EX-99.1 2 bbuq32019ex991.htm EXHIBIT 99.1 Exhibit
Brookfield Business Partners L.P.


UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF

BROOKFIELD BUSINESS PARTNERS L.P.

As at September 30, 2019 and December 31, 2018 and for the
three and nine months ended September 30, 2019 and 2018




1

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 (Loss)
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, 2019
 
December 31, 2018
Current Assets
 
 
 
 
 
 
Cash and cash equivalents
 
4
 
$
3,018

 
$
1,949

Financial assets
 
5
 
910

 
886

Accounts and other receivable, net
 
6
 
5,212

 
4,307

Inventory, net
 
7
 
3,147

 
1,562

Assets held for sale
 
8
 
63

 
63

Other assets
 
9
 
1,187

 
1,014

 
 
 
 
13,537

 
9,781

Financial assets
 
5
 
748

 
483

Accounts and other receivable, net
 
6
 
805

 
853

Other assets
 
9
 
461

 
499

Property, plant and equipment
 
10
 
14,124

 
6,947

Deferred income tax assets
 
 
 
557

 
280

Intangible assets
 
3, 11
 
11,252

 
5,523

Equity accounted investments
 
13
 
1,246

 
541

Goodwill
 
3, 12
 
5,118

 
2,411

 
 
 
 
$
47,848

 
$
27,318

Liabilities and equity
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
Accounts payable and other
 
14
 
$
9,671

 
$
7,188

Liabilities associated with assets held for sale
 
8
 
10

 
9

Corporate borrowings
 
16
 
—

 
—

Non-recourse subsidiary borrowings
 
16
 
1,613

 
1,819

 
 
 
 
11,294

 
9,016

Accounts payable and other
 
14
 
5,041

 
1,894

Non-recourse subsidiary borrowings
 
16
 
20,352

 
9,047

Deferred income tax liabilities
 
 
 
1,737

 
867

 
 
 
 
$
38,424

 
$
20,824

Equity
 
 
 
 
 
 
Limited partners
 
19
 
$
2,151

 
$
1,548

Non-controlling interests attributable to:
 
 
 
 
 
 
Redemption-Exchange Units, Preferred Shares and Special Limited Partnership Units held by Brookfield Asset Management Inc.
 
19
 
1,703

 
1,415

Interest of others in operating subsidiaries
 
 
 
5,570

 
3,531

 
 
 
 
9,424

 
6,494

 
 
 
 
$
47,848

 
$
27,318




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
 
2019
 
2018
 
2019
 
2018
Revenues
 
22
 
$
11,794

 
$
9,990

 
$
31,712

 
$
26,959

Direct operating costs
 
21
 
(10,389
)
 
(9,080
)
 
(28,358
)
 
(24,929
)
General and administrative expenses
 
22
 
(215
)
 
(174
)
 
(604
)
 
(434
)
Depreciation and amortization expense
 
22
 
(534
)
 
(251
)
 
(1,286
)
 
(462
)
Interest income (expense), net
 
22
 
(389
)
 
(148
)
 
(886
)
 
(317
)
Equity accounted income, net
 
13
 
32

 
(9
)
 
62

 
1

Impairment expense, net
 
10, 12
 
—

 
(180
)
 
(324
)
 
(180
)
Gain (loss) on acquisitions/dispositions, net
 
8
 
16

 
247

 
536

 
353

Other income (expenses), net
 
 
 
(83
)
 
(42
)
 
(354
)
 
(63
)
Income (loss) before income tax
 
 
 
232

 
353

 
498

 
928

Income tax (expense) recovery
 
 
 
 
 
 
 
 
 
 
Current
 
 
 
(108
)
 
(43
)
 
(231
)
 
(123
)
Deferred
 
 
 
58

 
(25
)
 
80

 
4

Net income (loss)
 
 
 
$
182

 
$
285

 
$
347

 
$
809

Attributable to:
 
 
 
 
 
 
 
 
 
 
Limited partners
 
 
 
$
13

 
$
(1
)
 
$
100

 
$
4

Non-controlling interests attributable to:
 
 
 
 
 
 
 
 
 
 
Redemption-Exchange Units held by Brookfield Asset Management Inc.           
 
 
 
11

 
—

 
93

 
4

Special Limited Partners
 
19
 
—

 
94

 
—

 
278

Interest of others in operating subsidiaries
 
 
 
158

 
192

 
154

 
523

 
 
 
 
$
182

 
$
285

 
$
347

 
$
809

Basic and diluted earnings per limited partner unit
 
19
 
$
0.16

 
$
—

 
$
1.41

 
$
0.06





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
 
2019
 
2018
 
2019
 
2018
Net income (loss)
 
 
 
$
182

 
$
285

 
$
347

 
$
809

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
 
 
 
$
(408
)
 
$
(38
)
 
$
(308
)
 
$
(361
)
Net investment and cash flow hedges
 
4
 
72

 
(1
)
 
(52
)
 
79

Equity accounted investment
 
13
 
—

 
3

 
—

 
—

Taxes on the above items
 
 
 
5

 
(8
)
 
11

 
(12
)
Reclassification to profit or loss on disposal
 
 
 
(2
)
 
—

 
6

 
—

 
 
 
 
(333
)
 
(44
)
 
(343
)
 
(294
)
 
 
 
 
 
 
 
 
 
 
 
Items that will not be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
 
 
Revaluation of pension obligations
 
 
 
12

 
—

 
27

 
—

Fair value through other comprehensive income
 
 
 
44

 
6

 
54

 
62

Taxes on the above item
 
 
 
(1
)
 
—

 
(2
)
 
(1
)
Total other comprehensive income (loss)
 
 
 
(278
)
 
(38
)
 
(264
)
 
(233
)
Comprehensive income (loss)
 
 
 
$
(96
)
 
$
247

 
$
83

 
$
576

Attributable to:
 
 
 
 
 
 
 
 
 
 
Limited partners
 
 
 
$
(29
)
 
$
(7
)
 
$
59

 
$
(33
)
Non-controlling interests attributable to:
 
 
 
 
 
 
 
 
 
 
Redemption-Exchange Units held by Brookfield Asset Management Inc.
 
