EX-1 2 bbuq32017ex991.htm EXHIBIT 99.1 Exhibit
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Exhibit 99.1
Brookfield Business Partners L.P.


UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF

BROOKFIELD BUSINESS PARTNERS L.P.

As at September 30, 2017 and December 31, 2016 and for the
three and nine months ended September 30, 2017 and 2016





INDEX TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF BROOKFIELD BUSINESS PARTNERS L.P.

 
 
Unaudited Interim Condensed Consolidated Statements of Financial Position
3

Unaudited Interim Condensed Consolidated Statements of Operating Results
4

Unaudited Interim Condensed Consolidated Statements of Comprehensive Income
5

Unaudited Interim Condensed Consolidated Statements of Changes in Equity
6

Unaudited Interim Condensed Consolidated Statements of Cash Flow
7

Notes to Unaudited Interim Condensed Consolidated Financial Statements
8



2

BROOKFIELD BUSINESS PARTNERS L.P.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION


(US$ MILLIONS)
 
Notes
 
September 30, 2017
 
December 31, 2016
Assets
 
 
 
 
 
 
Cash and cash equivalents
 
4

 
$
1,573

 
$
1,050

Financial assets
 
5

 
353

 
433

Accounts and other receivable, net
 
6

 
3,187

 
1,703

Inventory, net
 
7

 
997

 
229

Assets held for sale
 
8

 
17

 
264

Other assets
 
9

 
428

 
397

Current assets
 
 

 
6,555

 
4,076

Financial assets
 
5

 
327

 
106

Accounts and other receivable, net
 
6

 
870

 
94

Other assets
 
9

 
79

 
21

Property, plant and equipment
 
10

 
2,569

 
2,096

Deferred income tax assets
 
 

 
175

 
111

Intangible assets
 
11

 
3,202

 
371

Equity accounted investments
 
13

 
626

 
166

Goodwill
 
12

 
1,527

 
1,152

Total assets
 
 
 
$
15,930

 
$
8,193

Liabilities and equity
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Accounts payable and other
 
14

 
$
4,527

 
$
2,079

Liabilities associated with assets held for sale
 
8

 
13

 
66

Borrowings
 
16

 
822

 
411

Current liabilities
 
 

 
5,362

 
2,556

Accounts payable and other
 
14

 
817

 
378

Borrowings
 
16

 
2,840

 
1,140

Deferred income tax liabilities
 
 

 
880

 
81

Total liabilities
 
 

 
$
9,899

 
$
4,155

Equity
 
 
 
 
 
 
Limited partners
 
 
 
$
1,641

 
$
1,206

Non-controlling interests attributable to:
 
 
 
 
 
 
Redemption-Exchange Units, Preferred Shares and Special Limited Partnership Units held by Brookfield Asset Management Inc.
 
 
 
1,540

 
1,295

Interest of others in operating subsidiaries
 
 
 
2,850

 
1,537

Total equity
 
 

 
6,031

 
4,038

Total liabilities and equity
 
 

 
$
15,930

 
$
8,193

   
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

3

BROOKFIELD BUSINESS PARTNERS L.P.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF OPERATING RESULTS


 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(US$ MILLIONS, except per unit amounts)
 
Notes
 
2017
 
2016
 
2017
 
2016
Revenues
 
22

 
$
7,640

 
$
2,043

 
$
14,444

 
$
5,728

Direct operating costs
 
21

 
(7,295
)
 
(1,889
)
 
(13,842
)
 
(5,322
)
General and administrative expenses
 
22

 
(95
)
 
(70
)
 
(233
)
 
(197
)
Depreciation and amortization expense
 
22

 
(109
)
 
(71
)
 
(262
)
 
(219
)
Interest expense
 
22

 
(66
)
 
(24
)
 
(135
)
 
(71
)
Equity accounted income, net
 
 

 
37

 
28

 
61

 
75

Impairment expense, net
 
 

 
—

 
—

 
(30
)
 
(106
)
Gain on acquisitions/dispositions, net
 
8

 
(14
)
 
29

 
267

 
57

Other income (expenses), net
 
3 

 
(41
)
 
11

 
(36
)
 
(20
)
Income (loss) before income tax
 
 

 
57

 
57

 
234

 
(75
)
Income tax (expense) recovery
 
 
 
 
 
 
 
 
 
 
Current
 
 

 
(19
)
 
(8
)
 
(19
)
 
(18
)
Deferred
 
 

 
6

 
3

 
6

 
25

Net income (loss)
 
 

 
$
44

 
$
52

 
$
221

 
$
(68
)
Attributable to:
 
 
 
 
 
 
 
 
 
 
Limited partners (1)
 
 

 
$
(8
)
 
$
9

 
$
21

 
$
8

Brookfield Asset Management Inc. (2)
 
 

 
—

 
—

 
—

 
(35
)
Non-controlling interests attributable to:
 
 
 
 
 
 
 
 
 
 
Redemption-Exchange Units held by Brookfield Asset Management Inc. (1)           
 
 

 
(8
)
 
11

 
23

 
9

Special Limited Partners
 
19

 
25

 
—

 
25

 
—

Interest of others in operating subsidiaries
 
 

 
35

 
32

 
152

 
(50
)
 
 
 

 
$
44

 
$
52

 
$
221

 
$
(68
)
Basic and diluted earnings per limited partner unit
 
19

 
$
(0.15
)
 
$
0.22

 
$
0.40

 
$
0.19

____________________________________

(1) 
For the periods subsequent to June 20, 2016.
(2) 
For the periods prior to June 20, 2016.
   
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.


4

BROOKFIELD BUSINESS PARTNERS L.P.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)


 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(US$ MILLIONS)
Notes
 
2017
 
2016
 
2017
 
2016
Net income (loss)
 
 
$
44

 
$
52

 
$
221

 
$
(68
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
 
Foreign currency translation
 
 
$
179

 
$
(2
)
 
$
206

 
$
119

Available-for-sale securities
 
 
12

 
(20
)
 
7

 
8

Net investment and cash flow hedges
 
 
(25
)
 
(10
)
 
(52
)
 
(25
)
Equity accounted investment
 
 
(2
)
 
(7
)
 
(3
)
 
(59
)
Taxes on the above items
 
 
2

 
6

 
4

 
11

Total other comprehensive income (loss)
 
 
166

 
(33
)
 
162

 
54

Comprehensive income (loss)
 
 
$
210

 
$
19

 
$
383

 
$
(14
)
Attributable to:
 
 
 
 
 
 
 
 
 
Limited partners (1)
 
 
$
17

 
$
7

 
$
54

 
$
1

Brookfield Asset Management Inc. (2)
 
 
—

 
—

 
—

 
15

Non-controlling interests attributable to:
 
 
 
 
 
 
 
 
 
Redemption-Exchange Units held by Brookfield Asset Management Inc. (1)
 
 
18

 
8

 
58

 
1

Special Limited Partners
 
 
25

 
—

 
25

 
—

Interest of others in operating subsidiaries
 
 
150

 
4

 
246

 
(31
)
 
 
 
$
210

 
$
19

 
$
383

 
$
(14
)
____________________________________

(1) 
For the periods subsequent to June 20, 2016.
(2) 
For the periods prior to June 20, 2016.
   
