FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2019

Disclosure of detailed information about financial instruments [abstract]

The following table presents the changes in the balance of financial assets and liabilities classified as Level 3 for the years ended December 31, 2019 and 2018:



	2019						2018
AS AT AND FOR THE YEARS ENDED DEC. 31 (MILLIONS)	Financial Assets			Financial Liabilities			Financial Assets			Financial Liabilities
Balance, beginning of year	$	795		$	2,299		$	869		$	2,263
Fair value changes in net income	278			(27		)	(113		)	(89		)
Fair value changes in other comprehensive income¹	(10		)	6			(2		)	(48		)
Additions, net of disposals	717			264			41			173
Balance, end of year	$	1,780		$	2,542		$	795		$	2,299


1.	Includes foreign currency translation.

The current and non-current balances of other financial assets are as follows:



AS AT DEC. 31 (MILLIONS)	2019		2018
Current	$	3,605	$	3,382
Non-current	8,863		2,845
Total	$	12,468	$	6,227

The following tables list the company’s financial instruments by their respective classification as at December 31, 2019 and 2018:



AS AT DEC. 31, 2019 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets¹
Cash and cash equivalents	$	—	$	—	$	6,778	$	6,778
Other financial assets
Government bonds	156		2,247		—		2,403
Corporate bonds	1,118		1,839		310		3,267
Fixed income securities and other	1,131		619		—		1,750
Common shares and warrants	1,791		1,398		—		3,189
Loans and notes receivable	55		—		1,804		1,859
	4,251		6,103		2,114		12,468
Accounts receivable and other²	1,957		—		12,078		14,035
	$	6,208	$	6,103	$	20,970	$	33,281
Financial liabilities
Corporate borrowings	$	—	$	—	$	7,083	$	7,083
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		127,869		127,869
Subsidiary borrowings	—		—		8,423		8,423
	—		—		136,292		136,292
Accounts payable and other²	4,528		—		32,196		36,724
Subsidiary equity obligations	1,896		—		2,236		4,132
	$	6,424	$	—	$	177,807	$	184,231


1.	Financial assets include $7.0 billion of assets pledged as collateral.


2.	Includes derivative instruments which are elected for hedge accounting, totaling $950 million included in accounts receivable and other and $1.3 billion included in accounts payable and other, for which changes in fair value are recorded in other comprehensive income.



AS AT DEC. 31, 2018 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets¹
Cash and cash equivalents	$	—	$	—	$	8,390	$	8,390
Other financial assets
Government bonds	68		20		—		88
Corporate bonds	536		96		273		905
Fixed income securities and other	570		311		156		1,037
Common shares and warrants	689		1,690		—		2,379
Loans and notes receivable	50		—		1,768		1,818
	1,913		2,117		2,197		6,227
Accounts receivable and other²	2,113		—		10,449		12,562
	$	4,026	$	2,117	$	21,036	$	27,179
Financial liabilities
Corporate borrowings	$	—	$	—	$	6,409	$	6,409
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		103,209		103,209
Subsidiary borrowings	—		—		8,600		8,600
	—		—		111,809		111,809
Accounts payable and other²	3,362		—		20,627		23,989
Subsidiary equity obligations	1,725		—		2,151		3,876
	$	5,087	$	—	$	140,996	$	146,083


1.	Financial assets include $7.2 billion of assets pledged as collateral.


2.	Includes derivative instruments which are elected for hedge accounting, totaling $1.5 billion included in accounts receivable and other and $465 million included in accounts payable and other, for which changes in fair value are recorded in other comprehensive income.

