	
 
    	
 $
    	
6,285
    	
 
    	
 $
    	
5,056
    	
 
    	
 $
    	
17,476
    	
 
    	
 $
    	
14,375
    
	
Direct costs
    	
 
    	
 
    	
(4,590)
    	
 
    	
(3,740)
    	
 
    	
(12,568)
    	
 
    	
(10,341)
    
	
Other income and gains
    	
 
    	
 
    	
325
    	
 
    	
133
    	
 
    	
391
    	
 
    	
145
    
	
Equity accounted income
    	
 
    	
 
    	
454
    	
 
    	
304
    	
 
    	
1,041
    	
 
    	
1,174
    
	
Expenses
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Interest
    	
 
    	
 
    	
(825)
    	
 
    	
(691)
    	
 
    	
(2,407)
    	
 
    	
(2,117)
    
	
Corporate costs
    	
 
    	
 
    	
(20)
    	
 
    	
(25)
    	
 
    	
(68)
    	
 
    	
(83)
    
	
Fair value changes
    	
11
    	
 
    	
(59)
    	
 
    	
389
    	
 
    	
358
    	
 
    	
1,572
    
	
Depreciation and amortization
    	
 
    	
 
    	
(541)
    	
 
    	
(436)
    	
 
    	
(1,538)
    	
 
    	
(1,265)
    
	
Income taxes
    	
 
    	
 
    	
992
    	
 
    	
(145)
    	
 
    	
556
    	
 
    	
22
    
	
Net income
    	
 
    	
 
    	
 $
    	
2,021
    	
 
    	
 $
    	
845
    	
 
    	
 $
    	
3,241
    	
 
    	
 $
    	
3,482
    
	
Net income attributable to:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Shareholders
    	
 
    	
 
    	
 $
    	
1,036
    	
 
    	
 $
    	
289
    	
 
    	
 $
    	
1,478
    	
 
    	
 $
    	
1,663
    
	
Non-controlling interests
    	
 
    	
 
    	
985
    	
 
    	
556
    	
 
    	
1,763
    	
 
    	
1,819
    
	
 
    	
 
    	
 
    	
 $
    	
2,021
    	
 
    	
 $
    	
845
    	
 
    	
 $
    	
3,241
    	
 
    	
 $
    	
3,482
    
	
Net income per share:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Diluted
    	
10
    	
 
    	
 $
    	
1.03
    	
 
    	
 $
    	
0.26
    	
 
    	
 $
    	
1.41
    	
 
    	
 $
    	
1.60
    
	
Basic
    	
10
    	
 
    	
1.05
    	
 
    	
0.27
    	
 
    	
1.44
    	
 
    	
1.65
    


 

Q3 2016 INTERIM REPORT

 











 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine   Months Ended
    
	
(UNAUDITED)
   FOR THE PERIODS ENDED SEP. 30
   (MILLIONS)
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Net   income
    	
 
    	
 $
    	
2,021
    	
 
    	
 $
    	
845
    	
 
    	
 $
    	
3,241
    	
 
    	
 $
    	
3,482
    
	
Other   comprehensive income (loss)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Items   that may be reclassified to net income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Financial contracts and power sale agreements
    	
 
    	
11
    	
 
    	
(158)
    	
 
    	
(253)
    	
 
    	
(82)
    
	
Available-for-sale securities
    	
 
    	
(136)
    	
 
    	
(327)
    	
 
    	
39
    	
 
    	
(428)
    
	
Equity accounted investments
    	
 
    	
(9)
    	
 
    	
23
    	
 
    	
(69)
    	
 
    	
112
    
	
Foreign currency translation
    	
 
    	
(151)
    	
 
    	
(2,106)
    	
 
    	
1,741
    	
 
    	
(3,627)
    
	
Income taxes
    	
 
    	
13
    	
 
    	
(18)
    	
 
    	
52
    	
 
    	
(44)
    
	
 
    	
 
    	
(272)
    	
 
    	
(2,586)
    	
 
    	
1,510
    	
 
    	
(4,069)
    
	
Items   that will not be reclassified to net income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Revaluations of property, plant and equipment
    	
 
    	
37
    	
 
    	
(2)
    	
 
    	
59
    	
 
    	
49
    
	
Revaluation of pension obligations
    	
 
    	
(6)
    	
 
    	
15
    	
 
    	
(27)
    	
 
    	
19
    
	
Equity accounted investments
    	
 
    	
—
    	
 
    	
—
    	
 
    	
17
    	
 
    	
—
    
	
Income taxes
    	
 
    	
6
    	
 
    	
1
    	
 
    	
12
    	
 
    	
(3)
    
	
 
    	
 
    	
37
    	
 
    	
14
    	
 
    	
61
    	
 
    	
65
    
	
Other   comprehensive (loss) income
    	
 
    	
(235)
    	
 
    	
(2,572)
    	
 
    	
1,571
    	
 
    	
(4,004)
    
	
Comprehensive   income (loss)
    	
 
    	
 $
    	
1,786
    	
 
    	
 $
    	
(1,727)
    	
 
    	
 $
    	
4,812
    	
 
    	
 $
    	
(522)
    
	
Attributable   to:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Shareholders
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income
    	
 
    	
 $
    	
1,036
    	
 
    	
 $
    	
289
    	
 
    	
 $
    	
1,478
    	
 
    	
 $
    	
1,663
    
	
Other comprehensive (loss) income
    	
 
    	
(58)
    	
 
    	
(1,219)
    	
 
    	
544
    	
 
    	
(1,598)
    
	
Comprehensive income (loss)
    	
 
    	
 $
    	
978
    	
 
    	
 $
    	
(930)
    	
 
    	
 $
    	
2,022
    	
 
    	
 $
    	
65
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Non-controlling interests
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income
    	
 
    	
 $
    	
985
    	
 
    	
 $
    	
556
    	
 
    	
 $
    	
1,763
    	
 
    	
 $
    	
1,819
    
	
Other comprehensive (loss) income
    	
 
    	
(177)
    	
 
    	
(1,353)
    	
 
    	
1,027
    	
 
    	
(2,406)
    
	
Comprehensive income (loss)
    	
 
    	
 $
    	
808
    	
 
    	
 $
    	
(797)
    	
 
    	
 $
    	
2,790
    	
 
    	
 $
    	
(587)
    


 

BROOKFIELD ASSET MANAGEMENT

 











 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Accumulated   Other
    Comprehensive   Income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(UNAUDITED)
   FOR THE THREE MONTHS
   ENDED SEP. 30, 2016
   (MILLIONS)
    	
 
    	
Common
   Share
   Capital
    	
 
    	
Contributed
   Surplus
    	
 
    	
Retained
   Earnings
    	
 
    	
Ownership
   Changes1
    	
 
    	
Revaluation
   Surplus
    	
 
    	
Currency
   Translation
    	
 
    	
Other
   Reserves2
    	
 
    	
Common
   Equity
    	
 
    	
Preferred
   Equity
    	
 
    	
Non-
   controlling
   Interests
    	
 
    	
Total
   Equity
    
	
Balance   as at June 30, 2016
    	
 
    	
 $
    	
4,384
    	
 
    	
 $
    	
212
    	
 
    	
 $
    	
10,617
    	
 
    	
 $
    	
1,433
    	
 
    	
 $
    	
6,639
    	
 
    	
 $
    	
(1,090)
    	
 
    	
 $
    	
(562)
    	
 
    	
 $
    	
21,633
    	
 
    	
 $
    	
3,734
    	
 
    	
 $
    	
39,172
    	
 
    	
 $
    	
64,539
    
	
Changes   in period
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net   income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,036
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,036
    	
 
    	
—
    	
 
    	
985
    	
 
    	
2,021
    
	
Other   comprehensive income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
13
    	
 
    	
47
    	
 
    	
(118)
    	
 
    	
(58)
    	
 
    	
—
    	
 
    	
(177)
    	
 
    	
(235)
    
	
Comprehensive   income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,036
    	
 
    	
—
    	
 
    	
13
    	
 
    	
47
    	
 
    	
(118)
    	
 
    	
978
    	
 
    	
—
    	
 
    	
808
    	
 
    	
1,786
    
	
Shareholder   distributions
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Common equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(125)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(125)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(125)
    
	
Preferred equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(33)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(33)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(33)
    
	
Non-controlling interests
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(609)
    	
 
    	
(609)
    
	
Other   items
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Equity   issuances, net of redemptions
    	
 
    	
7
    	
 
    	
(3)
    	
 
    	
7
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
11
    	
 
    	
(2)
    	
 
    	
1,535
    	
 
    	
1,544
    
	
Share-based   compensation
    	
 
    	
—
    	
 
    	
14
    	
 
    	
(1)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
13
    	
 
    	
—
    	
 
    	
1
    	
 
    	
14
    
	
Ownership   changes
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(61)
    	
 
    	
(2)
    	
 
    	
12
    	
 
    	
6
    	
 
    	
(45)
    	
 
    	
—
    	
 
    	
48
    	
 
    	
3
    
	
Total   change in period
    	
 
    	
7
    	
 
    	
11
    	
 
    	
884
    	
 
    	
(61)
    	
 
    	
11
    	
 
    	
59
    	
 
    	
(112)
    	
 
    	
799
    	
 
    	
(2)
    	
 
    	
1,783
    	
 
    	
2,580
    
	
Balance   as at September 30, 2016
    	
 
    	
 $
    	
4,391
    	
 
    	
 $
    	
223
    	
 
    	
 $
    	
11,501
    	
 
    	
 $
    	
1,372
    	
 
    	
 $
    	
6,650
    	
 
    	
 $
    	
(1,031)
    	
 
    	
 $
    	
(674)
    	
 
    	
 $
    	
22,432
    	
 
    	
 $
    	
3,732
    	
 
    	
 $
    	
40,955
    	
 
    	
 $
    	
67,119
    


 

1. Includes gains or losses on changes in ownership interests of consolidated subsidiaries

2. Includes available-for-sale securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Accumulated   Other
    Comprehensive   Income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(UNAUDITED)
   FOR THE THREE MONTHS
   ENDED SEP. 30, 2015
   (MILLIONS)
    	
 
    	
Common
   Share
   Capital
    	
 
    	
Contributed
   Surplus
    	
 
    	
Retained
   Earnings
    	
 
    	
Ownership
   Changes1
    	
 
    	
Revaluation
   Surplus
    	
 
    	
Currency
   Translation
    	
 
    	
Other
   Reserves2
    	
 
    	
Common
   Equity
    	
 
    	
Preferred
   Equity
    	
 
    	
Non-
   controlling
   Interests
    	
 
    	
Total
   Equity
    	
 
    
	
Balance   as at June 30, 2015
    	
 
    	
 $
    	
4,278
    	
 
    	
 $
    	
204
    	
 
    	
 $
    	
10,590
    	
 
    	
 $
    	
1,542
    	
 
    	
 $
    	
6,173
    	
 
    	
 $
    	
(943)
    	
 
    	
 $
    	
(377)
    	
 
    	
 $
    	
21,467
    	
 
    	
 $
    	
3,549
    	
 
    	
 $
    	
30,006
    	
 
    	
 $
    	
55,022
    	
 
    
	
Changes   in period
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net   income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
289
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
289
    	
 
    	
—
    	
 
    	
556
    	
 
    	
845
    	
 
    
	
Other   comprehensive income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1
    	
 
    	
(936)
    	
 
    	
(284)
    	
 
    	
(1,219)
    	
 
    	
—
    	
 
    	
(1,353)
    	
 
    	
(2,572)
    	
 
    
	
Comprehensive   income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
289
    	
 
    	
—
    	
 
    	
1
    	
 
    	
(936)
    	
 
    	
(284)
    	
 
    	
(930)
    	
 
    	
—
    	
 
    	
(797)
    	
 
    	
(1,727)
    	
 
    
	
Shareholder   distributions
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Common   equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(115)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(115)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(115)
    	
 
    
	
Preferred   equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(32)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(32)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(32)
    	
 
    
	
Non-controlling   interests
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(479)
    	
 
    	
(479)
    	
 
    
	
Other   items
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Equity   issuances, net of redemptions
    	
 
    	
—
    	
 
    	
(4)
    	
 
    	
(115)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(119)
    	
 
    	
—
    	
 
    	
572
    	
 
    	
453
    	
 
    
	
Share-based   compensation
    	
 
    	
—
    	
 
    	
20
    	
 
    	
1
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
21
    	
 
    	