 
 
(26
)
 
(6
)
 
57

 
(32
)
Special Limited Partners
 
 
 
—

 
94

 
—

 
278

Interest of others in operating subsidiaries
 
 
 
(41
)
 
166

 
(33
)
 
363

 
 
 
 
$
(96
)
 
$
247

 
$
83

 
$
576





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
 
 
 
 
Limited Partners
 
Redemption-Exchange Units held by
Brookfield Asset Management Inc.
 
Special Limited Partners
 
Preferred
Shares
 
 
 
 
(US$ MILLIONS)
 
Capital
Retained
earnings
Ownership
change
Accumulated
other
comprehensive
income (loss) (1)
Limited
partners
 
Capital
Retained
earnings
Ownership
change
Accumulated
other
comprehensive
income (loss) (1)
Redemption-
exchange
units
 
Retained
earnings
 
Capital
 
Interest of
others in
operating
subsidiaries
 
Total
equity
Balance as at January 1, 2019
 
$
1,766

$
(237
)
$
205

$
(186
)
$
1,548

 
$
1,674

$
(234
)
$
195

$
(235
)
$
1,400

 
$
—

 
$
15

 
$
3,531

 
$
6,494

Net income (loss)
 
—

100

—

—

100

 
—

93

—

—

93

 
—

 
—

 
154

 
347

Other comprehensive income (loss)
 
—

—

—

(41
)
(41
)
 
—

—

—

(36
)
(36
)
 
—

 
—

 
(187
)
 
(264
)
Total comprehensive income (loss)
 
—

100

—

(41
)
59

 
—

93

—

(36
)
57

 
—

 
—

 
(33
)
 
83

Contributions
 
—

—

—

—

—

 
—

—

—

—

—

 
—

 
—

 
132

 
132

Distributions
 
—

(13
)
—

—

(13
)
 
—

(12
)
—

—

(12
)
 
—

 
—

 
(828
)
 
(853
)
Unit repurchases (2)
 
(7
)
—

—

—

(7
)
 
—

—

—

—

—

 
—

 
—

 
—

 
(7
)
Ownership change (3)
 
—

—

(8
)
—

(8
)
 
—

—

(7
)
—

(7
)
 
—

 
—

 
(41
)
 
(56
)
Acquisition of interest (4)
 
—

—

—

—

—

 
—

—

—

—

—

 
—

 
—

 
2,809

 
2,809

Unit issuance (2)
 
572

—

—

—

572

 
250

—

—

—

250

 
—

 
—

 
—

 
822

Balance as at September 30, 2019
 
$
2,331

$
(150
)
$
197

$
(227
)
$
2,151

 
$
1,924

$
(153
)
$
188

$
(271
)
$
1,688

 
$
—

 
$
15

 
$
5,570

 
$
9,424

Balance as at January 1, 2018
 
$
1,766

$
(69
)
$
—

$
(112
)
$
1,585

 
$
1,674

$
(71
)
$
—

$
(165
)
$
1,438

 
$
—

 
$
15

 
$
3,026

 
$
6,064

Adoption of new accounting standards
 
—

(132
)
—

—

(132
)
 
—

(128
)
—

—

(128
)
 
—

 
—

 
(5
)
 
(265
)
Revised opening balance January 1, 2018
 
1,766

(201
)
—

(112
)
1,453

 
1,674

(199
)
—

(165
)
1,310

 
—

 
15

 
3,021

 
5,799

Net income (loss)
 
—

4

—

—

4

 
—

4

—

—

4

 
278

 
—

 
523

 
809

Other comprehensive income (loss)
 
—

—

—

(37
)
(37
)
 
—

—

—

(36
)
(36
)
 
—

 
—

 
(160
)
 
(233
)
Total comprehensive income (loss)
 
—

4

—

(37
)
(33
)
 
—

4

—

(36
)
(32
)
 
278

 
—

 
363

 
576

Contributions
 
—

—

—

—

—

 
—

—

—

—

—

 
—

 
—

 
80

 
80

Distributions (2)
 
—

(12
)
—

—

(12
)
 
—

(12
)
—

—

(12
)
 
(278
)
 
—

 
(2,153
)
 
(2,455
)
Ownership change
 
—

(93
)
205

(1
)
111

 
—

(89
)
195

(1
)
105

 
—

 
—

 
1,564

 
1,780

Acquisition of interest (4)
 
—

—

—

—

—

 
—

—

—

—

—

 
—

 
—

 
696

 
696

Balance as at September 30, 2018
 
$
1,766

$
(302
)
$
205

$
(150
)
$
1,519

 
$
1,674

$
(296
)
$
195

$
(202
)
$
1,371

 
$
—

 
$
15

 
$
3,571

 
$
6,476

____________________________________

(1) 
See Note 20 for additional information.
(2) 
See Note 19 for additional information on distributions as it relates to the Special Limited Partners and for additional information on unit issuances and repurchases.
(3) 
Includes gains or losses on changes in ownership interests of consolidated subsidiaries.
(4) 
See Note 3 for additional information.