Disclosure of financial liabilities

The following table categorizes liabilities measured at amortized cost, but for which fair values are disclosed based upon the fair value hierarchy levels:



	2019						2018
AS AT DEC. 31 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Corporate borrowings	$	7,841	$	92	$	—	$	6,376	$	91	$	—
Property-specific borrowings	6,467		52,386		70,875		6,918		30,214		67,159
Subsidiary borrowings	6,111		299		2,222		3,640		2,355		2,562
Subsidiary equity obligations	—		73		2,170		—		—		2,151

The following table presents the changes in the balance of financial assets and liabilities classified as Level 3 for the years ended December 31, 2019 and 2018:



	2019						2018
AS AT AND FOR THE YEARS ENDED DEC. 31 (MILLIONS)	Financial Assets			Financial Liabilities			Financial Assets			Financial Liabilities
Balance, beginning of year	$	795		$	2,299		$	869		$	2,263
Fair value changes in net income	278			(27		)	(113		)	(89		)
Fair value changes in other comprehensive income¹	(10		)	6			(2		)	(48		)
Additions, net of disposals	717			264			41			173
Balance, end of year	$	1,780		$	2,542		$	795		$	2,299


1.	Includes foreign currency translation.

The following tables list the company’s financial instruments by their respective classification as at December 31, 2019 and 2018:



AS AT DEC. 31, 2019 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets¹
Cash and cash equivalents	$	—	$	—	$	6,778	$	6,778
Other financial assets
Government bonds	156		2,247		—		2,403
Corporate bonds	1,118		1,839		310		3,267
Fixed income securities and other	1,131		619		—		1,750
Common shares and warrants	1,791		1,398		—		3,189
Loans and notes receivable	55		—		1,804		1,859
	4,251		6,103		2,114		12,468
Accounts receivable and other²	1,957		—		12,078		14,035
	$	6,208	$	6,103	$	20,970	$	33,281
Financial liabilities
Corporate borrowings	$	—	$	—	$	7,083	$	7,083
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		127,869		127,869
Subsidiary borrowings	—		—		8,423		8,423
	—		—		136,292		136,292
Accounts payable and other²	4,528		—		32,196		36,724
Subsidiary equity obligations	1,896		—		2,236		4,132
	$	6,424	$	—	$	177,807	$	184,231


1.	Financial assets include $7.0 billion of assets pledged as collateral.


2.	Includes derivative instruments which are elected for hedge accounting, totaling $950 million included in accounts receivable and other and $1.3 billion included in accounts payable and other, for which changes in fair value are recorded in other comprehensive income.



AS AT DEC. 31, 2018 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets¹
Cash and cash equivalents	$	—	$	—	$	8,390	$	8,390
Other financial assets
Government bonds	68		20		—		88
Corporate bonds	536		96		273		905
Fixed income securities and other	570		311		156		1,037
Common shares and warrants	689		1,690		—		2,379
Loans and notes receivable	50		—		1,768		1,818
	1,913		2,117		2,197		6,227
Accounts receivable and other²	2,113		—		10,449		12,562
	$	4,026	$	2,117	$	21,036	$	27,179
Financial liabilities
Corporate borrowings	$	—	$	—	$	6,409	$	6,409
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		103,209		103,209
Subsidiary borrowings	—		—		8,600		8,600
	—		—		111,809		111,809
Accounts payable and other²	3,362		—		20,627		23,989
Subsidiary equity obligations	1,725		—		2,151		3,876
	$	5,087	$	—	$	140,996	$	146,083


1.	Financial assets include $7.2 billion of assets pledged as collateral.


2.	Includes derivative instruments which are elected for hedge accounting, totaling $1.5 billion included in accounts receivable and other and $465 million included in accounts payable and other, for which changes in fair value are recorded in other comprehensive income.

Disclosure of fair value of financial instruments [text block]

The following table lists the company’s financial instruments by their respective classification as at December 31, 2019 and December 31, 2018:



	2019				2018
AS AT DEC. 31 (MILLIONS)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Cash and cash equivalents	$	6,778	$	6,778	$	8,390	$	8,390
Other financial assets
Government bonds	2,403		2,403		88		88
Corporate bonds	3,267		3,267		905		905
Fixed income securities and other	1,750		1,750		1,037		1,037
Common shares and warrants	3,189		3,189		2,379		2,379
Loans and notes receivable	1,859		1,859		1,818		1,818
	12,468		12,468		6,227		6,227
Accounts receivable and other	14,035		14,035		12,562		12,562
	$	33,281	$	33,281	$	27,179	$	27,179
Financial liabilities
Corporate borrowings	$	7,083	$	7,933	$	6,409	$	6,467
Non-recourse borrowings of managed entities
Property-specific borrowings	127,869		129,728		103,209		104,291
Subsidiary borrowings	8,423		8,632		8,600		8,557
	136,292		138,360		111,809		112,848
Accounts payable and other	36,724		36,724		23,989		23,989
Subsidiary equity obligations	4,132		4,139		3,876		3,876
	$	184,231	$	187,156	$	146,083	$	147,180

