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FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2020

Disclosure of detailed information about financial instruments [abstract]

Disclosure of financial instruments [text block]

FAIR VALUE OF FINANCIAL INSTRUMENTS

a) Financial Instruments Classification

The following tables list the company’s financial instruments by their respective classification as at December 31, 2020 and 2019:


AS AT DEC. 31, 2020 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets1
Cash and cash equivalents	$	—	$	—	$	9,933	$	9,933
Other financial assets
Government bonds	356		2,295		—		2,651
Corporate bonds	1,094		2,148		357		3,599
Fixed income securities and other	1,079		1,191		—		2,270
Common shares and warrants	3,287		3,227		—		6,514
Loans and notes receivable2	110		—		2,586		2,696
	5,926		8,861		2,943		17,730
Accounts receivable and other3	1,766		—		11,906		13,672
	$	7,692	$	8,861	$	24,782	$	41,335
Financial liabilities
Corporate borrowings	$	—	$	—	$	9,077	$	9,077
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		128,556		128,556
Subsidiary borrowings	—		—		10,768		10,768
	—		—		139,324		139,324
Accounts payable and other2	5,889		—		35,228		41,117
Subsidiary equity obligations	1,457		—		2,242		3,699
	$	7,346	$	—	$	185,871	$	193,217

1.Financial assets include $9.7 billion of assets pledged as collateral.

2.Includes a shareholder loan of $500 million receivable from our U.S. gas pipeline.

3.Includes derivative instruments which are elected for hedge accounting, totaling $888 million included in accounts receivable and other and $2.4 billion included in accounts payable and other, for which changes in fair value are recorded in other comprehensive income.


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 receivable2	55		—		1,804		1,859
	4,251		6,103		2,114		12,468
Accounts receivable and other3	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 a shareholder loan of $500 million receivable from our U.S. gas pipeline.

3.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.

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, 2020, the unrealized gains and losses relating to the fair value of FVTOCI securities amounted to $916 million (2019 – $479 million) and $322 million (2019 – $108 million), respectively.

During the year ended December 31, 2020, $7 million (2019 – $3 million) of net deferred losses 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 $8.2 billion (2019 – $5.7 billion) of cash and $1.8 billion (2019 – $1.1 billion) of short-term deposits as at December 31, 2020.

b) Carrying and Fair Value

The following table lists the company’s financial instruments by their respective classification as at December 31, 2020 and December 31, 2019:


	2020				2019
AS AT DEC. 31 (MILLIONS)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Cash and cash equivalents	$	9,933	$	9,933	$	6,778	$	6,778
Other financial assets
Government bonds	2,651		2,651		2,403		2,403
Corporate bonds	3,599		3,599		3,267		3,267
Fixed income securities and other	2,270		2,270		1,750		1,750
Common shares and warrants	6,514		6,514		3,189		3,189
Loans and notes receivable	2,696		2,696		1,859		1,859
	17,730		17,730		12,468		12,468
Accounts receivable and other	13,672		13,672		14,035		14,035
	$	41,335	$	41,335	$	33,281	$	33,281
Financial liabilities
Corporate borrowings	$	9,077	$	10,540	$	7,083	$	7,933
Non-recourse borrowings of managed entities
Property-specific borrowings	128,556		131,099		127,869		129,728
Subsidiary borrowings	10,768		11,085		8,423		8,632
	139,324		142,184		136,292		138,360
Accounts payable and other	41,117		41,117		36,724		36,724
Subsidiary equity obligations	3,699		3,699		4,132		4,139
	$	193,217	$	197,540	$	184,231	$	187,156

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



AS AT DEC. 31 (MILLIONS)	2020		2019
Current	$	5,483	$	3,605
Non-current	12,247		8,863
Total	$	17,730	$	12,468

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:


	2020						2019
AS AT DEC. 31 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial assets
Other financial assets
Government bonds	$	7	$	2,644	$	—	$	—	$	2,403	$	—
Corporate bonds	192		2,764		286		—		2,682		275
Fixed income securities and other	867		912		491		419		851		480
Common shares and warrants	4,548		577		1,389		1,966		421		802
Loans and notes receivables	—		42		68		—		51		4
Accounts receivable and other	50		1,581		135		1		1,737		219
	$	5,664	$	8,520	$	2,369	$	2,386	$	8,145	$	1,780
Financial liabilities
Accounts payable and other	$	75	$	5,090	$	724	$	93	$	3,749	$	686
Subsidiary equity obligations	—		77		1,380		—		40		1,856
	$	75	$	5,167	$	2,104	$	93	$	3,789	$	2,542

