Brookfield Asset Management

2 0 1 6   A N N U A L   R E P O R T

Brookfield Asset 
     Management Inc.

Our Business

Brookfield is a leading global alternative asset manager with approximately 

$250 billion of assets under management.

We have over a 100-year history of owning and operating real assets with a focus on 

property, renewable power, infrastructure and private equity. We offer a range of public 

and private investment products and services which leverage our expertise and 

experience, and provide us with a distinct competitive advantage in the markets in which 

we operate.

~30

COUNTRIES

>70,000

OP ERATIN G EMPLOYEES

>700

INVESTM ENT PROF ESSIO NALS

CANADA
$23 billion AUM
~10,500 operating employees

EUROPE & MIDDLE EAST
$32 billion AUM
~24,000 operating employees

UNITED STATES
$138 billion AUM
~9,500 operating employees

SOUTH AMERICA
$28 billion AUM
~19,000 operating employees

ASIA PACIFIC
$19 billion AUM
~9,000 operating employees

Brookfield is listed on the New York, Toronto and Euronext stock exchanges under the symbols BAM, BAM.A, and BAMA

        BROOKFIELD ASSET MANAGEMENT Performance Record 

AS AT AND FOR THE YEARS ENDED DEC. 31

PER SHARE2
Net income

Funds from operations

Dividends3 

Cash

Special

Market trading price – NYSE

TOTAL (MILLIONS)
Assets under management

Consolidated results

Balance sheet assets

Equity

Revenues

Net income

Funds from operations

Common equity

2016

2015

2014

2013

20121

1.31

1.30

0.37

—

$ 

1.55 $ 

2.26 $ 

3.11 $ 

2.08 $ 

3.18

2.49

2.11

3.43

0.52

0.45

33.01

0.47

—

0.45

—

0.40

0.98

31.53

33.42

25.89

24.43

$  239,825 $  227,803 $  203,840 $  187,105 $  181,400

159,826

139,514

129,480

112,745

108,862

69,688

24,411

3,338

3,237

57,227

19,913

4,669

2,559

53,247

18,364

5,209

2,160

47,526

20,830

3,844

3,376

44,338

18,766

2,755

1,356

22,499

21,568

20,153

17,781

18,150

Diluted number of common shares outstanding2

1,002.0

1,003.3

983.2

976.6

987.0

Note: See “Use of Non-IFRS Measures” on page 11

1.  2012 adjusted to be consistent with 2013 accounting standards

2.  2012 to 2014 adjusted to reflect three-for-two stock split effective May 12, 2015

3.  See Corporate Dividends on page 39

CONTE NTS
Core Investment Principles 

Letter to Shareholders 

Management's Discussion & Analysis 

Internal Control Over Financial Reporting 

2

3

11

89

Consolidated Financial Statements 

Corporate Social Responsibility 

Shareholder Information 

Board of Directors and Officers 

93

170

172

173

2016 ANNUAL REPORT   1

Core Investment Principles

Our approach to investing is disciplined and straightforward. With a focus on value 

creation and capital preservation, we invest opportunistically in high quality real assets 

within our areas of expertise, manage them proactively and finance them conservatively 

with a goal of generating stable, predictable and growing cash flows for clients and 

shareholders. Our culture is anchored by a set of core investment principles that guide 

our decisions and how we measure success.

BUSINESS PH ILOS O PHY

•  Build our business and all our relationships based on integrity

•  Attract and retain high-calibre individuals who will grow with 

us over the long term

•  Ensure our people think and act like owners in  

all their decisions

•  Treat our client and shareholder money like it’s our own

INVESTME NT  GU IDE LINE S

•  Invest where we possess competitive advantages

•  Acquire assets on a value basis with a goal of maximizing 

return on capital

•  Build sustainable cash flows to provide certainty, reduce risk 

and lower our cost of capital

•  Recognize that superior returns often require a  

contrarian approach

MEASUREMENT  OF  O UR 
CORPORATE SU CCES S

•  Measure success based on total return on capital over  

the long term

•  Encourage calculated risks, but compare returns with risk

•  Sacrifice short-term profit, if necessary, to achieve long-term 

capital appreciation

•  Seek profitability rather than growth, as size does not 

necessarily add value

2     BROOKFIELD ASSET MANAGEMENT 

Letter to Shareholders

OVERVIEW

We reported strong results in 2016. FFO for shareholders was $3.2 billion, or $3.18 per share. Results across 

the board were good, with particularly strong growth in our asset management operations. Most of our U.S. 

businesses performed well, with the market generally continuing to strengthen. The exceptions were those 

connected to natural gas and electricity generation, which did not achieve expectations as a result of both low 

water levels and pricing.

Institutional investors continue to allocate greater proportions of their funds to real assets. This enabled us to 

raise $30 billion of capital for private strategies in our latest round of fundraising, which included closing what 

are among the largest infrastructure and real estate funds globally. We also raised approximately $2 billion of 

capital for three of our listed partnerships in 2016 to fund investments alongside our private investors. 

As part of the shift to real assets, we are now starting to see greater allocations from traditional fixed income 

portfolios into private credit strategies. We have been expanding our credit capabilities for many years, and 

are now fundraising with meaningful capital for these strategies. Over time, this could result in the addition of 

significant assets under management.

Our investing themes today continue to revolve around utilizing our competitive strengths of size, global 

footprint, and operating capabilities. We are allocating capital to most of our investment markets, but 

disproportionately to the emerging economies where we believe we are still buying very good value in slowly 

recovering economies.

INVEST MENT PERF ORMANCE

Our one-year stock performance at the time of writing, inclusive of dividends, was 26%. More importantly, we 

think we added substantial underlying intrinsic value to the business, and that we are in excellent financial 

shape and set up for growth in the years ahead. Fee bearing capital took a major step change upward this 

year and this should enable us to grow over the next number of years.

Investment 
Performance 

Brookfield 
NYSE

S&P 500

10-Year 
Treasuries

1

5

10

15

20

26%

14%

8%

19%

17%

26%

14%

7%

7%

7%

1%

2%

5%

5%

5%

While we are cognizant of short-term performance, we always manage our business for the long term, and 

therefore focus more on those metrics. To that end, we are pleased that our returns compare well with  

most investments, and are consistent with our goal of generating 12% to 15% compound returns over the 

longer term.

2016 ANNUAL REPORT   3

MARKET ENVIRONMENT

Despite all the political turmoil, most of the economies in which we participate are doing well, or are 

recovering. This has set the backdrop for a very constructive environment for us to invest in.

In the United States, we continue to believe, as we have for years, that interest rates will grind upwards to the 

3% to 4% range. We have not changed our overall view with the election of a new government. We do, 

however, believe that we may get to the top end sooner than we otherwise might have expected, and that we 

might stretch the top end of former expectations before we hit a recession and the cycle starts over. But, 

should interest rates climb faster, it also means that growth is stronger than we would have otherwise 

expected. In this environment, all of our investments should also do better. 

Europe and the United Kingdom have extremely low interest rates, and it looks like these will exist for some 

time, given the political turmoil, demographics and the underlying economies of the various countries. 

Despite this, we are finding many investments that can earn high leveraged cash returns, due to the 

correspondingly low borrowing rates. 

South America is recovering slowly, following the shock of low commodity prices and the unwind of the 

excesses from the boom. We believe Brazil has bottomed, but the political aftershocks of the government 

investigations are still being worked through. Chile, Colombia and Peru, while great countries, are also each 

dealing with their own set of discrete issues. From an investment perspective this has, and continues to, 

present us with great opportunities in all of these countries.

India has made tremendous strides with its economy and recently reduced interest rates for the first time in 

this cycle. Despite this, the loan stress across the bank system needs to be worked through, and we are 

therefore being presented with great opportunities across all of our businesses. We are also using our Indian 

operations to continue to expand our base in the Gulf region. We have found that our deep investor 

relationships are proving extremely helpful and that our operating skills are welcomed. 

China is a flashpoint for most economic prognosticators, but on the ground they continue to build out the 

greatest economic transformation ever undertaken in the world. We believe that they will be successful, but 

these transformations never go in a straight line. As a result, we are being very disciplined as we build our 

operations and investment strategies. We continue to find interesting ways to invest, and have also made 

great strides in partnering with world-class financial institutions and institutional partners in the region. These 

opportunities in both investing and fundraising should continue for years.

INTERES T RATES

For years we have been operating with the expectation that interest rates will increase in the United States. 

Our working assumption has been that the economy was getting stronger and that eventually interest rates 

would be able to rise as a result. 

With rates having been virtually zero in the U.S. for seven years, a 1% or 2% increase in interest rates on the 

short or long end of the treasury yield curve means very little to a long-term return on a real asset investment. 

We have assumed for years that a 10-year treasury would have a 3% to 4% yield, and we continue to base all 

of our investment decisions on this. 

The 10-year rate has now increased to circa 2.5%, but it is worth remembering that it is almost identical to 

where it was a year ago. At that time, everyone seemed to be worried about deflation; now the concern is 

about inflation. 

4     BROOKFIELD ASSET MANAGEMENT 

More important, in this cycle there have been very few sophisticated lenders or acquirers of real estate or 

infrastructure that have had a different view on rates, so cap rates have been stubbornly high relative to 

interest rates for one specific reason: that everyone knew interest rates were going up and no one has been 

willing to reduce cap rates to levels that matched the unduly low interest rates.

Our business is positioned to thrive in a higher interest rate environment; there are three simple reasons for 

this. First, and most important, we own “real return” assets that increase their cash flow generating capacity 

over time, either through contractual rights, our ability to operate them better, or an expansion of the 

operation. These enhancements should far outpace any extra interest costs, in particular in a more 

inflationary environment. Second, we generally earn total returns on equity of 10% to 20%. This is much 

greater than treasury yields and therefore a few percentage increases aren’t material. And third, much of our 

debt is fixed rate debt; therefore, cash flows until maturity of that debt will not change at all.

We still believe that the odds are currently stacked heavily in favour of lower-than-usual interest rates in the 

U.S. for the medium term, if not longer. With $50 trillion of savings in the world that need to earn a return and 

rates in many parts of the world continuing to be very low, these savings are increasingly targeted at the 

returns and dependability that come from investments in the U.S. This should keep rates down for a while.

SIZE AND FLEX IBILITY O F CAPITAL  M ATTE R

As the investment management industry consolidates, our size increasingly provides us with a strategic 

advantage. Added to that is the fact that not only is our capital base large, it is also very flexible. Both of these 

differentiate our franchise.

As the investment industry matures and the pools of capital grow, investors are under constant pressure to 

maintain a growing number of relationships. With all of our activities ranking among the largest in the 

industry, and with our ability to offer most of the investment products investors want in their real asset and 

alternative portfolios, we continue to gain a strategic advantage by providing them the opportunity to deploy 

large amounts of capital in multiple strategies through one relationship.