Carrying and fair values of financial assets

The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the fair value hierarchy levels:



	2019						2018
AS AT DEC. 31 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial assets
Other financial assets
Government bonds	$	—	$	2,403	$	—	$	—	$	88	$	—
Corporate bonds	—		2,682		275		—		632		—
Fixed income securities and other	419		851		480		22		369		490
Common shares and warrants	1,966		421		802		1,928		229		222
Loans and notes receivables	—		51		4		—		46		4
Accounts receivable and other	1		1,737		219		44		1,990		79
	$	2,386	$	8,145	$	1,780	$	1,994	$	3,354	$	795
Financial liabilities
Accounts payable and other	$	93	$	3,749	$	686	$	81	$	2,622	$	659
Subsidiary equity obligations	—		40		1,856		—		85		1,640
	$	93	$	3,789	$	2,542	$	81	$	2,707	$	2,299

The following table presents our investment properties measured at fair value:



AS AT DEC. 31 (MILLIONS)	2019		2018
Core office
United States	$	15,748	$	15,237
Canada	4,806		4,245
Australia	2,300		2,391
Europe	2,867		1,331
Brazil	361		329
Core retail	21,561		17,607
LP investments and other
LP investments office	8,756		8,438
LP investments retail	2,812		3,414
Logistics	94		183
Multifamily	2,937		4,151
Triple net lease	4,508		5,067
Self-storage	1,007		931
Student housing	2,605		2,417
Manufactured housing	2,446		2,369
Mixed-Use	2,703		12,086
Directly-held real estate properties	19,814		2,750
Other investment properties	1,361		1,363
	$	96,686	$	84,309

Carrying and fair values of financial liabilities

The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the fair value hierarchy levels:



	2019						2018
AS AT DEC. 31 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial assets
Other financial assets
Government bonds	$	—	$	2,403	$	—	$	—	$	88	$	—
Corporate bonds	—		2,682		275		—		632		—
Fixed income securities and other	419		851		480		22		369		490
Common shares and warrants	1,966		421		802		1,928		229		222
Loans and notes receivables	—		51		4		—		46		4
Accounts receivable and other	1		1,737		219		44		1,990		79
	$	2,386	$	8,145	$	1,780	$	1,994	$	3,354	$	795
Financial liabilities
Accounts payable and other	$	93	$	3,749	$	686	$	81	$	2,622	$	659
Subsidiary equity obligations	—		40		1,856		—		85		1,640
	$	93	$	3,789	$	2,542	$	81	$	2,707	$	2,299

Description of valuation techniques used in fair value measurement, assets

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 Dec. 31, 2019			Valuation Techniques and Key Inputs
Derivative assets/Derivative liabilities (accounts receivable/accounts payable)	$	1,737	/	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
	(3,749		)
Other financial assets	6,408			Valuation models based on observable market data
Redeemable fund units (subsidiary equity obligations)	(40		)	Aggregated market prices of underlying investments

Schedule of significant unobservable inputs used and change in balance of financial assets

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



(MILLIONS) Type of Asset/Liability	Carrying Value Dec. 31, 2019			Valuation Techniques	Significant Unobservable Inputs	Relationship of Unobservable Inputs to Fair Value
Fixed income securities and other	$	480		Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
Corporate bonds	275			Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
Common shares (common shares and warrants)	802			Black-Scholes model	• Volatility	• Increases (decreases) in volatility increase (decreases) fair value
					• Term to maturity	• Increases (decreases) in term to maturity increase (decrease) fair value
Limited-life funds (subsidiary equity obligations)	(1,856		)	Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
					• Terminal capitalization rate	• Increases (decreases) in terminal capitalization rate decrease (increase) fair value
					• Investment horizon	• Increases (decreases) in the investment horizon decrease (increase) fair value
Derivative assets/Derivative liabilities (accounts receivable/payable)	219		/	Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
	(686		)	Discounted cash flows	• Future cash flows
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value

