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SEGMENTED INFORMATION
 6 Months Ended
Jun. 30, 2020
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 long-term private funds, perpetual strategies and public securities on behalf of our investors and ourselves, as well as our share of the asset management activities of Oaktree Capital Management (“Oaktree”). 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.
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 affiliates, 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, 2020 (MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Note
External revenues
$
55

 
$
1,848

 
$
1,035

 
$
2,096

 
$
7,247

 
$
447

 
$
101

 
$
12,829

 
 
Inter-segment revenues1
688

 
8

 
—

 
1

 
144

 
—

 
(13
)
 
828

 
i
Segmented revenues
743

 
1,856

 
1,035

 
2,097

 
7,391

 
447

 
88

 
13,657

 
 
FFO from equity accounted investments1
67

 
186

 
6

 
284

 
80

 
4

 
(5
)
 
622

 
ii
Interest expense
—

 
(755
)
 
(220
)
 
(261
)
 
(379
)
 
(4
)
 
(96
)
 
(1,715
)
 
iii
Current income taxes
—

 
—

 
4

 
(57
)
 
(23
)
 
(8
)
 
(17
)
 
(101
)
 
iv
Funds from operations
355

 
89

 
566

 
84

 
137

 
(11
)
 
(59
)
 
1,161

 
v
Common equity
4,950

 
17,825

 
4,398

 
2,336

 
3,494

 
2,503

 
(7,581
)
 
27,925

 
 
Equity accounted investments
4,548

 
21,083

 
1,037

 
7,797

 
3,741

 
378

 
629

 
39,213

 
 
Additions to non-current assets2
64

 
1,963

 
341

 
418

 
311

 
12

 
8

 
3,117

 
 
1.
We equity account for our investment in Oaktree and include our share of the FFO and FFO from equity accounted investments at 62%. However, for segment reporting, Oaktree’s revenue is shown on a 100% basis. For the three months ended June 30, 2020, $290 million of Oaktree’s revenues was included in our Asset Management segment revenue.
2.
Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.
AS AT DEC. 31, 2019
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
4,927

 
18,781

 
5,320

 
2,792

 
4,086

 
2,859

 
(7,897
)
 
30,868

 
 
Equity accounted investments
4,599

 
22,314

 
1,154

 
8,972

 
2,596

 
382

 
681

 
40,698

 
 
Additions to non-current assets1
—

 
1,925

 
199

 
594

 
17,505

 
13

 
7

 
20,243

 
 
1.
Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.
FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)
Asset
Management

 
Real Estate

 
Renewable
Power

 
Infrastructure

 
Private Equity

 
Residential Development

 
Corporate
Activities

 
Total
Segments

 
Note
External revenues
$
116

 
$
4,463

 
$
2,065

 
$
4,369

 
$
17,339

 
$
855

 
$
208

 
$
29,415

 
 
Inter-segment and other revenues1
1,433

 
15

 
—

 
2

 
265

 
—

 
(17
)
 
1,698

 
i
Segmented revenues
1,549

 
4,478

 
2,065

 
4,371

 
17,604

 
855

 
191

 
31,113

 
 
FFO from equity accounted investments1
119

 
417

 
15

 
619

 
196

 
6

 
(24
)
 
1,348

 
ii
Interest expense
—

 
(1,597
)
 
(448
)
 
(552
)
 
(774
)
 
(12
)
 
(184
)
 
(3,567
)
 
iii
Current income taxes
—

 
(15
)
 
(16
)
 
(116
)
 
(98
)
 
(13
)
 
(39
)
 
(297
)
 
iv
Funds from operations1
735

 
308

 
632

 
221

 
302

 
(20
)
 
(133
)
 
2,045

 
v
Additions to non-current assets2
64

 
3,877

 
1,195

 
809

 
2,330

 
31

 
87

 
8,393

 
 
1.
We equity account for our investment in Oaktree and include our share of the FFO and FFO from equity accounted investments at 62%. However, for segment reporting, Oaktree’s revenue is shown on a 100% basis. For the six months ended June 30, 2020, $597 million of Oaktree’s revenues was included in our Asset Management segment revenue.
2.
Includes additions to 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 additions to 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, 2020, the adjustment to external revenues when determining segmented revenues consists of asset management revenues earned from consolidated entities and asset management revenues earned by Oaktree totaling $688 million (2019 – $549 million), revenues earned on construction projects between consolidated entities totaling $144 million (2019 – $102 million), and other revenues totaling a net loss of $4 million (2019 – income of $3 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.
For the six months ended June 30, 2020, the adjustment to external revenues when determining segmented revenues consists of asset management revenues earned from consolidated entities and asset management revenues earned by Oaktree totaling $1.4 billion (2019 – $1.0 billions), revenues earned on construction projects between consolidated entities totaling $264 million (2019 – $193 million), and interest income and other revenues totaling $1 million (2019 – $20 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)
2020