Possibly even more important than size is the flexibility of our capital when competing for transactions. Our 

varied sources of capital enable us to offer both permanent capital and traditional private equity-type capital 

to facilitate a transaction. This is very powerful.

First and foremost, the $30 billion plus of permanent capital on the balance sheet of Brookfield Asset 

Management has no restrictions, no time limits, and no size or geographic limits. Our only restriction for 

investing this capital is whether we deem it to be beneficial to our clients and our business. This often means 

we are supporting transactions alongside our clients, sometimes we are bridging transactions so clients have 

time to co-invest, and we regularly use it to support the start-up of new businesses. 

Our four listed entities that trade on the NYSE provide us with a further source of permanent capital. These 

entities have a combined enterprise value of $80 billion and equity capital of $40 billion. This equity capital is 

all permanent, but each entity has a mandate laid out for its shareholders, a guide for returns to be expected, 

dividend expectations and predetermined types of investments which are expected to be made by each. All of 

the entities have quite a wide range of investment strategies, but by virtue of the mandates laid out for each, 

this capital is slightly more restrictive than the capital on our Brookfield balance sheet.

2016 ANNUAL REPORT   5

Lastly, the capital we raise in our private funds is invested in specific transactions alongside our listed entities. 

This capital is also very flexible, but it has a time duration (most from 10 to 12 years), target return thresholds 

and asset classes laid out for investors. This is the type of capital that most of our competitors utilize, so in 

order to differentiate ourselves we set out to be one of the largest in each area in which we operate.

Because we believe that size and flexibility matter, we continue to build our global capital to facilitate the scale 

of transactions that investors expect from us. Our goal is to continue to establish ourselves as the go-to firm 

when a seller of assets needs to transact with size and flexibility.

TRI SURA

For the past 10 years, we have owned a property and casualty insurance business called Trisura Guarantee 

Insurance Company. Trisura Guarantee’s business is writing specialty insurance policies and it has consistently 

and profitably grown its operations over the years. Trisura also specializes in providing surety bonding for 

smaller contractors. The business is regulated, stands on its own, and has been run very conservatively over 

the years. Trisura Guarantee reinsures most of the exposures and only assumes underwriting risk in a 

measured way.

This business is no longer strategic to Brookfield as we focus on our asset management operations. Rather 

than pursue a sales process that would have been disruptive to Trisura Guarantee and unlikely to surface full 

value, we are planning to combine this business with the rest of our small specialty insurance operations and 

spin them off from Brookfield under the brand name Trisura Group.

Even though this business does not fit in Brookfield, we believe it is a great business for the shareholders of 

Brookfield to own as a stand-alone company with direct access to the capital markets. This will also provide 

Trisura Group with an important platform for future growth. As a result, in the next six months after 

regulatory approvals are received, we intend to distribute to you an extra US$0.10 dividend for each 

Brookfield share you own, in the form of Trisura Group shares. 

This spin-off will be a little different than others, as we do not intend for Brookfield to keep any shares. All of 

Trisura Group’s common shares will be distributed to you to own should you wish to keep your portion, or 

you can sell the shares and hence receive cash. In essence, it will be an extra dividend this year that we 

distribute to you. To ensure the initial success of Trisura Group, we will assist the company with its launch, but 

expect to have no ongoing role after an initial period.

For your interest, the senior management team generally intends to keep our shares (some select people for 

various reasons may not), and in the management partnership where we pool a number of our Brookfield 

shares we may provide financial support to Trisura Group, if necessary, and as a result may in the future have 

a greater interest in Trisura Group. However, please rest assured that this will be an insignificant passive 

investment compared to our collective +20% active ownership of Brookfield and in no way should be 

interpreted as reducing our commitment to align our interests with yours by holding the vast majority of our 

individual net worth in Brookfield equity.

6     BROOKFIELD ASSET MANAGEMENT 

PER FORMANCE ACRO SS OUR BUSI NE SS  GR OUPS

Asset Management

Our asset management business contributed $866 million of FFO for the full year, as a result of a 44% 

increase in fee related earnings to $712 million as well as realized carried interest, net of costs, of 

$149 million. This increase reflects strong flows of capital from our clients, with total assets under 

management increasing to $240 billion and fee bearing capital increasing by 16% to $110 billion. The resulting 

growth in base fees and IDRs, as well as the increase in capital on which we are able to earn carried interest, 

led to an annualized run-rate of fees and target carried interest for our franchise of more than $2 billion, up 

36% from last year.

AS AT AND FOR THE YEAR ENDED DEC. 31  
(MILLIONS)

2012

2013

2014

2015

2016

CAGR

Total assets under management

$  181,440

$  187,105

$  203,840

$  227,803

$  239,825

Fee bearing capital

60,069

77,045

85,936

94,262

109,576

Annual run-rate of fees plus target carry

Fee related earnings

750

180

1,006

300

1,204

378

1,489

496

2,031

712

7%

16%

28%

41%

We closed $30 billion of private funds with strong demand globally. We had final closes of our real estate fund 

at $9 billion and our infrastructure fund at $14 billion - both among the largest funds of their type in the 

world, and we closed our private equity fund at $4 billion. We launched Brookfield Business Partners, 

establishing our fourth listed entity through an initial distribution to shareholders and a subsequent 

$400 million equity issue. 

In the fourth quarter, we raised our first perpetual private fund, with a first close of $1 billion for an open-

ended core real estate fund, which is already 50% invested with a seed portfolio of eight high quality office 

and multifamily properties across the U.S. We expect this strategy to become a meaningful part of our real 

estate business moving forward, as it scales up over the course of 2017 and beyond.

With the capital raised across our various fund strategies, we acquired a number of very high quality assets 

across a variety of asset classes and geographies. This included a major hydro company in Colombia, a 

pipeline system in Brazil, a toll road in Peru, portfolios of office buildings and telecom towers in India, office/

retail/hotel complexes in Seoul and Berlin, a port business in Australia, and a number of property businesses 

across the U.S. and Europe. Although we highlight these large transactions, there have been many others.

Our business today increasingly generates significant free cash flow. The combination of fee related earnings 

from our asset management activities and the distributions we receive from our invested capital provides us 

with $2 billion of inflows to our parent company annually. After we pay our corporate costs, interest expense 

and preferred share dividends, we are left with annual free cash flow of $1.5 billion that we use to reinvest in 

our business, pay common dividends, and repurchase shares. 

Brookfield Property Group 

Our property group generated FFO of $1.1 billion in 2016, excluding disposition gains. Our share was 

$738 million, and we recorded an additional $823 million of disposition gains on assets sold. FFO prior to 

disposition gains increased by 23% over the prior year, driven by contributions from incremental capital 

invested in our opportunistic fund strategies and strong same-property performance in our U.S. office 

operations. Real estate fundamentals in the majority of our key markets remain positive, with the outlier 

2016 ANNUAL REPORT   7

being our energy-driven markets. The U.K. market hit a speed bump following the Brexit outcome in June, but 

the market corrected and stabilized quickly. Overall, the positive results throughout the year positioned us 

well to recently announce a 5.4% cash distribution increase in our flagship listed partnership, Brookfield 

Property Partners, and at the same time reduce the payout ratio substantially. 

In our office business, we continued to execute our multi-year capital recycling strategy, raising net equity 

proceeds of over $2 billion from asset sales during the year. These include the dispositions of stabilized office 

properties in Manhattan, London, Vancouver, Washington and Sydney. In addition to the repayment of debt 

and BPY share buybacks, proceeds were used to fund our office and multifamily development pipeline. During 

the course of the year we signed pre-lease commitments at four of our largest development projects: 

Manhattan West in Manhattan, Brookfield Place in Calgary, 100 Bishopsgate in London and Wynyard Place in 

Sydney. In total, our over 7 million square feet of active office developments are 60% pre-let. These projects 

will generate an incremental $300 million of annual cash flow as they are completed over the next three years. 

Our retail operations had strong same-store growth of 5% and maintained a healthy 96.5% occupancy rate. 

While there has been much publicity around the distress of department store retailers, this has generally had 

little to no impact on the profitability of our premier mall portfolio. In fact, we have been partnering with the 

department stores on select properties to redevelop them into higher return uses. Our malls also continue  

to draw strong investment interest from institutions. The best example of this was the partial sale of the 

premier Fashion Show mall in Las Vegas at a $2.5 billion valuation, executed at a sub-4% cap rate. We also 

successfully privatized our retail operator, Rouse Properties, which had been undervalued as a stand-alone 

public company. 

In our opportunistic activities, we invested capital into acquisitions through our $9 billion opportunistic real 

estate fund, BSREP II. These included a number of self-storage, student housing and manufactured housing 

businesses. We also expanded our global investment and operating footprint, agreeing to acquire premier, 

large-scale projects in Seoul and Mumbai. Lastly, we announced a proposal to acquire the remaining equity 

interest in our listed Canadian affiliate that we do not currently own. This will allow us to fully integrate our 

North American office operations and further simplify our structure.

Brookfield Renewable Group

Our renewable business generated FFO of $350 million in 2016, of which our share was $180 million. Water 

levels in the United States were well below long-term average during the year which affected results, while our 

Canadian portfolio performed in-line with the long-term average, partially mitigating the overall impact. As 

always, we manage our capital plans and growth based on how the business performs over the long term and 

as result, we were still able to grow the business while maintaining a strong balance sheet and healthy 

liquidity position. In early 2017, our flagship listed partnership, Brookfield Renewable Partners, announced a 

5% distribution increase, the seventh increase since inception in 2011.

During the year, we completed the acquisition of Isagen, a 3,000 megawatt Colombian hydroelectric portfolio. 

We are now in the process of delisting the company from the Colombian stock exchange. We also acquired, 

with partners, a 34% stake in the public float of TerraForm Power, as its sponsor SunEdison filed for 

bankruptcy protection. TerraForm Power and its sister company TerraForm Global collectively own and 

operate 4,000 megawatts of solar and wind assets. We are working with the companies under an exclusivity 

arrangement to complete a transaction. 

8     BROOKFIELD ASSET MANAGEMENT 

In Brazil, we recently commissioned a 25 megawatt hydro facility and continue with the construction of two 

other hydro projects, totalling 47 megawatts. In Europe, we continue to advance two wind projects in Ireland 

totalling 43 megawatts, and are also moving our first 19 megawatts of wind in Scotland and a further 

19 megawatt wind project in the Republic of Ireland towards the construction phase. In the fourth quarter we 

agreed to acquire two early-stage, greenfield solar development projects representing an aggregate 

120 megawatts. These projects will allow us to replenish our development pipeline and should enable us to 

deliver strong growth to the business over time. 