The significant unobservable inputs (Level 3) included in the discounted cash flow models used when determining the fair value of standing timber and agricultural assets include:



Valuation Techniques	Significant Unobservable Inputs	Relationship of Unobservable Inputs to Fair Value	Mitigating Factors
Discounted cash flow analysis	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value	• Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from cash flows
	• Timber / agricultural prices	• Increases (decreases) in price increase (decrease) fair value	• Increases (decreases) in price tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from price
	• Discount rate /terminal capitalization rate	• Increases (decreases) in discount rate or terminal capitalization rate decrease (increase) fair value	• Decreases (increases) in discount rates or terminal capitalization rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from rates
	• Exit Date	• Increases (decreases) in exit date decrease (increase) fair value	• Increases (decreases) in the exit date tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

The significant Level 3 inputs include:



Valuation Technique	Significant Unobservable Inputs	Relationship of Unobservable Inputs to Fair Value	Mitigating Factors
Discounted cash flow analysis¹	• Future cash flows – primarily driven by net operating income	• Increases (decreases) in future cash flows increase (decrease) fair value	• Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from cash flows
	• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value	• Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from discount rates
	• Terminal capitalization rate	• Increases (decreases) in terminal capitalization rate decrease (increase) fair value	• Increases (decreases) in terminal capitalization rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from terminal capitalization rates
	• Investment horizon	• Increases (decreases) in the investment horizon decrease (increase) fair value	• Increases (decreases) in the investment horizon tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year


1.	Certain investment properties are valued using the direct capitalization method instead of a discounted cash flow model. Under the direct capitalization method, a capitalization rate is applied to estimated current year cash flows.

The following table summarizes the key valuation metrics of the company’s investment properties:



	2019					2018
AS AT DEC. 31	Discount Rate		Terminal Capitalization Rate		Investment Horizon (years)	Discount Rate		Terminal Capitalization Rate		Investment Horizon (years)
Core office
United States	7.0	%	5.6	%	12	6.9	%	5.6	%	12
Canada	5.9	%	5.2	%	10	6.0	%	5.4	%	10
Australia	6.8	%	5.9	%	10	7.0	%	6.2	%	10
Europe	4.6	%	4.1	%	11	n/a		n/a		n/a
Brazil	7.9	%	7.4	%	10	9.6	%	7.7	%	6
Core retail	6.7	%	5.4	%	10	7.1	%	6.0	%	12
LP investments and other
LP investments office	10.0	%	7.3	%	7	10.2	%	7.0	%	6
LP investments retail	8.8	%	7.3	%	10	8.9	%	7.8	%	9
Mixed-use	7.6	%	5.4	%	10	7.8	%	5.4	%	10
Logistics¹	5.8	%	n/a		n/a	9.3	%	8.3	%	10
Multifamily¹	5.1	%	n/a		n/a	4.8	%	n/a		n/a
Triple net lease¹	6.3	%	n/a		n/a	6.3	%	n/a		n/a
Self-storage¹	5.6	%	n/a		n/a	5.7	%	n/a		n/a
Student housing¹	5.8	%	n/a		n/a	5.6	%	n/a		n/a
Manufactured housing¹	5.5	%	n/a		n/a	5.4	%	n/a		n/a
Directly-held real estate properties²	5.2% – 9.2%		6.1	%	19	7.4	%	6.8	%	10
Other investment properties¹	8.9	%	n/a		n/a	9.3	%	n/a		n/a


1.	Multifamily, triple net lease, self-storage, student housing, manufactured housing and other investment properties are valued using the direct capitalization method. The rates presented as the discount rate represent the overall implied capitalization rate. The terminal capitalization rate and the investment horizon are not applicable.

Key valuation metrics of the company’s utilities, transport, energy, data infrastructure and sustainable resources assets at the end of 2019 and 2018 are summarized below.