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.



5

BROOKFIELD BUSINESS PARTNERS L.P.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
 
 
 
 
 
 
 
 
 
 
Non-controlling interests
 
 
 
Brookfield Asset Management Inc.
 
Limited Partners
 
Redemption-Exchange Units held by
Brookfield Asset Management Inc.
 
Special Limited Partners
Preferred
Shares
 
 
 
 
(US$ MILLIONS)
Equity
Accumulated
other
comprehensive
loss (1)
Brookfield
Asset
Management
Inc.
 
Capital
Ownership Change (4)
Retained
earnings
Accumulated
other
comprehensive
loss (1)
Limited
Partners
 
Capital
Ownership
Change (4)
Retained
earnings
Accumulated
other
comprehensive
loss (1)
Redemption-
Exchange
Units
 
Retained Earnings
Capital
 
Interest of
others in
operating
subsidiaries
 
Total
Equity
Balance as at January 1, 2017
$
—

$
—

$
—

 
$
1,345

$
—

$
2

$
(141
)
$
1,206

 
$
1,474

$
—

$
3

$
(197
)
$
1,280

 
$
—

$
15

 
$
1,537

 
$
4,038

Net income (loss)
—

—

—

 
—

—

21

—

21

 
—

—

23

—

23

 
25

—

 
152

 
221

Other comprehensive income (loss)
—

—

—

 
—

—

—

33

33

 
—

—

—

35

35

 
—

—

 
94

 
162

Total comprehensive income (loss)
—

—

—

 
—

—

21

33

54

 
—

—

23

35

58

 
25

—

 
246

 
383

Contributions
—

—

—

 
—

—

—

—

—

 
—

—

—

—

—

 
—

—

 
4

 
4

Distributions (3)
—

—

—

 
—

—

(11
)
—

(11
)
 
—

—

(10
)
—

(10
)
 
(25
)
—

 
(381
)
 
(427
)
Acquisition of Interest (2)
—

—

—

 
—

—

—

—

—

 
—

—

—

—

—

 
—

—

 
1,444

 
1,444

Unit Issuance (3)
—

—

—

 
392

—

—

—

392

 
200

—

—

—

200

 
—

—

 
—

 
592

Other
—

—

—

 
—

—

—

—

—

 
—

—

(3
)
—

(3
)
 
—

—

 
—

 
(3
)
Balance as at September 30, 2017
$
—

$
—

$
—

 
$
1,737

$
—

$
12

$
(108
)
$
1,641

 
$
1,674

$
—

$
13

$
(162
)
$
1,525

 
$
—

$
15

 
$
2,850

 
$
6,031

Balance as at January 1, 2016
$
2,147

$
(360
)
$
1,787

 
$
—

$
—

$
—

$
—

$
—

 
$
—

$
—

$
—

$
—

$
—

 
$
—

$
—

 
$
1,297

 
$
3,084

Net income (loss)
(35
)
—

(35
)
 
—

—

8

—

8

 
—

—

9

—

9

 
—

—

 
(50
)
 
(68
)
Other comprehensive income (loss)
—

50

50

 
—

—

—

(7
)
(7
)
 
—

—

—

(8
)
(8
)
 
—

—

 
19

 
54

Total comprehensive income (loss)
(35
)
50

15

 
—

—

8

(7
)
1

 
—

—

9

(8
)
1

 
—

—

 
(31
)
 
(14
)
Contributions
78

—

78

 
—

—

—

—

—

 
—

—

—

—

—

 
—

—

 
268

 
346

Distributions
(18
)
—

(18
)
 
—

—

(3
)
—

(3
)
 
—

—

(4
)
—

(4
)
 
—

—

 
(23
)
 
(48
)
Net increase (decrease) in Brookfield Asset Management Inc. investment
13

(8
)
5

 
—

—

—

—

—

 
—

—

—

—

—

 
—

—

 
54

 
59

Ownership Changes
$
—

$
—

$
—

 
$
—

$
(3
)
$
2

$
—

$
(1
)
 
$
—

$
(3
)
$
2

$
—

$
(1
)
 
$
—

$
—

 
$
7

 
$
5

Unit issuance / reorganization
$
(2,185
)
$
318

$
(1,867
)
 
$
1,153

$
—

$
—

$
(131
)
$
1,022

 
$
1,282

$
—

$
—

$
(187
)
$
1,095

 
$
—

$
15

 
$
—

 
$
265

Balance as at September 30, 2016
$
—

$
—

$
—

 
$
1,153

$
(3
)
$
7

$
(138
)
$
1,019

 
$
1,282

$
(3
)
$
7

$
(195
)
$
1,091

 
$
—

$
15

 
$
1,572

 
$
3,697

_______________________________
(1)  
See Note 20 for additional information.
(2) 
See Note 3 Acquisition of Businesses.
(3) 
See Note 19 for additional information on distributions as it relates to the Special Limited Partners and for additional information on the September 2017 unit issuance.
(4) 
Includes gains or losses on changes in ownership interests of consolidated subsidiaries
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

6

BROOKFIELD BUSINESS PARTNERS L.P.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 
 
 
 
Nine Months Ended
September 30,
(US$ MILLIONS)
 
Notes
 
2017
 
2016
Operating Activities
 
 
 
 
 
 
Net income (loss)
 
 

 
$
221

 
$
(68
)
Adjusted for the following items:
 
 
 
 
 
 
Equity accounted income, net
 
 

 
(61
)
 
(75
)
Impairment expense, net
 
 

 
30

 
106

Depreciation and amortization expense
 
 

 
262

 
219

Gain on acquisitions/dispositions, net
 
 

 
(267
)
 
(57
)
Provisions and other items
 
 

 
27

 
40

Deferred income tax expense (recovery)
 
 

 
(6
)
 
(25
)
Changes in non-cash working capital, net
 
23

 
174

 
25

Cash from operating activities
 
 

 
380

 
165

Financing Activities
 
 
 
 
 
 
Proceeds from borrowings, net
 
 

 
1,423

 
424

Repayment of borrowings
 
 

 
(768
)
 
(684
)
Capital provided by limited partners and Redemption-Exchange Unitholders
 
19

 
592

 
250

Capital provided by preferred shareholders
 
 
 
—

 
15

Capital provided by others who have interests in operating subsidiaries
 
 

 
699

 
259

Capital provided by Brookfield Asset Management Inc.
 