Hydro, wind and solar portfolios continue to trade hands at premium valuations across our core markets. The 

levels at which these assets are transacting speaks to the continued value proposition of renewables while 

simultaneously underlining the intrinsic value of our own portfolio. Despite this, we continue to identify a 

range of new investment opportunities with strong return potential and where we possess competitive 

advantages. Accordingly, we are focused on opportunities that require operating and development expertise, 

access to large-scale capital, restructuring capabilities and a long-term counter-cyclical investment approach.

Brookfield Infrastructure Group

Our infrastructure group generated FFO of $969 million for the year, before disposition gains, of which our 

share was $279 million. Results benefitted from ‘same-store’ growth of 10%, on a constant currency basis, and 

the contribution from new investments acquired in 2016. Disposition gains for the year were $95 million, 

reflecting our share of the gains on the sale of utility assets. Our flagship listed partnership, Brookfield 

Infrastructure Partners, recently announced an 11% distribution increase, marking the eighth consecutive 

increase since its inception in 2008. 

Growth prospects for our business are strong, driven by ongoing organic growth initiatives and a number of 

acquisitions. We have in excess of $2 billion of committed development projects underway and a majority of 

this backlog will be commissioned within the next 12 to 18 months. We deployed $850 million into such 

projects in 2016 and identified $1.4 billion of additional projects as we continued to replenish our backlog.

Looking ahead, we are focused on closing nearly $7 billion of transactions, all of which should be completed in 

the first half of 2017. We are building out our Brazilian utility business by investing $5 billion in NTS, a large-

scale natural gas pipeline system, and approximately $1 billion over the next five years to construct 4,200 km 

of new electricity transmission lines. We also recently agreed to invest approximately $600 million in India to 

acquire a portfolio of over 40,000 telecommunications towers, representing approximately 10% of the 

country’s towers. Similar to our existing tower business in France, this is a high quality business that generates 

secure, sustainable cash flows but is expected to benefit from continued growth in the industry. 

We have significant capital in our flagship listed partnership and private funds for new investments. At 

Brookfield Infrastructure Partners, we recently raised almost $1 billion at the corporate level through a series 

of common and preferred equity unit issuances. We also generated a further $1 billion of net cash proceeds 

in 2016 from two asset sales and the partial disposition of our toehold position in Asciano, with the remainder 

rolled into our ports investment. 

Brookfield Private Equity Group 

Our private equity operations generated FFO of $491 million for the year, of which our share was $468 million. 

We generated strong results both from our directly owned operations and the businesses we now own 

through Brookfield Business Partners. Our North American residential development business and our 

2016 ANNUAL REPORT   9

investment in Norbord continue to be positively impacted in the U.S. and Ontario by a strong housing market 

backed by limited supply. Key fundamentals remained favourable in 2016, including increased consumer 

confidence and job growth. We are also seeing a positive trend in consumer confidence in our Brazilian 

residential markets, where we are now launching new projects on a selective basis. 

We announced the acquisition of a 70% interest in Ambiental. This is Brazil’s largest private water distribution, 

collection and treatment company and we believe it is well positioned to provide a growing share of the water 

and sewage improvements planned over the next two decades. We also entered into an agreement to sell our 

bath and shower manufacturing business to a strategic buyer in the U.S. for a sizable gain. We acquired this 

business during the U.S. housing crisis and repositioned the company, which included appointing a new 

management team, redefining strategy, reducing costs, and focusing on new product development. 

Earlier this year we took advantage of the volatility in capital markets and the selloff in high yield debt to 

acquire equity and debt securities at attractive valuations in a number of energy related and industrial 

businesses with high quality assets and solid long-term fundamentals. Given the rally in capital markets, these 

investments did not lead to restructurings, so we exited most of the positions with gains. 

A number of our investments have started by us acquiring debt in potential restructurings. This includes our 

investment in Vistra Energy, formerly TCEH Corp., a Texas utility company. Vistra Energy recently emerged 

from bankruptcy and is currently trading in the over-the-counter market. The company is led by a new 

management team, boasts a much leaner and more efficient business with a strong balance sheet, and 

generates significant free cash flow. We believe the future for Vistra Energy is positive, with significant upside 

potential from rising energy prices in Texas which could come from both improved natural gas prices and 

tightening supply and demand. We control approximately 15% of the company with institutional clients.

CL OS ING

We remain committed to being a world-class alternative asset manager, and investing capital for you and our 

investment partners in high quality, simple to understand assets which earn a solid cash return on equity, 

while emphasizing downside protection for the capital employed. The primary objective of the company 

continues to be generating increased cash flows on a per share basis, and as a result, higher intrinsic value 

per share over the longer term.

Please do not hesitate to contact any of us, should you have suggestions, questions, comments, or ideas you 

wish to share with us.

J. Bruce Flatt 

Chief Executive Officer

February 9, 2017

10     BROOKFIELD ASSET MANAGEMENT 

MANAGEMENT’S DISCUSSION AND ANALYSIS 

Our Management’s Discussion and Analysis (“MD&A”) is provided to enable a reader to assess our results of operations and 
financial condition for the fiscal year ended December 31, 2016. This MD&A should be read in conjunction with our 2016 annual 
consolidated financial statements and related notes and is dated March 31, 2017. Unless the context indicates otherwise, references 
in this report to the “Corporation” refer to Brookfield Asset Management Inc., and references to “Brookfield,” “us,” “we,” “our” 
or  “the  company”  refer  to  the  Corporation  and  its  direct  and  indirect  subsidiaries  and  consolidated  entities.  The  company’s 
consolidated  financial  statements  are  in  U.S.  dollars,  and  are  prepared  in  accordance  with  International  Financial  Reporting 
Standards (“IFRS”), as issued by the International Accounting Standards Board.

Additional  information  about  the  company,  including  our  Annual  Information  Form,  is  available  on  our  website  at 
www.brookfield.com, on the Canadian Securities Administrators’ website at www.sedar.com and on the EDGAR section of the 
U.S. Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

We are incorporated in Ontario, Canada and qualify as an eligible Canadian issuer under the Multijurisdictional Disclosure System 
and as a “foreign private issuer” as such term is defined in Rule 405 under the U.S. Securities Act of 1933, as amended, and Rule 
3b-4  under  the  U.S.  Securities  Exchange Act  of  1934,  as  amended. As  a  result,  we  comply  with  U.S.  continuous  reporting 
requirements by filing our Canadian disclosure documents with the SEC; our annual report is filed under Form 40-F and we furnish 
our quarterly interim reports under Form 6-K.

Organization of the MD&A

PART 1 – Overview and Outlook

PART 3 – Operating Segment Results

Liquidity ............................................ 63

Basis of Presentation .........................

40

Review of Consolidated Statements

Summary of Results by Operating

of Cash Flows ................................. 66

Our Business......................................

Strategy and Value Creation..............

Economic and Market Review ..........

12

12

14

Segment ..........................................

Basis of Presentation and Use of

Asset Management ............................

Non-IFRS Measures .......................

16

Property .............................................

PART 2 – Financial Performance

Renewable Power ..............................

Review

Infrastructure .....................................

Selected Annual Financial

Private Equity ....................................

Residential Development...................

Corporate Activities...........................

Information .....................................

Annual Financial Performance ..........

Financial Profile ................................

Summary of Quarterly Results ..........

Corporate Dividends..........................

18

19

30

37

39

43

43

47

49

51

53

55

56

Contractual Obligations..................... 67

Exposures to Selected Financial

Instruments...................................... 68

PART 5 – Operating Capabilities,....

Environment and Risks

Operating Capabilities ....................... 69

Risk Management.............................. 69

Business Environment and Risks ...... 70

PART 4 – Capitalization and Liquidity

PART 6 – Additional Information

Financing Strategy.............................

Capitalization.....................................

58

59

Accounting Policies and Internal

Controls........................................... 84

Interest Rate Profile........................... 63 Related Party Transactions ................ 88

We provide additional information on our basis of presentation of financial information contained in the MD&A and key financial 
and operating measures on pages 40 to 42 of our December 31, 2016 Annual Report.

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND USE OF NON-IFRS MEASURES

This Annual  Report  contains  “forward-looking  information”  within  the  meaning  of  Canadian  provincial  securities  laws  and 
“forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of 
the U.S. Securities Exchange Act of 1934, as amended, “safe harbor” provisions of the United States Private Securities Litigation 
Reform Act of 1995 and in any applicable Canadian securities regulations. We may provide such information and make such 
statements in the Report, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission or in other 
communications. See “Cautionary Statement Regarding Forward-Looking Statements and Information” on page 169.

We disclose a number of financial measures in this Report that are calculated and presented using methodologies other than in 
accordance with IFRS. We utilize these measures in managing the business, including performance measurement, capital allocation 
and valuation purposes, and believe that providing these performance measures on a supplemental basis to our IFRS results is 
helpful to investors in assessing the overall performance of our businesses. These financial measures should not be considered 
as a  substitute  for  similar  financial  measures  calculated  in  accordance  with  IFRS.  We  caution  readers  that  these  non-IFRS 
financial measures may differ from the calculations disclosed by other businesses, and as a result, may not be comparable to similar 
measures presented by others. Reconciliations of these non-IFRS financial measures to the most directly comparable financial 
measures calculated and presented in accordance with IFRS, where applicable, are included within this MD&A.

Information contained in or otherwise accessible through the websites mentioned does not form part of this Report. All references in this 
Report to websites are inactive textual references and are not incorporated by reference.

      2016 ANNUAL REPORT     11

PART 1 – OVERVIEW AND OUTLOOK

OUR BUSINESS

Brookfield is a global alternative asset manager with approximately $250 billion in assets under management. For more than 
100 years we have owned and operated assets on behalf of shareholders and clients with a focus on property, renewable power, 
infrastructure and private equity. We manage a wide range of investment funds and other entities that enable institutional and retail 
clients to invest in these assets.

We earn asset management income including base management fees, carried interest and other forms of performance income for 
doing so. As at December 31, 2016, our listed partnerships, private funds and public securities portfolios represented $110 billion 
of invested and committed fee bearing capital. This capital includes public partnerships that are listed on major stock exchanges; 
private  institutional  partnerships  that  are  available  to  accredited  investors,  typically  pension  funds,  endowments  and  other 
institutional investors; and managed portfolios of listed securities through a series of segregated accounts and mutual funds.

We align our interests with clients by investing alongside them and have over $30 billion of capital invested in our listed partnerships, 
private funds and directly held investments and businesses, based on our IFRS carrying values.

Our business model is simple: (i) raise pools of capital from our clients and ourselves that target attractive investment strategies; 
(ii) utilize our global reach to identify and acquire high quality assets at favourable valuations; (iii) finance them on a long-term 
basis; (iv) enhance the cash flows and values of these assets through our operating business groups to earn reliable, attractive long-
term total returns; and (v) realize capital from asset sales or refinancings when opportunities arise for reinvestment or distribution 
to our clients.

