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SEGMENTED INFORMATION
 6 Months Ended
Jun. 30, 2018
Operating Segments [Abstract]  
SEGMENTED INFORMATION
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 (“FFO”) 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 include managing our listed partnerships, private funds and public securities on behalf of our investors and ourselves. We generate contractual base management fees for these activities as well as incentive distributions and performance income, including performance fees, transaction fees and carried interest. Common equity in our asset management segment is immaterial.
ii.
Real estate operations include the ownership, operation and development of core office, core retail, opportunistic and other properties.
iii.
Renewable power operations include the ownership, operation and development of hydroelectric, wind, solar and storage and other power generating facilities.
iv.
Infrastructure operations include the ownership, operation and development of utilities, transport, energy, data infrastructure and sustainable resource assets.
v.
Private equity operations include a broad range of industries, and are mostly focused on construction, business services, energy and industrial operations.
vi.
Residential development operations consist 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 our operating segments and allocated to each operating segment based on an internal pricing framework.
b)
Segment Financial Measures
FFO is a key measure of our financial performance and our segment measure of profit and loss. It is utilized by our Chief Operating Decision Maker in assessing operating results and the performance of our businesses on a segmented basis. We define FFO as net income excluding fair value changes, depreciation and amortization and deferred income taxes, net of non-controlling interests. When determining FFO, we include our proportionate share of the FFO from equity accounted investments on a fully diluted basis. FFO also includes realized disposition gains and losses, which are gains or losses arising from transactions during the reporting period, adjusted to include associated fair value changes and revaluation surplus recorded in prior periods, taxes payable or receivable in connection with those transactions and amounts that are recorded directly in equity, such as ownership changes.
We use FFO to assess our performance as an asset manager and as an investor in our assets. FFO from our asset management segment includes fees, net of the associated costs, that we earn from managing capital in our listed partnerships, private funds and public securities accounts. We are also eligible to earn incentive payments in the form of incentive distributions, performance fees or carried interest. As an investor in our assets, our FFO represents the company’s share of revenues less costs incurred within our operations, which include interest expenses and other costs. Specifically, it includes the impact of contracts that we enter into to generate revenues, including power sales agreements, contracts that our operating businesses enter into such as leases and take or pay contracts and sales of inventory. FFO includes the impact of changes in leverage or the cost of that financial leverage and other costs incurred to operate our business.
We use realized disposition gains and losses within FFO in order to provide additional insight regarding the performance of investments on a cumulative realized basis, including any unrealized fair value adjustments that were recorded in equity and not otherwise reflected in current period FFO, and believe it is useful to investors to better understand variances between reporting periods. We exclude depreciation and amortization from FFO, as we believe that the value of most of our assets typically increases over time, provided we make the necessary maintenance expenditures, the timing and magnitude of which may differ from the amount of depreciation recorded in any given period. In addition, the depreciated cost base of our assets is reflected in the ultimate realized disposition gain or loss on disposal. As noted above, unrealized fair value changes are excluded from FFO until the period in which the asset is sold. We also exclude deferred income taxes from FFO because the vast majority of the company’s deferred income tax assets and liabilities are a result of the revaluation of our assets under IFRS.
Our definition of FFO may differ from the definition used by other organizations, as well as the definition of FFO 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 FFO and the determination of FFO 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 do not use FFO as a measure of cash generated from our operations.
We illustrate how we derive FFO for each operating segment and reconcile total FFO to net income in Note 3(c)(v) of the consolidated financial statements. We do not use FFO as a measure of cash generated from our operations.
Segment Balance Sheet Information
We use common equity by segment as our measure of segment assets when reviewing our deconsolidated balance sheet because it is utilized by our Chief Operating Decision Maker for capital allocation decisions.
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 between the consolidated entities. Inter-segment revenues are determined under terms that approximate market value.
The company allocates the costs of shared functions that would otherwise be included within its corporate activities segment, such as information technology and internal audit, pursuant to formal policies.
c)
Reportable Segment Measures
AS AT AND FOR THE THREE MONTHS ENDED JUN. 30, 2018
(MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Notes
External revenues
$
18

 
$
1,794

 
$
898

 
$
1,144

 
$
8,678

 
$
686

 
$
58

 
$
13,276

 
 
Inter-segment revenues
362

 
9

 
3

 
—

 
126

 
—

 
(11
)
 
489

 
i
Segmented revenues
380

 
1,803

 
901

 
1,144

 
8,804

 
686

 
47

 
13,765

 
 
FFO from equity accounted investments
—

 
218

 
8

 
193

 
201

 
2

 
3

 
625

 
ii
Interest expense
—

 
(544
)
 
(218
)
 
(133
)
 
(84
)
 
(14
)
 
(80
)
 
(1,073
)
 
iii
Current income taxes
—

 
(1
)
 
(9
)
 
(47
)
 
(52
)
 
(9
)
 
(18
)
 
(136
)
 
iv
Funds from operations
241

 
206

 
66

 
86

 
282

 
14

 
(105
)
 