—
    	
 
    	
2
    	
 
    	
23
    	
 
    
	
Ownership   changes
    	
 
    	
—
    	
 
    	
—
    	
 
    	
10
    	
 
    	
17
    	
 
    	
(5)
    	
 
    	
(3)
    	
 
    	
(5)
    	
 
    	
14
    	
 
    	
—
    	
 
    	
97
    	
 
    	
111
    	
 
    
	
Total   change in period
    	
 
    	
—
    	
 
    	
16
    	
 
    	
38
    	
 
    	
17
    	
 
    	
(4)
    	
 
    	
(939)
    	
 
    	
(289)
    	
 
    	
(1,161)
    	
 
    	
—
    	
 
    	
(605)
    	
 
    	
(1,766)
    	
 
    
	
Balance   as at September 30, 2015
    	
 
    	
 $
    	
4,278
    	
 
    	
 $
    	
220
    	
 
    	
 $
    	
10,628
    	
 
    	
 $
    	
1,559
    	
 
    	
 $
    	
6,169
    	
 
    	
 $
    	
(1,882)
    	
 
    	
 $
    	
(666)
    	
 
    	
 $
    	
20,306
    	
 
    	
 $
    	
3,549
    	
 
    	
 $
    	
29,401
    	
 
    	
 $
    	
53,256
    	
 
    


 

1. Includes gains or losses on changes in ownership interests of consolidated subsidiaries

2. Includes available-for-sale securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes

 

Q3 2016 INTERIM REPORT











 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Accumulated   Other
   Comprehensive Income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(UNAUDITED)
   FOR THE NINE MONTHS
   ENDED SEP. 30, 2016
   (MILLIONS)
    	
 
    	
Common
   Share
   Capital
    	
 
    	
Contributed
   Surplus
    	
 
    	
Retained
   Earnings
    	
 
    	
Ownership
   Changes1 
    	
 
    	
Revaluation
   Surplus
    	
 
    	
Currency
   Translation
    	
 
    	
Other
   Reserves2
    	
 
    	
Common
   Equity
    	
 
    	
Preferred
   Equity
    	
 
    	
Non-
   controlling
   Interests
    	
 
    	
Total
   Equity
    	
 
    
	
Balance as at   December 31, 2015
    	
 
    	
 $
    	
4,378
    	
 
    	
 $
    	
192
    	
 
    	
 $
    	
11,045
    	
 
    	
 $
    	
1,500
    	
 
    	
 $
    	
6,787
    	
 
    	
 $
    	
(1,796)
    	
 
    	
 $
    	
(538)
    	
 
    	
 $
    	
21,568
    	
 
    	
 $
    	
3,739
    	
 
    	
 $
    	
31,920
    	
 
    	
 $
    	
57,227
    	
 
    
	
Changes in period
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,478
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,478
    	
 
    	
—
    	
 
    	
1,763
    	
 
    	
3,241
    	
 
    
	
Other comprehensive income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
26
    	
 
    	
657
    	
 
    	
(139)
    	
 
    	
544
    	
 
    	
—
    	
 
    	
1,027
    	
 
    	
1,571
    	
 
    
	
Comprehensive income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,478
    	
 
    	
—
    	
 
    	
26
    	
 
    	
657
    	
 
    	
(139)
    	
 
    	
2,022
    	
 
    	
—
    	
 
    	
2,790
    	
 
    	
4,812
    	
 
    
	
Shareholder distributions
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Common equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(872)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
54
    	
 
    	
2
    	
 
    	
(816)
    	
 
    	
—
    	
 
    	
441
    	
 
    	
(375)
    	
 
    
	
Preferred equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(100)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(100)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(100)
    	
 
    
	
Non-controlling interests
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(1,450)
    	
 
    	
(1,450)
    	
 
    
	
Other items
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Equity   issuances, net of redemptions
    	
 
    	
13
    	
 
    	
(9)
    	
 
    	
(74)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(70)
    	
 
    	
(7)
    	
 
    	
5,684
    	
 
    	
5,607
    	
 
    
	
Share-based   
   compensation
    	
 
    	
—
    	
 
    	
40
    	
 
    	
(17)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
23
    	
 
    	
—
    	
 
    	
6
    	
 
    	
29
    	
 
    
	
Ownership   changes
    	
 
    	
—
    	
 
    	
—
    	
 
    	
41
    	
 
    	
(128)
    	
 
    	
(163)
    	
 
    	
54
    	
 
    	
1
    	
 
    	
(195)
    	
 
    	
—
    	
 
    	
1,564
    	
 
    	
1,369
    	
 
    
	
Total change in period
    	
 
    	
13
    	
 
    	
31
    	
 
    	
456
    	
 
    	
(128)
    	
 
    	
(137)
    	
 
    	
765
    	
 
    	
(136)
    	
 
    	
864
    	
 
    	
(7)
    	
 
    	
9,035
    	
 
    	
9,892
    	
 
    
	
Balance   as at September 30, 2016
    	
 
    	
 $
    	
4,391
    	
 
    	
 $
    	
223
    	
 
    	
 $
    	
11,501
    	
 
    	
 $
    	
1,372
    	
 
    	
 $
    	
6,650
    	
 
    	
 $
    	
(1,031)
    	
 
    	
 $
    	
(674)
    	
 
    	
 $
    	
22,432
    	
 
    	
 $
    	
3,732
    	
 
    	
 $
    	
40,955
    	
 
    	
 $
    	
67,119
    	
 
    


 

1. Includes gains or losses on changes in ownership interests of consolidated subsidiaries

2. Includes available-for-sale securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Accumulated   Other
   Comprehensive Income
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
(UNAUDITED)
   FOR THE NINE MONTHS
   ENDED SEP. 30, 2015
   (MILLIONS)
    	
 
    	
Common
   Share
   Capital
    	
 
    	
Contributed
   Surplus
    	
 
    	
Retained
   Earnings
    	
 
    	
Ownership
   Changes1
    	
 
    	
Revaluation
   Surplus
    	
 
    	
Currency
   Translation
    	
 
    	
Other
   Reserves2
    	
 
    	
Common
   Equity
    	
 
    	
Preferred
   Equity
    	
 
    	
Non-
   controlling
   Interests
    	
 
    	
Total
   Equity
    	
 
    
	
Balance as at   December 31, 2014
    	
 
    	
 $
    	
3,031
    	
 
    	
 $
    	
185
    	
 
    	
 $
    	
9,702
    	
 
    	
 $
    	
1,979
    	
 
    	
 $
    	
6,133
    	
 
    	
 $
    	
(441)
    	
 
    	
 $
    	
(436)
    	
 
    	
 $
    	
20,153
    	
 
    	
 $
    	
3,549
    	
 
    	
 $
    	
29,545
    	
 
    	
 $
    	
53,247
    	
 
    
	
Changes in period
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,663
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,663
    	
 
    	
—
    	
 
    	
1,819
    	
 
    	
3,482
    	
 
    
	
Other comprehensive income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
30
    	
 
    	
(1,400)
    	
 
    	
(228)
    	
 
    	
(1,598)
    	
 
    	
—
    	
 
    	
(2,406)
    	
 
    	
(4,004)
    	
 
    
	
Comprehensive income
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,663
    	
 
    	
—
    	
 
    	
30
    	
 
    	
(1,400)
    	
 
    	
(228)
    	
 
    	
65
    	
 
    	
—
    	
 
    	
(587)
    	
 
    	
(522)
    	
 
    
	
Shareholder distributions
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Common equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(336)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(336)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(336)
    	
 
    
	
Preferred equity
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(100)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(100)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(100)
    	
 
    
	
Non-controlling interests
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
(1,178)
    	
 
    	
(1,178)
    	
 
    
	
Other items
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Equity   issuances, net of redemptions
    	
 
    	
1,247
    	
 
    	
(15)
    	
 
    	
(309)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
923
    	
 
    	
—
    	
 
    	
1,431
    	
 
    	
2,354
    	
 
    
	
Share-based   compensation
    	
 
    	
—
    	
 
    	
50
    	
 
    	
(2)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
48
    	
 
    	
—
    	
 
    	
32
    	
 
    	
80
    	
 
    
	
Ownership   changes
    	
 
    	
—
    	
 
    	
—
    	
 
    	
10
    	
 
    	
(420)
    	
 
    	
6
    	
 
    	
(41)
    	
 
    	
(2)
    	
 
    	
(447)
    	
 
    	
—
    	
 
    	
158
    	
 
    	
(289)
    	
 
    
	
Total change in period
    	
 
    	
1,247
    	
 
    	
35
    	
 
    	
926
    	
 
    	
(420)
    	
 
    	
36
    	
 
    	
(1,441)
    	
 
    	
(230)
    	
 
    	
153
    	
 
    	
—
    	
 
    	
(144)
    	
 
    	
9
    	
 
    
	
Balance   as at September 30, 2015
    	
 
    	
 $
    	
4,278
    	
 
    	
 $
    	
220
    	
 
    	
 $
    	
10,628
    	
 
    	
 $
    	
1,559
    	
 
    	
 $
    	
6,169
    	
 
    	
 $
    	
(1,882)
    	
 
    	
 $
    	
(666)
    	
 
    	
 $
    	
20,306
    	
 
    	
 $
    	
3,549
    	
 
    	
 $
    	
29,401
    	
 
    	
 $
    	
53,256
    	
 
    


 

1. Includes gains or losses on changes in ownership interests of consolidated subsidiaries

2. Includes available-for-sale securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes

 

BROOKFIELD ASSET MANAGEMENT











 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

	
 
    	
 
    	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine Months Ended
    
	
(UNAUDITED)
   FOR THE PERIODS ENDED SEP. 30
   (MILLIONS)
    	
 
    	
 Note
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Operating activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Net income
    	
 
    	
 
    	
 
    	
 $
    	
2,021
    	
 
    	
 $
    	
845
    	
 
    	
 $
    	
3,241
    	
 
    	
 $
    	
3,482
    
	
Share of undistributed equity accounted earnings
    	
 
    	
 
    	
 
    	
(318)
    	
 
    	
(98)
    	
 
    	
(677)
    	
 
    	
(739)
    
	
Fair value changes
    	
 
    	
11
    	
 
    	
59
    	
 
    	
(389)
    	
 
    	
(358)
    	
 
    	
(1,572)
    
	
Depreciation and amortization
    	
 
    	
 
    	
 
    	
541
    	
 
    	
436
    	
 
    	
1,538
    	
 
    	
1,265
    
	
Deferred income taxes
    	
 
    	
 
    	
 
    	
(1,030)
    	
 
    	
107
    	
 
    	
(698)
    	
 
    	
(131)
    
	
Investments in residential inventory
    	
 
    	
 
    	
 
    	
(342)
    	
 
    	
(73)
    	
 
    	
(497)
    	
 
    	
(130)
    
	
Net change in non-cash working capital balances
    	
 
    	
 
    	
 
    	
(296)
    	
 
    	
157
    	
 
    	
(830)
    	
 
    	
(74)
    
	
 
    	
 
    	
 
    	
 
    	
635
    	
 
    	
985
    	
 
    	
1,719
    	
 
    	
2,101
    
	
Financing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate borrowings arranged
    	
 
    	
 
    	
 
    	
377
    	
 
    	
280
    	
 
    	
869
    	
 
    	
776
    
	
Corporate borrowings repaid
    	
 
    	
 
    	
 
    	
(232)
    	
 
    	
—
    	
 
    	
(232)
    	
 
    	
—
    
	
Commercial paper and bank borrowings, net
    	
 
    	
 
    	
 
    	
138
    	
 
    	
504
    	
 
    	
(71)
    	
 
    	
(11)
    
	
Non-recourse borrowings arranged
    	
 
    	
 
    	
 
    	
4,113
    	
 
    	
6,959
    	
 
    	
16,225
    	
 
    	
14,741
    
	
Non-recourse borrowings repaid
    	
 
    	
 
    	
 
    	
(4,301)
    	
 
    	
(2,185)
    	
 
    	
(13,457)
    	
 
    	
(9,024)
    
	
Non-recourse credit facilities, net
    	
 
    	
 
    	
 
    	
(981)
    	
 
    	
—
    	
 
    	
(981)
    	
 
    	
—
    
	
Subsidiary equity obligations issued
    	
 
    	
 
    	
 
    	
—
    	
 
    	
21
    	
 
    	
9
    	
 
    	