 

 
—

 
78

Distributions to limited partners and Redemption-Exchange Unitholders
 
 

 
(21
)
 
(7
)
Distributions to Special Limited Partners Unitholders
 
19

 
(25
)
 
—

Distributions to others who have interests in operating subsidiaries
 
 

 
(381
)
 
(23
)
Distributions to Brookfield Asset Management Inc.
 
 

 
—

 
(11
)
Cash from (used in) financing activities
 
 

 
1,519

 
301

Investing Activities
 
 
 
 
 
 
Acquisitions
 
 
 
 
 
 
Subsidiaries, net of cash acquired
 
3

 
(1,575
)
 
(32
)
Property, plant and equipment and intangible assets
 
 

 
(168
)
 
(110
)
Equity accounted investments
 
 
 
(208
)
 
—

Financial assets
 
 

 
(198
)
 
(379
)
Dispositions and distributions
 
 
 
 
 
 
Subsidiaries, net of cash disposed
 
 

 
382

 
—

Property, plant and equipment
 
 

 
16

 
17

Equity accounted investments
 
 

 
21

 
120

Financial assets
 
 

 
259

 
254

Net settlement of foreign exchange hedges
 
 

 
(6
)
 
20

Restricted cash and deposits
 
 

 
84

 
18

Cash from (used in) investing activities
 
 

 
(1,393
)
 
(92
)
Cash
 
 
 
 
 
 
Change during the period
 
 

 
506

 
374

Impact of foreign exchange on cash
 
 

 
17

 
—

Balance, beginning of year
 
 

 
1,050

 
354

Balance, end of period
 
 

 
$
1,573

 
$
728

Supplemental cash flow information is presented in Note 23  
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

7

NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

NOTE 1.    NATURE AND DESCRIPTION OF THE PARTNERSHIP
Brookfield Business Partners L.P. and its subsidiaries, (collectively, "the partnership") own and operate business services and industrial operations ("the Business") on a global basis. Brookfield Business Partners L.P. was registered as a limited partnership established under the laws of Bermuda, and organized pursuant to a limited partnership agreement as amended on May 31, 2016, and as further amended on June 17, 2016. Brookfield Business Partners L.P. is a subsidiary of Brookfield Asset Management Inc. ("Brookfield Asset Management" or "Brookfield" or the "parent company"). Brookfield Business Partners L.P.'s limited partnership units are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbols "BBU" and "BBU.UN", respectively. The registered head office of Brookfield Business Partners L.P. is 73 Front Street, 5th Floor, Hamilton HM 12, Bermuda.
NOTE 2.    SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of presentation
These unaudited interim condensed consolidated financial statements of the partnership have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, or IAS 34, as issued by the International Accounting Standards Board, or the IASB, and using the accounting policies the partnership applied in its annual consolidated financial statements as at and for the year ended December 31, 2016, except for the impact of the adoption of the accounting standards described below and for the impact of accounting policies related to certain assets acquired and liabilities assumed on acquisition of certain businesses during the current period (described further below). The accounting policies the partnership applied in its annual consolidated financial statements as at and for the year ended December 31, 2016 are disclosed in Note 2 of such consolidated financial statements, with which reference should be made in reading these unaudited interim condensed consolidated financial statements. All defined terms are also described in the annual consolidated financial statements. The unaudited interim condensed consolidated financial statements are prepared on a going concern basis and have been presented in U.S. dollars rounded to the nearest million unless otherwise indicated.
The preparation of financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the accounting policies. The critical accounting estimates and judgments have been set out in Note 2 to the partnership's consolidated financial statements as at and for the year ended December 31, 2016. There have been no significant changes to the method of determining significant estimates and judgments since December 31, 2016.
These unaudited interim condensed consolidated financial statements were approved by the partnership's Board of Directors and authorized for issue on November 3, 2017.
(b)
Continuity of interests
Brookfield Business Partners L.P. was established on January 18, 2016 by Brookfield and on June 20, 2016 Brookfield completed the spin-off of the Business to holders of Brookfield's Class A and B limited voting shares. Brookfield directly and indirectly controlled the Business prior to the spin-off and continues to control the partnership subsequent to the spin-off through its interests in the partnership. As a result of this continuing common control, there is insufficient substance to justify a change in the measurement of the Business. In accordance with the partnership's and Brookfield's accounting policy, the partnership has reflected the Business in its financial position and results of operations using Brookfield's carrying values, prior to the spin-off.
To reflect this continuity of interests these unaudited interim condensed consolidated financial statements provide comparative information of the Business for the periods prior to the spin-off, as previously reported by Brookfield. The economic and accounting impact of contractual relationships created or modified in conjunction with the spin-off have been reflected prospectively from the date of the spin-off and have not been reflected in the results of operations or financial position of the partnership prior to June 20, 2016, as such items were in fact not created or modified prior thereto. Accordingly, the financial information for the periods prior to June 20, 2016 is presented based on the historical financial information for the Business as previously reported by Brookfield. For the period after completion of the spin-off, the results are based on the actual results of the partnership, including the adjustments associated with the spin-off and the execution of several new and amended agreements including management service and relationship agreements. Therefore, net income (loss) and comprehensive income (loss) not