790

 
v
Common equity
334

 
17,116

 
4,549

 
2,592

 
4,204

 
2,601

 
(7,015
)
 
24,381

 
 
Equity accounted investments
—

 
19,309

 
517

 
7,363

 
2,301

 
434

 
101

 
30,025

 
 
Additions to non-current assets1
—

 
2,951

 
3,214

 
1,514

 
679

 
33

 
24

 
8,415

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


AS AT DEC. 31, 2017 AND FOR THE
THREE MONTHS ENDED JUN. 30, 2017
(MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Notes
External revenues
$
63

 
$
1,748

 
$
654

 
$
1,037

 
$
5,370

 
$
499

 
$
73

 
$
9,444

 
 
Inter-segment revenues
290

 
9

 
—

 
5

 
83

 
—

 
—

 
387

 
i
Segmented revenues
353

 
1,757

 
654

 
1,042

 
5,453

 
499

 
73

 
9,831

 
 
FFO from equity accounted investments
—

 
243

 
4

 
225

 
39

 
(12
)
 
(8
)
 
491

 
ii
Interest expense
—

 
(453
)
 
(157
)
 
(117
)
 
(60
)
 
(20
)
 
(63
)
 
(870
)
 
iii
Current income taxes
—

 
(51
)
 
5

 
(40
)
 
(21
)
 
(3
)
 
22

 
(88
)
 
iv
Funds from operations
231

 
661

 
65

 
84

 
62

 
(30
)
 
(47
)
 
1,026

 
v
Common equity
312

 
16,725

 
4,944

 
2,834

 
4,215

 
2,915

 
(7,893
)
 
24,052

 
 
Equity accounted investments
—

 
19,596

 
509

 
8,793

 
2,385

 
346

 
365

 
31,994

 
 
Additions to non-current assets1
—

 
1,052

 
77

 
6,953

 
3,528

 
18

 
2

 
11,630

 
 
1.
Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill
FOR THE SIX MONTHS
ENDED JUN. 30, 2018
(MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Notes
External revenues
$
81

 
$
3,670

 
$
1,837

 
$
2,257

 
$
16,793

 
$
1,145

 
$
124

 
$
25,907

 
 
Inter-segment revenues
798

 
18

 
6

 
3

 
231

 
—

 
(24
)
 
1,032

 
i
Segmented revenues
879

 
3,688

 
1,843

 
2,260

 
17,024

 
1,145

 
100

 
26,939

 
 
FFO from equity accounted investments
—

 
446

 
20

 
432

 
341

 
7

 
—

 
1,246

 
ii
Interest expense
—

 
(1,074
)
 
(447
)
 
(255
)
 
(151
)
 
(31
)
 
(158
)
 
(2,116
)
 
iii
Current income taxes
—

 
(7
)
 
(16
)
 
(219
)
 
(80
)
 
(13
)
 
(28
)
 
(363
)
 
iv
Funds from operations
604

 
645

 
166

 
427

 
336

 
(19
)
 
(199
)
 
1,960

 
v
Additions to non-current assets1
—

 
6,024

 
3,484

 
1,756

 
803

 
109

 
179

 
12,355

 
 
1.
Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill
FOR THE SIX MONTHS
ENDED JUN. 30, 2017
(MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Notes
External revenues
$
100

 
$
3,435

 
$
1,297

 
$
1,785

 
$
7,768

 
$
938

 
$
122

 
$
15,445

 
 
Inter-segment revenues
543

 
17

 
—

 
5

 
161

 
—

 
—

 
726

 
i
Segmented revenues
643

 
3,452

 
1,297

 
1,790

 
7,929

 
938

 
122

 
16,171

 
 
FFO from equity accounted investments
—

 
461

 
5

 
414

 
75

 
(11
)
 
4

 
948

 
ii
Interest expense
—

 
(922
)
 
(322
)
 
(216
)
 
(90
)
 
(42
)
 
(125
)
 
(1,717
)
 
iii
Current income taxes
—

 
(54
)
 
(12
)
 
(52
)
 
(16
)
 
(5
)
 
34

 
(105
)
 
iv
Funds from operations
397

 
986

 
132

 
167

 
164

 
(38
)
 
(108
)
 
1,700

 
v
Additions to non-current assets1
—

 
4,709

 
144

 
7,273

 
3,617

 
41

 
28

 
15,812

 
 

1.
Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill
i.Inter-Segment Revenues
For the three months ended June 30, 2018, the adjustment to external revenues, when determining segment revenues, consists of management fees earned from consolidated entities totaling $362 million (2017 – $290 million), revenues earned on construction projects between consolidated entities totaling $122 million (2017 – $83 million) and interest income and other revenues between consolidated entities totaling $5 million (2017 – $14 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.
For the six months ended June 30, 2018, the adjustment to external revenues when determining segmented revenues consists of asset management fee revenues earned from consolidated entities totaling $798 million (2017 – $543 million), revenues earned on construction projects between consolidated entities totaling $224 million (2017 – 161 million), and interest income and other revenues totaling $10 million (2017 – $22 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.
ii.FFO from Equity Accounted Investments
The company determines FFO from its equity accounted investments by applying the same methodology utilized in adjusting net income of consolidated entities. The following table reconciles the company’s consolidated equity accounted income to FFO from equity accounted investments:
 