36
    
	
Subsidiary equity obligations redeemed
    	
 
    	
 
    	
 
    	
(2)
    	
 
    	
(19)
    	
 
    	
(177)
    	
 
    	
(80)
    
	
Capital provided from non-controlling interests
    	
 
    	
 
    	
 
    	
2,400
    	
 
    	
1,162
    	
 
    	
8,250
    	
 
    	
3,718
    
	
Capital repaid to non-controlling interests
    	
 
    	
 
    	
 
    	
(865)
    	
 
    	
(590)
    	
 
    	
(2,566)
    	
 
    	
(2,287)
    
	
Preferred equity redemption
    	
 
    	
 
    	
 
    	
(1)
    	
 
    	
—
    	
 
    	
(6)
    	
 
    	
—
    
	
Common shares issued
    	
 
    	
 
    	
 
    	
2
    	
 
    	
12
    	
 
    	
12
    	
 
    	
1,252
    
	
Common shares repurchased
    	
 
    	
 
    	
 
    	
—
    	
 
    	
(133)
    	
 
    	
(94)
    	
 
    	
(337)
    
	
Distributions to non-controlling interests
    	
 
    	
 
    	
 
    	
(609)
    	
 
    	
(479)
    	
 
    	
(1,450)
    	
 
    	
(1,178)
    
	
Distributions to shareholders
    	
 
    	
 
    	
 
    	
(158)
    	
 
    	
(147)
    	
 
    	
(475)
    	
 
    	
(436)
    
	
 
    	
 
    	
 
    	
 
    	
(119)
    	
 
    	
5,385
    	
 
    	
5,856
    	
 
    	
7,170
    
	
Investing activities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Acquisitions
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Investment properties
    	
 
    	
 
    	
 
    	
(292)
    	
 
    	
(744)
    	
 
    	
(1,419)
    	
 
    	
(2,214)
    
	
Property, plant and equipment
    	
 
    	
 
    	
 
    	
(376)
    	
 
    	
(295)
    	
 
    	
(1,007)
    	
 
    	
(760)
    
	
Equity accounted investments
    	
 
    	
 
    	
 
    	
(239)
    	
 
    	
(281)
    	
 
    	
(1,065)
    	
 
    	
(3,649)
    
	
Financial assets and other
    	
 
    	
 
    	
 
    	
(419)
    	
 
    	
(619)
    	
 
    	
(2,796)
    	
 
    	
(2,405)
    
	
Acquisition of subsidiaries
    	
 
    	
 
    	
 
    	
(1,194)
    	
 
    	
(5,406)
    	
 
    	
(6,082)
    	
 
    	
(7,041)
    
	
Dispositions
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Investment properties
    	
 
    	
 
    	
 
    	
766
    	
 
    	
303
    	
 
    	
2,550
    	
 
    	
1,690
    
	
Property, plant and equipment
    	
 
    	
 
    	
 
    	
21
    	
 
    	
60
    	
 
    	
33
    	
 
    	
147
    
	
Equity accounted investments
    	
 
    	
 
    	
 
    	
472
    	
 
    	
207
    	
 
    	
969
    	
 
    	
971
    
	
Financial assets and other
    	
 
    	
 
    	
 
    	
1,216
    	
 
    	
537
    	
 
    	
2,874
    	
 
    	
2,099
    
	
Disposition of subsidiaries
    	
 
    	
 
    	
 
    	
4
    	
 
    	
266
    	
 
    	
131
    	
 
    	
347
    
	
Restricted cash and deposits
    	
 
    	
 
    	
 
    	
(141)
    	
 
    	
(82)
    	
 
    	
(248)
    	
 
    	
1,696
    
	
 
    	
 
    	
 
    	
 
    	
(182)
    	
 
    	
(6,054)
    	
 
    	
(6,060)
    	
 
    	
(9,119)
    
	
Cash and cash equivalents
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Change in cash and cash equivalents
    	
 
    	
 
    	
 
    	
334
    	
 
    	
316
    	
 
    	
1,515
    	
 
    	
152
    
	
Foreign exchange revaluation
    	
 
    	
 
    	
 
    	
18
    	
 
    	
(182)
    	
 
    	
83
    	
 
    	
(255)
    
	
Balance, beginning of period
    	
 
    	
 
    	
 
    	
4,020
    	
 
    	
2,923
    	
 
    	
2,774
    	
 
    	
3,160
    
	
Balance, end of period
    	
 
    	
 
    	
 
    	
 $
    	
4,372
    	
 
    	
 $
    	
3,057
    	
 
    	
 $
    	
4,372
    	
 
    	
 $
    	
3,057
    


 

Q3 2016 INTERIM REPORT

 









 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.    CORPORATE INFORMATION

 

Brookfield Asset Management Inc. (the “Corporation”) is a global alternative asset management company. References in these interim financial statements to “Brookfield,” “us,” “we,” “our” or “the company” refer to the Corporation and its direct and indirect subsidiaries and consolidated entities. The company owns and operates assets with a focus on property, renewable power, infrastructure and private equity. The Corporation is listed on the New York, Toronto and Euronext stock exchanges under the symbols BAM, BAM.A and BAMA, respectively. The Corporation was formed by articles of amalgamation under the Business Corporations Act (Ontario) and is registered in Ontario, Canada. The registered office of the company is Brookfield Place, 181 Bay Street, Suite 300, Toronto, Ontario, M5J 2T3.

 

2.    SIGNIFICANT ACCOUNTING POLICIES

 

a)    Statement of Compliance

 

The interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the fiscal year ended December 31, 2015, except as noted below in Note 2(b).

 

The interim financial statements should be read in conjunction with the most recently issued Annual Report of the company which includes information necessary or useful to understanding the company’s businesses and financial statement presentation. In particular, the company’s significant accounting policies were presented as Note 2 to the Consolidated Financial Statements for the fiscal year ended December 31, 2015 included in that report.

 

The interim financial statements are unaudited and reflect any adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for fair statement of results for the interim periods in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

 

The results reported in these interim financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The interim financial statements were authorized for issuance by the Board of Directors of the company on November 10, 2016.

 

b)    Adoption of Accounting Standards

 

The company has applied new and revised standards issued by the IASB that are effective for the period beginning on or after January 1, 2016 as follows:

 

Property, Plant, and Equipment and Intangible Assets

 

IAS 16 Property, Plant, and Equipment (“IAS 16”) and IAS 38 Intangible Assets (“IAS 38”) were amended to clarify the appropriate method of amortization for intangible assets. Amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant, and equipment; the amendments to IAS 38 introduces a rebuttable presumption that revenue is not an appropriate basis for amortization of an intangible asset, with only limited circumstances where the presumption can be rebutted. The company adopted the amendments to IAS 16 and IAS 38 on January 1, 2016, on a prospective basis, the adoption did not have a significant impact on the company’s consolidated financial statements.

 

Investments in Associates and Joint Ventures

 

The amendments to IFRS 10 Consolidated Financial Statements (“IFRS 10”), and IAS 28 Investments in Associates and Joint Ventures (2011) (“IAS 28”) address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments are effective for transactions occurring in annual periods beginning on or after January 1, 2016 with earlier application permitted. The impacts of the amendments to IFRS 10 and IAS 28 on the consolidated financial statements are not significant.

 

c)    Future Changes in Accounting Standards

 

Revenue from Contracts with Customers

 

IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) specifies how and when revenue should be recognized as well as requiring more informative and relevant disclosures. This standard supersedes IAS 18 Revenue, IAS 11 Construction Contracts and a number of revenue-related interpretations. Application of the Standard is mandatory and it applies to nearly all contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. The IASB has tentatively deferred mandatory adoption of IFRS 15 until periods beginning on or after January 1, 2018 with early application permitted. The company has not yet determined the impact of IFRS 15 on its consolidated financial statements.

 

BROOKFIELD ASSET MANAGEMENT

 











 

Financial Instruments

 

In July 2014, the IASB issued the final publication of IFRS 9, Financial Instruments (“IFRS 9”), superseding IAS 39, Financial Instruments. IFRS 9 establishes principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. This new standard also includes a new general hedge accounting standard which will align hedge accounting more closely with risk management. It does not fully change the types of hedging relationships or the requirement to measure and recognize ineffectiveness, however, it will allow more hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to assess the effectiveness of a hedging relationship. The standard has a mandatory effective date for annual periods beginning on or after January 1, 2018 with early adoption permitted. The company has not yet determined the impact of IFRS 9 on its consolidated financial statements.

 

Leases

 

In January 2016, the IASB published a new standard – IFRS 16 Leases (“IFRS 16”). The new standard brings most leases on balance sheets, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 Leases and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 has also been applied. The company has not yet determined the impact of IFRS 16 on its consolidated financial statements.

 

3.    SEGMENTED INFORMATION

 

a)    Operating Segments

 

Our operations are organized into five operating business groups in addition to our corporate and asset management activities, which collectively represent seven operating segments for internal and external reporting purposes. We measure performance primarily using funds from operations generated by each operating segment and the amount of capital invested by the Corporation in each segment using common equity by segment.

 

Our operating segments are as follows:

 

 

i.                  Asset management operations consist of managing our listed partnerships, private funds and public securities on behalf of our clients and ourselves. We generate contractual base management fees for these activities as well as performance income, including incentive distributions, performance fees and carried interests. We also provide transaction and advisory services.

 

 

ii.               Property operations include the ownership, operation and development of office, retail, industrial, multifamily, hospitality and other properties.

 

 

iii.            Renewable power operations include the ownership, operation and development of hydroelectric, wind power and other generating facilities.

 

 

iv.           Infrastructure operations include the ownership, operation and development of utilities, transport, energy, communications and agricultural assets.

 

 

v.              Private equity operations include a broad range of industries, and are mostly focused on energy, industrial, construction and other business services.

 

 

vi.           Residential development operations consist predominantly of homebuilding, condominium development and land development.

 

 

vii.        Corporate activities include the investment of cash and financial assets, as well as the management of our corporate capitalization, including corporate borrowings and preferred equity which fund a portion of the capital invested in our other operations. Certain corporate costs such as technology and operations are incurred on behalf of all of our operating segments and allocated to each operating segment based on an internal pricing framework.

 

On June 20, 2016 we formed a listed issuer called Brookfield Business Partners L.P. (“BBU”) by way of a special dividend to shareholders. BBU is the primary vehicle through which we own and operate businesses within our private equity business group. In connection with the formation of BBU, we have realigned the organizational and governance structure of these businesses and changed how the company presents information for financial reporting and management decision making which has resulted in a change in the private equity and service activities segments. Specifically, our private equity reportable segment includes our investments included in BBU, Norbord Inc. and certain other directly held investments. Accordingly, effective the first quarter 2016, we changed our private equity and service activities operating segments into a single operating segment, and a single reportable segment, called Private Equity. The company has retrospectively applied this segment change for all periods presented.

 

Q3 2016 INTERIM REPORT

 











 

b)    Segment Financial Measures

 

Funds from Operations (“FFO”) is a key measure of our financial performance and we use FFO to assess operating results and the performance of our businesses on a segmented basis. We define FFO as net income prior to fair value changes, depreciation and amortization and deferred income taxes. When determining FFO, we include our proportionate share of the FFO of equity accounted investments on a fully diluted basis.

 

We use FFO to assess our performance both as an asset manager and an investor and operator of our assets; we use FFO to understand the financial impact of our operating decisions. FFO includes the fees that we earn from managing capital as well as our share of revenues earned and costs incurred within our operations, which include interest expense and other costs. Specifically, FFO includes the in period impact of contracts that we enter into to generate revenue, including asset management agreements, leases, power sales agreements, take or pay contracts, and sales of inventory, and also the impact of changes in leverage or the cost of that leverage as well as other costs incurred to operate our business.

 

FFO includes gains or losses arising from transactions during the reporting period adjusted to include fair value changes and revaluation surplus recorded in prior periods adjusted to include taxes payable or receivable, as well as amounts that are recorded directly in equity, such as ownership changes (“realized disposition gains”). We include realized disposition gains in FFO because we consider the purchase and sale of assets to be a normal part of the company’s business and the ultimate gain or loss on disposition of an asset is an important indicator of our performance as an allocator of capital. As noted above, unrealized fair value changes are excluded from FFO; however, gains or losses recorded over the life of an asset are included in the determination of realized disposition gains or losses.