8
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

attributable to interests of others in operating subsidiaries have been allocated to Brookfield prior to June 20, 2016 and allocated to the limited partners, the general partner and redemption-exchange unitholders on and after June 20, 2016.
Prior to June 20, 2016, intercompany transactions between the partnership and Brookfield have been included in these unaudited interim consolidated financial statements and are considered to be forgiven at the time the transaction, are recorded and reflected as a "Net increase/(decrease) in Brookfield Asset Management Inc. investment". "Net increase/(decrease) in Brookfield Asset Management Inc. investment" as shown in the unaudited interim condensed consolidated statements of changes in equity represents the parent company's historical investment in the partnership, accumulated net income and the net effect of the transactions and allocations from the parent company. The total net effect of transactions with the parent company is reflected in the unaudited interim condensed consolidated statements of cash flow as a financing activity and in the unaudited interim condensed consolidated statements of financial position as "Equity attributable to Brookfield Asset Management Inc."
(c)
Inventories
Inventories, with the exception of certain fuel inventories, are valued at the lower of cost and net realizable value. Cost is determined using specific identification where possible and practicable or using the first-in, first-out or weighted average method. Costs include direct and indirect expenditures incurred in bringing the inventory to its existing condition and location. Net realizable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Fuel inventories are traded in active markets and are purchased with the view to resell in the near future, generating a profit from fluctuations in prices or margins. As a result, fuel inventories are carried at market value by reference to prices in a quoted active market, in accordance with the commodity broker-trader exemption granted by IAS 2, Inventories. Change in fair value less costs to sell, are recognized in the unaudited interim condensed consolidated statement of operating results through direct operating costs. Fuel products that are held for extended periods in order to benefit from future anticipated increases in fuel prices or located in territories where no active market exists are recognized at the lower of cost and net realizable value. Products and chemicals used in the production of biofuels are valued at the lower of cost and net realizable value.
(d)
Renewable Transport Fuel Obligation (RTFO)
Under the UK government's Renewable Transport Fuel Obligation ("RTFO") Order, which regulates biofuels used for transport and non road mobile machinery, our UK road fuel service operation is required to meet annual targets for the supply of biofuels. The obligations which arise are either settled by cash or through the delivery of certificates which are generated by blending biofuels. To the extent that the partnership generates certificates in excess of its current year obligation, these can either be carried forward to offset up to 25% of the next year’s obligation or sold to other parties.
Certificates generated or purchased during the year which will be used to settle the current obligation are recognized in inventory at the lower of cost and net realizable value. Where certificates are generated, cost is deemed to be the average cost of blending biofuels during the year in which the certificates are generated.
Certificates held for sale to third parties are recognized in inventory at fair value. There is no externally quoted marketplace for the valuation of RTFO certificates. In order to value these contracts, the partnership has adopted a pricing methodology combining both observable inputs based on market data and assumptions developed internally based on observable market activity. Changes in market prices of the certificates and the quantity of tickets considered to be realizable through external sales are recognized immediately in the unaudited condensed consolidated statement of operating results. Certificates for which no active market is deemed to exist are not recognized.
The liability associated with the obligations under the RTFO Order is recognized in the year in which the obligation arises and is valued by reference to either the cost of generating the certificates which will be surrendered to meet the obligation or the expected future cash outflow where the obligation is settled. The liability is recorded in accounts payable and other.
(e)
Intangible assets
Intangible assets acquired in a business combination and recognized separately from goodwill are    initially recognized at their fair value at the acquisition date. The partnership’s intangible assets are comprised primarily of water and sewage system, concession rights, computer software, trademarks, distribution networks, patents, product development, customer relationships, loyalty program and technology.

9
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

Subsequent to the initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets acquired separately. Intangible assets are amortized on a straight line basis over the following periods:

    
Water and sewage system
Up to 50 years
Concession right and client portfolio
Up to 50 years
Computer software
Up to 10 years
Customer relationships
Up to 30 years
Patents, trademarks and proprietary technology
Up to 40 years
Product development costs
Up to 5 years
Distribution networks
Up to 25 years
Loyalty program
Up to 15 years

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.

Services concessions arrangements which provides the partnership the right to charge users for the services are accounted for as an intangible asset under IFRIC 12, Service Concession Arrangements. Water and sewage system and concession right and client portfolio were acquired as part of the acquisition of BRK Ambiental Participações S.A. (“BRK Ambiental”), the Brazilian water, wastewater and industrial water and sewerage services company and were initially recognized at their fair values. Further information on the acquisition is available in Note 3.
    
(f)
Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the partnership and the revenue and costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of estimated customer returns, trade allowances, rebates and other similar allowances.

The partnership recognizes revenue when the specific criteria are met for each of the partnership's activities as described below. Cash received by the partnership from customers is recorded as deferred revenue until the revenue recognition criteria are met.

In the business services segment, revenue from the sale of goods in our UK road fuel service operation represents net invoiced sales of fuel products and RTFO certificates, excluding value added taxes but including excise duty, which has been assessed to be a production tax and recorded as part of the consideration received. Revenue is recognized at the point that title passes to the customer.
 
(g)
Future Changes in Accounting Policies

(i)
Revenue from Contracts with Customers
IFRS 15, Revenue from Contracts with Customers ("IFRS 15") specifies how and when revenue should be recognized as well as requiring more informative and relevant disclosures. IFRS 15 also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. IFRS 15 supersedes IAS 18, Revenue, IAS 11, Construction Contracts and a number of revenue-related interpretations. IFRS 15 applies to nearly all contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. IFRS 15 must be applied for periods beginning on or after January 1, 2018 with early application permitted. The partnership has developed a detailed transition plan to implement IFRS 15. The partnership has substantially completed the assessment phase and the impact assessment. We are progressing as planned for the implementation of the standard.

10
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

The partnership has concluded on a preliminary basis to use the modified retrospective approach on transition date, in which a cumulative catch-up adjustment will be recorded through opening equity as of January 1, 2018 upon initial adoption. No material adjustments required upon adoption have been noted to date, however further technical analysis and quantitative assessments are required to conclude on the overall impact. The partnership continues to evaluate the overall impact of IFRS 15 on the consolidated financial statements.
(ii)
Financial Instruments
In July 2014, the IASB issued the final publication of IFRS 9, Financial Instruments ("IFRS 9") superseding the current IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 establishes principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity's future cash flows. This new standard also includes a new general hedge accounting standard which will align hedge accounting more closely with an entity's risk management activities. It does not fully change the types of hedging relationships or the requirement to measure and recognize ineffectiveness, however, it will provide more hedging strategies that are used for risk management to qualify for hedge accounting and introduce greater judgment to assess the effectiveness of a hedging relationship. IFRS 9 has a mandatory effective date for annual periods beginning on or after January 1, 2018 with early adoption permitted. The partnership has developed a detailed transition plan to implement IFRS 9. The partnership is at the assessment phase and has compiled an inventory of all of its financial instruments. To date, management has participated in strategic planning sessions with its subsidiaries and associates. The partnership has completed the issue identification phase of the transition project and is currently quantifying the impact. No material adjustments required upon adoption have been noted to date; however, further technical analysis and quantitative assessments are required to conclude on the overall impact. Management continues to evaluate the overall impact of IFRS 9 on the consolidated financial statements.
(iii)
Leases
IFRS 16, Leases, ("IFRS 16") provides a single lessee accounting model, requiring recognition of assets and liabilities for all leases, unless the lease term is shorter than 12 months or the underlying asset has a low value. IFRS 16 supersedes IAS 17, Leases, and its related interpretative guidance. IFRS 16 must be applied for periods beginning on or after January 1, 2019 with early adoption permitted if IFRS 15 has also been adopted. The partnership is currently evaluating the impact of IFRS 16 on its consolidated financial statements.
(iv)
IFRIC 22 Foreign Currency Transactions (“IFRIC 22”)
In December 2016, the IASB issued IFRIC 22, effective for annual periods beginning on or after January 1, 2018. The interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. The Interpretation may be applied either retrospectively or prospectively. The partnership is evaluating the impact of IFRIC 22 on its consolidated financial statements, including the adoption method.
(v)    IFRIC 23 Uncertainty over Income Tax Treatments (“IFRIC 23”)
In June 2017, the IASB published IFRIC 23, effective for annual periods beginning on or after January 1, 2019. The interpretation requires an entity to assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings and to exercise judgment in determining whether each tax treatment should be considered independently or whether some tax treatments should be considered together. The decision should be based on which approach provides better predictions of the resolution of the uncertainty. An entity also has to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments, assuming that the taxation authority with the right to examine any amounts reported to it will examine those amounts and will have full knowledge of all relevant information when doing so. The interpretation may be applied on either a fully retrospective basis or a modified retrospective basis without restatement of comparative information. The partnership haven’t stated evaluating the impact of IFRIC 23 on its consolidated financial statements yet.