During the year ended December 31, 2020 and 2019, 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, 2020

Valuation Techniques and Key Inputs

Derivative assets/Derivative liabilities (accounts receivable/accounts payable)

1,581

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

(5,090)

Other financial assets

6,939

Valuation models based on observable market data

Redeemable fund units (subsidiary equity obligations)

(77)

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, 2020

Valuation

Techniques

Significant

Unobservable Inputs

Relationship of Unobservable
Inputs to Fair Value

Fixed income securities and other

491

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

286

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 and warrants

1,389

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

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)

(1,380)

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)

135

Discounted cash flows

• Future cash flows

•Increases (decreases) in future cash flows increase (decrease) fair value

(724)

• 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, 2020 and 2019:


	2020					2019
AS AT AND FOR THE YEARS ENDED DEC. 31 (MILLIONS)		Financial Assets		Financial Liabilities			Financial Assets		Financial Liabilities
Balance, beginning of year		$	1,780	$	2,542		$	795	$	2,299
Fair value changes in net income		(92)		(111)			278		(27)
Fair value changes in other comprehensive income1		15		4			(10)		6
Additions, net of disposals		666		(331)			717		264
Balance, end of year		$	2,369	$	2,104		$	1,780	$	2,542

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:


	2020						2019
AS AT DEC. 31, 2020 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Corporate borrowings	$	10,443	$	97	$	—	$	7,841	$	92	$	—
Property-specific borrowings	3,406		57,927		69,766		6,467		52,386		70,875
Subsidiary borrowings	7,825		3		3,257		6,111		299		2,222
Subsidiary equity obligations	—		73		2,169		—		73		2,170

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, 2020, pre-tax net unrealized losses of $479 million (2019 – losses of $89 million) were recorded in other comprehensive income for the effective portion of the cash flow hedges. As at December 31, 2020, there was an unrealized derivative liability balance of $689 million relating to derivative contracts designated as cash flow hedges (2019 – $210 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, 2020, unrealized pre-tax net losses of $182 million (2019 – gains of $433 million) were recorded in other comprehensive income for the effective portion of hedges of net investments in foreign operations. As at December 31, 2020, there was an unrealized derivative liability balance of $868 million relating to derivative contracts designated as net investment hedges (2019 – asset balance of $551 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)	2020		2019		2020		2019
Gross amounts of financial instruments before netting	$	2,195	$	2,380	$	4,379	$	2,853
Gross amounts of financial instruments set-off in Consolidated Balance Sheets	(429)		(423)		(351)		(366)
Net amount of financial instruments in Consolidated Balance Sheets	$	1,766	$	1,957	$	4,028	$	2,487

FAIR VALUE OF FINANCIAL INSTRUMENTS

a) Financial Instruments Classification

The following tables list the company’s financial instruments by their respective classification as at December 31, 2020 and 2019:


AS AT DEC. 31, 2020 (MILLIONS)	Fair Value Through Profit or Loss		Fair Value Through OCI		Amortized Cost		Total
Financial assets1
Cash and cash equivalents	$	—	$	—	$	9,933	$	9,933
Other financial assets
Government bonds	356		2,295		—		2,651
Corporate bonds	1,094		2,148		357		3,599
Fixed income securities and other	1,079		1,191		—		2,270
Common shares and warrants	3,287		3,227		—		6,514
Loans and notes receivable2	110		—		2,586		2,696
	5,926		8,861		2,943		17,730
Accounts receivable and other3	1,766		—		11,906		13,672
	$	7,692	$	8,861	$	24,782	$	41,335
Financial liabilities
Corporate borrowings	$	—	$	—	$	9,077	$	9,077
Non-recourse borrowings of managed entities
Property-specific borrowings	—		—		128,556		128,556
Subsidiary borrowings	—		—		10,768		10,768
	—		—		139,324		139,324
Accounts payable and other2	5,889		—		35,228		41,117
Subsidiary equity obligations	1,457		—		2,242		3,699
	$	7,346	$	—	$	185,871	$	193,217

1.Financial assets include $9.7 billion of assets pledged as collateral.

2.Includes a shareholder loan of $500 million receivable from our U.S. gas pipeline.


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 receivable2	55		—		1,804		1,859
	4,251		6,103		2,114		12,468
Accounts receivable and other3	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 a shareholder loan of $500 million receivable from our U.S. gas pipeline.