 

We exclude depreciation and amortization from FFO, as we believe that the value of most of our assets typically increase over time, provided we make the necessary maintenance expenditures. In addition, the depreciated cost base of our assets is reflected in the ultimate realized disposition gain or loss on disposal. We also exclude deferred income taxes from FFO. The vast majority of the company’s deferred income tax assets and liabilities are a result of the revaluation of our assets under IFRS, and as a result, these unrealized balances are eliminated. Cash taxes are included within FFO.

 

Our definition of funds from operations may differ from the definition used by other organizations, as well as the definition of funds from operations used by the Real Property Association of Canada (“REALPAC”) and the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), in part because the NAREIT definition is based on U.S. GAAP, as opposed to IFRS. The key differences between our definition of funds from operations and the determination of funds from operations by REALPAC and/or NAREIT are that we include the following: realized disposition gains or losses and cash taxes payable or receivable on those gains or losses, if any; foreign exchange gains or losses on monetary items not forming part of our net investment in foreign operations; and foreign exchange gains or losses on the sale of an investment in a foreign operation.

 

We illustrate how we derive funds from operations for each operating segment and reconcile total reportable segment FFO to net income in Note 3 of the consolidated financial statements and on page 25. We do not use FFO as a measure of cash generated from our operations.

 

We measure segment assets based on Common Equity by Segment, which we consider to be the amount of common equity allocated to each segment. We utilize Common Equity by Segment to review our deconsolidated balance sheet and to assist in capital allocation decisions.

 

 

i.                                         Segment Balance Sheet Information

 

The company uses common equity by operating segment as its measure of segment assets, because it is utilized by the company’s Chief Operating Decision Maker for capital allocation decisions.

 

 

ii.                                     Segment Allocation and Measurement

 

Segment measures include amounts earned from consolidated entities that are eliminated on consolidation. The principal adjustment is to include asset management revenues charged to consolidated entities as revenues within the company’s asset management segment with the corresponding expense recorded as corporate costs within the relevant segment. These amounts are based on the in-place terms of the asset management contracts amongst the consolidated entities. Inter-segment revenues are determined under terms that approximate market value.

 

The company allocates the costs of shared functions, which would otherwise be included within its corporate activities segment such as information technology and internal audit, pursuant to formal policies.

 

BROOKFIELD ASSET MANAGEMENT

 











 

c)    Reportable Segment Measures

 

 

	
AS AT AND FOR THE   
   THREE MONTHS ENDED SEP. 30, 
   2016 
   (MILLIONS)
    	
 
    	
Asset
   Management
    	
 
    	
Property
    	
 
    	
Renewable
   Power
    	
 
    	
Infrastructure
    	
 
    	
Private
   Equity
    	
 
    	
Residential
   Development
    	
 
    	
Corporate
   Activities
    	
 
    	
Total
   Segments
    	
 
    	
Notes
    
	
External revenues
    	
 
    	
$
    	
46
    	
 
    	
$
    	
1,654
    	
 
    	
$
    	
627
    	
 
    	
$
    	
593
    	
 
    	
$
    	
2,500
    	
 
    	
$
    	
832
    	
 
    	
$
    	
33
    	
 
    	
$
    	
6,285
    	
 
    	
 
    
	
Inter-segment revenues
    	
 
    	
237
    	
 
    	
4
    	
 
    	
—
    	
 
    	
—
    	
 
    	
83
    	
 
    	
—
    	
 
    	
—
    	
 
    	
324
    	
 
    	
i
    
	
Segmented revenues
    	
 
    	
283
    	
 
    	
1,658
    	
 
    	
627
    	
 
    	
593
    	
 
    	
2,583
    	
 
    	
832
    	
 
    	
33
    	
 
    	
6,609
    	
 
    	
 
    
	
Segmented equity accounted income
    	
 
    	
—
    	
 
    	
201
    	
 
    	
4
    	
 
    	
184
    	
 
    	
39
    	
 
    	
5
    	
 
    	
3
    	
 
    	
436
    	
 
    	
ii
    
	
Interest expense
    	
 
    	
—
    	
 
    	
(440)
    	
 
    	
(162)
    	
 
    	
(102)
    	
 
    	
(37)
    	
 
    	
(20)
    	
 
    	
(64)
    	
 
    	
(825)
    	
 
    	
iii
    
	
Current income taxes
    	
 
    	
—
    	
 
    	
(10)
    	
 
    	
(7)
    	
 
    	
(9)
    	
 
    	
(8)
    	
 
    	
(9)
    	
 
    	
5
    	
 
    	
(38)
    	
 
    	
iv
    
	
Funds from operations
    	
 
    	
178
    	
 
    	
545
    	
 
    	
49
    	
 
    	
89
    	
 
    	
97
    	
 
    	
10
    	
 
    	
(85)
    	
 
    	
883
    	
 
    	
v
    
	
Common equity
    	
 
    	
337
    	
 
    	
17,121
    	
 
    	
4,862
    	
 
    	
2,343
    	
 
    	
2,505
    	
 
    	
2,699
    	
 
    	
(7,435)
    	
 
    	
22,432
    	
 
    	
 
    
	
Equity accounted investments
    	
 
    	
—
    	
 
    	
16,678
    	
 
    	
202
    	
 
    	
6,697
    	
 
    	
386
    	
 
    	
385
    	
 
    	
105
    	
 
    	
24,453
    	
 
    	
 
    
	
Additions to non-current assets1
    	
 
    	
—
    	
 
    	
3,238
    	
 
    	
100
    	
 
    	
2,678
    	
 
    	
66
    	
 
    	
5
    	
 
    	
10
    	
 
    	
6,097
    	
 
    	
 
    
																											


 

 

1. Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill

 

 

	
AS AT DEC. 31, 2015 AND FOR   THE 
   THREE MONTHS ENDED SEP. 30,
   2015
   (MILLIONS)
    	
 
    	
Asset
   Management
    	
 
    	
Property
    	
 
    	
Renewable
   Power
    	
 
    	
Infrastructure
    	
 
    	
Private
   Equity
    	
 
    	
Residential
   Development
    	
 
    	
Corporate
   Activities
    	
 
    	
Total
   Segments
    	
 
    	
Notes
    
	
External revenues
    	
 
    	
$
    	
69
    	
 
    	
$
    	
1,403
    	
 
    	
$
    	
342
    	
 
    	
$
    	
532
    	
 
    	
$
    	
2,180
    	
 
    	
$
    	
539
    	
 
    	
$
    	
(9)
    	
 
    	
$
    	
5,056
    	
 
    	
 
    
	
Inter-segment revenues
    	
 
    	
182
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
93
    	
 
    	
—
    	
 
    	
9
    	
 
    	
284
    	
 
    	
i
    
	
Segmented revenues
    	
 
    	
251
    	
 
    	
1,403
    	
 
    	
342
    	
 
    	
532
    	
 
    	
2,273
    	
 
    	
539
    	
 
    	
—
    	
 
    	
5,340
    	
 
    	
 
    
	
Segmented equity accounted income
    	
 
    	
—
    	
 
    	
193
    	
 
    	
5
    	
 
    	
146
    	
 
    	
35
    	
 
    	
4
    	
 
    	
(2)
    	
 
    	
381
    	
 
    	
ii
    
	
Interest expense
    	
 
    	
—
    	
 
    	
(386)
    	
 
    	
(107)
    	
 
    	
(96)
    	
 
    	
(34)
    	
 
    	
(19)
    	
 
    	
(58)
    	
 
    	
(700)
    	
 
    	
iii
    
	
Current income taxes
    	
 
    	
—
    	
 
    	
(9)
    	
 
    	
(10)
    	
 
    	
(5)
    	
 
    	
(6)
    	
 
    	
(5)
    	
 
    	
(3)
    	
 
    	
(38)
    	
 
    	
iv
    
	
Funds from operations
    	
 
    	
141
    	
 
    	
214
    	
 
    	
48
    	
 
    	
71
    	
 
    	
84
    	
 
    	
41
    	
 
    	
(98)
    	
 
    	
501
    	
 
    	
v
    
	
Common equity
    	
 
    	
328
    	
 
    	
16,265
    	
 
    	
4,424
    	
 
    	
2,203
    	
 
    	
2,178
    	
 
    	
2,221
    	
 
    	
(6,051)
    	
 
    	
21,568
    	
 
    	
 
    
	
Equity accounted investments
    	
 
    	
—
    	
 
    	
17,494
    	
 
    	
197
    	
 
    	
4,690
    	
 
    	
412
    	
 
    	
358
    	
 
    	
65
    	
 
    	
23,216
    	
 
    	
 
    
	
Additions to non-current assets1
    	
 
    	
—
    	
 
    	
8,675
    	
 
    	
79
    	
 
    	
293
    	
 
    	
1,238
    	
 
    	
67
    	
 
    	
24
    	
 
    	
10,376
    	
 
    	
 
    
																											


 

 

1. Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill

 

 

	
FOR THE NINE MONTHS
   ENDED SEP. 30, 2016
   (MILLIONS)
    	
 
    	
Asset
   Management
    	
 
    	
Property
    	
 
    	
Renewable
   Power
    	
 
    	
Infrastructure
    	
 
    	
Private
   Equity
    	
 
    	
Residential
   Development
    	
 
    	
Corporate
   Activities
    	
 
    	
Total
   Segments
    	
 
    	
Notes
    
	
External revenues
    	
 
    	
$
    	
179
    	
 
    	
$
    	
4,759
    	
 
    	
$
    	
1,898
    	
 
    	
$
    	
1,690
    	
 
    	
$
    	
6,999
    	
 
    	
$
    	
1,808
    	
 
    	
$
    	
143
    	
 
    	
$
    	
17,476
    	
 
    	
 
    
	
Inter-segment revenues
    	
 
    	
702
    	
 
    	
10
    	
 
    	
—
    	
 
    	
—
    	
 
    	
241
    	
 
    	
—
    	
 
    	
6
    	
 
    	
959
    	
 
    	
i
    
	
Segmented revenues
    	
 
    	
881
    	
 
    	
4,769
    	
 
    	
1,898
    	
 
    	
1,690
    	
 
    	
7,240
    	
 
    	
1,808
    	
 
    	
149
    	
 
    	
18,435
    	
 
    	
 
    
	
Segmented equity accounted income
    	
 
    	
—
    	
 
    	
647
    	
 
    	
8
    	
 
    	
487
    	
 
    	
135
    	
 
    	
26
    	
 
    	
(2)
    	
 
    	
1,301
    	
 
    	
ii
    
	
Interest expense
    	
 
    	
—
    	
 
    	
(1,288)
    	
 
    	
(455)
    	
 
    	
(308)
    	
 
    	
(113)
    	
 
    	
(69)
    	
 
    	
(180)
    	
 
    	
(2,413)
    	
 
    	
iii
    
	
Current income taxes
    	
 
    	
—
    	
 
    	
(20)
    	
 
    	
(23)
    	
 
    	
(22)
    	
 
    	
(23)
    	
 
    	
(15)
    	
 
    	
(39)
    	
 
    	
(142)
    	
 
    	
iv
    
	
Funds from operations
    	
 
    	
554
    	
 
    	
1,193
    	
 
    	
154
    	
 
    	
271
    	
 
    	
277
    	
 
    	
(12)
    	
 
    	
(214)
    	
 
    	
2,223
    	
 
    	
v
    
	
Additions to non-current assets1
    	
 
    	
—
    	
 
    	
7,670
    	
 
    	
6,766
    	
 
    	
4,723
    	
 
    	
270
    	
 
    	
68
    	
 
    	
46
    	
 
    	
19,543
    	
 
    	
 
    
																											


 

 

1. Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill

 

 

	
FOR THE NINE MONTHS
   ENDED SEP. 30, 2015
   (MILLIONS)
    	
 
    	
Asset
   Management
    	
 
    	
Property
    	
 
    	
Renewable
   Power
    	
 
    	
Infrastructure
    	
 
    	
Private
   Equity
    	
 
    	
Residential
   Development
    	
 
    	
Corporate
   Activities
    	
 
    	
Total
   Segments
    	
 
    	
Notes
    
	
External   revenues
    	
 
    	
$
    	
202
    	
 
    	
$
    	
4,020
    	
 
    	
$
    	
1,243
    	
 
    	
$
    	
1,606
    	
 
    	
$
    	
5,693
    	
 
    	
$
    	
1,540
    	
 
    	
$
    	
71
    	
 
    	
$
    	
14,375
    	
 
    	
 
    
	
Inter-segment   revenues
    	
 
    	