Utilities

Transport

Energy

Data Infrastructure

Sustainable Resources

AS AT DEC. 31

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Discount rates

7 – 14%

9 – 14%

10 – 13%

12 – 15%

13 – 15%

5 – 10%

5 – 8%

Terminal capitalization multiples

8x – 21x

8x – 22x

9x – 14x

10x – 17x

10x – 14x

11x – 17x

10x – 11x

5x – 10x

12x – 23x

Investment horizon / Exit date (years)

10 – 20

5 – 10

10 – 11

3 – 21

3 – 30

Key valuation metrics of the company’s hydroelectric, wind and solar generating facilities at the end of 2019 and 2018 are summarized below.



	North America		Brazil				Colombia				Europe
AS AT DEC. 31	2019	2018	2019		2018		2019		2018		2019		2018
Discount rate
Contracted	4.6 – 4.9%	4.8 – 5.6%	8.2	%	9.0	%	9.0	%	9.6	%	3.5	%	4.0 – 4.3%
Uncontracted	6.2 – 6.4%	6.4 – 7.2%	9.5	%	10.3	%	10.3	%	10.9	%	5.3	%	5.8 – 6.1%
Terminal capitalization rate¹	6.2 – 6.4%	6.1 – 7.1%	n/a		n/a		9.8	%	10.4	%	n/a		n/a
Exit date	2040	2039	2047		2047		2039		2038		2034		2033


1.	Terminal capitalization rate applies only to hydroelectric assets in North America and Colombia.

the following significant unobservable inputs as part of our valuation:



Valuation Technique	Significant Unobservable Input(s)	Relationship of Unobservable Input(s) to Fair Value	Mitigating Factor(s)
Discounted cash flow models	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) the recoverable amount	• Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in recoverable amounts from cash flows
	• Discount rate	• Increases (decreases) in discount rate decrease (increase) the recoverable amount	• Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in recoverable amounts from discount rates
	• Terminal capitalization rate	• Increases (decreases) in terminal capitalization rate decrease (increase) the recoverable amount	• Increases (decreases) in terminal capitalization rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in recoverable amounts from terminal capitalization rates
	• Exit date	• Increases (decreases) in the exit date decrease (increase) the recoverable amount	• Increases (decreases) in the exit date tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

The recoverable amounts used in goodwill impairment testing are calculated using discounted cash flow models based on the following significant unobservable inputs:



Valuation Technique	Significant Unobservable Input(s)	Relationship of Unobservable Input(s) to Fair Value	Mitigating Factor(s)
Discounted cash flow models	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) the recoverable amount	• Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in recoverable amounts from cash flows
	• Discount rate	• Increases (decreases) in discount rate decrease (increase) the recoverable amount	• Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in recoverable amounts from discount rates
	• Terminal capitalization rate / multiple	• Increases (decreases) in terminal capitalization rate/multiple decrease (increase) the recoverable amount	• Increases (decreases) in terminal capitalization rates/multiple tend to be accompanied by increases (decreases) in cash flows that may offset changes in recoverable amounts from terminal capitalization rates
	• Exit date / terminal year of cash flows	• Increases (decreases) in the exit date/terminal year of cash flows decrease (increase) the recoverable amount	• Increases (decreases) in the exit date/terminal year of cash flows tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

Schedule of significant unobservable inputs used and change in balance of financial liabilities

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



(MILLIONS) Type of Asset/Liability	Carrying Value Dec. 31, 2019			Valuation Techniques	Significant Unobservable Inputs	Relationship of Unobservable Inputs to Fair Value
Fixed income securities and other	$	480		Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
Corporate bonds	275			Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
Common shares (common shares and warrants)	802			Black-Scholes model	• Volatility	• Increases (decreases) in volatility increase (decreases) fair value
					• Term to maturity	• Increases (decreases) in term to maturity increase (decrease) fair value
Limited-life funds (subsidiary equity obligations)	(1,856		)	Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
					• Terminal capitalization rate	• Increases (decreases) in terminal capitalization rate decrease (increase) fair value
					• Investment horizon	• Increases (decreases) in the investment horizon decrease (increase) fair value
Derivative assets/Derivative liabilities (accounts receivable/payable)	219		/	Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
	(686		)	Discounted cash flows	• Future cash flows
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value