 
2019

 
2020

 
2019

Consolidated equity accounted (loss) income
$
(631
)
 
$
1,003

 
$
(843
)
 
$
1,347

Non-FFO items from equity accounted investments1
1,253

 
(379
)
 
2,191

 
(128
)
FFO from equity accounted investments
$
622

 
$
624


$
1,348

 
$
1,219

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, 2020, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $nil (2019 – $11 million) that is eliminated on consolidation, along with the associated revenue.
For the six months ended June 30, 2020, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $nil (2019 – $27 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 and deferred income taxes:
 
Three Months Ended
 
Six Months Ended
FOR THE PERIODS ENDED JUN. 30
(MILLIONS)
2020

 
2019

 
2020

 
2019

Current income tax expense
$
(101
)
 
$
(232
)
 
$
(297
)

$
(419
)
Deferred income tax recovery (expense)
96

 
(7
)
 
(72
)
 
(56
)
Income tax expense
$
(5
)
 
$
(239
)
 
$
(369
)
 
$
(475
)

v.
Reconciliation of Net (Loss) Income to Total FFO
The following table reconciles net (loss) income to total FFO:
 
 
 
Three Months Ended
 
Six Months Ended
FOR THE PERIODS ENDED JUN. 30
(MILLIONS)
Note
 
2020

 
2019

 
2020

 
2019

Net (loss) income
 
 
$
(1,493
)
 
$
704

 
$
(1,650
)
 
$
1,960

Realized disposition gains in fair value changes or equity
vi
 
469

 
7

 
562

 
239

Non-controlling interests in FFO
 
 
(1,501
)
 
(1,863
)
 
(3,482
)
 
(3,465
)
Financial statement components not included in FFO
 
 
 
 
 
 
 
 
 
Equity accounted fair value changes and other non-FFO items
 
 
1,253

 
(379
)
 
2,191

 
(128
)
Fair value changes
 
 
1,153

 
1,398

 
1,567

 
1,229

Depreciation and amortization
 
 
1,376

 
1,234

 
2,785

 
2,268

Deferred income taxes
 
 
(96
)
 
7

 
72

 
56

Total FFO
 
 
$
1,161

 
$
1,108

 
$
2,045

 
$
2,159


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 $469 million for the three months ended June 30, 2020 (2019 – $7 million), of which $5 million loss relates to prior periods (2019 – $11 million), $479 million has been recorded directly in equity as changes in ownership (2019 – $nil) and a loss of $5 million has been recorded in fair value changes (2019 – a gain of $18 million).
The realized disposition gains recorded in fair value changes, revaluation surplus or directly in equity were $562 million for the six months ended June 30, 2020 (2019 – $239 million), of which $38 million relates to prior periods (2019 – $58 million), $534 million has been recorded directly in equity as changes in ownership (2019 – $163 million) and a loss of $10 million has been recorded in fair value changes (2019 – gain of $18 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)
2020

 
2019

 
2020

 
2019

United States
$
4,111

 
$
4,228

 
$
8,650

 
$
7,731

Canada
1,330

 
1,393

 
2,813

 
3,229

United Kingdom
2,458

 
5,553

 
7,413

 
10,868

Europe
1,273

 
1,518

 
2,869

 
2,660

Australia
1,316

 
1,423

 
2,611

 
2,471

Brazil
767

 
1,020

 
1,626

 
1,946

Asia
771

 
702

 
1,434

 
1,221

Colombia
357

 
499

 
877

 
1,000

Other
446

 
588

 
1,122


1,006

 
$
12,829

 
$
16,924

 
$
29,415

 
$
32,132

The company’s consolidated assets by location are as follows:
AS AT JUN. 30, 2020 AND DEC. 31, 2019
(MILLIONS)
2020

 
2019

United States
$
156,990

 
$
149,687

Canada
32,092

 
35,840

United Kingdom
28,301

 
30,184

Brazil
18,708

 
24,354

Europe
19,812

 
19,404

Australia
21,640

 
22,971

Asia
17,083

 
17,468

Colombia
8,892

 
10,819

Other
12,917

 
13,242

 
$
316,435

 
$
323,969