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
 
2019
 
2018
Operating Activities
 
 
 
 
 
 
Net income (loss)
 
 
 
$
347

 
$
809

Adjusted for the following items:
 
 
 
 
 
 
Equity accounted earnings, net of distributions
 
 
 
(22
)
 
23

Impairment expense, net
 
 
 
324

 
180

Depreciation and amortization expense
 
 
 
1,286

 
462

Gain on acquisitions/dispositions, net
 
 
 
(536
)
 
(353
)
Provisions and other items
 
 
 
174

 
14

Deferred income tax expense (recovery)
 
 
 
(80
)
 
(4
)
Changes in non-cash working capital, net
 
23
 
624

 
(775
)
Cash from operating activities
 
 
 
2,117

 
356

Financing Activities
 
 
 
 

 
 

Proceeds from non-recourse subsidiary borrowings
 
 
 
13,748

 
6,539

Repayment of non-recourse subsidiary borrowings
 
 
 
(2,311
)
 
(1,973
)
Proceeds from other financing
 
14
 
1,733

 
—

Repayment of other financing
 
 
 
(21
)
 
—

Proceeds from other credit facilities, net
 
 
 
315

 
416

Lease liability repayment
 
 
 
(143
)
 
—

Capital provided by limited partners and Redemption-Exchange Unitholders
 
19
 
822

 
—

Capital provided by others who have interests in operating subsidiaries
 
 
 
2,475

 
1,386

Capital repaid to others who have interests in operating subsidiaries
 
 
 
(10
)
 
—

Partnership units repurchased
 
 
 
(7
)
 
—

Distributions to limited partners and Redemption-Exchange Unitholders
 
 
 
(25
)
 
(24
)
Distributions to Special Limited Partners Unitholders
 
 
 
—

 
(232
)
Distributions to others who have interests in operating subsidiaries
 
19
 
(872
)
 
(1,792
)
Cash from (used in) financing activities
 
 
 
15,704

 
4,320

Investing Activities
 
 
 
 

 
 

Acquisitions
 
 
 
 

 
 

Subsidiaries, net of cash acquired
 
3
 
(17,076
)
 
(3,354
)
Property, plant and equipment and intangible assets
 
 
 
(837
)
 
(345
)
Equity accounted investments
 
 
 
(24
)
 
(8
)
Financial assets and other
 
 
 
(42
)
 
(417
)
Dispositions
 
 
 
 
 
 
Subsidiaries, net of cash disposed
 
 
 
918

 
—

Property, plant and equipment
 
 
 
58

 
66

Equity accounted investments
 
 
 
42

 
143

Financial assets and other
 
 
 
223

 
9

Net settlement of hedges
 
 
 
41

 
4

Restricted cash and deposits
 
 
 
86

 
(59
)
Cash from (used in) investing activities
 
 
 
(16,611
)
 
(3,961
)
Cash
 
 
 
 
 
 
Change during the period
 
 
 
1,210

 
715

Impact of foreign exchange on cash
 
 
 
(40
)
 
(51
)
Net change in cash classified within assets held for sale
 
 
 
(101
)
 
—

Balance, beginning of year
 
 
 
1,949

 
1,106

Balance, end of period
 
 
 
$
3,018

 
$
1,770


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, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018
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, 2018, except for the impact of the adoption of the accounting standards described below. The accounting policies the partnership applied in its annual consolidated financial statements as at and for the year ended December 31, 2018 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, 2018. There have been no significant changes to the method of determining significant estimates and judgments since December 31, 2018, other than changes required as a result of adopting new standards as discussed below.
These unaudited interim condensed consolidated financial statements were approved by the partnership's Board of Directors and authorized for issue on November 8, 2019.
(b)
New accounting policies adopted
The partnership has applied new and revised standards issued by the IASB that are effective for the period beginning on or after January 1, 2019.
(i)
Leases
The partnership has applied IFRS 16, Leases (“IFRS 16”) as of its effective date of January 1, 2019. The new standard brings most leases on the statement of financial position, eliminating the distinction between operating and finance leases. Lessor accounting, however, remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17, Leases and related interpretations and is effective for periods beginning on or after January 1, 2019. The transition impact is outlined in Note 2(c).
The partnership assesses whether a contract is, or contains, a lease at inception of the contract and recognizes a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is a lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the partnership recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

8
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

The lease liability is initially measured at the present value of the future lease payments, discounted using the interest rate implicit in the lease, if that rate can be determined, or otherwise the incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise i) fixed lease payments, including in-substance fixed payments, less any lease incentives; ii) variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; iii) the amount expected to be payable by the lessee under residual value guarantees; iv) the exercise price of purchase options, if it is reasonably certain that the option will be exercised; and v) payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The partnership remeasures lease liabilities and makes a corresponding adjustment to the related right-of-use asset when i) the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; ii) the lease payments have changed due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); or iii) a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
The right-of-use asset comprises the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs. The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses. It is depreciated over the shorter period of the lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the partnership expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts on the commencement date of the lease. The partnership applies IAS 36, Impairment of Assets, to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the property plant and equipment policy.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line “direct operating costs” in the consolidated statements of operating results.
The partnership has applied critical judgments in the application of IFRS 16, including: i) identifying whether a contract (or part of a contract) includes a lease; and ii) determining whether it is reasonably certain that lease extension or termination options will be exercised in determining lease terms. The partnership also uses critical estimates in the application of IFRS 16, including the estimation of lease term and determination of the appropriate rate to discount the lease payments.
The partnership has elected to apply the following practical expedients in its application of the standard:
•
To recognize the payments associated with short-term and low value leases on a straight-line basis as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed; and
•
To not allocate contract consideration between lease and non-lease components, but rather account for each lease and non-lease component as a single lease component, on a lease-by-lease basis.
(ii)
Uncertainty over Income Tax Treatments
In June 2017, the IASB published IFRIC 23, Uncertainty over Income Tax Treatments (“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. On January 1, 2019, the partnership adopted IFRIC 23 on a modified retrospective basis. The adoption did not have a significant impact on the partnership’s financial results.