Disclosure of offsetting of financial assets and financial liabilities

FAIR VALUE OF FINANCIAL INSTRUMENTS


a)	Financial Instrument Classification

The following tables list the company’s financial instruments by their respective classification as at December 31, 2019 and 2018:



AS AT DEC. 31, 2019 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets¹
Cash and cash equivalents	$	—	$	—	$	6,778	$	6,778
Other financial assets
Government bonds	156		2,247		—		2,403
Corporate bonds	1,118		1,839		310		3,267
Fixed income securities and other	1,131		619		—		1,750
Common shares and warrants	1,791		1,398		—		3,189
Loans and notes receivable	55		—		1,804		1,859
	4,251		6,103		2,114		12,468
Accounts receivable and other²	1,957		—		12,078		14,035
	$	6,208	$	6,103	$	20,970	$	33,281
Financial liabilities
Corporate borrowings	$	—	$	—	$	7,083	$	7,083
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		127,869		127,869
Subsidiary borrowings	—		—		8,423		8,423
	—		—		136,292		136,292
Accounts payable and other²	4,528		—		32,196		36,724
Subsidiary equity obligations	1,896		—		2,236		4,132
	$	6,424	$	—	$	177,807	$	184,231


1.	Financial assets include $7.0 billion of assets pledged as collateral.


2.	Includes derivative instruments which are elected for hedge accounting, totaling $950 million included in accounts receivable and other and $1.3 billion included in accounts payable and other, for which changes in fair value are recorded in other comprehensive income.



AS AT DEC. 31, 2018 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets¹
Cash and cash equivalents	$	—	$	—	$	8,390	$	8,390
Other financial assets
Government bonds	68		20		—		88
Corporate bonds	536		96		273		905
Fixed income securities and other	570		311		156		1,037
Common shares and warrants	689		1,690		—		2,379
Loans and notes receivable	50		—		1,768		1,818
	1,913		2,117		2,197		6,227
Accounts receivable and other²	2,113		—		10,449		12,562
	$	4,026	$	2,117	$	21,036	$	27,179
Financial liabilities
Corporate borrowings	$	—	$	—	$	6,409	$	6,409
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		103,209		103,209
Subsidiary borrowings	—		—		8,600		8,600
	—		—		111,809		111,809
Accounts payable and other²	3,362		—		20,627		23,989
Subsidiary equity obligations	1,725		—		2,151		3,876
	$	5,087	$	—	$	140,996	$	146,083


1.	Financial assets include $7.2 billion of assets pledged as collateral.


2.	Includes derivative instruments which are elected for hedge accounting, totaling $1.5 billion included in accounts receivable and other and $465 million included in accounts payable and other, for which changes in fair value are recorded in other comprehensive income.

Gains or losses arising from changes in the fair value through profit or loss (“FVTPL”) financial assets are presented in the Consolidated Statements of Operations in the period in which they arise. Dividends from FVTPL and fair value through other comprehensive income (“FVTOCI”) financial assets are recognized in the Consolidated Statements of Operations when the company’s right to receive payment is established. Interest on FVTOCI financial assets is calculated using the effective interest method and reported in our Consolidated Statements of Operations.

FVTOCI debt and equity securities are recorded on the balance sheet at fair value with changes in fair value recorded through other comprehensive income. As at December 31, 2019, the unrealized gains and losses relating to the fair value of FVTOCI securities amounted to $479 million (2018 – $212 million) and $108 million (2018 – $152 million), respectively.

During the year ended December 31, 2019, $3 million of net deferred losses (2018 – $nil) previously recognized in accumulated other comprehensive income were reclassified to net income as a result of the disposition or impairment of certain of our FVTOCI financial assets that are not equity instruments.