11
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

(h)
New Accounting Policies adopted

(i)
Income taxes
In January 2016, the IASB issued certain amendments to IAS 12, Income Taxes, to clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value. A deductible temporary difference arises when the carrying amount of the debt instrument measured at fair value is less than the cost for tax purposes, irrespective of whether the debt instrument is held for sale or held to maturity. The recognition of the deferred tax asset that arises from this deductible temporary difference is considered in combination with other deferred taxes applying local tax law restrictions where applicable. In addition, when estimating future taxable profits, consideration can be given to recovering more than the asset's carrying amount where probable. These amendments are effective for periods beginning on or after January 1, 2017 with early application permitted. These amendments did not have a significant impact on the unaudited interim condensed consolidated financial statements.
(ii)
Disclosures — Statement of cash flows
In January 2016, the IASB issued the amendments to IAS 7, Statement of Cash Flows, effective for annual periods beginning January 1, 2017. The IASB requires that the following changes in liabilities arising from financing activities are disclosed (to the extent necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes. These amendments will be applied to the annual consolidated financial statements with no comparatives required.

12
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

NOTE 3. ACQUISITION OF BUSINESSES
When determining the basis of accounting for the partnership’s investees, the partnership evaluates the degree of influence that the partnership exerts directly or through an arrangement over the investees' relevant activities. Control is obtained when the partnership has power over the acquired entities and an ability to use its power to affect the returns of these entities.
The partnership accounts for business combinations using the acquisition method of accounting, pursuant to which the cost of acquiring a business is allocated to its identifiable tangible and intangible assets and liabilities on the basis of the estimated fair values at the date of acquisition.
(a)
Acquisitions completed in the nine months ended September 30, 2017
The following summarizes the consideration transferred, assets acquired and liabilities assumed at the applicable acquisition dates:
(US$ MILLIONS)
Business Services (1)
 
Industrial Operations (1)
 Cash
$
190

 
$
383

 Contingent consideration
10

 
—

Total Consideration (2)
$
200

 
$
383

 
 
 
 
(US$ MILLIONS)
 
 
 
Cash and cash equivalents
29

 
296

Accounts receivable and other
1,193

 
978

Inventory
661

 
10

Equity accounted investments
125

 
109

Property, plant and equipment
248

 
200

Intangible assets
376

 
2,467

Goodwill
295

 
14

Deferred income tax assets
9

 
50

Financial assets
106

 
—

Other assets
—

 
65

Accounts payable and other
(1,801
)
 
(220
)
Borrowings
(210
)
 
(1,468
)
Deferred income tax liabilities
(52
)
 
(747
)
Net assets acquired before non-controlling interest
979

 
1,754

Non-controlling interest (3) (4)
(779
)
 
(1,371
)
Net Assets Acquired
$
200

 
$
383

____________________________________

(1) 
The initial fair values of all acquired assets, liabilities and goodwill for this acquisition have been determined on a preliminary basis at the end of the reporting period.
(2) 
Excludes consideration attributable to non-controlling interests.
(3) 
Non‑controlling interest, which represents the interest of others in operating subsidiaries, recognized on business combinations, were measured at fair value for Business Services.
(4) 
Non‑controlling interest, which represents the interest of others in operating subsidiaries, recognized on business combinations, were measured at the proportionate share of fair value of the assets acquired and liabilities assumed for Industrial Operations.


13
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

Industrial Operations 
BRK Ambiental
On April 25, 2017, the partnership acquired, together with institutional investors, a 70% voting interest in BRK Ambiental, a wastewater and industrial water treatment business in Brazil, which had a 12.5% voting interest in BRK Ambiental - Ativos Maduros S.A. (“OAMA”), an industrial water treatment business. OAMA is accounted for by BRK Ambiental using the equity method. Subsequently, on May 30, 2017, the partnership acquired, in partnership with institutional investors, the remaining 87.5% voting interest in OAMA and began consolidating the business. On acquisition of BRK Ambiental, the 12.5% voting interest in OAMA was re-measured at fair value as part of the purchase price allocation. Given the brief duration of time between the two closing dates, no remeasurement gain or loss was recognized.
On acquisition of the businesses, the partnership had approximately a 27% economic interest, which combined with our voting interest, provides us with control over both BRK Ambiental and OAMA. Accordingly, the partnership consolidates the businesses for financial statement purposes. As at September 30, 2017, the partnership holds $35 million of the consideration in escrow, which will be released to the seller over the next five years on each anniversary date of closing. Acquisition costs of $11 million were expensed at the acquisition dates and recorded as other expenses on the unaudited interim condensed consolidated statement of operating results. Goodwill of approximately $14 million was acquired, which represents the expected growth that the partnership expects to receive from the integration of the operations. Goodwill recognized is not deductible for income tax purposes.
The partnership’s results from the combined operations for the nine months ended September 30, 2017 includes $83 million of revenue and $5 million of net income attributable to the partnership from the acquisition. If the acquisition had been effective January 1, 2017, the partnership would have recorded revenue of approximately $150 million for the nine months ended September 30, 2017 and net income of approximately $16 million attributable to the partnership for the nine months ended September 30, 2017.
Business Services
Fuel Holdings Ltd. ("Greenergy")
On May 10, 2017, the partnership acquired, together with institutional investors, an 85% interest in Greenergy, a UK road fuel storage and distribution operation, for consideration of $78 million attributable to the partnership. On acquisition, the partnership had a 14% economic interest and an 85% voting interest in this business, which provides us with control over the business. Accordingly, the partnership consolidates this business for financial reporting purposes.
The contingent consideration contemplates potential earn outs based on reaching specific EBITDA targets over the five year period following closing, as well as achieving certain cash distribution and investment targets. Possible undiscounted earn outs payable ranges from $6 to $10 million. As of the acquisition date, the partnership has recorded contingent consideration of $10 million.
Prior to closing the acquisition, the partnership had entered into a cash flow hedge, which generated a gain of $12 million, on closing. The partnership had elected to recognize and accordingly, reclassify the associated gains from other comprehensive income to include them in the initial fair value of net assets acquired.
Acquisition costs of $7 million were expensed at the acquisition date and recorded as other expenses on the unaudited interim condensed consolidated statement of operating results. Goodwill of $73 million was acquired, which represents the expected growth the partnership expects to receive from the integration of the operations. Goodwill recognized is not deductible for income tax purposes.
The partnership’s results from operations for the nine months ended September 30, 2017 includes $1,120 million of revenue and $5 million of net income attributable to the partnership from the acquisition. If the acquisition had been effective January 1, 2017, the partnership would have recorded revenue of approximately $2,068 million for the nine months ended September 30, 2017 and net income of approximately $6 million attributable to the partnership for the nine months ended September 30, 2017.