9
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

(iii)
Business Combinations
In October 2018, the IASB issued an amendment to IFRS 3, Business Combinations (“IFRS 3”), effective for annual periods beginning on or after January 1, 2020, with the option to early adopt beginning January 1, 2019. The amendment clarifies the definition of a business and assists entities in determining whether an acquisition is a business combination or an acquisition of a group of assets. The amendment emphasizes that to be considered a business, an acquired set of activities and assets must include an input and a substantive process that together significantly contribute to the ability to create outputs. The partnership adopted the IFRS 3 amendment on January 1, 2019 on a prospective basis and the adoption did not have an impact on the partnership’s consolidated financial statements. 
(c)
Impact on adoption of new IFRS standards
The partnership has adopted IFRS 16 using the modified retrospective method, whereby any transitional impact is recorded in equity as at January 1, 2019, and comparative periods are not restated. In applying IFRS 16 for the first time, the partnership has applied the following practical expedients permitted by the standard on a lease-by-lease basis. These practical expedients are only available upon adoption and cannot be applied for any new lease executed after adoption:
•
The accounting for operating leases with a remaining lease term of less than 12 months as of January 1, 2019 as short-term leases;
•
The application of a single discount rate to a portfolio of leases with reasonably similar characteristics;
•
The application of the policy choice option on adoption to measure the right-of-use assets at an amount equal to the lease liabilities, adjusted for any prepaid or accrued lease payments;
•
The reliance on our assessments of whether leases are onerous applied IAS 37, Provisions, Contingent Liabilities and Contingent Assets, immediately before January 1, 2019, instead of performing an impairment review; and
•
The use of hindsight in determining the lease term if the contract contains options to extend or terminate the lease.
In addition, the partnership has applied the practical expedient available on transition to not reassess whether a contract meets the definition of a lease under IFRS 16 if the contract was, or was not, previously classified as a lease under IAS 17 Leases and IFRIC 4 Determining whether an Arrangement Contains a Lease prior to the adoption of IFRS 16.
As at January 1, 2019, the adoption of IFRS 16 resulted in the recognition of lease liabilities that are recorded in accounts payable and other of $987 million and right-of-use assets that are classified as property, plant, and equipment of $978 million, adjusted for any prepaid or accrued lease payments (including any lease incentives). The adoption of IFRS 16 did not have any impact on equity. The weighted average incremental borrowing rate used in determining the lease liabilities on January 1, 2019 was approximately 4.3%. The difference between the operating lease commitments disclosed applying IAS 17 as at December 31, 2018 and the lease liabilities recognized as at January 1, 2019 is due to discounting using the incremental borrowing rate on January 1, 2019, and short-term and low value leases recognized on a straight-line basis as expense. When comparing results to prior periods, the adoption of IFRS 16 resulted in a reduction of direct operating costs by $61 million and $174 million, an increase to interest and depreciation expense of $11 million and $36 million, and $52 million and $140 million, respectively, for the three and nine months ended September 30, 2019. In addition, under IFRS 16, lease payments are split between cash payments for the interest portion of the lease liability, which are classified as cash flows used in operating activities, and repayments of principal, which are classified as cash flows used in financing activities. In contrast under IAS 17, payments under operating leases were presented as part of cash flows used in operating activities.
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.


10
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

(a)
Acquisitions completed in the nine months ended September 30, 2019
The following summarizes the consideration transferred, assets acquired and liabilities assumed at the applicable acquisition dates for significant acquisitions.
(US$ MILLIONS)
 
Business
Services
 
Infrastructure
Services
 
Industrials
 
Total (1)
Cash
 
$
1,170

 
$
5

 
$
3,764

 
$
4,939

Non-cash consideration
 
15

 
1

 
—

 
16

Total Consideration (2)
 
$
1,185

 
$
6

 
$
3,764

 
$
4,955

 
 
 
 
 
 
 
 
 
(US$ MILLIONS)
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
66

 
$
—

 
$
11

 
$
77

Accounts and other receivable, net
 
254

 
2

 
1,131

 
1,387

Inventory, net
 
41

 
—

 
1,775

 
1,816

Assets held for sale
 
6

 
—

 
—

 
6

Equity accounted investments
 
9

 
—

 
838

 
847

Property, plant and equipment
 
3,026

 
1

 
3,582

 
6,609

Intangible assets
 
291

 
—

 
6,420

 
6,711

Goodwill (3)
 
1,472

 
12

 
1,845

 
3,329

Deferred income tax asset
 
93

 
—

 
170

 
263

Financial assets
 
24

 
—

 
27

 
51

Other assets
 
—

 
—

 
358

 
358

Accounts payable and other
 
(634
)
 
(1
)
 
(1,957
)
 
(2,592
)
Borrowings
 
(367
)
 
—

 
—

 
(367
)
Deferred income tax liabilities
 
(101
)
 
—

 
(961
)
 
