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SEGMENTED INFORMATION
 6 Months Ended
Jun. 30, 2019
Disclosure of 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, LP investments and other properties.
iii.
Renewable power operations include the ownership, operation and development of hydroelectric, wind, solar, 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 business services, infrastructure services and industrials.
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 leverage, 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.
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, 2019 (MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Note
External revenues
$
61

 
$
2,560

 
$
1,028

 
$
1,806

 
$
10,738

 
$
594

 
$
137

 
$
16,924

 
 
Inter-segment revenues
549

 
9

 
4

 
—

 
107

 
—

 
(15
)
 
654

 
i
Segmented revenues
610

 
2,569

 
1,032

 
1,806

 
10,845

 
594

 
122

 
17,578

 
 
FFO from equity accounted investments
—

 
241

 
11

 
271

 
85

 
13

 
3

 
624

 
ii
Interest expense
—

 
(884
)
 
(240
)
 
(250
)
 
(372
)
 
(12
)
 
(86
)
 
(1,844
)
 
iii
Current income taxes
—

 
(45
)
 
(15
)
 
(64
)
 
(94
)
 
(2
)
 
(12
)
 
(232
)
 
iv
Funds from operations
400

 
316

 
69

 
62

 
326

 
18

 
(83
)
 
1,108

 
v
Common equity
328

 
17,453

 
5,072

 
2,678

 
4,743

 
2,695

 
(6,310
)
 
26,659

 
 
Equity accounted investments
—

 
23,203

 
701

 
8,269

 
2,745

 
426

 
74

 
35,418

 
 
Additions to non-current assets1
—

 
1,925

 
199

 
594

 
17,505

 
13

 
7

 
20,243

 
 
1.
Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill. Excludes non-current assets recognized on adoption of IFRS 16.
AS AT DEC. 31, 2018
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

 
Note
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
328

 
17,423

 
5,302

 
2,887

 
4,279

 
2,606

 
(7,178
)
 
25,647

 
 
Equity accounted investments
—

 
22,949

 
685

 
7,636

 
1,943

 
395

 
39

 
33,647

 
 
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.
FOR THE SIX MONTHS ENDED JUN. 30 , 2019 (MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Note
External revenues
$
107

 
$
5,150

 
$
2,060

 
$
3,537

 
$
19,882

 
$
1,033

 
$
363

 
$
32,132

 
 
Inter-segment revenues
1,022

 
20

 
15

 
—

 
201

 
—

 
(23
)
 
1,235

 
i
Segmented revenues
1,129

 
5,170

 
2,075

 
3,537

 
20,083

 
1,033

 
340

 
33,367

 
 
FFO from equity accounted investments
—

 
515

 
23

 
502

 
152

 
17

 
10

 
1,219

 
ii
Interest expense
—

 
(1,764
)
 
(466
)
 
(469
)
 
(579
)
 
(25
)
 
(173
)
 
(3,476
)
 
iii
Current income taxes
—

 
(61
)
 
(41
)
 
(129
)
 
(124
)
 
(5
)
 
(59
)
 
(419
)
 
iv
Funds from operations
723

 
566

 
223

 
256

 
501

 
(4
)
 
(106
)
 
2,159

 
v
Additions to non-current assets1
—

 
3,655

 
266

 
4,314

 
17,734

 
30

 
13

 
26,012

 
 
1.
Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill. Excludes non-current assets recognized on adoption of IFRS 16.
FOR THE SIX MONTHS ENDED JUN. 30, 2018
(MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Note
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.
i.Inter-Segment Revenues
For the three months ended June 30, 2019, the adjustment to external revenues when determining segmented revenues consists of asset management revenues earned from consolidated entities totaling $549 million (2018 – $362 million), revenues earned on construction projects between consolidated entities totaling $102 million (2018 – $122 million), and interest income and other revenues totaling $3 million (2018 – $5 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.
For the six months ended June 30, 2019, the adjustment to external revenues when determining segmented revenues consists of asset management revenues earned from consolidated entities totaling $1.0 billion (2018 – $798 million), revenues earned on construction projects between consolidated entities totaling $193 million (2018 – $224 million), and interest income and other revenues totaling $20 million (2018 – $10 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)
2019