14
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016


Fuel Marketing
On July 17, 2017, together with institutional partners, the partnership acquired 213 retail gas stations and associated convenience kiosks ("fuel marketing business") across Canada for consideration of $110 million attributable to the partnership. On acquisition, the partnership had a 26% economic interest and a 100% voting interest in this business, which gives the partnership control over the business. Accordingly, the partnership consolidates this business for financial reporting purposes.
The gas stations will be rebranded as Mobil as part of an agreement with Imperial Oil, marking the introduction of the Mobil fuel brand into Canada. The gas stations will continue to allow customers to collect points through an existing loyalty program. An intangible asset was recognized on acquisition for the loyalty program.
Prior to the closing of the acquisition, the partnership had entered into a cash flow hedge, which generated a gain of $3 million on closing. The partnership elected to recognize and accordingly, reclassify the associated gains from other comprehensive income to include them in the initial fair value of net assets acquired.
Acquisition costs of $4 million were expensed at the acquisition date and recorded as other expenses in the unaudited interim condensed consolidated statements of operating results. Goodwill of $211 million was acquired, which represents the expected growth and synergies the partnership expects to receive from the integration of the operations. Goodwill recognized is deductible for income tax purposes.
The partnership’s results from operations for the nine months ended September 30, 2017 includes $74 million of revenue and less than $1 million of net income attributable to the partnership from the acquisition. If the acquisition had been effective January 1, 2017, the partnership would have recorded revenue of approximately $266 million for the nine months ended September 30, 2017 and net income of approximately $2 million attributable to the partnership for the nine months ended September 30, 2017.
Other    
On June 19, 2017, one of the partnership's subsidiaries acquired a real estate brokerage operation in Quebec, Canada for total consideration of approximately $9 million attributable to the partnership. On acquisition, the partnership had a 100% economic interest and a 100% voting interest in this business, which give us control over the business. Accordingly, the partnership consolidates this business for financial reporting purposes. Acquisition costs of less than a million were expensed at the acquisition date and recorded as other expenses on the unaudited interim condensed consolidated statements of operating results.
Goodwill of $9 million was acquired, which represents the synergies the partnership expects to receive from the integration of the operations. Goodwill recognized is not deductible for income tax purposes.
The partnership’s results from operations for the nine months ended September 30, 2017 includes $1 million of revenue and less than $1 million of net income attributable to the partnership from the acquisition. If the acquisition had been effective January 1, 2017, the partnership would have recorded revenue of approximately $5 million for the nine months ended September 30, 2017 and net income of approximately $1 million attributable to the partnership for the nine months ended September 30, 2017.

15
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

(b)
Acquisitions completed in the nine months ended September 30, 2016
The following summarizes the consideration transferred, assets acquired and liabilities assumed at the applicable acquisition date:
(US$ MILLIONS)
Business Services (1)
Total Consideration (1)
$
9

 
 
(US$ MILLIONS)
 
Net working capital
8

Intangible assets
4

Goodwill
25

Net assets acquired before non-controlling interest
37

Non-controlling interest (2)
(28
)
Net Assets Acquired
$
9

____________________________________

(1) 
Excludes consideration attributable to non-controlling interests.
(2) 
Non‑controlling interest recognized on business combinations was measured at fair value.

Business Services - Facilities Management
On August 1, 2016, we acquired, together with institutional investors, an 85% interest in a data center facility management services provider in the United States for consideration of $9 million attributable to the partnership. On acquisition, the partnership had a 24% economic interest and an 85% voting interest in this business, which provides us with control over the business. Accordingly, we consolidate this business for financial reporting purposes. Acquisition costs of less than $0.5 million were expensed at the acquisition dates and recorded as other expenses on the unaudited interim condensed consolidated statement of operating results. Goodwill of $25 million was acquired, which represents the synergies we expect to receive from the integration of the operations. Goodwill recognized is not deductible for income tax purposes.
Our partnership’s results from operations for the nine months ended September 30, 2016, includes $3 million of revenue and $nil of net income attributable to the partnership from the acquisition. If the acquisition had been effective January 1, 2016 our pro forma revenue would have been increased by approximately $13 million for the nine months ended September 30, 2016 and pro forma net income would have been increased by less than $1 million attributable to the partnership for the nine months ended September 30, 2016.
NOTE 4.    FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values are determined by reference to quoted bid or ask prices, as appropriate. Where 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 such as bid and ask prices, as appropriate 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.
Fair values determined using valuation models require the use of assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining those assumptions, the partnership looks primarily to external readily observable market inputs such as interest rate yield curves, currency rates, and price and rate volatilities as applicable. Financial instruments classified as fair value through profit or loss are carried at fair value on the unaudited interim condensed consolidated statements of financial position and changes in fair values are recognized in profit or loss.

16
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

The following table provides the details of financial instruments and their associated financial instrument classifications as at September 30, 2017:
(US$ MILLIONS)
 
FVTPL
 
Available for
sale securities
 
Loans and
Receivables/
Other Liabilities
 
Total
MEASUREMENT BASIS
 
(Fair Value)
 
(Fair Value
through OCI)
 
(Amortized
Cost)
 
 
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
—

 
$
—

 
$
1,573

 
$
1,573

Accounts receivable, net (current and non-current) (1)
 
50

 
—

 
4,007

 
4,057

Other assets (current and non-current) (2)
 
—

 
—

 
231

 
231

Financial assets (current and non-current) (3)
 
96

 
334

 
250

 
680

Total
 
$
146

 
$
334

 
$
6,061

 
$
6,541

Financial liabilities
 
 
 
 
 
 
 
 
Accounts payable and other (4)
 
$
113

 
—

 
$
4,988

 
$
5,101

Borrowings (current and non-current)
 
—

 
—

 
3,662

 
3,662

Total
 
$
113

 
$
—

 
$
8,650

 
$
8,763

____________________________________

(1) 
Accounts receivable recognized at fair value relates to our mining business.
(2) 
Excludes prepayments and other assets of $276 million.
(3) 
Refer to Hedging Activities in note 4(a) below.
(4) 
Excludes provisions and decommissioning liabilities of $243 million.
Included in cash and cash equivalents as at September 30, 2017 is $792 million of cash (December 31, 2016: $519 million) and $781 million of cash equivalents (December 31, 2016: $531 million) which includes $588 million on deposit with Brookfield (December 31, 2016: $519 million), as described in Note 17.
The fair value of all financial assets and liabilities as at September 30, 2017 were consistent with carrying value with the exception of the borrowings at one of our industrial operations, where fair value determined using Level 1 inputs was $236 million (December 31, 2016: $204 million) versus a book value of $227 million (December 31, 2016: $221 million), and the promissory note receivable from Teekay Offshore Partners L.P. ("Teekay Offshore"), where fair value was $88 million versus a book value of $69 million.