(1,062
)
Net assets acquired before non-controlling interest
 
4,180

 
14

 
13,239

 
17,433

Non-controlling interest (4)
 
(2,995
)
 
(8
)
 
(9,475
)
 
(12,478
)
Net Assets Acquired
 
$
1,185

 
$
6

 
$
3,764

 
$
4,955

__________________________________
(1) 
The initial fair values of acquired assets, liabilities and goodwill for the acquisitions have been determined on a preliminary basis as at the dates of acquisition.
(2) 
Excludes consideration attributable to non-controlling interest which represents the interest of others in operating subsidiaries.
(3) 
Adjustments to a purchase price allocation within our industrials segment resulted in a $109 million increase to goodwill.
(4) 
Non-controlling interests recognized on business combination were measured at fair value.
Business Services
Healthscope Limited (“Healthscope”)
On June 6, 2019, together with institutional partners, the partnership acquired Healthscope, an Australian based healthcare provider that operates private hospitals and provides pathology services. The partnership’s economic interest of 28% was acquired for consideration of $1,156 million. The partnership has a 100% voting interest in this business, which provides the partnership with control. Accordingly, the partnership consolidates this business for financial reporting purposes.
Acquisition costs of approximately $22 million were recorded as other expense on the consolidated statements of operating results. Goodwill of $1,450 million was acquired, which represents the expected growth the partnership expects to receive from the integration of the operations. The goodwill recognized is not deductible for income tax purposes. Intangible assets of $264 million were acquired, primarily comprised of customer contracts.

11
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

The partnership’s results from operations for the nine months ended September 30, 2019 includes $168 million of revenue and $4 million of net loss attributable to the partnership from the acquisition. If this acquisition had been effective January 1, 2019, the partnership would have recorded revenue of $321 million and net loss of $20 million attributable to the partnership for the nine months ended September 30, 2019.
Ouro Verde Locação e Seviços S.A. (“Ouro Verde”)
On July 8, 2019, the partnership, together with institutional partners, acquired a 38% economic interest in Ouro Verde, a Brazilian heavy equipment and light fleet vehicle management company, for total consideration of $16 million. The partnership has a 100% voting interest in this business, which provides the partnership with control. Accordingly, the partnership consolidates this business for financial reporting purposes.
Others
On August 20, 2019, the partnership, through its road fuel storage and distribution business, completed a tuck-in acquisition for consideration of $12 million, acquiring the remaining ownership interests in a terminal storage operator in which it previously had an equity interest. The partnership has a 100% voting interest in this business, which provides the partnership with control. Accordingly, the partnership consolidates this business for financial reporting purposes.
Industrials
Clarios
On April 30, 2019, together with institutional partners, the partnership acquired Clarios (formerly known as the “Power Solutions Business of Johnson Controls International plc”), a global producer and distributor of automotive batteries. The partnership’s economic interest of 29% was acquired for consideration of $3,764 million. The partnership has a 100% voting interest in this business, which provides the partnership with control. Accordingly, the partnership consolidates this business for financial reporting purposes.
Acquisition costs of approximately $41 million were recorded as other expense on the consolidated statements of operating results. Goodwill of $1,845 million was acquired, which is largely reflective of the potential to innovate and grow the business. $20 million of the goodwill recognized is deductible for income tax purposes. Intangible assets of $6,420 million were acquired, primarily comprised of customer relationships, patented technology, and trademarks. Intangible assets with a finite life will be amortized on a straight-line basis over their remaining weighted average useful lives which range from 14 to 16 years.
The partnership’s results from operations for the nine months ended September 30, 2019 includes $984 million of revenue and $93 million of net loss attributable to the partnership from the acquisition. If this acquisition had been effective January 1, 2019, the partnership would have recorded revenue of $1,783 million and net loss of $25 million attributable to the partnership for the nine months ended September 30, 2019.

12
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

(b)
Acquisitions completed in 2018
The following summarizes the consideration transferred, assets acquired and liabilities assumed at the applicable acquisition dates:
(US$ MILLIONS)
 
Business
Services (1)
 
Infrastructure
Services (2)
 
Industrials
 
Total (3)
Cash
 
$
25

 
$
1,764

 
$
45

 
$
1,834

Non-cash consideration
 
—

 
275

 
—

 
275

Total Consideration (4)
 
$
25

 
$
2,039

 
$
45

 
$
2,109

 
 
 
 
 
 
 
 
 
(US$ MILLIONS)
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
36

 
$
592

 
$
30

 
$
658

Accounts and other receivable, net
 
11

 
786

 
75

 
872

Inventory, net
 
2

 
626

 
58

 
686

Equity accounted investments
 
—

 
328

 
1

 
329

Property, plant and equipment
 
56

 
4,631

 
187

 
4,874

Intangible assets
 
28

 
2,544

 
231

 
2,803

Goodwill
 
36

 
721

 
180

 
937

Deferred income tax assets
 
—

 
11

 
27

 
38

Financial assets
 
—

 
410

 
2

 
412

Other assets
 
—

 
1,234

 
—

 
1,234

Accounts payable and other
 
(28
)
 
(3,290
)
 
(199
)
 
(3,517
)
Borrowings
 
(50
)
 
(3,352
)
 
(266
)
 
(3,668
)
Deferred income tax liabilities
 
(2
)
 
(82
)
 
(72
)
 
(156
)
Net assets acquired before non-controlling interest
 
89

 
5,159

 
254

 
5,502

Non-controlling interest (5) (6)
 
(64
)
 
(3,120
)
 
(209
)
 