Organization Structure

Our operations are organized into five operating business groups. Our property, renewable power, infrastructure and private equity 
business groups are responsible for operating the assets owned by our various funds and investee companies. The equity capital 
invested in these assets is provided by a series of listed partnerships and private funds which are managed by us and are funded 
with  capital  from  our  clients  and  ourselves. A  fifth  group  operates  our  asset  management  business,  which  is  responsible  for 
managing our various pools of capital, development of new products for our clients and fundraising for our various fund products.

Our balance sheet capital is invested primarily in our four flagship listed partnerships, Brookfield Property Partners L.P. (“BPY” 
or “Brookfield Property Partners”); Brookfield Renewable Partners L.P. (“BEP” or “Brookfield Renewable Partners”); Brookfield 
Infrastructure Partners L.P. (“BIP” or “Brookfield Infrastructure Partners”); and Brookfield Business Partners L.P. (“BBU” or 
“Brookfield Business Partners”). These publicly traded, large capitalization partnerships are the primary vehicles through which 
we  invest  our  capital  in  our  property,  renewable  power  and  infrastructure  segments.  During  the  second  quarter  of  2016,  we 
completed the formation of Brookfield Business Partners by way of a special dividend to shareholders, which is the primary vehicle 
through which we own and operate the majority of the industrial and services businesses of our private equity business group. As 
well as owning assets directly, these partnerships serve as the cornerstone investors in our private funds, alongside capital committed 
by institutional investors. This approach enables us to attract a broad range of public and private investment capital and the ability 
to match our various investment strategies with the most appropriate form of capital.

STRATEGY AND VALUE CREATION 

Our business is centered around the ownership and operation of real assets, which we define as long-life, physical assets that form 
the critical backbone of economic activity, including property, renewable power and infrastructure facilities. Whether they provide 
high quality office or retail space in major urban markets, generate reliable clean electricity, or transport goods and resources 
between key locations, these assets play an essential role within the global economy. Additionally, these assets typically benefit 
from some form of barrier to entry, regulatory regime or other competitive advantage that provide for relatively stable cash flow 
streams, strong operating margins and value appreciation over the longer term. 

We currently own and manage one of the world’s largest portfolios of real assets. We have established a variety of investment 
products through which our clients can invest in these assets, including both listed entities and private funds. We invest our own 
capital alongside our clients, ensuring a meaningful alignment of interests. 

12     BROOKFIELD ASSET MANAGEMENT

We are active managers of capital. We strive to add value by judiciously and opportunistically reallocating capital to continuously 
increase returns. Our track record shows that we can add meaningful value and cash flow through “hands-on” operational expertise, 
whether through the negotiation of property leases, energy contracts or regulatory agreements, or through a focus on optimizing 
asset development, operations or other activities. Our operating business groups include over 70,000 employees worldwide who 
are instrumental in maximizing the value and cash flows from our assets. As real asset operations tend to be industry specific and 
often driven by complex regulations, we believe operational experience is necessary in order to maximize efficiency, productivity 
and returns.

We prefer to invest when capital is less available to a specific market or industry and in situations that tend to require a broader 
range of expertise and are more challenging to execute. We believe these situations provide more attractive valuations recognizing 
also  that  they  may  appear  out  of  favour  and  generate  lower  initial  returns. We  maintain  development  and  capital  expansion 
capabilities and a large pipeline of attractive opportunities. This provides flexibility in deploying capital, as we can invest in both 
acquisition and development initiatives, depending on the relative attractiveness of returns.  

We strive to finance our operations on a long-term, investment-grade basis, and most of our capital consists of equity and stand-
alone asset-by-asset financing with minimal recourse to other parts of the organization. We utilize relatively modest levels of 
corporate debt to provide operational flexibility and optimize returns and strive to maintain excess liquidity at all times in order 
to respond to opportunities as they arise. This provides us with considerable stability, improves our ability to withstand financial 
downturns and enables our management teams to focus on operations and other growth initiatives. 

As an asset manager, we create value for shareholders in the following ways: 

•  We offer attractive investment opportunities to our clients through our managed funds and entities that will, in turn, enable 
us to earn base management fees based on the amount of capital that we manage and additional performance-based returns 
such as incentive distributions and carried interest. Accordingly, we create value by increasing the amount of fee bearing 
capital under management and by achieving strong investment performance that leads to increased cash flows and asset 
values. 

•  We are able to source large scale capital from multiple sources.  We invest significant amounts of our own capital alongside 
our clients. This differentiates us from many of our competitors, creates a strong alignment of interest with our clients, and 
enables us to create value by directly participating in the cash flows and value increases generated by these assets in addition 
to the performance returns that we earn as the manager. 

•  Our operating capabilities enable us to increase the value of the assets within our businesses, and the cash flows they produce. 
Through  our  operating  expertise, development  capabilities and  effective  financing, we  believe  our  specialized  real asset 
experience can help ensure that an investment’s full value creation potential is realized. We believe this is one of our most 
important competitive advantages as an asset manager. 

•  We aim to finance assets effectively, using a prudent amount of leverage. We believe the majority of our assets are well suited 
to support an appropriate level of investment-grade secured debt with long-dated maturities given the predictability of the 
cash flows and tendency of these assets to retain substantial value throughout economic cycles. This is reflected in our return 
on net capital deployed, our overall return on capital and our cost of capital. While we tend to hold our assets for extended 
periods of time, we endeavour to own our businesses in a manner that maximizes our ability to realize the value and liquidity 
of our assets on short notice and without disrupting our operations. 

• 

Finally, as an investor and capital allocator with a value investing culture and expertise in recapitalizations and operational 
turnarounds, we strive to invest at attractive valuations, particularly in situations that create opportunities for superior valuation 
gains and cash flow returns.

      2016 ANNUAL REPORT     13

ECONOMIC AND MARKET REVIEW
(As at March 8th, 2017)

The predictions and forecasts within our Economic and Market Review and Outlook are based on information and assumptions 
from sources we consider reliable. If this information or these assumptions are not accurate, actual economic outcomes may differ 
materially from the outlook presented in this section. For details on risk factors from general business and economic conditions 
that may affect our business and financial results, refer to Part 5 – Operating Capabilities, Environment and Risks.

Overview and Outlook

In 2016, the year began with weak inflation across most of the developed world due to falling commodity prices and modest 
economic growth. This supported further interest rate cuts (Europe and Australia), reduced expectations for rate hikes (U.S.), and 
even new policies targeting interest rate levels (Japan). Meanwhile, many countries in Latin America were dealing with above-
target inflation and high interest rates due to a combination of weakening currencies and weather-related events (Colombia, Brazil, 
and Peru). As the year progressed, inflation began returning to target, aided by a rebound in commodity prices and firmer growth 
(developed countries) and stabilizing currencies (Latin America). Overall, real GDP growth was slightly lower in 2016 than 2015, 
with the U.S. slowing to 1.6% year over year and Eurozone slowing to 1.7%. Latin America also saw a modest slowdown, with 
many countries growing by 1.5 to 2.5%, except for Peru (3.9%) which outperformed and Brazil (-3.6%) which remained in a 
recession. The outlook for growth in 2017 is brighter, as many countries ended the year stronger than they started.  However, it 
also  looks  riskier  from  a  geopolitical  perspective,  with  major  elections  in  Europe  (France  and  Germany),  the  start  of  Brexit 
negotiations, and uncertainty related to U.S. trade and foreign policy. We expect developed markets to continue averaging close 
to 2% growth, and the developing countries to recover to a faster pace than what was seen in 2016.

United States

The U.S. economy grew by 1.6% in 2016, slightly below the 2.2% average from 2009-2015. Consumer spending remained the 
primary growth driver, but unlike recent years, investment growth was weak. Nonetheless, the second half of the year was much 
stronger than the first half, and there is solid momentum heading into 2017. The labour market remains very strong, with the 
unemployment rate down to 4.8%, initial jobless claims below 250 thousand (40-year low), and the number of discouraged workers 
nearly back to pre-crisis levels. This is very close to what the Federal Reserve considers to be full employment, and it is supporting 
strong wage growth and helping push inflation back to the Fed’s 2% target. Inflationary pressures could build in 2017, particularly 
if the new administration increases spending, cuts taxes, or raises import tariffs. In this context, we expect to see multiple rate 
hikes this year as the Fed’s targets are met. Interest rate divergence with other developed nations should continue to support a 
strong USD. Meanwhile, momentum in the housing sector stalled in 2016 after several years of strong growth, and annual housing 
starts of approximately 1.2 million remains below our estimate of the sustainable range (1.4 to 1.6 million). We continue to see 
upside to housing starts in 2017. Overall, real GDP should continue to grow by 2-3%, barring any major policy disruption.

United Kingdom

Real GDP in the U.K. grew 2.0% in the fourth quarter and by 1.8% overall in 2016. Growth continues to defy forecasts for a sharp 
downturn in the wake of Brexit, but inflation has risen quickly from 0.4% in June to 1.9% in January, as the GBP depreciation 
(-10% on a trade-weighted basis) is being passed on to consumers. Inflation will likely exceed the Bank of England’s 2% target 
early in 2017 and could impact consumption, the primary driver of growth, if real purchasing power erodes. Year-over-year job 
growth averaged 1.7% through the first nine months of 2016, but slowed to just 1% in the fourth quarter. Despite the uncertainty 
related to Brexit, industrial production and manufacturing grew faster in the second half of the year, aided by the weaker pound. 
The outlook for 2017 is mixed, but consumer spending will likely be the key. If consumption holds up despite higher inflation, 
growth should remain solid and the Bank of England may need to consider a rate hike. Alternatively, if consumption weakens, 
growth could slow abruptly, as some originally expected. Longer term, if Brexit leads the U.K. to become a more closed nation, 
in terms of both immigration and trade, it will have lower growth potential.

Eurozone

Eurozone real GDP grew steadily at 1.7% in the fourth quarter, and 1.7% overall in 2016. Germany and Spain both outperformed 
the region in 2016, growing by 1.8% and 3.0%, respectively. Italy and France were laggards, growing at 1.0% and 1.2%. Countries 
that were initially hit the hardest during the Euro crisis are now outperforming, as job growth in Spain and Ireland was more than 
double the Eurozone average in 2016 (2.7% vs. 1.3%). Despite some progress in 2016, structural issues remain in the region, with 
budget deficits in the 2 to 5% range and debt-to-GDP ratios in the 100 to 140% range. Italy, Portugal, Spain and France are not 
making progress towards reducing government debt levels. This leaves some countries, particularly Italy and Portugal, with debt 
ratios over 130% of GDP, susceptible to rising interest rates. While the ECB is keeping downward pressure on regional interest 
rates, global rate movements can still push Eurozone rates higher, as seen in the fourth quarter. 2017 will be a major year for 
European politics, with elections in France and Germany, and potentially in Italy after a failed referendum in December led the 
Prime Minister to resign. Rising popularity of anti-EU parties continues to be a key risk. 