Included in cash and cash equivalents is $5.7 billion (2018 – $7.7 billion) of cash and $1.1 billion (2018 – $685 million) of short-term deposits as at December 31, 2019.


b)	Carrying and Fair Value

The following table lists the company’s financial instruments by their respective classification as at December 31, 2019 and December 31, 2018:



	2019				2018
AS AT DEC. 31 (MILLIONS)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Cash and cash equivalents	$	6,778	$	6,778	$	8,390	$	8,390
Other financial assets
Government bonds	2,403		2,403		88		88
Corporate bonds	3,267		3,267		905		905
Fixed income securities and other	1,750		1,750		1,037		1,037
Common shares and warrants	3,189		3,189		2,379		2,379
Loans and notes receivable	1,859		1,859		1,818		1,818
	12,468		12,468		6,227		6,227
Accounts receivable and other	14,035		14,035		12,562		12,562
	$	33,281	$	33,281	$	27,179	$	27,179
Financial liabilities
Corporate borrowings	$	7,083	$	7,933	$	6,409	$	6,467
Non-recourse borrowings of managed entities
Property-specific borrowings	127,869		129,728		103,209		104,291
Subsidiary borrowings	8,423		8,632		8,600		8,557
	136,292		138,360		111,809		112,848
Accounts payable and other	36,724		36,724		23,989		23,989
Subsidiary equity obligations	4,132		4,139		3,876		3,876
	$	184,231	$	187,156	$	146,083	$	147,180

The current and non-current balances of other financial assets are as follows:



AS AT DEC. 31 (MILLIONS)	2019		2018
Current	$	3,605	$	3,382
Non-current	8,863		2,845
Total	$	12,468	$	6,227

c) Fair Value Hierarchy Levels

The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the fair value hierarchy levels:



	2019						2018
AS AT DEC. 31 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial assets
Other financial assets
Government bonds	$	—	$	2,403	$	—	$	—	$	88	$	—
Corporate bonds	—		2,682		275		—		632		—
Fixed income securities and other	419		851		480		22		369		490
Common shares and warrants	1,966		421		802		1,928		229		222
Loans and notes receivables	—		51		4		—		46		4
Accounts receivable and other	1		1,737		219		44		1,990		79
	$	2,386	$	8,145	$	1,780	$	1,994	$	3,354	$	795
Financial liabilities
Accounts payable and other	$	93	$	3,749	$	686	$	81	$	2,622	$	659
Subsidiary equity obligations	—		40		1,856		—		85		1,640
	$	93	$	3,789	$	2,542	$	81	$	2,707	$	2,299

During the year ended December 31, 2019 and 2018, there were no transfers between Level 1, 2 or 3.

Fair values of financial instruments are determined by reference to quoted bid or ask prices, as appropriate. If 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.

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 Dec. 31, 2019			Valuation Techniques and Key Inputs
Derivative assets/Derivative liabilities (accounts receivable/accounts payable)	$	1,737	/	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
	(3,749		)
Other financial assets	6,408			Valuation models based on observable market data
Redeemable fund units (subsidiary equity obligations)	(40		)	Aggregated market prices of underlying investments

Fair values determined using valuation models requiring the use of unobservable inputs (Level 3 financial assets and liabilities) include 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 of Level 3 financial instruments:



(MILLIONS) Type of Asset/Liability	Carrying Value Dec. 31, 2019			Valuation Techniques	Significant Unobservable Inputs	Relationship of Unobservable Inputs to Fair Value
Fixed income securities and other	$	480		Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
Corporate bonds	275			Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
Common shares (common shares and warrants)	802			Black-Scholes model	• Volatility	• Increases (decreases) in volatility increase (decreases) fair value
					• Term to maturity	• Increases (decreases) in term to maturity increase (decrease) fair value
Limited-life funds (subsidiary equity obligations)	(1,856		)	Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value
					• Terminal capitalization rate	• Increases (decreases) in terminal capitalization rate decrease (increase) fair value
					• Investment horizon	• Increases (decreases) in the investment horizon decrease (increase) fair value
Derivative assets/Derivative liabilities (accounts receivable/payable)	219		/	Discounted cash flows	• Future cash flows	• Increases (decreases) in future cash flows increase (decrease) fair value
	(686		)	Discounted cash flows	• Future cash flows
					• Discount rate	• Increases (decreases) in discount rate decrease (increase) fair value

The following table presents the changes in the balance of financial assets and liabilities classified as Level 3 for the years ended December 31, 2019 and 2018:



	2019						2018
AS AT AND FOR THE YEARS ENDED DEC. 31 (MILLIONS)	Financial Assets			Financial Liabilities			Financial Assets			Financial Liabilities
Balance, beginning of year	$	795		$	2,299		$	869		$	2,263
Fair value changes in net income	278			(27		)	(113		)	(89		)
Fair value changes in other comprehensive income¹	(10		)	6			(2		)	(48		)
Additions, net of disposals	717			264			41			173
Balance, end of year	$	1,780		$	2,542		$	795		$	2,299


1.	Includes foreign currency translation.

The following table categorizes liabilities measured at amortized cost, but for which fair values are disclosed based upon the fair value hierarchy levels:



	2019						2018
AS AT DEC. 31 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Corporate borrowings	$	7,841	$	92	$	—	$	6,376	$	91	$	—
Property-specific borrowings	6,467		52,386		70,875		6,918		30,214		67,159
Subsidiary borrowings	6,111		299		2,222		3,640		2,355		2,562
Subsidiary equity obligations	—		73		2,170		—		—		2,151

Fair values of Level 2 and Level 3 liabilities measured at amortized cost but for which fair values are disclosed are determined using valuation techniques such as adjusted public pricing and discounted cash flows.


d)	Hedging Activities

The company uses derivatives and non-derivative financial instruments to manage or maintain exposures to interest, currency, credit and other market risks. Derivative financial instruments are recorded at fair value. For certain derivatives which are used to manage exposures, the company determines whether hedge accounting can be applied. Hedge accounting is applied when the derivative is designated as a hedge of a specific exposure and there is assurance that it will continue to be highly effective as a hedge based on an expectation of offsetting cash flows or fair value. Hedge accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the hedging relationship is terminated. Once discontinued, the cumulative change in fair value of a derivative that was previously recorded in other comprehensive income by the application of hedge accounting is recognized in profit or loss over the remaining term of the original hedging relationship as amounts related to the hedged item are recognized in profit or loss. The assets or liabilities relating to unrealized mark-to-market gains and losses on derivative financial instruments are recorded in financial assets and financial liabilities, respectively.


i.	Cash Flow Hedges

The company uses the following cash flow hedges: energy derivative contracts to hedge the sale of power; interest rate swaps to hedge the variability in cash flows or future cash flows related to a variable rate asset or liability; and equity derivatives to hedge long-term compensation arrangements. For the year ended December 31, 2019, pre-tax net unrealized losses of $89 million (2018 – gains of $38 million) were recorded in other comprehensive income for the effective portion of the cash flow hedges. As at December 31, 2019, there was an unrealized derivative asset balance of $210 million relating to derivative contracts designated as cash flow hedges (2018 – $468 million).


ii.	Net Investment Hedges

The company uses foreign exchange contracts and foreign currency denominated debt instruments to manage its foreign currency exposures arising from net investments in foreign operations. For the year ended December 31, 2019, unrealized pre-tax net losses of $433 million (2018 – gains of $999 million) were recorded in other comprehensive income for the effective portion of hedges of net investments in foreign operations. As at December 31, 2019, there was an unrealized derivative liability balance of $551 million relating to derivative contracts designated as net investment hedges (2018 – asset balance of $523 million).


e)	Netting of Financial Instruments

Financial assets and liabilities are offset with the net amount reported in the Consolidated Balance Sheets where the company currently has a legally enforceable right to offset and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

The company enters into derivative transactions under International Swaps and Derivatives Association (“ISDA”) master netting agreements. In general, under such agreements the amounts owed by each counterparty on a single day are aggregated into a single net amount that is payable by one party to the other. The agreements provide the company with the legal and enforceable right to offset these amounts and accordingly the following balances are presented net in the consolidated financial statements:



	Accounts Receivable and Other						Accounts Payable and Other
AS AT DEC. 31 (MILLIONS)	2019			2018			2019			2018
Gross amounts of financial instruments before netting	$	2,380		$	2,367		$	2,853		$	1,873
Gross amounts of financial instruments set-off in Consolidated Balance Sheets	(423		)	(254		)	(366		)	(250		)
Net amount of financial instruments in Consolidated Balance Sheets	$	1,957		$	2,113		$	2,487		$	1,623