(3,393
)
Net Assets Acquired
 
$
25

 
$
2,039

 
$
45

 
$
2,109

__________________________________
(1) 
Adjustments to a purchase price allocation within our business services segment resulted in a $5 million increase to goodwill.
(2) 
Adjustments to a purchase price allocation within our infrastructure services segment resulted in a decrease in accounts and other receivable of $50 million, a decrease in property, plant and equipment of $38 million, a decrease in intangible assets of $139 million, a decrease in goodwill of $39 million, an increase in financial assets of $93 million, an increase in other assets of $208 million, a decrease in accounts payable and other of $141 million, and a decrease in deferred income tax liabilities of $1 million.
(3) 
The initial fair values of acquired assets, liabilities and goodwill for certain acquisitions have been determined on a preliminary basis at the end of the reporting period.
(4) 
Excludes consideration attributable to non-controlling interest, which represents the interest of others in operating subsidiaries.
(5) 
Non-controlling interest recognized on business combination were measured at fair value for business services and infrastructure services.
(6) 
Non-controlling interest recognized on business combination were measured at the proportionate share of fair value of the assets acquired and liabilities assumed for industrials.

13
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

Business Services
In 2018, the partnership, together with institutional investors, acquired Imagine Communications Group Limited and completed tuck-in acquisitions through its investments in its facilities management business and fuel marketing business for total consideration of $25 million attributable to the partnership. On acquisition, the partnership’s voting interest in each of these acquisitions was greater than 50% and gave the partnership control over the business. Accordingly, the partnership consolidates these businesses for financial reporting purposes.
Infrastructure Services
Westinghouse Electric Company (“Westinghouse”)
On August 1, 2018, the partnership, together with institutional investors, acquired a 100% interest in Westinghouse, a leading global provider of infrastructure services to the power generation industry. The partnership's economic interest of 44% was acquired for consideration of $1,686 million. The partnership has a 100% voting interest in this business, which provides the partnership with control. Accordingly, the partnership consolidates this business for financial reporting purposes.
Acquisition costs of approximately $55 million were expensed at the acquisition date and recorded as other expenses on the consolidated statements of operating results. Goodwill of $174 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. Intangible assets of $2,544 million were acquired, primarily comprised of developed technology and the Westinghouse trade name.
The partnership’s results from operations for the year ended December 31, 2018 includes $743 million of revenue and $37 million of net loss attributable to the partnership from the acquisition. If this acquisition had been effective January 1, 2018, the partnership would have recorded revenue of $1,715 million for the year ended December 31, 2018 and net loss of $105 million attributable to the partnership for the year ended December 31, 2018.
Teekay Offshore Partners L.P. (“Teekay Offshore”)
Prior to July 3, 2018, the partnership, together with institutional investors, had a 60% economic interest in Teekay Offshore and a 49% voting interest in Teekay Offshore’s General Partner (“Teekay Offshore GP”). The 60% economic interest in Teekay Offshore was accounted for using the equity method. On July 3, 2018, the partnership, together with institutional investors, exercised its general partner option to acquire an additional 2% voting interest in Teekay Offshore GP, in exchange for one million of warrants and began consolidating the business. On acquisition, the partnership, together with institutional investors, had a 60% economic interest in Teekay Offshore and a 51% voting interest in Teekay Offshore GP, which provided the partnership with control over the business. Accordingly, the partnership has consolidated this business for financial statement purposes. Total consideration for the acquisition was $275 million attributable to the partnership.
Goodwill of $547 million was acquired, which represents benefits we expect 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 year ended December 31, 2018 includes revenues of $181 million and approximately $46 million of net income attributable to the partnership from the acquisition. If this acquisition had been effective January 1, 2018, the partnership would have recorded revenue of $334 million for the year ended December 31, 2018 and net income of $54 million attributable to the partnership for the year ended December 31, 2018.

14
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

The following table provides details of the business combination achieved in stages on a gross basis:
(US$ MILLIONS)
 
December 31, 2018
Fair value of investment immediately before acquiring control
 
$
651

Less: Carrying value of investment immediately before acquisition
 
447

Add: Amounts recognized in OCI (1)
 
2

Remeasurement gain
 
$
206

Gain on extinguishment (2)
 
44

Gain (loss) on acquisitions/dispositions, net
 
$
250

Total gain on acquisition attributable to non-controlling interest
 
$
135

Total gain on acquisition attributable to the partnership
 
$
115

____________________________________
(1) 
Included in carrying value of the investment immediately before acquisition.
(2) 
The partnership recognized a total gain on extinguishment of $44 million at the subsidiary level ($18 million on debt and $26 million on warrants).
Industrials
Schoeller Allibert Group B.V. (“Schoeller Allibert”)
On May 15, 2018, the partnership, together with institutional investors, acquired a 70% interest in Schoeller Allibert, one of Europe's leading manufacturers of returnable plastic packaging systems. The partnership’s economic interest of 14% was acquired for consideration of $45 million. The partnership has a 52% voting interest in this business, which provides the partnership with control. Accordingly, the partnership consolidates this business for financial reporting purposes.
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 in the unaudited interim condensed consolidated statements of financial position and changes in fair values are recognized in profit or loss.