14     BROOKFIELD ASSET MANAGEMENT

Brazil

Brazil’s economic contraction continues to slow, with real GDP declining 2.5% year over year in the fourth quarter and 3.6% 
overall in 2016. Brazil looks to be on track to resume growth in 2017 after a deep two-year recession. Net exports continue to 
rise, while the contractions in consumption and investment have slowed. Inflation declined sharply from 10.7% last January 
to 5.4% this January. In response, the central bank has cut interest rates by 200 bps since October, and further cuts will provide 
relief to public finances, consumers, and businesses. The government’s primary deficit stood at 2.5% of GDP in November, while 
the budget deficit (which includes interest payments) remains wide at 9.3% of GDP. As the central bank lowers interest rates, 
financing costs and the budget deficit will be substantially reduced. A virtuous cycle of lower inflation and lower interest rates 
will  also  help  stimulate  investment.  The  unemployment  rate  rose  to  12%  in  December,  with  job  cuts  particularly  acute  in 
manufacturing and construction. However, this significant slack in employment could lead the economy to outperform in the 
coming years once growth returns. The Lava Jato corruption investigations continue, and upcoming plea bargain testimonies are 
a key short-term uncertainty for the markets and popular sentiment. However, this challenging period has placed pressure on the 
administration to accelerate economic reforms, which are now underway. This leaves Brazil, with its large and growing middle 
class, well placed to grow sustainably in the medium and long term.

Canada

Growth in Canada rebounded to 1.4% in 2016 after growing by 0.6% in 2015. The pain in the energy sector has begun to ease 
with global oil prices rising back to the $50-55/barrel level and investment may positively contribute to growth again in 2017 after 
declining for two years. There continues to be disparities in performance between provinces, with Alberta and Saskatchewan 
shedding  a  combined  500k  jobs  in  2016,  while  the  diversified  economies  of  Ontario,  Quebec,  and  British  Columbia  added 
2.2 million. Overall, substantial slack remains in the economy, and Canada should continue to grow at a slower pace than the U.S. 
The Bank of Canada will likely maintain an accommodative monetary policy to keep the CAD weak and support the economy 
until it is operating closer to full capacity. A key risk remains high consumer debt levels and high housing prices in Toronto and 
Vancouver – a correction in housing prices would lead to weaker growth.

Australia

Australia grew by 2.5% in 2016, but slowed in the second half, growing by 1.9% in Q3 and 2.4% in Q4. Growth is being driven 
by a combination of higher export volumes (LNG, coal, and iron ore), steady consumer spending and higher government spending 
on major infrastructure projects. Offsetting some of the growth was a steep decline (-35%) in mining investment. Higher commodity 
prices and export volumes led to Australia’s first trade surplus in three years in the fourth quarter. Employment started the year 
strong, growing 2.1% year over year in the first half of 2016, but slipped in the second half of the year to 1.1%, with all of the 
growth coming from part-time jobs. A similar story was seen in retail sales volumes, which grew by 2.7% year over year in the first 
half of 2016 before slipping to 1.7% in the second half. The housing sector remained a key driver of consumption and investment 
in 2016 as prices continued to rise, but a surge in housing starts – paired with high household debt levels – creates a risk of a 
correction in the next couple of years. Given these risks, and fairly benign inflation, the central bank will look to keep interest 
rates low.

China

China reported real GDP growth of 6.7% in 2016, aided by a surge in government-directed credit (total social financing) of 16%. 
The credit boost lifted the real estate market, with prices in Tier 1 cities rising 28% in 2016. It also supported a recovery in key 
industrial indicators, including investment (+8%), housing starts  (+8%), and industrial power consumption (+2%). However, 
corporate debt levels have risen to 175% of GDP, the highest of any major economy, which poses a risk. The transition from 
investment-driven economy to consumption-driven is still in its early stages, and the economy may experience some volatility 
along the way. Despite the risks ahead, China’s growing middle class continues to spend more, with retail sales growth remaining 
above 10%. China is also seeking to compete in higher value-added sectors, and its R&D spending (2.1% of GDP) is nearly on 
par with the OECD average (2.4% of GDP). China faces a declining working-age population in the coming years, so growth should 
slow down, but continued productivity gains will support sustained economic development.

India

India’s official real GDP grew by 7.5% in 2016 and remains one of the fastest growing developing countries in the world. Inflation 
continued to decline – reaching a five-year low of 3.2% in January – supported by lower food prices following last year’s strong 
harvest. In response, the central bank has started to cut interest rates. India introduced a sales tax reforms bill in Q3, which should 
improve inter-state trade flows and tax collection. The November decision to withdraw the largest denominated bills from circulation 
(86% of the total) faced logistical challenges in its rollout, particularly in India’s largely cash-based informal economy. While this 
could  dampen  activity  in  the  near  term,  it  should  accelerate  financial  sector  formalization  and  support  continued  growth 
in the country.

      2016 ANNUAL REPORT     15

BASIS OF PRESENTATION AND USE OF NON-IFRS MEASURES

Basis of Accounting

We are a Canadian corporation and, as such, we prepare our consolidated financial statements in accordance with International 
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. We are listed on the Toronto 
Stock  Exchange,  New York  Stock  Exchange  and  Euronext. The  following  discussion  contains  a  summary  of  two  key  IFRS 
accounting policies that we believe are particularly relevant to users of our financial statements. Our significant accounting policies 
are described in Note 2 to our consolidated financial statements, which also contains a summary of judgments and estimates.

Election of Fair Value Accounting

We account for a number of our assets at fair value including our commercial properties, renewable power facilities, and certain 
of our infrastructure and financial assets. 

We classify the vast majority of the property assets within our office, retail and opportunistic portfolios as investment properties. 
We have elected to record our investment properties at fair value, and accordingly changes in the value of these assets are recorded 
as fair value changes within net income on a quarterly basis. Depreciation is not recorded on investment properties. 

Our renewable power facilities, certain of our infrastructure assets and hospitality assets within our property portfolio are classified 
as property, plant and equipment and we have elected to record these assets at fair value using the revaluation method. Unlike 
investment properties, these assets are fair valued on an annual basis and changes in value are recorded as revaluation surplus 
within other comprehensive income and accumulated within equity. Depreciation is determined on the revalued carrying values 
at the beginning of each year and recorded in net income. 

A significant portion of our infrastructure operation’s assets such as public service concessions are classified as intangible assets 
and reflect the fair value of the regulatory rate base or other characteristics at acquisition. These intangible assets are carried at 
amortized cost, subject to impairment tests, and are amortized over their useful lives.

Property, plant and equipment and inventory included within our private equity and residential development operations are typically 
recorded at amortized historic cost or the lower of cost and net realizable value. Other intangible assets and goodwill are recorded 
at amortized cost or cost. 

Financial assets, financial contracts and other contractual arrangements that are treated as derivatives are recorded at fair value in 
our financial statements and changes in their value are recorded in net income or other comprehensive income, depending on their 
nature and business purpose (i.e. whether a security is held for trading, classified as available-for-sale, or whether a financial 
contract  qualifies  for  hedge  accounting  or  not).  The  more  significant  and  more  common  financial  contracts  and  contractual 
arrangements  employed  in  our  business  that  are  fair  valued  include:  interest  rate  contracts,  foreign  exchange  contracts,  and 
agreements for the sale of electricity. 

Equity accounted investments follow the same accounting principles as our consolidated operations and accordingly, include 
amounts recorded at fair value and amounts recorded at amortized cost or cost, depending on the nature of the underlying assets.

Consolidated Financial Information

We consolidate a number of entities even though we hold only a minority economic interest. This is the result of our exercising 
control, as determined under IFRS, over the affairs of these entities due to contractual arrangements and our significant economic 
interest in these entities. 

As a result, we include 100% of the revenues and expenses of these entities in our consolidated statements of operations, even 
though a substantial portion of the net income in these consolidated entities is attributable to non-controlling interests. On the 
other hand, revenues earned and expenses paid between us and our subsidiaries, such as asset management fees, are eliminated 
in our consolidated statements of operations; however, these items impact the attribution of net income between shareholders and 
non-controlling interests. For example, asset management fees paid by our listed partnerships to the Corporation are eliminated 
from consolidated revenues and expenses.  However, as the common shareholders are attributed all of the fee revenue while only 
attributed  their  proportionate  share  of  the  listed  partnerships’  expenses,  the  amount  of  net  income  attributable  to  common 
shareholders is increased with a corresponding decrease in net income attributable to non-controlling interests.

16     BROOKFIELD ASSET MANAGEMENT

Interests in entities over which we exercise significant influence, but where we do not exercise control, are accounted for as equity 
accounted investments. We record our proportionate share of their net income on a “one-line” basis as equity accounted income 
within our Consolidated Statements of Operations and “two-lines” within Consolidated Statements of Comprehensive Income as  
equity accounted income that may be reclassified to net income and equity accounted income that will not be reclassified to net 
income. As a result, our share of items such as fair value changes, that would be included within fair value changes if the entity 
was consolidated, are instead included within equity accounted income. 

Certain of our consolidated subsidiaries and equity accounted investments do not utilize IFRS for their own statutory reporting 
purposes. The comprehensive income utilized by us for these entities is determined using IFRS and may differ significantly from 
the comprehensive income pursuant to the accounting principles reported elsewhere by the investee. For example, IFRS provides 
a reporting issuer a policy election to fair value its investment properties, as described above, whereas other accounting principles 
such as U.S. GAAP may not. Accordingly, their statutory financial statements, which may be publicly available, may differ from 
those which we consolidate.

Use of Non-IFRS Measures

We disclose a number of financial measures in this Report that are calculated and presented using methodologies other than in 
accordance with IFRS. These measures are used primarily in Part 3 of the MD&A. We utilize these non-IFRS measures in managing 
the business, including performance measurement, capital allocation and valuation and believe that providing these performance 
measures on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of our businesses. 
These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with 
IFRS. We caution readers that these non-IFRS financial measures may differ from the calculations disclosed by other businesses, 
and as a result, may not be comparable to similar measures presented by others. Reconciliations of these non-IFRS financial 
measures to the most directly comparable financial measures calculated and presented in accordance with IFRS, where applicable, 
are included within Part 3 of this MD&A and elsewhere as appropriate.

      2016 ANNUAL REPORT     17

PART 2 – FINANCIAL PERFORMANCE REVIEW

SELECTED ANNUAL FINANCIAL INFORMATION

1,549

(1,315)

234

(45)

101

(241)

17

(1,508)

(225)

1,127

(540)

(229)

(769)

(0.85)

(854)

(1,744)

8

292

162

(2,136)

1,055

FOR THE YEARS ENDED DEC. 31
(MILLIONS, EXCEPT PER SHARE AMOUNTS)

Condensed Statements of Operations
Revenues .................................................................... $
Direct costs.................................................................
Gross margin1.............................................................
Other income and gains .............................................

