SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q. The unaudited condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments so that the unaudited condensed consolidated financial statements are presented fairly and that estimates made in preparing its unaudited condensed consolidated financial statements are reasonable and prudent, and that all such adjustments are of a normal recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”).

The unaudited condensed consolidated financial statements include the accounts and activities of the AOG entities, their consolidated subsidiaries and certain Consolidated Funds. All intercompany balances and transactions have been eliminated upon consolidation.

The Company has reclassified certain prior period amounts to conform to the current year presentation.

Non-Controlling Interests in Ares Operating Group Entities

The non-controlling interests in AOG entities represent a component of equity and net income attributable to the owners of the Ares Operating Group Units (“AOG Units”) that are not held directly or indirectly by the Company. These owners consist predominantly of Ares Owners Holdings L.P. but also include other strategic distribution partnerships with whom the Company has established joint ventures and other non-controlling strategic investors. Non-controlling interests in

AOG entities are adjusted for contributions to and distributions from AOG during the reporting period and are allocated income from the AOG entities either based on their historical ownership percentage for the proportional number of days in the reporting period or based on the activity associated with certain membership interests.

Redeemable Interest

On July 1, 2020, the Company completed its acquisition of a majority interest in SSG Capital Holdings Limited and its operating subsidiaries (“SSG”) (the “SSG Acquisition”). In connection with the SSG Acquisition, the former owners of SSG retained a 20% ownership interest in the operations acquired by the Company. In certain circumstances, the Company had the ability to acquire full ownership of SSG pursuant to a contractual arrangement to be initiated by the Company or by the former owners of SSG. Since the acquisition of the remaining interest in SSG was not within the Company's sole discretion, the ownership interest held by the former owners of SSG was classified as a redeemable interest and represented mezzanine equity.

Redeemable interest in AOG entities was initially recorded at fair value on the date of the SSG Acquisition within mezzanine equity within the Condensed Consolidated Statements of Financial Condition. Income (loss) was allocated based on the ownership percentage attributable to the redeemable interest. As of the date of acquisition, the Company determined that the redemption of the redeemable interest was probable. At each balance sheet date, the carrying value of the redeemable interest is presented at the redemption amount, as defined in accordance with the terms of a contractual arrangement between the Company and the former owners of SSG, to the extent that the redemption amount exceeded the initial measurement on the date of acquisition. The Company recognizes changes in the redemption amount with corresponding adjustments against retained earnings, or additional paid-in-capital in the absence of retained earnings, within stockholders’ equity within the Condensed Consolidated Statements of Financial Condition.

In connection with a merger agreement to acquire the remaining 20% ownership interest in the Ares SSG fee-generating business that was retained by the former owners of SSG (the “SSG Buyout”), a portion of the redeemable interest in AOG entities was purchased on March 31, 2023 and the Company now owns 100% of Ares SSG’s fee-generating business. The SSG Buyout was effectuated through newly issued shares of Class A common stock. The remaining redeemable interest in AOG entities represents ownership in certain investments that were not included in the SSG Buyout and continues to be presented at the redemption amount within mezzanine equity within the Condensed Consolidated Statements of Financial Condition.

Redeemable interest in Consolidated Funds represent the Class A ordinary shares issued by Ares Acquisition Corporation (NYSE: AAC) (“AAC”) that are redeemable for cash by the public shareholders in the event that AAC does not complete a business combination or tender offer associated with stockholder approval provisions. The Class A ordinary shareholders have redemption rights that are considered to be outside of AAC’s control. At each balance sheet date, the carrying value of the redeemable interest is presented at the redemption amount. During the three months ended March 31, 2023, in connection with the extension of the period to complete a business combination, AAC shareholders elected to redeem an aggregate amount of $539.0 million that was paid from AAC’s trust account. At March 31, 2023, the remaining 46,997,081 Class A ordinary shares of AAC continues to be presented at the redemption amount within mezzanine equity within the Condensed Consolidated Statements of Financial Condition.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). ASUs were assessed and determined either to be not applicable or expected to have an immaterial impact on its unaudited condensed consolidated financial statements.