15
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

The following table provides the details of financial instruments and their associated classifications as at September 30, 2019:
(US$ MILLIONS)
 
 
 
 
 
 
 
 
MEASUREMENT BASIS
 
Fair Value through Profit and Loss
 
Fair Value through Other Comprehensive Income
 
Amortized Cost
 
Total
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
—

 
$
—

 
$
3,018

 
$
3,018

Accounts and other receivable, net (current and non-current) (1)
 
78

 
—

 
5,939

 
6,017

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

 
—

 
598

 
598

Financial assets (current and non-current) (3)
 
648

 
373

 
637

 
1,658

Total
 
$
726

 
$
373

 
$
10,192

 
$
11,291

Financial liabilities
 
 
 
 
 
 
 
 
Accounts payable and other (current and non-current)(4)
 
$
575

 
$
190

 
$
10,522

 
$
11,287

Borrowings (current and non-current)
 
—

 
—

 
21,965

 
21,965

Total
 
$
575

 
$
190

 
$
32,487

 
$
33,252

____________________________________
(1) 
Accounts receivable recognized at fair value relates to our mining business.
(2) 
Excludes prepayments and other assets of $1,050 million.
(3) 
Refer to Hedging Activities in Note 4(a) below.
(4) 
Excludes provisions, decommissioning liabilities, deferred revenue, work in progress, post-employment benefits and various taxes and duties of $3,425 million.
Included in cash and cash equivalents as at September 30, 2019 is $1,747 million of cash (December 31, 2018: $1,597 million) and $1,271 million of cash equivalents (December 31, 2018: $352 million) which includes $590 million on deposit with Brookfield (December 31, 2018: $244 million), as described in Note 17.
The fair value of all financial assets and liabilities as at September 30, 2019 were consistent with carrying value, with the exception of the borrowings at Teekay Offshore, where fair value determined using Level 1 and Level 2 inputs resulted in a fair value of $2,646 million (December 31, 2018: $2,611 million) versus a carrying value $2,632 million (December 31, 2018: $2,638 million).
Included in financial assets as at September 30, 2019 is $299 million (December 31, 2018: $283 million) of equity instruments designated as measured at fair value through other comprehensive income.

16
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

The following table provides the allocation of financial instruments and their associated classifications as at December 31, 2018:
(US$ MILLIONS)
 
 
 
 
 
 
 
 
MEASUREMENT BASIS
 
Fair Value through Profit and Loss
 
Fair Value through Other Comprehensive Income
 
Amortized Cost
 
Total
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
—

 
$
—

 
$
1,949

 
$
1,949

Accounts and other receivable, net (current and non-current) (1)
 
67

 
—

 
5,093

 
5,160

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

 
—

 
563

 
563

Financial assets (current and non-current) (3)
 
413

 
376

 
580

 
1,369

Total
 
$
480

 
$
376

 
$
8,185

 
$
9,041

Financial liabilities
 
 

 
 

 
 

 
 

Accounts payable and other (4)
 
$
311

 
$
48

 
$
4,679

 
$
5,038

Borrowings (current and non-current)
 
—

 
—

 
10,866

 
10,866

Total
 
$
311

 
$
48

 
$
15,545

 
$
15,904

____________________________________
(1) 
Accounts receivable recognized at fair value relates to our mining business.
(2) 
Excludes prepayments and other assets of $950 million.
(3) 
Refer to Hedging Activities in Note 4(a) below.
(4) 
Excludes provisions, decommissioning liabilities, deferred revenue, work in progress, post-employment benefits and various taxes and duties of $4,044 million.

(a)
Hedging activities

Net Investment Hedges
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, 2019, pre-tax net gain of $152 million and $77 million (September 30, 2018: pre-tax net loss of $10 million and pre-tax net gain of $57 million), respectively, were recorded in other comprehensive income for the effective portion of hedges of net investments in foreign operations. As at September 30, 2019, there was a derivative asset balance of $52 million (December 31, 2018: $76 million) and derivative liability balance of $3 million (December 31, 2018: $nil) relating to derivative contracts designated as net investment hedges.
Cash Flow Hedges
The partnership uses commodity swap contracts to hedge the purchase price of decant oil. Foreign exchange contracts and option contracts may be used to hedge highly probable future transactions. The partnership also uses interest rate swaps to hedge the cash flows on its floating rate borrowings. A number of these contracts are designated as cash flow hedges. For the three and nine months ended September 30, 2019, pre-tax net loss of $80 million and $129 million (September 30, 2018: net gains of $9 million and $22 million) were recorded in other comprehensive income for the effective portion of cash flow hedges. As at September 30, 2019, there was a derivative asset balance of $22 million (December 31, 2018: $17 million) and derivative liability balance of $187 million (December 31, 2018: $48 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.


17
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

(b)
Fair value hierarchical levels - financial instruments
Level 3 assets and liabilities measured at fair value on a recurring basis include $287 million (December 31, 2018: $280 million) of financial assets and $35 million (December 31, 2018: $50 million) of financial liabilities, which are measured at fair value using valuation inputs based on management’s best estimates of what market participants would use in pricing the asset or liability at the measurement date.
There were no transfers between levels during the three and nine months ended September 30, 2019. The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the level of input as at September 30, 2019 and December 31, 2018:
 
 
September 30, 2019
 
December 31, 2018
(US$ MILLIONS)
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Financial assets
 
 
 
 
 
 
 
 
 
 
 
 
Common shares
 
$
292

 
$
—

 
$
—

 
$
266

 
$
—

 
$
—

Accounts receivable
 
—

 
78

 
—

 
—

 
67

 
—

Derivative assets
 
19

 
419

 
—

 
41

 
202

 
—

Other financial assets
 
4

 
—

 
287

 
—

 
—

 
280

Total
 
$
315

 
$
497

 
$
287

 
$
307

 
$
269

 
$
280

Financial liabilities
 
 

 
 

 
 

 
 

 
 

 
 

Derivative liabilities
 
$
5

 
$
725

 
$
2

 
$
13

 
$
296

 
$
13

Other financial liabilities
 
—

 
—

 
33

 
—

 
—

 
37

Total
 
$
5

 
$
725

 
$
35

 
$
13

 
$
296

 
$
50


The following table presents the change in the balance of financial assets classified as Level 3 as at September 30, 2019:
(US$ MILLIONS)
September 30, 2019
Balance at beginning of year
$
280

Fair value change recorded in net income
8

Fair value change recorded in other comprehensive income
(1
)
Balance at end of period
$
287


(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, 2019, $193 million gross, of financial assets (December 31, 2018: $nil) and $193 million gross, of financial liabilities (December 31, 2018: $nil) were offset in the unaudited interim condensed consolidated statements of financial position.