Equity accounted income...........................................

Expenses

Interest ..................................................................

Corporate costs .....................................................

Fair value changes......................................................

Depreciation and amortization...................................

Income taxes ..............................................................

Net income .................................................................

Non-controlling interests ...........................................
Net income attributable to shareholders................ $
Net income per share ............................................... $

1.  Gross margin is defined on page 20

2016

2015

2014

2016 vs 2015

2015 vs 2014

Change

24,411

$

19,913

$

18,364

$

4,498

$

(17,718)

(14,433)

(13,118)

6,693

482

1,293

(3,233)

(92)

(130)

(2,020)

345

3,338

(1,687)

5,480

145

1,695

(2,820)

(106)

2,166

(1,695)

(196)

4,669

(2,328)

5,246

190

1,594

(2,579)

(123)

3,674

(1,470)

(1,323)

5,209

(2,099)

(3,285)

1,213

337

(402)

(413)

14

(2,296)

(325)

541

(1,331)

641

1,651

1.55

$

$

2,341

2.26

$

$

3,110

3.11

$

$

(690) $

(0.71) $

Condensed Statements of Other Comprehensive Income (Loss)
Revaluation of property, plant and equipment........... $
Foreign currency translation ......................................

824

1,236

$

2,144

$

2,998

$

(1,320) $

(3,461)

(1,717)

4,697

Financial contracts and other .....................................

Equity accounted investments....................................

Taxes on above items.................................................

Other comprehensive income (loss)...........................

Non-controlling interests ...........................................

Other comprehensive income (loss)

attributable to shareholders..............................

Comprehensive income

496

430

(173)

2,813

(1,992)

(475)

515

(448)

(1,725)

945

821

(780)

(483)

223

(610)

411

(110)

301

971

(85)

275

4,538

(2,937)

1,601

(1,081)

attributable to shareholders.............................. $

2,472

$

1,561

$

3,411

$

911

$

(1,850)

Selected Balance Sheet Information

AS AT DEC. 31
(MILLIONS)
Consolidated assets .................................................... $
Borrowings and other non-current financial

liabilities...............................................................
Equity.........................................................................

Change

2016

2015

2014

2016 vs 2015

2015 vs 2014

159,826

$

139,514

$

129,480

$

20,312

$

10,034

72,650

69,688

65,420

57,227

60,663

53,247

7,230

12,461

4,757

3,980

Dividends declared for each class of issued securities for the three most recent years are presented on page 39.

18     BROOKFIELD ASSET MANAGEMENT

ANNUAL FINANCIAL PERFORMANCE 

The following section contains a discussion and analysis of line items presented within our consolidated financial statements. We 
have disaggregated several of the line items into the amounts that are attributable to our seven operating segments in order to 
facilitate the review. The financial data in this section has been prepared in accordance with IFRS for each of the three most 
recently completed financial years. 

Overview 

2016 vs. 2015 

Consolidated net income for the year ended December 31, 2016 was $3.3 billion compared to $4.7 billion in 2015. Gross margin 
increased by $1.2 billion, attributable to new businesses and developments that were acquired or completed during the year and 
operational improvements across our businesses, including the commencement of new leases and improved pricing in our panel 
board business. The acquisitions and developments also led to increases in interest expense and depreciation of $413 million and 
$325 million, respectively.

Fair value changes were a loss of $130 million in 2016, whereas we recorded fair value increases of $2.2 billion in 2015. Fair 
value changes relating to our investment properties were a gain of $1.0 billion due to value increases, primarily in our opportunistic 
property portfolios. Appraised values in our core office portfolios were consistent with the prior year end as the strengths in some 
markets offset weaknesses in others. Furthermore, the impact of rising interest rates on our discount rates was offset by de-risking 
of certain properties through leasing activity and the general compression of spreads between interest and capitalization rates for 
commercial properties. We recorded appraisal gains in our opportunistic properties due to improvements in projected cash flows 
and reviews of comparable transaction metrics for certain opportunistic asset classes. Investment properties appraisal gains were 
offset by the impact of impairments on certain financial assets that are valued based on stock market prices and certain non-core 
manufacturing businesses that have been classified as held for sale. 

Income taxes represented a net recovery as a result of a reduction in the effective tax rate on certain property assets following a 
change in ownership structure. Equity accounted income declined by $402 million, primarily due to a decrease in the amount of 
fair value gains recorded in these entities. We also recorded a higher level of other income and gains, largely due to gains on the 
disposition of hospitality properties during the year.

Net income attributable to common shareholders totalled $1.7 billion, or $1.55 per share, compared to $2.3 billion, or $2.26 per 
share in 2015. The decline of $641 million in the amount of net income attributable to non-controlling interests reflects the overall 
decline in net income, as well as a reattribution of income related to carried interest earned.

2015 vs. 2014

Consolidated net income for the year ended December 31, 2015 was $4.7 billion, compared to $5.2 billion in 2014. Gross margin 
increased by $234 million as the contribution from acquired assets, completed developments and new leases in our commercial 
office portfolio was largely offset by a lower contribution from our renewable power operations, due to below average generation, 
and reduced deliveries in our residential operations, as well as the absence of contributions from assets sold since the 2014 period 
and the impact of foreign currency. A $1.5 billion decline in fair value changes compared to the prior year, combined with a higher 
provision for depreciation and amortization, was partially offset by a reduction in deferred income taxes. Lastly, a larger proportion 
of net income was attributable to non-controlling interests which further reduced net income attributable to Brookfield shareholders. 

Fair value changes declined from 2014 to 2015. Appraisal gains on investment properties held within consolidated subsidiaries 
totalled $2.2 billion, which were $991 million less than the prior year. In addition, gains arising within fair value changes on the 
value of warrants we hold in General Growth Properties Inc. (“General Growth Properties” or “GGP”) were $556 million lower 
in the current year. Income taxes in 2015 includes a $464 million deferred income tax recovery on a change in the effective tax 
rates of some of our commercial properties, and an overall lower level of deferred income taxes associated with the lower level 
of investment property fair value gains. 

Net income attributable to shareholders decreased by $769 million from 2014 to $2.3 billion in 2015 or $2.26 per share. Much of 
the increase in revenues net of direct costs relates to acquisitions within consolidated funds in which Brookfield has a lower 
economic interest while the decrease in fair value changes occurred within our property operations in which we have a higher 
ownership interest.

      2016 ANNUAL REPORT     19

Foreign Currency Translation

The most significant currency exchange rates that impact net income are shown in the following table:

FOR THE YEARS ENDED DEC. 31

Australian dollar.................................................................................

Brazilian real......................................................................................

British pound......................................................................................

Canadian dollar ..................................................................................

2016

0.7441

3.4904

1.3554

0.7555

2015

0.7523

3.2776

1.5285

0.7832

2014

0.9023

2.3469

1.6478

0.9057

2016
vs 2015
(1)%

(6)%

(11)%

(4)%

2015
vs 2014
(17)%

(40)%

(7)%

(14)%

Average Annual Rate

Change

The average annual foreign exchange rates relative to the U.S. dollar for the more significant currencies that impact our business 
were lower for the year ended December 31, 2016, than that of 2015 and 2014. As a result of these rate variations, the U.S. dollar 
equivalents of the contributions from our subsidiaries and investments in these regions, particularly in the U.K., were lower in 
2016 than in 2015 and 2014, all else being equal. From time to time, we mitigate the impacts of movements in foreign exchange 
rates through the use of financial contracts, where it is economically feasible to do so. 

Statements of Operations 

Revenues and Gross Margin

The following table presents consolidated revenues and gross margin, which we have disaggregated into our operating segments 
in order to facilitate a review of year-over-year variances. Gross margin is calculated as revenues less direct costs as presented in 
our Consolidated Statements of Operations. Acquisitions, dispositions, changes in the basis of presentation, such as  between 
consolidation or equity accounting following changes in control, can impact revenues and direct costs concurrently, as can foreign 
currency fluctuations; accordingly, analysis of revenues less direct costs (i.e. gross margin) on a segmented basis can facilitate 
analysis by presenting the net impact of these items. 

Revenues from our property and infrastructure assets tend to be relatively consistent between periods because they are largely 
determined by contractual arrangements, whereas renewable power revenues can be impacted by changes in water availability 
and wind conditions. Revenues within our private equity business generally vary in line with changes in the level of economic 
activity, with the exception of our construction operations that can fluctuate significantly with the award of large contracts. 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Asset management ................................................... $
Property....................................................................

Renewable power.....................................................

Infrastructure............................................................

Private equity ...........................................................

Residential development..........................................

Corporate activities..................................................
Eliminations and adjustments1.................................
Total consolidated.................................................... $

Revenue

Gross Margin

Change

2016

2015

2016

2015

Revenue 

1,320

$

921

$

877

$

544

$

6,338

2,474

2,414

9,962

3,019

235

5,444

1,632

2,126

8,580

2,329

78

3,306

1,429

1,230

772

196

181

2,779

1,072

1,236

642

253

54

(1,351)

(1,197)

(1,298)

(1,100)

399

894

842

288

1,382

690

157

(154)

Gross 
Margin 
333

$

527

357

(6)

130

(57)

127

(198)

24,411

$

19,913

$

6,693

$

5,480

$

4,498

$

1,213

1.  Adjustment to eliminate asset management fee revenue and carried interest, interest income earned from entities that we consolidate and revenues earned on 

construction projects between consolidated entities. See Note 3 to our consolidated financial statements

20     BROOKFIELD ASSET MANAGEMENT

 
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Asset management ................................................... $
Property....................................................................

Renewable power.....................................................

Infrastructure............................................................

Private equity ...........................................................

Residential development..........................................

Corporate activities..................................................
Eliminations and adjustments1.................................
Total consolidated.................................................... $

Revenue

Gross Margin

Change

2015

2014

2015

2014

Revenue 

921

$

771

$

544

$

399

$

5,444

1,632

2,126

8,580

2,329

78

(1,197)

5,010

1,679

2,193

6,158

2,912

199

(558)

2,779

1,072

1,236

642

253

54

2,382

1,149

1,202

442

2,519

108

(1,100)

(2,955)

150

434

(47)

(67)

2,422

(583)

(121)

(639)

19,913

$

18,364

$

5,480

$

5,246

$

1,549

$

Gross 
Margin 
145

$

397

(77)

34

200

(2,266)

(54)

1,855

234

1.  Adjustment to eliminate asset management fee revenue and carried interest, interest income earned from entities that we consolidate and revenues earned on 

construction projects between consolidated entities. See Note 3 to our consolidated financial statements

Asset Management 

2016 vs. 2015 

Revenues in our asset management operations increased by $399 million or 43% in 2016 due to a $257 million increase in base 
management fees and incentive distributions and a $129 million increase in carried interest on the monetization of investments 
in our private equity and property private funds. Base management fees from funds increased by $186 million to $495 million, as 
these fees benefitted from a 44% increase in fee bearing capital driven by new fund commitments. Listed partnership fees increased 
$58 million due to a 15% increase in capitalization from higher market pricing and new issuances of debt and equity, in addition 
to the launch of BBU which had a capitalization of $2.3 billion at the time of the initial spin-off. Incentive distributions increased 
by $32 million, reflecting our participation in our listed partnerships’ unitholder distribution increases in 2016. Gross margin 
increased by $333 million to $877 million due to the aforementioned increases in revenues, which were partially offset by higher 
direct costs driven by the expansion of our operations. 