Three Months Ended
 
Six Months Ended
FOR THE PERIODS ENDED JUN. 30
(MILLIONS)
2018

 
2017

 
2018

 
2017

Consolidated equity accounted income
$
342

 
$
250

 
$
630

 
$
585

Non-FFO items from equity accounted investments1
283

 
241

 
616

 
363

FFO from equity accounted investments
$
625

 
$
491


$
1,246

 
$
948


1.
Adjustment to back out non-FFO expenses (income) that are included in consolidated equity accounted income including depreciation and amortization, deferred taxes and fair value changes from equity accounted investments
iii.Interest Expense
For the three months ended June 30, 2018, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $7 million (2017 – $5 million) that is eliminated on consolidation, along with the associated revenue.
For the six months ended June 30, 2018, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $13 million (2017 – $9 million) that is eliminated on consolidation, along with the associated revenue.
iv.
Current Income Taxes
Current income taxes are included in FFO but are aggregated with deferred income taxes in income tax expense on the company’s Consolidated Statements of Operations. The following table reconciles consolidated income taxes to current income taxes by segment:
 
Three Months Ended
 
Six Months Ended
FOR THE PERIODS ENDED JUN. 30
(MILLIONS)
2018

 
2017

 
2018

 
2017

Current tax expense
$
(136
)
 
$
(88
)
 
$
(363
)

$
(105
)
Deferred income tax expense
(203
)
 
(31
)
 
(129
)
 
(139
)
Income tax expense
$
(339
)
 
$
(119
)
 
$
(492
)
 
$
(244
)

v.Reconciliation of Net Income to Total FFO
The following table reconciles net income to total FFO:
 
 
 
Three Months Ended
 
Six Months Ended
FOR THE PERIODS ENDED JUN. 30
(MILLIONS)
Note
 
2018

 
2017

 
2018

 
2017

Net income
 
 
$
1,664

 
$
958

 
$
3,519

 
$
1,476

Realized disposition gains in fair value changes or equity
vi
 
95

 
499

 
515

 
651

Non-controlling interests in FFO
 
 
(1,294
)
 
(1,103
)
 
(2,756
)
 
(2,032
)
Financial statement components not included in FFO
 
 
 
 
 
 
 
 
 
Equity accounted fair value changes and other non-FFO items
 
 
283

 
241

 
616

 
363

Fair value changes
 
 
(833
)
 
(213
)
 
(1,405
)
 
(9
)
Depreciation and amortization
 
 
672

 
613

 
1,342

 
1,112

Deferred income taxes
 
 
203

 
31

 
129

 
139

Total FFO
 
 
$
790

 
$
1,026

 
$
1,960

 
$
1,700


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 in connection with the assets sold. 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, revaluation surplus or directly in equity were $95 million for the three months ended June 30, 2018 (2017 – $499 million), of which $nil relates to prior periods (2017 – $498 million) and $89 million has been recorded directly in equity as changes in ownership (2017 – $nil).
The realized disposition gains recorded in fair value changes, revaluation surplus or directly in equity were $515 million for the six months ended June 30, 2018 (2017 – $651 million), of which $401 million relates to prior periods (2017 – $581 million) and $89 million has been recorded directly in equity as changes in ownership (2017 – $nil).
d)
Geographic Allocation
The company’s revenues by location of operations are as follows:
 
Three Months Ended
 
Six Months Ended
FOR THE PERIODS ENDED JUN. 30
(MILLIONS)
2018

 
2017

 
2018

 
2017

United States
$
2,130

 
$
2,041

 
$
4,094

 
$
4,020

Canada
1,596

 
1,091

 
3,264

 
2,248

United Kingdom
6,008

 
3,491

 
11,397

 
4,185

Other Europe
536

 
102

 
994

 
219

Australia
1,069

 
1,099

 
2,129

 
2,018

Brazil
944

 
808

 
2,127

 
1,086

Colombia
346

 
235

 
614

 
479

Other
647

 
577

 
1,288

 
1,190

 
$
13,276

 
$
9,444

 
$
25,907

 
$
15,445


The company’s consolidated assets by location are as follows:
AS AT JUN. 30, 2018 AND DEC. 31, 2017
(MILLIONS)
2018

 
2017

United States
$
87,212

 
$
84,860

Canada
21,777

 
21,897

United Kingdom
22,225

 
20,005

Other Europe
8,130

 
3,979

Australia
14,120

 
14,501

Brazil
20,491

 
23,931

Colombia
9,024

 
7,362

Other
16,189

 
16,185

 
$
199,168

 
$
192,720