512
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
285
    	
 
    	
—
    	
 
    	
22
    	
 
    	
819
    	
 
    	
i
    
	
Segmented   revenues
    	
 
    	
714
    	
 
    	
4,020
    	
 
    	
1,243
    	
 
    	
1,606
    	
 
    	
5,978
    	
 
    	
1,540
    	
 
    	
93
    	
 
    	
15,194
    	
 
    	
 
    
	
Segmented   equity accounted income
    	
 
    	
—
    	
 
    	
534
    	
 
    	
18
    	
 
    	
402
    	
 
    	
54
    	
 
    	
8
    	
 
    	
(3
    	
)
    	
1,013
    	
 
    	
ii
    
	
Interest   expense
    	
 
    	
—
    	
 
    	
(1,153
    	
)
    	
(326
    	
)
    	
(288
    	
)
    	
(100
    	
)
    	
(102
    	
)
    	
(170
    	
)
    	
(2,139
    	
)
    	
iii
    
	
Current   income taxes
    	
 
    	
—
    	
 
    	
(32
    	
)
    	
(20
    	
)
    	
(19
    	
)
    	
(9
    	
)
    	
(19
    	
)
    	
(10
    	
)
    	
(109
    	
)
    	
iv
    
	
Funds   from operations
    	
 
    	
393
    	
 
    	
821
    	
 
    	
195
    	
 
    	
189
    	
 
    	
179
    	
 
    	
20
    	
 
    	
(219
    	
)
    	
1,578
    	
 
    	
v
    
	
Additions   to non-current assets1
    	
 
    	
—
    	
 
    	
14,824
    	
 
    	
1,349
    	
 
    	
1,824
    	
 
    	
3,004
    	
 
    	
98
    	
 
    	
92
    	
 
    	
21,191
    	
 
    	
 
    
																											


 

 

1. Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill

 

Q3 2016 INTERIM REPORT

 











 

i.                                         Inter-Segment Revenues

 

For the three months ended September 30, 2016, the adjustment to external revenues, when determining segmented revenues, consists of management fees and leasing revenues earned from consolidated entities totalling $241 million (2015 – $182 million), revenues earned on construction projects between consolidated entities totalling $83 million (2015 – $93 million) and interest income on loans between consolidated entities totalling $nil (2015 – $9 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.

 

For the nine months ended September 30, 2016, the adjustment to external revenues, when determining segmented revenues, consists of management fees and leasing revenues earned from consolidated entities totalling $712 million (2015 – $512 million) revenues earned on construction projects between consolidated entities totalling $241 million (2015 – $285 million) and interest income on loans between consolidated entities totalling $6 million (2015 – $22 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.

 

 

ii.                                     Equity Accounted Income

 

The company defines equity accounted profit or loss to be the company’s share of FFO from its investments in associates (equity accounted investments), determined by applying the same methodology utilized in adjusting net income of consolidated entities. The following table reconciles equity accounted income on a segmented basis to the company’s Consolidated Statements of Operations:

 

 

	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine Months Ended
    
	
FOR THE PERIODS ENDED SEP. 30
   (MILLIONS)
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Segmented equity accounted income
    	
 
    	
$
    	
436
    	
 
    	
$
    	
381
    	
 
    	
$
    	
1,301
    	
 
    	
$
    	
1,013
    
	
Fair   value changes and other non-FFO items
    	
 
    	
18
    	
 
    	
(77)
    	
 
    	
(260)
    	
 
    	
161
    
	
Equity   accounted income
    	
 
    	
$
    	
454
    	
 
    	
$
    	
304
    	
 
    	
$
    	
1,041
    	
 
    	
$
    	
1,174
    


 

iii.                                 Interest Expense

 

For the three months ended September 30, 2016, the adjustment to interest expense consists of interest on loans between consolidated entities totalling $nil (2015 – $9 million) that is eliminated on consolidation, along with the associated revenue.

 

For the nine months ended September 30, 2016, the adjustment to interest expense consists of interest on loans between consolidated entities totalling $6 million (2015 – $22 million) that is eliminated on consolidation, along with the associated revenue.

 

 

iv.                                   Current Income Taxes

 

Current income taxes are included in segmented FFO, but are aggregated with deferred income taxes in income tax expense on the company’s Consolidated Statements of Operations. The following table reconciles segment current tax expense to consolidated income taxes:

 

 

	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine Months Ended
    
	
FOR THE PERIODS ENDED SEP.   30
   (MILLIONS)
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Segment current tax expense
    	
 
    	
$
    	
(38)
    	
 
    	
$
    	
(38)
    	
 
    	
$
    	
(142)
    	
 
    	
$
    	
(109)
    
	
Deferred income tax recovery (expense)
    	
 
    	
1,030
    	
 
    	
(107)
    	
 
    	
698
    	
 
    	
131
    
	
Income tax recovery (expense)
    	
 
    	
$
    	
992
    	
 
    	
$
    	
(145)
    	
 
    	
$
    	
556
    	
 
    	
$
    	
22
    


 

 

v.                                       Reconciliation of FFO to Net Income

 

The following table reconciles total reportable segment FFO to net income:

 

 

	
 
    	
 
    	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine Months Ended
    
	
FOR THE PERIODS ENDED SEP. 30
   (MILLIONS)
    	
 
    	
Note
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Total reportable segment FFO
    	
 
    	
 
    	
 
    	
$
    	
883
    	
 
    	
$
    	
501
    	
 
    	
$
    	
2,223
    	
 
    	
$
    	
1,578
    
	
Realized disposition gains in fair value changes or prior periods
    	
 
    	
vi
    	
 
    	
(235)
    	
 
    	
(68)
    	
 
    	
(570)
    	
 
    	
(421)
    
	
Non-controlling interests in FFO
    	
 
    	
 
    	
 
    	
925
    	
 
    	
643
    	
 
    	
2,330
    	
 
    	
1,726
    
	
Financial statement components not included in FFO
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Equity   accounted fair value changes and other non-FFO items
    	
 
    	
 
    	
 
    	
18
    	
 
    	
(77)
    	
 
    	
(260)
    	
 
    	
161
    
	
Fair   value changes
    	
 
    	
 
    	
 
    	
(59)
    	
 
    	
389
    	
 
    	
358
    	
 
    	
1,572
    
	
Depreciation   and amortization
    	
 
    	
 
    	
 
    	
(541)
    	
 
    	
(436)
    	
 
    	
(1,538)
    	
 
    	
(1,265)
    
	
Deferred   income taxes
    	
 
    	
 
    	
 
    	
1,030
    	
 
    	
(107)
    	
 
    	
698
    	
 
    	
131
    
	
Net income
    	
 
    	
 
    	
 
    	
$
    	
2,021
    	
 
    	
$
    	
845
    	
 
    	
$
    	
3,241
    	
 
    	
$
    	
3,482
    


 

BROOKFIELD ASSET MANAGEMENT

 











 

vi.                                   Realized Disposition Gains

 

Realized disposition gains include gains and losses recorded in net income arising from transactions during the current period adjusted to include fair value changes and revaluation surplus recorded in prior periods. Realized disposition gains also include amounts that are recorded directly in equity as changes in ownership as opposed to net income because they result from a change in ownership of a consolidated entity.

 

The realized disposition gains recorded in fair value changes or prior periods for the three and nine months ended September 30, 2016, were $235 million (2015 – $68 million) and $570 million (2015 – $421 million), respectively. There were no realized disposition gains recorded directly in equity as changes in ownership.

 

d)    Geographic Allocation

 

The company’s revenues by location of operations are as follows:

 

 

	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine Months Ended
    
	
FOR THE PERIODS ENDED SEP.   30
   (MILLIONS)
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
United States
    	
 
    	
$
    	
2,040
    	
 
    	
$
    	
1,544
    	
 
    	
$
    	
5,710
    	
 
    	
$
    	
4,791
    
	
Canada
    	
 
    	
1,152
    	
 
    	
1,004
    	
 
    	
3,222
    	
 
    	
2,731
    
	
Europe
    	
 
    	
805
    	
 
    	
795
    	
 
    	
2,422
    	
 
    	
1,860
    
	
Australia
    	
 
    	
995
    	
 
    	
951
    	
 
    	
2,801
    	
 
    	
2,675
    
	
Brazil
    	
 
    	
583
    	
 
    	
273
    	
 
    	
1,220
    	
 
    	
896
    
	
Colombia
    	
 
    	
243
    	
 
    	
36
    	
 
    	
710
    	
 
    	
118
    
	
Other
    	
 
    	
467
    	
 
    	
453
    	
 
    	
1,391
    	
 
    	
1,304
    
	
 
    	
 
    	
$
    	
6,285
    	
 
    	
$
    	
5,056
    	
 
    	
$
    	
17,476
    	
 
    	
$
    	
14,375
    


 

The company’s consolidated assets by location of assets are as follows:

 

 

	
(MILLIONS)
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    
	
United   States
    	
 
    	
$
    	
76,867
    	
 
    	
$
    	
68,438
    
	
Canada
    	
 
    	
19,671
    	
 
    	
18,805
    
	
Europe
    	
 
    	
20,034
    	
 
    	
20,762
    
	
Australia
    	
 
    	
14,019
    	
 
    	
13,549
    
	
Brazil
    	
 
    	
12,508
    	
 
    	
9,968
    
	
Colombia
    	
 
    	
7,563
    	
 
    	
676
    
	
Other
    	
 
    	
9,175
    	
 
    	
7,316
    
	
 
    	
 
    	
$
    	
159,837
    	
 
    	
$
    	
139,514
    


 

Q3 2016 INTERIM REPORT

 









 

e)    Revenues Allocation

 

Total external revenues by product or service are as follows:

 

	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine   Months Ended
    
	
FOR THE PERIODS ENDED SEP.   30 
   (MILLIONS)
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Asset management
    	
 
    	
 $
    	
46
    	
 
    	
 $
    	
69
    	
 
    	
 $
    	
179
    	
 
    	
 $
    	
202
    
	
Property
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Core office
    	
 
    	
555
    	
 
    	
554
    	
 
    	
1,639
    	
 
    	
1,735
    
	
Opportunistic and other
    	
 
    	
1,099
    	
 
    	
849
    	
 
    	
3,120
    	
 
    	
2,285
    
	
Renewable power
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Hydroelectric
    	
 
    	
518
    	
 
    	
262
    	
 
    	
1,583
    	
 
    	
941
    
	
Wind energy
    	
 
    	
83
    	
 
    	
70
    	
 
    	
279
    	
 
    	
272
    
	
Co-generation and other
    	
 
    	
26
    	
 
    	
10
    	
 
    	
36
    	
 
    	
30
    
	
Infrastructure
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Utilities
    	
 
    	
208
    	
 
    	
218
    	
 
    	
625
    	
 
    	
647
    
	
Transport
    	
 
    	
212
    	
 
    	
164
    	
 
    	
531
    	
 
    	
491
    
	
Energy
    	
 
    	
102
    	
 
    	
89
    	
 
    	
283
    	
 
    	
274
    
	
Sustainable resources and other
    	
 
    	
71
    	
 
    	
61
    	
 
    	
251
    	
 
    	
194
    
	
Private equity
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Construction services
    	
 
    	
1,037
    	
 
    	
929
    	
 
    	
2,886
    	
 
    	
2,337
    
	
Other business services
    	
 
    	
509
    	
 
    	
476
    	
 
    	
1,442
    	
 
    	
1,236
    
	
Energy
    	
 
    	
68
    	
 
    	
80
    	
 
    	
197
    	
 
    	
256
    
	
Other industrial operations
    	
 
    	
886
    	
 
    	
695
    	
 
    	
2,474
    	
 
    	
1,864
    
	
Residential development
    	
 
    	
832
    	
 
    	
539
    	
 
    	
1,808
    	
 
    	
1,540
    
	
Corporate activities
    	
 
    	
33
    	
 
    	
(9)
    	
 
    	
143
    	
 
    	
71
    
	
 
    	
 
    	
 $
    	
6,285
    	
 
    	
 $
    	
5,056
    	
 
    	
 $
    	
17,476
    	
 
    	
 $
    	
14,375
    


 

BROOKFIELD ASSET MANAGEMENT

 











 

4.    ACQUISITIONS OF CONSOLIDATED ENTITIES

 

The company accounts for business combinations using the acquisition method of accounting, pursuant to which the cost of acquiring a business is allocated to its identifiable tangible and intangible assets and liabilities on the basis of the estimated fair values at the date of acquisition.