2015 vs. 2014 

Revenues in our asset management operations increased by $150 million or 19% in 2015 primarily due to a $155 million increase 
in base management fees. Base management fees from private funds increased by $93 million or 38%, including $83 million of 
fees earned on new fund commitments. We also earned an additional $24 million of incentive distributions reflecting our incentive 
participation in our listed partnerships’ unitholder distribution increases in 2015. In addition, we realized $49 million (2014 – 
$8 million) of carried interest on the monetization of properties. Gross margin increased from $399 million to $544 million as the 
increases in fees were partially offset by $36 million of additional costs associated with the expansion of our operations as well 
as incentive compensation paid on the realization of carried interest.

Property 

2016 vs. 2015

Revenue increased by $894 million or 16% mainly as a result of incremental capital allocated to higher yielding opportunistic 
investments and same-property growth in our core office business. Acquisitions contributed an additional $612 million of revenues 
in the year, primarily through our opportunistic funds. These included the acquisition of an office portfolio in Brazil, a self-storage 
portfolio, a student housing portfolio and the privatization of a U.S. regional mall business. Same-property growth in our core 
office portfolio contributed $39 million in revenue driven by the commencement of new leases, particularly at the Brookfield 
Place New York redevelopment project. Merchant development sales increased revenues and gross margins by $296 million and 
$117 million, respectively. These increases were offset by the disposition or partial disposition of mature assets within our core 
office and retail portfolios. Gross margin increased by $527 million or 19% to $3.3 billion due to the redeployment of capital in 
higher margin asset classes, including self-storage and student housing, a full year of contribution from our U.K. resort business, 
and higher rental income following the renovation program within our multifamily portfolio. 

      2016 ANNUAL REPORT     21

 
2015 vs. 2014

Acquisitions within our property operations increased revenues and gross margins by $803 million and $552 million, respectively, 
in comparison to 2014. Acquisitions in 2015 include a large U.K. resort operator and multifamily properties in the U.S. Margins 
in our property operations increased significantly in 2015 due to the acquisition of a large triple net lease portfolio in the second 
half of 2014, which incurs minimal direct costs. The contribution from these investments and same-property growth in occupancy 
and rental rates in our office portfolio, particularly in Lower Manhattan, was partially offset by the effects of lower exchange rates 
on results from our foreign operations and the elimination of $176 million of revenues and $104 million of gross margins following 
the disposal of assets throughout the year. Significant dispositions in 2015 included office properties in Melbourne, Australia, 
Washington, D.C. and Boston.

Renewable Power 

2016 vs. 2015

Revenues and gross margin increased by $842 million and $357 million compared to the prior year, respectively, primarily due 
to  acquisitions  in  Colombia,  Brazil  and  Pennsylvania,  which  contributed  $882 million  of  additional  revenues. The  impact  of 
stronger hydroelectric generation in Canada and Brazil, coupled with improved wind generation in Brazil were offset by lower 
pricing in our North American and Brazilian hydroelectric portfolios, as well as the impact of foreign exchange on our non-U.S. 
denominated operations. Gross margin increased by $357 million as the increase in revenues from acquisitions were partially 
offset by the associated increase in direct costs of $470 million.

2015 vs. 2014

Generation from facilities acquired and completed developments coming online increased revenues by $202 million in 2015, 
compared to 2014. This positive variance was more than offset by lower generation from assets held in both periods, reduced 
pricing and negative foreign currency variation. Lower hydrology conditions in the northeast U.S. and in Brazil, and lower overall 
wind conditions, reduced revenues from assets held throughout both periods by $84 million during the year. In addition, North 
American electricity pricing decreased relative to the prior year, which reduced revenue by $42 million in aggregate. Gross margin 
decreased by $77 million, reflecting the decline in revenue as well as an increase of $30 million in direct costs over the prior year, 
primarily due to costs associated with newly acquired facilities.

Infrastructure 

2016 vs. 2015

Revenues in our infrastructure operations increased by $288 million in 2016 compared to 2015. The increase in revenue is primarily 
due to acquisitions and internal growth initiatives completed over the past 12 months which contributed $380 million of additional 
revenues, net of dispositions. Acquisitions in 2016 include a ports business in Australia, North American gas storage, and toll 
roads in India and Peru. Completion of expansion projects also contributed to revenue growth, in particular from projects completed 
within our U.K. regulated distribution business and district energy operations. This increase was partially offset by the impact of 
lower currency exchange rates on revenues at non-U.S. subsidiaries. Gross margin decreased by $6 million, reflecting direct costs 
of $325 million from businesses acquired in 2016 and $50 million in costs associated with higher volumes were partially offset 
by the aforementioned increases in revenues.

2015 vs. 2014

Revenues  in  our  infrastructure  operations  declined by  $67  million  in  2015  compared  to  2014.  Improved  volumes  across  our 
businesses, along with higher rates and tariff increased revenues by $180 million from 2014. These increases were more than 
offset by the impact of lower currency exchange rates on revenues at non-U.S. subsidiaries.  Gross margin increased by $34 million 
compared to 2014 as increased costs of $53 million from businesses acquired in 2015 and $24 million in costs associated with 
higher volumes were more than offset by a decrease from the depreciation of the non-U.S. dollar currencies in which we operate 
and a decrease of $25 million resulting from cost reduction programs.

Private Equity 

2016 vs. 2015

Revenues increased by $1.4 billion as a reflection of earnings from entities which were acquired throughout 2015 that now have 
contributed revenues for the full year, namely in our other industrial operations segment which included an infrastructure support 
business acquired in June 2015 a graphite electrode manufacturing operations acquired in August 2015, and our palladium business 

22     BROOKFIELD ASSET MANAGEMENT

acquired in August 2015. Revenues in our construction services operations increased 14% from $3.8 billion in 2015 to $4.4 billion 
in the current year as a result of an increased level of activity in Australia and the U.K. Furthermore, our directly held panel board 
business benefitted from higher pricing and volume in the North American oriented strand board (“OSB”) market throughout the 
year, increasing revenue by $368 million. This increase in revenue combined with the aforementioned increase in activity at our 
construction services operations contributed to higher gross margins, partially offset by lower margins on an Australian contract; 
this resulted in an overall increase of $200 million in gross margin compared to last year.

2015 vs. 2014

The increases in revenues are substantially attributable to the businesses acquired throughout the year, including a U.S. industrial 
manufacturing operation, an infrastructure products manufacturing operation and a Canadian palladium mine. Revenues at our 
directly held panel board operations decreased by $103 million or 7% in 2015, primarily due to lower prices partially offset by a 
4% increase in shipment volumes. Revenues from our construction services operation increased by $1.0 billion as a number of 
large projects commenced during the year. A large percentage of revenues and costs are earned and incurred in non-U.S. dollars, 
therefore the decline in the value of local currencies reduced the translated value of gross margins by $19 million. Other business 
services revenues increased by $873 million as a result of the acquisition of an integrated facilities management business during 
the first quarter of 2015. This increase was partially offset by reduced volumes in our residential real estate services business, where 
revenues decreased by $193 million.

Residential 

2016 vs. 2015

Revenues for the year increased by $690 million while gross margins decreased by $57 million. We delivered 43 projects in our 
Brazilian operation, compared to 25 in the prior year, which increased revenue by $466 million. This increase in revenue was 
more than offset by higher selling costs and corporate overhead, which resulted in a reduction in gross margins. In our North 
American operations, we experienced 537 additional home closings and a 7% overall increase in the average home selling prices 
based on the product mix of homes sold, however, these were offset by lower land gross margins as a result of decreases in average 
selling prices based on the product mix of lots sold.

2015 vs. 2014

Revenues from our Brazilian operations decreased by $691 million compared to 2014; we delivered fewer projects in 2015 due 
to a slowing economy in Brazil and delivery dates for a number of projects that were moved to future quarters due to construction 
and permitting delays. The decline in the Brazilian currency also reduced the translated value of revenues by $364 million. In our 
North American business, revenues increased by $67 million due to increased housing sales volumes, particularly in the U.S., 
although these were partially offset by the mix of deliveries being more weighted to lower priced homes and the decreased impact 
of the lower Canadian dollar on sales in our Canadian operations. Gross margins also declined compared to 2014 with the increased 
proportion of lower-priced product sold. 

Corporate Activities 

2016 vs. 2015

Revenues increased as a result of higher level of investment gains within our financial asset portfolio compared to 2015.

2015 vs. 2014 

Revenues declined due to reduced level of investment gains within our financial asset portfolio compared to 2014. 

Other Income and Gains

Other income and gains in 2016 included gains on the disposition of a portfolio of hospitality assets and hospitality trademarks 
of $108 million and $131 million, respectively, as well as a $67 million gain from a partial disposition of a toehold position in 
publicly traded securities. 

      2016 ANNUAL REPORT     23

Equity Accounted Income

Equity accounted income represents our share of the net income recorded by investments over which we exercise significant 
influence. The following table disaggregates consolidated equity accounted income to facilitate analysis:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Property operations

2016

2015

2014

2016 vs 2015

2015 vs 2014

Change

General Growth Properties............................. $
Canary Wharf .................................................

Other property operations...............................

Infrastructure operations ...................................

Private equity and other ....................................

476

$

10

445

314

48

526

461

600

125

(17)

$

1,006

$

(50) $

(480)

—

387

81

120

(451)

(155)

189

65

461

213

44

(137)

101

$

1,293

$

1,695

$

1,594

$

(402) $

Our share of GGP’s equity accounted income was $476 million this year, compared to $526 million in 2015. GGP’s income, 
excluding  fair  value  changes  and  depreciation  and  amortization,  in  2016  was  $430  million,  which  increased  by  $34  million 
compared to 2015 due to a 5% improvement in operating results on a same-store basis, partially offset by the absence of income 
from asset dispositions. GGP recorded fair value gains of $21 million in the year, as asset values remained relatively consistent 
year over year. Our share of GGP’s equity accounted income in 2015 decreased by $480 million compared to 2014, of which 
$466 million was due to a reduction in the level of fair value gains recognized by GGP. 