Included in cash and cash equivalents is $8.2 billion (2019 – $5.7 billion) of cash and $1.8 billion (2019 – $1.1 billion) of short-term deposits as at December 31, 2020.

b) Carrying and Fair Value

The following table lists the company’s financial instruments by their respective classification as at December 31, 2020 and December 31, 2019:


	2020				2019
AS AT DEC. 31 (MILLIONS)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Cash and cash equivalents	$	9,933	$	9,933	$	6,778	$	6,778
Other financial assets
Government bonds	2,651		2,651		2,403		2,403
Corporate bonds	3,599		3,599		3,267		3,267
Fixed income securities and other	2,270		2,270		1,750		1,750
Common shares and warrants	6,514		6,514		3,189		3,189
Loans and notes receivable	2,696		2,696		1,859		1,859
	17,730		17,730		12,468		12,468
Accounts receivable and other	13,672		13,672		14,035		14,035
	$	41,335	$	41,335	$	33,281	$	33,281
Financial liabilities
Corporate borrowings	$	9,077	$	10,540	$	7,083	$	7,933
Non-recourse borrowings of managed entities
Property-specific borrowings	128,556		131,099		127,869		129,728
Subsidiary borrowings	10,768		11,085		8,423		8,632
	139,324		142,184		136,292		138,360
Accounts payable and other	41,117		41,117		36,724		36,724
Subsidiary equity obligations	3,699		3,699		4,132		4,139
	$	193,217	$	197,540	$	184,231	$	187,156

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



AS AT DEC. 31 (MILLIONS)	2020		2019
Current	$	5,483	$	3,605
Non-current	12,247		8,863
Total	$	17,730	$	12,468

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:


	2020						2019
AS AT DEC. 31 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Financial assets
Other financial assets
Government bonds	$	7	$	2,644	$	—	$	—	$	2,403	$	—
Corporate bonds	192		2,764		286		—		2,682		275
Fixed income securities and other	867		912		491		419		851		480
Common shares and warrants	4,548		577		1,389		1,966		421		802
Loans and notes receivables	—		42		68		—		51		4
Accounts receivable and other	50		1,581		135		1		1,737		219
	$	5,664	$	8,520	$	2,369	$	2,386	$	8,145	$	1,780
Financial liabilities
Accounts payable and other	$	75	$	5,090	$	724	$	93	$	3,749	$	686
Subsidiary equity obligations	—		77		1,380		—		40		1,856
	$	75	$	5,167	$	2,104	$	93	$	3,789	$	2,542

During the year ended December 31, 2020 and 2019, there were no transfers between Level 1, 2 or 3.

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, 2020

Valuation Techniques and Key Inputs

Derivative assets/Derivative liabilities (accounts receivable/accounts payable)

1,581

(5,090)

Other financial assets

6,939

Valuation models based on observable market data

Redeemable fund units (subsidiary equity obligations)

(77)

Aggregated market prices of underlying investments

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, 2020

Valuation

Techniques

Significant

Unobservable Inputs

Relationship of Unobservable
Inputs to Fair Value

Fixed income securities and other

491

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

286

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 and warrants

1,389

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

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)

(1,380)

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)

135

Discounted cash flows

• Future cash flows

•Increases (decreases) in future cash flows increase (decrease) fair value

(724)

• 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, 2020 and 2019:


	2020					2019
AS AT AND FOR THE YEARS ENDED DEC. 31 (MILLIONS)		Financial Assets		Financial Liabilities			Financial Assets		Financial Liabilities
Balance, beginning of year		$	1,780	$	2,542		$	795	$	2,299
Fair value changes in net income		(92)		(111)			278		(27)
Fair value changes in other comprehensive income1		15		4			(10)		6
Additions, net of disposals		666		(331)			717		264
Balance, end of year		$	2,369	$	2,104		$	1,780	$	2,542

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:


	2020						2019
AS AT DEC. 31, 2020 (MILLIONS)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Corporate borrowings	$	10,443	$	97	$	—	$	7,841	$	92	$	—
Property-specific borrowings	3,406		57,927		69,766		6,467		52,386		70,875
Subsidiary borrowings	7,825		3		3,257		6,111		299		2,222
Subsidiary equity obligations	—		73		2,169		—		73		2,170

d) Hedging Activities

i. Cash Flow Hedges

ii. Net Investment Hedges

e) Netting of Financial Instruments


	Accounts Receivable and Other				Accounts Payable and Other
AS AT DEC. 31 (MILLIONS)	2020		2019		2020		2019
Gross amounts of financial instruments before netting	$	2,195	$	2,380	$	4,379	$	2,853
Gross amounts of financial instruments set-off in Consolidated Balance Sheets	(429)		(423)		(351)		(366)
Net amount of financial instruments in Consolidated Balance Sheets	$	1,766	$	1,957	$	4,028	$	2,487