 

The following table summarizes the balance sheet impact as a result of business combinations that occurred in the nine months ended September 30, 2016. Purchase price allocations for the business combinations completed in the period have been completed on a preliminary basis:

 

	
(MILLIONS)
    	
 
    	
Property
    	
 
    	
Renewable
    Power
    	
 
    	
Infrastructure and
   Other
    	
 
    	
Total
    
	
Cash and cash equivalents
    	
 
    	
 $
    	
88
    	
 
    	
 $
    	
116
    	
 
    	
 $
    	
149
    	
 
    	
 $
    	
353
    
	
Accounts receivable and other
    	
 
    	
147
    	
 
    	
177
    	
 
    	
656
    	
 
    	
980
    
	
Inventory
    	
 
    	
9
    	
 
    	
34
    	
 
    	
39
    	
 
    	
82
    
	
Equity accounted investments
    	
 
    	
—
    	
 
    	
—
    	
 
    	
40
    	
 
    	
40
    
	
Investment properties
    	
 
    	
6,081
    	
 
    	
—
    	
 
    	
—
    	
 
    	
6,081
    
	
Property, plant and equipment
    	
 
    	
198
    	
 
    	
5,722
    	
 
    	
1,094
    	
 
    	
7,014
    
	
Intangible assets
    	
 
    	
1
    	
 
    	
—
    	
 
    	
1,186
    	
 
    	
1,187
    
	
Goodwill
    	
 
    	
5
    	
 
    	
808
    	
 
    	
486
    	
 
    	
1,299
    
	
Deferred income tax assets
    	
 
    	
—
    	
 
    	
—
    	
 
    	
14
    	
 
    	
14
    
	
Total assets
    	
 
    	
6,529
    	
 
    	
6,857
    	
 
    	
3,664
    	
 
    	
17,050
    
	
Less:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts payable and other
    	
 
    	
(299)
    	
 
    	
(386)
    	
 
    	
(263)
    	
 
    	
(948)
    
	
Non-recourse borrowings
    	
 
    	
(2,803)
    	
 
    	
(1,143)
    	
 
    	
(1,165)
    	
 
    	
(5,111)
    
	
Deferred income tax liabilities
    	
 
    	
—
    	
 
    	
(1,016)
    	
 
    	
(255)
    	
 
    	
(1,271)
    
	
Non-controlling interests1
    	
 
    	
(33)
    	
 
    	
(1,417)
    	
 
    	
(1,403)
    	
 
    	
(2,853)
    
	
 
    	
 
    	
(3,135)
    	
 
    	
(3,962)
    	
 
    	
(3,086)
    	
 
    	
(10,183)
    
	
Net assets acquired
    	
 
    	
 $
    	
3,394
    	
 
    	
 $
    	
2,895
    	
 
    	
 $
    	
578
    	
 
    	
 $
    	
6,867
    
	
Consideration2
    	
 
    	
 $
    	
3,368
    	
 
    	
 $
    	
2,895
    	
 
    	
 $
    	
578
    	
 
    	
 $
    	
6,841
    


 

1. Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the assets and liabilities on the date of acquisition

2. Total consideration, including amounts paid by non-controlling interests that participated in the acquisition

 

Significant acquisitions completed in the first nine months of 2016 are as follows:

 

In January 2016, a subsidiary of the company acquired an initial 57.6% interest in Isagen S.A. E.S.P. (“Isagen”) from the Colombian government for total consideration of $1.9 billion. Isagen is Colombia’s third-largest power generation company which owns and operates a 3,032 MW portfolio, consisting predominantly of six, largely reservoir-based, hydroelectric facilities.

 

Following the acquisition, the subsidiary of the company was required to conduct two mandatory tender offers (the “MTOs”) for the remaining publicly held shares at the same price per share paid for the 57.6% controlling interest. The first MTO closed in May 2016, in which the subsidiary acquired an additional 26% of economic interest for $929 million. The second MTO closed in September 2016 with total consideration of $605 million, and the subsidiary effectively owns 99.64% of Isagen as of September 30, 2016 after giving effect to the initial acquisition and the two MTOs. The company is accounting for the initial acquisition of the 57.6% controlling interest and MTOs as separate transactions. Total revenue and net income that would have been recorded if the transaction had occurred at the beginning of the year would have been $674 million and $46 million, respectively.

 

In March 2016, a subsidiary of the company completed the acquisition of a self-storage operation for total consideration of $471 million. Total revenue and net income that would have been recorded if the transaction had occurred at the beginning of the year would have been $82 million and $55 million, respectively.

 

In April 2016, a subsidiary of the company completed the acquisition of a portfolio of student housing assets for total consideration of $397 million. Total revenue and net income that would have been recorded if the transaction had occurred at the beginning of the year would have been $33 million and $3 million, respectively.

 

In April 2016, a subsidiary of the company completed the acquisition of hydroelectric facilities in Pennsylvania for total consideration of $859 million. Total revenue and net loss that would have been recorded if the transaction had occurred at the beginning of the year would have been $37 million and $0.4 million, respectively.

 

In June 2016, a subsidiary of the company completed the acquisition of a portfolio of toll roads in Peru for total consideration of $128 million. Total revenue and net income that would have been recorded if the transaction had occurred at the beginning of the year would have been $39 million and $7 million, respectively.

 

Q3 2016 INTERIM REPORT

 











 

In July 2016, a subsidiary of the company completed the acquisition of a North American gas storage business for total consideration of $227 million. Total revenue and net income that would have been recorded if the transaction had occurred at the beginning of the year would have been $94 million and $23 million, respectively.

 

In July 2016, a subsidiary of the company completed the acquisition of a retail mall business for total consideration of $1.1 billion. Total revenue and net loss that would have been recorded if the transaction had occurred at the beginning of the year would have been $250 million and $44 million, respectively.

 

In August 2016, a subsidiary of the company completed the acquisition of an Australia port business for total consideration of $150 million. Total revenue and net income that would have been recorded if the transaction had occurred at the beginning of the year would have been $382 million and $8 million, respectively.

 

5.    FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The following table provides the carrying values and fair values of financial instruments as at September 30, 2016 and December 31, 2015:

 

 

	
 
    	
 
    	
Sep. 30, 2016
    	
 
    	
Dec. 31,   2015
    
	
(MILLIONS)
    	
 
    	
Carrying
    Value
    	
 
    	
Fair Value
    	
 
    	
Carrying
    Value
    	
 
    	
Fair Value
    
	
Financial assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash equivalents
    	
 
    	
 $
    	
4,372
    	
 
    	
 $
    	
4,372
    	
 
    	
 $
    	
2,774
    	
 
    	
 $
    	
2,774
    
	
Other financial assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Government bonds
    	
 
    	
51
    	
 
    	
51
    	
 
    	
122
    	
 
    	
122
    
	
Corporate bonds
    	
 
    	
1,355
    	
 
    	
1,355
    	
 
    	
1,274
    	
 
    	
1,274
    
	
Fixed income securities and other
    	
 
    	
334
    	
 
    	
334
    	
 
    	
396
    	
 
    	
396
    
	
Common shares and warrants
    	
 
    	
2,098
    	
 
    	
2,098
    	
 
    	
2,985
    	
 
    	
2,985
    
	
Loans and notes receivable
    	
 
    	
1,258
    	
 
    	
1,258
    	
 
    	
1,379
    	
 
    	
1,379
    
	
 
    	
 
    	
5,096
    	
 
    	
5,096
    	
 
    	
6,156
    	
 
    	
6,156
    
	
Accounts receivable and other
    	
 
    	
6,725
    	
 
    	
6,725
    	
 
    	
5,568
    	
 
    	
5,568
    
	
 
    	
 
    	
 $
    	
16,193
    	
 
    	
 $
    	
16,193
    	
 
    	
 $
    	
14,498
    	
 
    	
 $
    	
14,498
    
	
Financial liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Corporate borrowings
    	
 
    	
 $
    	
4,674
    	
 
    	
 $
    	
5,108
    	
 
    	
 $
    	
3,936
    	
 
    	
 $
    	
4,229
    
	
Property-specific mortgages
    	
 
    	
50,910
    	
 
    	
53,282
    	
 
    	
46,044
    	
 
    	
47,081
    
	
Subsidiary borrowings
    	
 
    	
9,663
    	
 
    	
9,874
    	
 
    	
8,303
    	
 
    	
8,376
    
	
Accounts payable and other
    	
 
    	
12,478
    	
 
    	
12,478
    	
 
    	
11,366
    	
 
    	
11,366
    
	
Subsidiary equity obligations
    	
 
    	
3,543
    	
 
    	
3,543
    	
 
    	
3,331
    	
 
    	
3,331
    
	
 
    	
 
    	
 $
    	
81,268
    	
 
    	
 $
    	
84,285
    	
 
    	
 $
    	
72,980
    	
 
    	
 $
    	
74,383
    


 

BROOKFIELD ASSET MANAGEMENT

 











 

Fair Value Hierarchy Levels

 

Assets and liabilities measured at fair value on a recurring basis include $1.7 billion (2015 – $1.7 billion) of financial assets and $1.4 billion (2015 – $1.3 billion) of financial liabilities which are measured at fair value using unobservable valuation inputs or based on management’s best estimates. The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the fair value hierarchy levels:

 

 

	
 
    	
 
    	
Sep. 30, 2016
    	
 
    	
Dec. 31,   2015
    
	
(MILLIONS)
    	
 
    	
Level 1
    	
 
    	
Level 2
    	
 
    	
Level 3
    	
 
    	
Level 1
    	
 
    	
Level 2
    	
 
    	
Level 3
    
	
Financial assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Other financial assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Government bonds
    	
 
    	
 $
    	
—
    	
 
    	
 $
    	
51
    	
 
    	
 $
    	
—
    	
 
    	
 $
    	
74
    	
 
    	
 $
    	
48
    	
 
    	
 $
    	
—
    
	
Corporate bonds and debt instruments
    	
 
    	
182
    	
 
    	
1,168
    	
 
    	
5
    	
 
    	
9
    	
 
    	
1,263
    	
 
    	
2
    
	
Fixed income securities
    	
 
    	
40
    	
 
    	
125
    	
 
    	
169
    	
 
    	
67
    	
 
    	
152
    	
 
    	
177
    
	
Common shares and warrants
    	
 
    	
682
    	
 
    	
—
    	
 
    	
1,416
    	
 
    	
1,613
    	
 
    	
—
    	
 
    	
1,372
    
	
Loans and notes receivables
    	
 
    	
—
    	
 
    	
62
    	
 
    	
12
    	
 
    	
—
    	
 
    	
70
    	
 
    	
12
    
	
Accounts receivable and other
    	
 
    	
—
    	
 
    	
1,164
    	
 
    	
107
    	
 
    	
4
    	
 
    	
1,109
    	
 
    	
128
    
	
 
    	
 
    	
 $
    	
904
    	
 
    	
 $
    	
2,570
    	
 
    	
 $
    	
1,709
    	
 
    	
 $
    	
1,767
    	
 
    	
 $
    	
2,642
    	
 
    	
 $
    	
1,691
    
	
Financial liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts payable and other
    	
 
    	
 $
    	
65
    	
 
    	
 $
    	
2,693
    	
 
    	
 $
    	
68
    	
 
    	
 $
    	
103
    	
 
    	
 $
    	
2,138
    	
 
    	
 $
    	
38
    
	
Subsidiary equity obligations
    	
 
    	
—
    	
 
    	
54
    	
 
    	
1,363
    	
 
    	
—
    	
 
    	
51
    	
 
    	
1,223
    
	
 
    	
 
    	
 $
    	
65
    	
 
    	
 $
    	
2,747
    	
 
    	
 $
    	
1,431
    	
 
    	
 $
    	
103
    	
 
    	
 $
    	
2,189
    	
 
    	
 $
    	
1,261
    


 

 

During the three months and nine months ended September 30, 2016, there were no transfers between level 1, 2 or 3. During the nine months ended September 30, 2015, $769 million of financial assets were transferred from level 1 to level 2 due to the elimination of an active market for those financial assets. There were no transfers during the three months ended September 30, 2015.

 

Fair values for financial instruments are determined by reference to quoted bid or ask prices, as appropriate. Where bid and ask prices are unavailable, the closing price of the most recent transaction of that instrument is used. In the absence of an active market, fair values are determined based on prevailing market rates for instruments with similar characteristics and risk profiles or internal or external valuation models, such as option pricing models and discounted cash flow analysis, using observable market inputs.