17
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

The following table provides the allocation of financial instruments and their associated financial instrument classifications as at December 31, 2016:
(US$ MILLIONS)
 
FVTPL
 
Available for
sale securities
 
Loans and
Receivables/
Other Liabilities
 
Total
MEASUREMENT BASIS
 
(Fair Value)
 
(Fair Value
through OCI)
 
(Amortized
Cost)
 
 
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
—

 
$
—

 
$
1,050

 
$
1,050

Accounts receivable, net (current and non-current) (1)
 
42

 
—

 
1,755

 
1,797

Other assets (current and non-current) (2)
 
—

 
—

 
309

 
309

Financial assets (current and non-current) (3)
 
34

 
432

 
73

 
539

Total
 
$
76

 
$
432

 
$
3,187

 
$
3,695

Financial liabilities
 
 

 
 

 
 

 
 

Accounts payable and other (4)
 
$
32

 
—

 
$
2,222

 
$
2,254

Borrowings (current and non-current)
 
—

 
—

 
1,551

 
1,551

Total
 
$
32

 
$
—

 
$
3,773

 
$
3,805

____________________________________
(1) 
Accounts receivable recognized at fair value relates to our mining business.
(2) 
Excludes prepayments and other assets of $109 million.
(3) 
Refer to Hedging Activities in note 4(a) below.
(4) 
Excludes provisions and decommissioning liabilities of $203 million.

(a)Hedging Activities
The partnership uses foreign exchange contracts and foreign currency denominated debt instruments to manage foreign currency exposures arising from net investments in foreign operations. For the three and nine months ended September 30, 2017, unrealized pre-tax net losses of $31 million and $77 million (September 30, 2016: net losses of $10 million and $25 million, respectively) were recorded in other comprehensive income respectively for the effective portion of hedges of net investments in foreign operations. As at September 30, 2017, there was an unrealized derivative asset balance of $3 million (December 31, 2016: $21 million) and derivative liability balance of $35 million (December 31, 2016: $1 million) relating to derivative contracts designated as net investment hedges.
The partnership uses commodity swap contracts to hedge the sale price of its gas contracts and foreign exchange contracts to hedge highly probable future acquisitions. A number of these contracts are designated as cash flow hedges. For the three and nine months ended September 30, 2017, unrealized pre-tax net gains of $6 million and $26 million (September 30, 2016: $nil and $nil, respectively) were recorded in other comprehensive income, respectively for the effective portion of cash flow hedges. As at September 30, 2017, there was an unrealized derivative asset balance of $14 million (December 31, 2016: $nil) and derivative liability balance of $nil (December 31, 2016: $12 million) relating to the derivative contracts designated as cash flow hedges.
Other derivative instruments are measured at fair value, with changes in fair value recognized in the consolidated statements of operating results.

18
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

(b)Fair Value Hierarchical Levels — Financial Instruments
Level 3 assets and liabilities measured at fair value on a recurring basis include $170 million (December 31, 2016: $108 million) of financial assets and $44 million (December 31, 2016: $nil) of financial liabilities, which are measured at fair value using valuation inputs based on management's best estimates.
There were no transfers between levels during the three and nine month period ended September 30, 2017. The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the level of input as at September 30, 2017 and December 31, 2016:
 
 
September 30, 2017
 
December 31, 2016
(US$ MILLIONS)
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Financial assets
 
 
 
 
 
 
 
 
 
 
 
 
Common shares
 
$
210

 
$
—

 
$
—

 
$
192

 
$
—

 
$
—

Corporate bonds
 
—

 
—

 
—

 
143

 
—

 
—

Accounts receivable
 
—

 
50

 
—

 
—

 
42

 
—

Loans and notes receivable
 
—

 
—

 
1

 
—

 
—

 
8

Derivative assets
 
5

 
45

 
45

 
—

 
23

 
9

Other financial assets
 
—

 
—

 
124

 
—

 
—

 
91

 
 
$
215

 
$
95

 
$
170

 
$
335

 
$
65

 
$
108

Financial liabilities
 
 

 
 

 
 

 
 

 
 

 
 

Derivative liabilities
 
$
6

 
$
62

 
$
—

 
$
—

 
$
32

 
$
—

Other financial liabilities
 
$
—

 
$
—

 
$
44

 


 


 


 
 
$
6

 
$
62

 
$
44

 
$
—

 
$
32

 
$
—


As part of the investment in Teekay Offshore, the partnership acquired warrants that are recorded as Level 3 derivative assets. On initial recognition, the transaction price differed from the fair value of the warrants, resulting in a deferred gain of $11 million. The deferred gain will be recognized in the consolidated statement of operating results when the warrants are settled.
The following table presents the change in the balance of financial assets classified as Level 3 as at September 30, 2017:
(US$ MILLIONS)
September 30, 2017
Balance at beginning of year
$
108

Fair value change recorded in net income
(9
)
Fair value change recorded in other comprehensive income
5

Additions
72

Disposals
(6
)
Balance at end of period
$
170


(c)Offsetting of Financial Assets and Liabilities
Financial assets and liabilities are offset with the net amount reported in the unaudited interim condensed consolidated statements of financial position where the partnership 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. As at September 30, 2017, $18 million gross, of financial assets (December 31, 2016: $20 million) and $13 million gross, of financial liabilities (December 31, 2016: $11 million) were offset in the unaudited interim condensed consolidated statements of financial position related to derivative financial instruments.

19
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

NOTE 5.    FINANCIAL ASSETS
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Current
 
 
 
 
Marketable securities (1)
 
$
208

 
$
335

Restricted cash
 
87

 
71

Derivative contracts
 
52

 
23

Loans and notes receivable
 
6

 
4

Total current
 
$
353

 
$
433

Non-current
 
 
 
 
Marketable securities (1)
 
$
1

 
$
—

Restricted cash
 
11

 
—

Derivative contracts
 
42

 
9

Loans and notes receivable
 
148

 
6

Other financial assets
 
125

 
91

Total non-current
 
$
327

 
$
106

____________________________________
(1) 
During the three and nine month periods ended September 30, 2017, the partnership recognized $10 million and $49 million, respectively (September 30, 2016: $29 million and $57 million) of net gains on disposition of marketable securities.
As part of the investment in Teekay Offshore, the partnership acquired a promissory note bearing interest at 10% per annum. On initial recognition, the purchase price of $69 million differed from the fair value of $88 million, resulting in a deferred gain of $19 million. The deferred gain will be recognized in the consolidated statements of operating results from acquisition to maturity of the promissory note based on the effective interest rate method.
NOTE 6.    ACCOUNTS AND OTHER RECEIVABLE, NET
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Current, net
 
$
3,187

 
$
1,703

Non-current, net
 
 
 
 
Retainer on customer contract
 
129

 
94

Billing rights
 
741

 
—

Total Non-current, net
 
$
870

 
$
94

Total
 
$
4,057

 
$
1,797

The increase in accounts and other receivable, net from December 31, 2016 is primarily attributable to the acquisitions in our business services and industrial operations segments during the nine months ended September 30, 2017. This accounts for a $1,971 million movement in accounts receivable as at September 30, 2017 compared to December 31, 2016.
Billing rights represent unbilled rights arising at BRK Ambiental from revenue earned from the construction on public concessions contracts, which are recognized when there is an unconditional right to receive cash or other financial assets from the concession authority for the construction services.