 
2018

 
2019

 
2018

Consolidated equity accounted income
$
1,003

 
$
342

 
$
1,347

 
$
630

Non-FFO items from equity accounted investments1
(379
)
 
283

 
(128
)
 
616

FFO from equity accounted investments
$
624

 
$
625


$
1,219

 
$
1,246


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, 2019, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $11 million (2018 – $7 million) that is eliminated on consolidation, along with the associated revenue.
For the six months ended June 30, 2019, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $27 million (2018 – $13 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)
2019

 
2018

 
2019

 
2018

Current tax expense
$
(232
)
 
$
(136
)
 
$
(419
)

$
(363
)
Deferred income tax expense
(7
)
 
(203
)
 
(56
)
 
(129
)
Income tax expense
$
(239
)
 
$
(339
)
 
$
(475
)
 
$
(492
)

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
 
2019

 
2018

 
2019

 
2018

Net income
 
 
$
704

 
$
1,664

 
$
1,960

 
$
3,519

Realized disposition gains in fair value changes or equity
vi
 
7

 
95

 
239

 
515

Non-controlling interests in FFO
 
 
(1,863
)
 
(1,294
)
 
(3,465
)
 
(2,756
)
Financial statement components not included in FFO
 
 
 
 
 
 
 
 
 
Equity accounted fair value changes and other non-FFO items
 
 
(379
)
 
283

 
(128
)
 
616

Fair value changes
 
 
1,398

 
(833
)
 
1,229

 
(1,405
)
Depreciation and amortization
 
 
1,234

 
672

 
2,268

 
1,342

Deferred income taxes
 
 
7

 
203

 
56

 
129

Total FFO
 
 
$
1,108

 
$
790

 
$
2,159

 
$
1,960


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 $7 million for the three months ended June 30, 2019 (2018 – $95 million), of which $11 million loss relates to prior periods (2018 – $nil), $nil has been recorded directly in equity as changes in ownership (2018 – $89 million) and $18 million has been recorded in fair value changes (2018 – $6 million).
The realized disposition gains recorded in fair value changes, revaluation surplus or directly in equity were $239 million for the six months ended June 30, 2019 (2018 – $515 million), of which $58 million relates to prior periods (2018 – $401 million), $163 million has been recorded directly in equity as changes in ownership (2018 – $89 million) and $18 million has been recorded in fair value changes (2018 – $25 million).
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)
2019

 
2018

 
2019

 
2018

United States
$
4,228

 
$
2,130

 
$
7,731

 
$
4,094

Canada
1,393

 
1,596

 
3,229

 
3,264

United Kingdom
5,553

 
6,008

 
10,868

 
11,397

Other Europe
1,518

 
536

 
2,660

 
994

Australia
1,423

 
1,069

 
2,471

 
2,129

Brazil
1,020

 
944

 
1,946

 
2,127

Asia
702

 
286

 
1,221

 
563

Colombia
499

 
346

 
1,000

 
614

Other
588

 
361

 
1,006


725

 
$
16,924

 
$
13,276

 
$
32,132

 
$
25,907


The company’s consolidated assets by location are as follows:
AS AT JUN. 30, 2019 AND DEC. 31, 2018
(MILLIONS)
2019

 
2018

United States
$
135,379

 
$
128,808

Canada
29,014

 
27,850

United Kingdom
24,619

 
23,093

Brazil
24,321

 
22,539

Other Europe
18,838

 
13,250

Australia
18,239

 
13,309

Asia
15,583

 
10,479

Colombia
10,139

 
9,862

Other
10,204

 
7,091

 
$
286,336

 
$
256,281