 

Level 2 financial assets and financial liabilities include foreign currency forward contracts, interest rate swap agreements, energy derivatives and subsidiary equity obligations.

 

The following table summarizes the valuation techniques and key inputs used in the fair value measurement of level 2 financial instruments:

 

 

	
(MILLIONS)
    Type   of asset/liability
    	
 
    	
Carrying
   value
   Sep. 30, 2016
    	
 
    	
Valuation technique(s) and   key input(s)
    
	
Derivative   assets/Derivative liabilities (accounts receivable/ accounts payable)
    	
 
    	
 $
    	
1,164/

(2,693)
    	
 
    	
Foreign currency forward   contracts – discounted cash flow model – forward exchange rates (from   observable forward exchange rates at the end of the reporting period) and   discounted at credit adjusted rate
    
    Interest   rate contracts – discounted cash flow model – forward interest rates (from   observable yield curves) and applicable credit spreads discounted at a credit   adjusted rate
    
    Energy   derivatives – quoted market prices, or in their absence internal valuation   models corroborated with observable market data
    
	
Redeemable   fund units (subsidiary equity obligations)
    	
 
    	
54
    	
 
    	
Aggregated   market prices of underlying investments
    
	
Other   financial assets
    	
 
    	
1,406
    	
 
    	
Valuation   models based on observable market data
    
						


 

Q3 2016 INTERIM REPORT

 











 

Fair values determined using valuation models (Level 3 financial assets and liabilities) require the use of unobservable inputs, including assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining those unobservable inputs, the company uses observable external market inputs such as interest rate yield curves, currency rates, and price and rate volatilities, as applicable, to develop assumptions regarding those unobservable inputs.

 

The following table summarizes the valuation techniques and significant unobservable inputs used in the fair value measurement level 3 financial instruments:

 

 

	
(MILLIONS)
    Type   of asset/liability
    	
 
    	
Carrying
   value
   Sep. 30,
   2016
    	
 
    	
Valuation
    technique(s)
    	
 
    	
Significant
    unobservable input(s)
    	
 
    	
Relationship of    unobservable
    input(s) to   fair value
    
	
Fixed income securities
    	
 
    	
 $
    	
169
    	
 
    	
Discounted cash flows
    	
 
    	
·  Future   cash flows
    
    
    
    ·  Discount   rate
    	
 
    	
·  Increases (decreases) in   future cash flows increase (decrease) fair value

 

·  Increases (decreases) in   discount rate decrease (increase) fair value
    
	
Warrants   (common shares and warrants)
    	
 
    	
1,416
    	
 
    	
Black-Scholes   model
    	
 
    	
•  Volatility
    	
 
    	
·  Increases   (decreases) in volatility increase (decrease) fair value
    
	
Limited-life   funds (subsidiary equity obligations)
    	
 
    	
1,363
    	
 
    	
Discounted   cash flows
    	
 
    	
·  Future cash   flows
    
    
    
    ·  Discount   rate
    
    
    
    ·  Terminal   capitalization rate
    
    
    
    ·  Investment   horizon
    	
 
    	
·  Increases (decreases) in   future cash flows increase (decrease) fair value

 

·  Increases (decreases) in   discount rate decrease (increase) fair value

 

·  Increases (decreases) in   terminal capitalization rate decrease (increase) fair value

 

·  Increases (decreases) in the   investment horizon increase (decrease) fair value
    
	
Derivative assets/Derivative   liabilities (accounts receivable/payable)
    	
 
    	
 $
    	
107/

(68)
    	
 
    	
Discounted   cash flows
    	
 
    	
·  Future cash   flows
    
    
    
    ·  Forward   exchange rates (from observable forward exchange rates at the end of the   reporting period)
    
    ·  Discount   rate
    	
 
    	
·  Increases (decreases) in   future cash flows increase (decrease) fair value

 

·  Increases   (decreases) in the forward exchange rate increase (decrease) fair value

 

·  Increases (decreases) in   discount rate decrease (increase) fair value
    


 

 

The following table presents the change in the balance of financial assets and liabilities classified as Level 3 as at September 30, 2016:

 

 

	
 
    	
 
    	
Three   Months Ended
    	
 
    	
Nine   Months Ended
    
	
FOR THE PERIODS ENDED SEP.   30
   (MILLIONS)
    	
 
    	
Financial
    Assets
    	
 
    	
Financial
    Liabilities
    	
 
    	
Financial
    Assets
    	
 
    	
Financial
    Liabilities
    
	
Balance at beginning of period
    	
 
    	
 $
    	
1,855
    	
 
    	
 $
    	
1,405
    	
 
    	
 $
    	
1,691
    	
 
    	
 $
    	
1,261
    
	
Fair value changes in net income
    	
 
    	
(154)
    	
 
    	
(4)
    	
 
    	
5
    	
 
    	
39
    
	
Fair value changes in other comprehensive income1
    	
 
    	
(13)
    	
 
    	
3
    	
 
    	
(14)
    	
 
    	
55
    
	
Additions, net of disposals
    	
 
    	
21
    	
 
    	
27
    	
 
    	
27
    	
 
    	
76
    
	
Balance at end of period
    	
 
    	
 $
    	
1,709
    	
 
    	
 $
    	
1,431
    	
 
    	
 $
    	
1,709
    	
 
    	
 $
    	
1,431
    


 

1. Includes foreign currency translation

 

BROOKFIELD ASSET MANAGEMENT

 









 

6.            CURRENT AND NON-CURRENT PORTION OF ACCOUNT BALANCES

 

a)            Assets

 

 

	
 
    	
 
    	
Other Financial Assets
    	
 
    	
Accounts Receivable
   and Other
    	
 
    	
Inventory
    
	
(MILLIONS)
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    
	
Current portion
    	
 
    	
$
    	
2,010
    	
 
    	
$
    	
1,194
    	
 
    	
$
    	
6,185
    	
 
    	
$
    	
4,746
    	
 
    	
$
    	
3,291
    	
 
    	
$
    	
3,198
    
	
Non-current portion
    	
 
    	
3,086
    	
 
    	
4,962
    	
 
    	
2,697
    	
 
    	
2,298
    	
 
    	
2,578
    	
 
    	
2,083
    
	
 
    	
 
    	
$
    	
5,096
    	
 
    	
$
    	
6,156
    	
 
    	
$
    	
8,882
    	
 
    	
$
    	
7,044
    	
 
    	
$
    	
5,869
    	
 
    	
$
    	
5,281
    


 

b)            Liabilities

 

 

	
 
    	
 
    	
Accounts Payable
   and Other
    	
 
    	
Property-Specific
   Mortgages
    	
 
    	
Subsidiary
   Borrowings
    
	
(MILLIONS)
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    	
 
    	
Sep. 30, 
   2016
    	
 
    	
Dec. 31,
   2015
    
	
Current portion
    	
 
    	
$
    	
7,876
    	
 
    	
$
    	
7,560
    	
 
    	
$
    	
7,243
    	
 
    	
$
    	
9,426
    	
 
    	
$
    	
630
    	
 
    	
$
    	
1,839
    
	
Non-current portion
    	
 
    	
4,602
    	
 
    	
3,806
    	
 
    	
43,667
    	
 
    	
36,618
    	
 
    	
9,033
    	
 
    	
6,464
    
	
 
    	
 
    	
$
    	
12,478
    	
 
    	
$
    	
11,366
    	
 
    	
$
    	
50,910
    	
 
    	
$
    	
46,044
    	
 
    	
$
    	
9,663
    	
 
    	
$
    	
8,303
    


 

7.    HELD FOR SALE

 

The following is a summary of the assets and liabilities that were classified as held for sale as at September 30, 2016:

 

 

	
(MILLIONS)
    	
 
    	
Property 
    	
 
    	
Other 
    	
 
    	
Total 
    
	
Assets
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cash and cash equivalents
    	
 
    	
$
    	
—
    	
 
    	
$
    	
5
    	
 
    	
$
    	
5
    
	
Accounts receivables and other
    	
 
    	
56
    	
 
    	
137
    	
 
    	
193
    
	
Investment properties
    	
 
    	
3,125
    	
 
    	
20
    	
 
    	
3,145
    
	
Property, plant and equipment
    	
 
    	
—
    	
 
    	
302
    	
 
    	
302
    
	
Equity accounted investments
    	
 
    	
—
    	
 
    	
115
    	
 
    	
115
    
	
Assets classified as held for sale
    	
 
    	
$
    	
3,181
    	
 
    	
$
    	
579
    	
 
    	
$
    	
3,760
    
	
Liabilities
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Accounts payable and other
    	
 
    	
$
    	
59
    	
 
    	
$
    	
33
    	
 
    	
$
    	
92
    
	
Property-specific mortgages
    	
 
    	
1,723
    	
 
    	
170
    	
 
    	
1,893
    
	
Liabilities associated with assets classified as held for sale
    	
 
    	
$
    	
1,782
    	
 
    	
$
    	
203
    	
 
    	
$
    	
1,985
    


 

As at September 30, 2016, a subsidiary of the company classified three office properties in New York, Washington, D.C., and London, as well a portfolio of industrial assets and a portfolio of multifamily assets in the United States as held for sale in the next 12 months. The Core Office assets to be disposed of represent total assets and liabilities of $1.9 billion and $1.0 billion, respectively. In addition, the industrial and multifamily assets classified to held for sale represent assets of $428 million.

 

8.    PROPERTY, PLANT AND EQUIPMENT

 

 

	
(MILLIONS)
    	
 
    	
Sep. 30,
   2016
    	
 
    	
Dec. 31,
   2015
    
	
Renewable power
    	
 
    	
$
    	
26,804
    	
 
    	
$
    	
19,738
    
	
Infrastructure
    	
 
    	
 
    	
 
    	
 
    
	
Utilities
    	
 
    	
3,518
    	
 
    	
3,600
    
	
Transport and energy
    	
 
    	
5,159
    	
 
    	
4,032
    
	
Sustainable resources
    	
 
    	
839
    	
 
    	
706
    
	
Property
    	
 
    	
5,182
    	
 
    	
5,316
    
	
Private equity and other
    	
 
    	
3,701
    	
 
    	
3,881
    
	
 
    	
 
    	
$
    	
45,203
    	
 
    	
$
    	
37,273
    


 

Q3 2016 INTERIM REPORT

 











 

9.    SUBSIDIARY PUBLIC ISSUERS

 

Brookfield Finance Inc. (“BFI”) may offer and sell debt securities in one or more issuances in the aggregate of up to $2.5 billion. Any debt securities issued by BFI will be fully and unconditionally guaranteed by the company. On May 25, 2016, BFI issued a $500 million 4.25% note due in 2026.

 

The company provided a full and unconditional guarantee of the Class 1 Senior Preferred Shares, Series A issued by its wholly owned subsidiary, Brookfield Investments Corporation (“BIC”). As at September 30, 2016, C$42 million of these senior preferred shares were held by third-party shareholders, and are retractable at the option of the holder.