20
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

NOTE 7.    INVENTORY, NET
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Current
 
 
 
 
Raw materials and consumables
 
$
151

 
$
75

Fuel products
 
464

 
—

Work in progress
 
72

 
59

RTFO certificates (1)
 
282

 
—

Finished goods other (2)
 
28

 
95

Carrying amount of inventories
 
$
997

 
$
229

____________________________________
(1) 
$54 million of RTFO certificates are held for trading and recorded at fair value. There is no externally quoted marketplace for the valuation of RTFO certificates. In order to value these contracts, the partnership has adopted a pricing methodology combining both observable inputs based on market data and assumptions developed internally based on observable market activity.
(2) 
Finished goods other inventory is mainly composed of properties acquired in our real estate services business as well as some finished goods inventory in the industrials, construction and energy segments.

The increase in inventory from December 31, 2016 is primarily attributable to the acquisitions in our business services segment, which account for $745 million of the increase in inventory as at September 30, 2017 compared to December 31, 2016.
NOTE 8.    ASSETS HELD FOR SALE
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Cash and cash equivalents
 
$
—

 
$
8

Accounts receivable, net
 
10

 
56

Inventory
 
1

 
75

Property, plant and equipment
 
6

 
58

Intangible assets and goodwill
 
—

 
67

Assets held for sale
 
$
17

 
$
264

 
 
 
 
 
Liabilities classified as held for sale
 
$
13

 
$
66

Industrial Operations - Graphite electrode business
During the three and nine month period ended September 30, 2017, our graphite electrodes business within our industrial operations segment recorded a $nil and $10 million charge respectively, to align the carrying value of the assets to estimated fair value. In July 2017, the assets were sold for proceeds consistent with the estimated fair value of $28 million. At September 30, 2017, assets and liabilities related to certain non-core operations of graphite electrode business remain as held for sale.
Industrial Operations - Infrastructure support manufacturing
During the three and nine month period ended September 30, 2017, our infrastructure support manufacturing business sold assets held for sale for proceeds of $nil and $27 million, respectively.
Industrial Operations - Bath and shower products manufacturing
In January 2017, together with institutional partners, the partnership completed the sale of its bath and shower products manufacturing business for proceeds of $357 million after transaction costs and other items, with an associated gain of $nil and $233 million recorded during the three and nine months ended September 30, 2017.

21
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

Energy - Oil and natural gas business
During the three and nine month period ended September 30, 2017, our oil and natural gas business within our energy segment recorded a $nil and $23 million charge, respectively, to align the carrying value of assets to the estimated fair value. In August 2017, the partnership completed the sale for proceeds of $24 million, with an associated loss of $24 million recorded during the three and nine months ended September 30, 2017.
NOTE 9.    OTHER ASSETS
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Current
 
 
 
 
Work in progress (1)
 
$
231

 
$
309

Prepayments and other assets
 
197

 
88

Total current
 
$
428

 
$
397

Non-current
 
 
 
 
Prepayments and other assets
 
$
79

 
$
21

Total non-current
 
$
79

 
$
21

____________________________________
(1) 
See Note 15 for additional information.
NOTE 10.    PROPERTY, PLANT AND EQUIPMENT
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Gross Carrying Amount:
 
 
 
 
Beginning Balance
 
$
2,849

 
$
2,959

Additions
 
125

 
134

Disposals
 
(15
)
 
(113
)
Acquisitions through business combinations (1)
 
448

 
—

Transfers and assets reclassified as held for sale (2)
 
(185
)
 
(197
)
Net foreign currency exchange differences
 
199

 
66

Ending Balance
 
$
3,421

 
$
2,849

Accumulated Depreciation and Impairment
 
 
 
 
Beginning Balance
 
(753
)
 
(595
)
Depreciation/depletion/impairment expense
 
(188
)
 
(216
)
Disposals
 
11

 
14

Transfers and assets reclassified as held for sale (2)
 
136

 
59

Net foreign currency exchange differences
 
(58
)
 
(15
)
Ending Balance
 
$
(852
)
 
$
(753
)
Net Book Value
 
$
2,569

 
$
2,096

____________________________________

(1) 
See Note 3 for additional information.
(2) 
See Note 8 for additional information.

22
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

NOTE 11.    INTANGIBLE ASSETS
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Gross Carrying Amount:
 
 
 
 
Beginning Balance
 
$
554

 
$
628

Additions, net
 
58

 
18

Acquisitions through business combinations (1)
 
2,843

 
36

Assets reclassified as held for sale
 
—

 
(130
)
Net foreign currency exchange differences
 
22

 
2

Ending Balance
 
$
3,477

 
$
554

Accumulated Amortization and Impairment
 
 
 
 
Beginning Balance
 
(183
)
 
(183
)
Amortization expense
 
(84
)
 
(52
)
Assets reclassified as held for sale
 
—

 
52

Net foreign currency exchange differences
 
(8
)
 
—

Ending Balance
 
$
(275
)
 
$
(183
)
Net Book Value
 
$
3,202

 
$
371

____________________________________

(1) 
See Note 3 for additional information.
NOTE 12.    GOODWILL
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Balance at beginning of period
 
$
1,152

 
$
1,124

Acquisitions through business combinations (1)
 
309

 
39

Impairment losses
 
—

 
(3
)
Assets reclassified as held for sale
 
—

 
(4
)
Foreign currency translation
 
66

 
(4
)
Balance at end of period
 
$
1,527

 
$
1,152

____________________________________
(1) 
See Note 3 for additional information.


23
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2017 and December 31, 2016 and for the three and nine months ended
September 30, 2017 and 2016

NOTE 13.    EQUITY ACCOUNTED INVESTMENTS
(US$ MILLIONS)
 
September 30, 2017
 
December 31, 2016
Balance at beginning of year
 
$
166

 
$
492

Acquisitions through business combinations (1)
 
234

 
—

Additions
 
208

 
—

Dispositions (2)
 
—

 
(289
)
Share of net income
 
61

 
68

Share of other comprehensive income/(loss)
 
(3
)
 
(79
)
Distributions received
 
(43
)
 
(25
)
Foreign currency translation
 
3

 
(1
)
Balance at end of period
 
$
626

 
$
166

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