18
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

NOTE 5.    FINANCIAL ASSETS
(US$ MILLIONS)
 
September 30, 2019
 
December 31, 2018
Current
 
 
 
 
Marketable securities
 
$
292

 
$
265

Restricted cash
 
157

 
376

Derivative contracts
 
398

 
223

Loans and notes receivable
 
63

 
22

Total current
 
$
910

 
$
886

Non-current
 
 
 
 
Marketable securities
 
$
—

 
$
1

Restricted cash
 
198

 
32

Derivative contracts
 
40

 
20

Loans and notes receivable
 
219

 
150

Other financial assets (1)
 
291

 
280

Total non-current
 
$
748

 
$
483

____________________________________
(1) 
Other financial assets include secured debentures to homebuilding companies in our business services segment.    
The increase in financial assets from December 31, 2018 is primarily due to fair value movements in derivatives at Greenergy.
NOTE 6.    ACCOUNTS AND OTHER RECEIVABLE, NET
(US$ MILLIONS)
 
September 30, 2019
 
December 31, 2018
Current, net
 
$
5,212

 
$
4,307

Non-current, net
 
 
 
 
Accounts receivable
 
40

 
37

Retainer on customer contract
 
124

 
103

Billing rights
 
641

 
713

Total Non-current, net
 
$
805

 
$
853

Total
 
$
6,017

 
$
5,160

The increase in accounts and other receivable, net from December 31, 2018 is primarily due to the acquisition of Clarios, an increase in trade receivables at Greenergy due to an increase in fuel prices at the end of the quarter, and at Multiplex primarily in the Australian operations as a result of higher project activity, partially offset by the dispositions of the partnership's facilities management business and executive relocation business.
Billing rights represent unbilled rights arising at BRK Ambiental from revenue earned from the construction on public concessions contracts classified as financial assets, which are recognized when there is an unconditional right to receive cash or other financial assets from the concession authority for the construction services.
The construction services business has a retention balance which comprises amounts that have been earned but held back until certain conditions specified in the contract are satisfied.

19
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

NOTE 7.    INVENTORY, NET
(US$ MILLIONS)
 
September 30, 2019
 
December 31, 2018
Raw materials and consumables (1)
 
$
842

 
$
605

Fuel products (2)
 
584

 
490

Work in progress
 
717

 
258

RTFO certificates (3)
 
212

 
95

Finished goods and other (4)
 
792

 
114

Carrying amount of inventories
 
$
3,147

 
$
1,562

____________________________________
(1) 
Raw materials and consumables are mainly composed of raw materials in the industrials segment.
(2) 
Fuel products are traded in active markets and are purchased with a view to resell in the near future. As a result, stocks of fuel products are recorded at fair value based on quoted market prices.
(3) 
RTFO certificates held for trading as at September 30, 2019 have a fair value of $10 million (December 31, 2018: $nil). There is no externally quoted marketplace for the valuation of RTFO certificates. In order to value these contracts, the partnership has adopted a pricing methodology combining both observable inputs based on market data and assumptions developed internally based on observable market activity.
(4) 
Finished goods and other are mainly composed of finished goods inventory in the infrastructure services and industrials segments.
NOTE 8.    ASSETS HELD FOR SALE AND DISPOSITIONS
(a)
Assets Held for Sale
(US$ MILLIONS)
 
September 30, 2019
 
December 31, 2018
Accounts receivable, net
 
$
13

 
$
28

Inventory
 
—

 
6

Property, plant and equipment
 
50

 
29

Assets held for sale
 
$
63

 
$
63

 
 
 
 
 
Accounts payable and other
 
$
10

 
$
9

Liabilities associated with assets held for sale
 
$
10

 
$
9

At September 30, 2019, our infrastructure support products manufacturing operation has certain asset and liabilities related to plants within the precast operations classified as held for sale.
(b)
Dispositions
On May 31, 2019, the partnership completed the sale of its facilities management business for approximate gross proceeds of $1 billion, resulting in a $341 million pre-tax gain recognized by the partnership.
In June 2019, the partnership completed the sale of its executive relocation business for proceeds of approximately $230 million, resulting in a $180 million pre-tax gain recognized by the partnership.
On September 30, 2019, BRK Ambiental completed the sale of certain assets and liabilities related to its industrial water treatment business segment for proceeds of approximately $220 million, resulting in a $16 million pre-tax gain recognized by the partnership.

20
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 

As at September 30, 2019 and December 31, 2018 and for the three and nine months ended
September 30, 2019 and 2018

NOTE 9.    OTHER ASSETS
(US$ MILLIONS)
 
September 30, 2019
 
December 31, 2018
Current
 
 
 
 
Work in progress (1)
 
$
525

 
$
506

Prepayments and other assets
 
662

 
508

Total current
 
$
1,187

 
$
1,014