 

The following tables contain summarized financial information of the Corporation, BFI, BIC and non-guarantor subsidiaries:

 

 

	
AS AT AND FOR THE
   THREE MONTHS ENDED SEP. 30, 2016
   (MILLIONS)
    	
 
    	
The  Corporation1 
    	
 
    	
BFI 
    	
 
    	
BIC
    	
 
    	
Subsidiaries of
   the
   Corporation
   other than BFI
   and BIC2
    	
 
    	
Consolidating
   Adjustments3
    	
 
    	
The
   Company
   Consolidated
    
	
Revenues
    	
 
    	
$
    	
36
    	
 
    	
$
    	
5
    	
 
    	
$
    	
—
    	
 
    	
$
    	
6,265
    	
 
    	
$
    	
(21)
    	
 
    	
$
    	
6,285
    
	
Net   income attributable to shareholders
    	
 
    	
1,036
    	
 
    	
—
    	
 
    	
19
    	
 
    	
1,073
    	
 
    	
(1,092)
    	
 
    	
1,036
    
	
Total assets
    	
 
    	
34,621
    	
 
    	
512
    	
 
    	
2,703
    	
 
    	
157,700
    	
 
    	
(35,699)
    	
 
    	
159,837
    
	
Total liabilities
    	
 
    	
8,457
    	
 
    	
(503)
    	
 
    	
1,123
    	
 
    	
87,054
    	
 
    	
(3,413)
    	
 
    	
92,718
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
AS AT DEC. 31, 2015 AND FOR   THE
   THREE MONTHS ENDED SEP. 30, 2015
   (MILLIONS)
    	
 
    	
The  Corporation1 
    	
 
    	
BFI
    	
 
    	
BIC
    	
 
    	
Subsidiaries of
   the
   Corporation
   other than BFI
   and BIC2
    	
 
    	
Consolidating
   Adjustments3
    	
 
    	
The
   Company
   Consolidated
    
	
Revenues
    	
 
    	
$
    	
45
    	
 
    	
$
    	
—
    	
 
    	
$
    	
2
    	
 
    	
$
    	
5,078
    	
 
    	
$
    	
(69)
    	
 
    	
$
    	
5,056
    
	
Net   income attributable to shareholders
    	
 
    	
289
    	
 
    	
—
    	
 
    	
18
    	
 
    	
297
    	
 
    	
(315)
    	
 
    	
289
    
	
Total assets
    	
 
    	
33,325
    	
 
    	
—
    	
 
    	
2,625
    	
 
    	
143,552
    	
 
    	
(39,988)
    	
 
    	
139,514
    
	
Total liabilities
    	
 
    	
8,017
    	
 
    	
—
    	
 
    	
1,095
    	
 
    	
80,236
    	
 
    	
(7,061)
    	
 
    	
82,287
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
FOR THE NINE MONTHS ENDED   SEP. 30, 2016
   (MILLIONS)
    	
 
    	
The  Corporation1 
    	
 
    	
BFI 
    	
 
    	
BIC
    	
 
    	
Subsidiaries of
   the
   Corporation
   other than BFI
   and BIC2
    	
 
    	
Consolidating
   Adjustments3
    	
 
    	
The
   Company
   Consolidated
    
	
Revenues
    	
 
    	
$
    	
209
    	
 
    	
$
    	
7
    	
 
    	
$
    	
2
    	
 
    	
$
    	
17,406
    	
 
    	
$
    	
(148)
    	
 
    	
$
    	
17,476
    
	
Net   income attributable to shareholders
    	
 
    	
1,478
    	
 
    	
—
    	
 
    	
22
    	
 
    	
1,556
    	
 
    	
(1,578)
    	
 
    	
1,478
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
FOR THE NINE MONTHS ENDED   SEP. 30, 2015
   (MILLIONS)
    	
 
    	
The  Corporation1 
    	
 
    	
BFI 
    	
 
    	
BIC
    	
 
    	
Subsidiaries of
   the
   Corporation
   other than BFI
   and BIC2
    	
 
    	
Consolidating
   Adjustments3
    	
 
    	
The
   Company
   Consolidated
    
	
Revenues
    	
 
    	
$
    	
228
    	
 
    	
$
    	
—
    	
 
    	
$
    	
193
    	
 
    	
$
    	
14,176
    	
 
    	
$
    	
(222)
    	
 
    	
$
    	
14,375
    
	
Net   income attributable to shareholders
    	
 
    	
1,663
    	
 
    	
—
    	
 
    	
201
    	
 
    	
1,701
    	
 
    	
(1,902)
    	
 
    	
1,663
    


 

 

1. This column accounts for investments in all subsidiaries of the corporation under the equity method

2. This column accounts for investments in all subsidiaries of the corporation other than BFI and BIC on a combined basis

3. This column includes the necessary amounts to present the company on a consolidated basis

 

BROOKFIELD ASSET MANAGEMENT

 











 

10.     COMMON EQUITY

 

The company’s common equity is comprised of the following:

 

 

	
(MILLIONS)
    	
 
    	
Sep. 30, 
   2016
    	
 
    	
Dec. 31, 
   2015
    
	
Common shares
    	
 
    	
$
    	
4,391
    	
 
    	
$
    	
4,378
    
	
Contributed surplus
    	
 
    	
223
    	
 
    	
192
    
	
Retained earnings
    	
 
    	
11,501
    	
 
    	
11,045
    
	
Ownership changes
    	
 
    	
1,372
    	
 
    	
1,500
    
	
Accumulated other comprehensive income
    	
 
    	
4,945
    	
 
    	
4,453
    
	
Common equity
    	
 
    	
$
    	
22,432
    	
 
    	
$
    	
21,568
    


 

The company is authorized to issue an unlimited number of Class A shares and 85,120 Class B shares, together referred to as common shares. The company’s common shares have no stated par value. The holders of Class A shares and Class B shares rank on parity with each other with respect to the payment of dividends and the return of capital on the liquidation, dissolution or winding up of the company or any other distribution of the assets of the company among its shareholders for the purpose of winding up its affairs. Holders of the Class A shares are entitled to elect one-half of the Board of Directors of the company and holders of the Class B shares are entitled to elect the other one-half of the Board of Directors. With respect to the Class A and Class B shares, there are no dilutive factors, material or otherwise, that would result in different diluted earnings per share between the classes. This relationship holds true irrespective of the number of dilutive instruments issued in either one of the respective classes of common stock, as both classes of shares participate equally, on a pro rata basis, in the dividends, earnings and net assets of the company, whether taken before or after dilutive instruments, regardless of which class of shares are diluted.

 

The holders of the company’s common shares received cash dividends during the third quarter of 2016 of $0.13 per share (2015 – $0.12 per share).

 

On June 20, 2016, the company paid a special dividend of approximately 19 million limited partnership units of a newly created subsidiary, Brookfield Business Partners L.P. (“BBU”), to the holders of the company’s Class A Limited Voting Shares and Class B Limited Voting Shares. This was a common control transaction and as such the special dividend of $441 million reflected in equity was based on the IFRS carrying value of the 21% interest in BBU distributed to shareholders on June 20, 2016.

 

The number of issued and outstanding common shares and unexercised options are as follows:

 

 

	
 
    	
 
    	
Sep. 30, 2016
    	
 
    	
Dec. 31, 2015
    
	
Class A shares1
    	
 
    	
959,175,279
    	
 
    	
961,205,719
    
	
Class B shares
    	
 
    	
85,120
    	
 
    	
85,120
    
	
Shares outstanding1
    	
 
    	
959,260,399
    	
 
    	
961,290,839
    
	
Unexercised options and other share-based plans2
    	
 
    	
45,289,259
    	
 
    	
41,978,628
    
	
Total diluted shares
    	
 
    	
1,004,549,658
    	
 
    	
1,003,269,467
    


 

1. Net of 27,846,452 (2015 – 26,260,617) Class A shares held by the company in respect of long-term compensation agreements

2. Includes management share option plan and escrowed stock plan

 

The authorized common share capital consists of an unlimited number of shares. Shares issued and outstanding changed as follows:

 

 

	
 
    	
 
    	
Three   Months Ended
    	
 
    	
Nine   Months Ended
    
	
FOR THE PERIODS ENDED SEP. 30
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Outstanding at beginning of period1
    	
 
    	
958,993,493
    	
 
    	
960,335,048
    	
 
    	
961,290,839
    	
 
    	
928,227,520
    
	
Issued (repurchased)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Issuances
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
32,901,133
    
	
Repurchases
    	
 
    	
(62,916)
    	
 
    	
(4,052,703)
    	
 
    	
(3,326,875)
    	
 
    	
(9,011,617)
    
	
Long-term   share ownership plans2
    	
 
    	
276,666
    	
 
    	
764,428
    	
 
    	
1,094,592
    	
 
    	
4,807,553
    
	
Dividend   reinvestment plan and others
    	
 
    	
53,156
    	
 
    	
60,413
    	
 
    	
201,843
    	
 
    	
182,597
    
	
Outstanding at end of period1
    	
 
    	
959,260,399
    	
 
    	
957,107,186
    	
 
    	
959,260,399
    	
 
    	
957,107,186
    


 

1. Net of 27,846,452 (2015 – 23,807,487) Class A shares held by the company in respect of long-term compensation agreements

2. Includes management share option plan and restricted stock plan

 

Q3 2016 INTERIM REPORT

 











 

a)    Earnings Per Share

 

The components of basic and diluted earnings per share are summarized in the following table:

 

 

	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine   Months Ended
    
	
FOR   THE PERIODS ENDED SEP. 30
   (MILLIONS)
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Net income attributable to shareholders
    	
 
    	
$
    	
1,036
    	
 
    	
$
    	
289
    	
 
    	
$
    	
1,478
    	
 
    	
$
    	
1,663
    
	
Preferred share dividends
    	
 
    	
(33)
    	
 
    	
(32)
    	
 
    	
(100)
    	
 
    	
(100)
    
	
Net income available to shareholders
    	
 
    	
$
    	
1,003
    	
 
    	
$
    	
257
    	
 
    	
$
    	
1,378
    	
 
    	
$
    	
1,563
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted average – common shares
    	
 
    	
959.1
    	
 
    	
958.7
    	
 
    	
959.0
    	
 
    	
946.7
    
	
Dilutive   effect of the conversion of options and escrowed shares using treasury stock   method
    	
 
    	
18.8
    	
 
    	
25.0
    	
 
    	
17.4
    	
 
    	
28.0
    
	
Common shares and common share equivalents
    	
 
    	
977.9
    	
 
    	
983.7
    	
 
    	
976.4
    	
 
    	
974.7
    


 

b)    Stock-Based Compensation

 

The company and its consolidated subsidiaries account for stock options using the fair value method. Under the fair value method, compensation expense for stock options that are direct awards of stock is measured at fair value at the grant date using an option pricing model and recognized over the vesting period. Options issued under the company’s Management Share Option Plan (“MSOP”) vest proportionately over five years and expire ten years after the grant date. The exercise price is equal to the market price at the close of business on the day prior to the grant date, or under certain conditions, the volume-weighted average price for the five business days prior to the grant date. During the nine months ended September 30, 2016, the company granted 4.4 million stock options at a weighted average exercise price of $30.59 per share. The compensation expense was calculated using the Black-Scholes method of valuation, assuming an average 7.5 year term, 28.0% volatility, a weighted average expected dividend yield of 1.6% annually, a risk free rate of 1.6% and a liquidity discount of 25%.

 

The company previously established an Escrowed Stock Plan whereby a private company is capitalized with preferred shares issued to Brookfield for cash proceeds and common shares (the “escrowed shares”) that are granted to executives. The proceeds are used to purchase Brookfield Class A shares and therefore the escrowed shares represent an interest in the underlying Brookfield Shares. The escrowed shares vest on and must be held until the fifth anniversary of the grant date. At a date at least five years from and no more than ten years from the grant date, all escrowed shares held will be exchanged for a number of Class A shares issued from treasury of the company, based on the market value of Class A shares at the time of exchange. During the nine months ended September 30, 2016, the company granted 3.25 million escrowed shares at a weighted average exercise price of $30.59 per share. The compensation expense was calculated using the Black-Scholes method of valuation, assuming an average 7.5 year term, 28.0% volatility, a weighted average expected dividend yield of 1.6% annually, a risk free rate of 1.6% and a liquidity discount of 25%.

 

11.    FAIR VALUE CHANGES

 

Fair value changes recorded in net income represent gains or losses arising from changes in the fair value of assets and liabilities, including derivative financial instruments, accounted for using the fair value method and are comprised of the following:

 

 

	
 
    	
 
    	
Three Months Ended
    	
 
    	
Nine   Months Ended
    
	
FOR   THE PERIODS ENDED SEP. 30
   (MILLIONS)
    	
 
    	
2016
    	
 
    	
2015
    	
 
    	
2016
    	
 
    	
2015
    
	
Investment property
    	
 
    	
$
    	
99
    	
 
    	
$
    	
410
    	
 
    	
$
    	
590
    	
 
    	
$
    	
1,521
    
	
General Growth Properties warrants
    	
 
    	
(151)
    	
 
    	
33
    	
 
    	
33
    	
 
    	
(118)
    
	
Redeemable fund units
    	
 
    	
12
    	
 
    	
18
    	
 
    	
(33)
    	
 
    	
31
    
	
Transaction related gains
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
232
    
	
Investment in Canary Wharf
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
150
    
	
Impairments and other
    	
 
    	
(19)
    	
 
    	
(72)
    	
 
    	
(232)
    	
 
    	
(244)
    
	
 
    	
 
    	
$
    	
(59)
    	
 
    	
$
    	
389
    	
 
    	
$
    	
358
    	
 
    	
$
    	
1,572
    


 

BROOKFIELD ASSET MANAGEMENT