Our share of Canary Wharf’s equity accounted income was $10 million in 2016. Income earned from Canary Wharf’s operating 
activities increased by $55 million to $154 million. This increase was partially offset by $126 million of unrealized losses on 
interest rate swap contracts, as a result of changes in long-term interest rates. We commenced equity accounting for our interest 
in Canary Wharf in February 2015 when we increased our ownership from 22% to 50%. Our share of Canary Wharf’s equity 
accounted income in 2015 included appraisal gains of $332 million related to increases in the value of Canary Wharf’s investment 
property portfolio since acquisition. 

Equity  accounted  income  from  other  property  operations,  which  consist  mainly  of  core  office  properties,  decreased  from 
$600 million in 2015 to $445 million in 2016 due to the absence of net income from a U.S. regional mall business which we had 
equity accounted for in the prior year but began consolidating following its privatization in July 2016. 

Infrastructure equity accounted income for the year includes a $103 million transaction gain recognized in the second quarter of 
2016 on the privatization of our Brazilian toll road investment. The gain was determined based on the difference between the cost 
paid for our additional interest and our IFRS carrying value of this business. 

Equity accounted income from private equity and other investments in 2016 increased by $65 million as the prior year’s results 
included valuation charges on oil and gas reserves by investee companies and inventory impairments on equity accounted Brazilian 
residential projects. 

Interest Expense

The following table presents interest expense organized by the balance sheet classification of the associated liability:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Corporate borrowings .............................................. $
Non-recourse borrowings

Property-specific mortgages...............................

Subsidiary borrowings........................................

Subsidiary equity obligations ..................................

2016

2015

2014

2016 vs 2015

2015 vs 2014

241

$

225

$

228

$

16

$

(3)

Change

2,498

307

187

2,124

330

141

2,047

272

32

374

(23)

46

$

3,233

$

2,820

$

2,579

$

413

$

77

58

109

241

The majority of our borrowings are fixed rate long-term financing. Accordingly, changes in interest rates are typically limited to 
the impact of refinancing borrowings at current rates or changes in the level of debt as a result of acquisitions and dispositions. 
Borrowings are generally denominated in the same currencies as the assets they finance and therefore, the overall increase in the 
value of the U.S. dollar in this period, compared to the prior year, resulted in a decrease in the translated value of the interest 
expense on non-U.S. dollar denominated borrowings.
24     BROOKFIELD ASSET MANAGEMENT

 
 
Interest  expense  on  property-specific  mortgages  during  the  year  increased  by  $374  million  over  the  prior  year  and  included 
$366 million of interest on additional borrowings associated with acquisitions, particularly within our property, infrastructure and 
renewable power operations. We continue to refinance maturing obligations and, in certain instances, increased the notional level 
of borrowings, albeit at reduced rates.  

Interest expense on subsidiary borrowings decreased by $23 million largely due to repayments of credit facilities throughout the 
year. In addition, our Brazilian residential operations continued to reduce the level of borrowings throughout the year, decreasing 
interest expense. 

Subsidiary equity obligations carrying charges increased by $46 million as a result of the interest incurred during the year on the 
BPY preferred equity units issued in the second quarter. 

Fair Value Changes

The following table disaggregates fair value changes into major components to facilitate analysis: 

Change

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Investment properties ............................................... $
General Growth Properties warrants .......................

Investment in Canary Wharf....................................

Private equity investments.......................................

Redeemable units.....................................................

Transaction related gains
Impairments and other .............................................

2016

2015

2014

2016 vs 2015

2015 vs 2014

960

$

2,275

$

3,266

$

(1,315) $

(110)

—

(665)

(40)

—

(275)

(30)

150

(120)

(2)

232

(339)

526

(283)

230

319

(31)

(353)

(80)

(150)

(545)

(38)

(232)

64

(991)

(556)

433

(350)

(321)

263

14

$

(130) $

2,166

$

3,674

$

(2,296) $

(1,508)

Investment Properties

Our investment properties are recorded at fair value with changes recorded in net income. The following table disaggregates 
investment property fair value changes by asset type:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Core office ............................................................... $
Opportunistic and other ...........................................

$

2016

51

909

960

$

$

2015

1,638

637

2,275

$

$

2014

2016 vs 2015

2015 vs 2014

2,937

329

3,266

$

$

(1,587) $

(1,299)

272

(1,315) $

308

(991)

Change

Our investment properties are recorded at fair value, generally determined using discounted cash flow analysis or, in limited 
circumstances, direct capitalization rates. External appraisals and market comparables, when available, are used to support our 
valuations. 

Office property appraisal gains in the year totalled $51 million, compared to $1.6 billion in the prior year. The appraisal gains 
reflect lower discount rates as a result of de-risking in our portfolio through leasing activity. The impact of rising interest rates 
was offset by the general compression of spreads between interest rates and capitalization rates for commercial properties. This 
was partially offset by lower pricing assumptions for projected lease renewals, particularly in commodity-based markets. Appraisal 
gains in 2015 related to a reduction in capitalization and discount rates as a result of improving markets within our New York, 
London, Toronto and Australian core office portfolios, and a positive impact on cash flow from leases signed during the period. 
In 2014, the office appraisal gains were primarily as a result of a decline in capitalization and discount rate as a result of improving 
economic conditions in the U.S.  

We recorded fair value gains of $909 million in opportunistic and other properties which consist of our industrial, multifamily, 
hospitality and other portfolio. We have been investing additional capital into this property class over the last three years, increasing 
the asset base on which we record fair value increments. The gains were mainly driven by improved leasing activity in certain 
industrial properties, higher projected cash flow in our multifamily and triple net lease portfolios, and lower terminal capitalization 
rates due to operational improvements and review of comparable transactions. We also recorded fair value gains on the recently 
acquired  self-storage  business,  in  which  occupancy  has  increased  since  acquisition. Additionally,  directly  held  investment 
properties generated $283 million of gains as a result of improved performance at our multifamily services.

      2016 ANNUAL REPORT     25

 
 
We discuss the key valuation inputs of our investment properties on page 31. 

General Growth Properties Warrants

We hold warrants that are convertible into approximately 75 million common shares of GGP. The share price declined by 8% in 
the current year, resulting in a $110 million loss. A smaller decline in share price in 2015 generated a $30 million loss in the prior 
year. This loss was partially offset by our share of the mark-to-market decrease of $36 million on the warrant liability by GGP, 
which is included in equity accounted income.

Investment in Canary Wharf

We commenced equity accounting for our investment in early 2015 after increasing our interest from 22% to 50% and since that 
time our share of valuation gains are recorded in equity accounted income. We recognized a $150 million revaluation gain in 2015 
based on the price paid when we acquired our additional interest in Canary Wharf. In 2014 we recorded increases of $319 million, 
in the value of this investment, which related to increases in the value of Canary Wharf’s development activities, as well as the 
impact of lower discount rates on the valuations of its commercial office properties.

Private Equity Investments

In the fourth quarter of 2016, a company owned within our private equity operation emerged from a multi-year restructuring 
process and our investment in debt securities of the company was converted into equity. The extinguishment of the debt and 
establishment  of  the  equity  as  a  new  financial  asset  resulted  in  a  reclassification  of  the  prior  unrealized  fair  value  losses  of 
$447 million that had previously been recorded in OCI resulting in an impairment loss being recorded in net income in the current 
year. The impairment losses also included $81 million of fair value changes recorded in the current period for these securities.  

During the second quarter of 2016, we recognized a $106 million impairment relating to certain non-core assets in an investee 
company that have been classified as held for sale. The impairment was based on the difference between the expected sale price 
of the assets and our IFRS carrying value. 

Transaction Related Gains

Included in 2015 are two significant transaction related gains. First, in January of 2015 we acquired natural gas production facilities 
in western Canada valued at $652 million for gross consideration of $481 million, including debt financing. Secondly, in February 
2015 we acquired the remaining 50% interest in an integrated real estate management services business, increasing our ownership 
to 100%. We commenced consolidation of the business which required us to revalue our existing 50% investment to the acquisition 
cost resulting in a $101 million gain based on the excess of the transaction value over our IFRS book value.

During  the  first  quarter  of  2014  we  disposed  of  a  partial  interest  in  a  private  equity  investee  company,  resulting  in  the  de-
consolidation of the business from our results and revaluing our retained interest based on its quoted market price. This gave rise 
to a $230 million revaluation gain.

Impairment and Other

We recognized $85 million of impairments in 2016, compared with $79 million in 2015 and $121 million in 2014, related primarily 
to development inventory at our Brazilian residential operations, which are experiencing weaker market fundamentals. This has 
resulted in a decrease in margins relating to cost overruns and a slowing consumer demand.  Additionally, we recognized $92 million 
of provisions on projects under development at these operations in 2016, compared with $97 million in 2015 and $87 million in 
2014.

Other fair value changes also include mark-to-market losses on financial contracts used to offset foreign currency and interest rate 
exposure.

Depreciation and Amortization

Depreciation and amortization includes the depreciation of property, plant and equipment, as well as the amortization of intangible 
assets. The two largest contributions to depreciation and amortization come from our renewable power and infrastructure facilities. 
Many of the assets in these businesses, with the exception of intangible assets, are revalued annually with changes recorded in 
OCI, but are depreciated in net income. Depreciation is based on their carrying value at the beginning of each year. We do not 
record depreciation on assets that are classified as investment properties (e.g. commercial office and retail properties) or biological 
assets (e.g. our timberlands and agricultural assets). The amount of depreciation and amortization is generally consistent year over 
year with large changes typically due to the addition or removal of depreciable assets, as a result of acquisitions, development and 
disposition activities, the revaluation of carrying values and the impact of foreign currency revaluation on non-U.S. assets. 

26     BROOKFIELD ASSET MANAGEMENT

Depreciation and amortization is summarized in the following table:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Renewable power..................................................... $
Infrastructure ............................................................

Private equity ...........................................................

Property ....................................................................

Other ........................................................................

2016

2015

2014

2016 vs 2015

2015 vs 2014

Change

$

805

466

389

311

49

$

638

390

337

267

63

566

395

225

261

23

$

167

$

76

52

44

(14)

325

$

72

(5)

112

6

40

225

$

2,020

$

1,695

$

1,470

$

The increase in depreciation and amortization each year is driven by acquisitions and development projects, as well as increases 
resulting  from  our  annual  revaluation  process.  In  2016,  the  increase  primarily  relates  to  the  following:  our  acquisitions  of 
hydroelectric portfolios in Colombia and Pennsylvania in our renewable power operations; a U.S. gas storage business and Indian 
and Peruvian toll roads, as well as investments in internal growth capital projects, in our infrastructure operations; a full year’s 
contribution from assets acquired throughout the prior year in our private equity operations; and the acquisition of a U.S. hospitality 
asset in our property operations. These increases were partially offset by the impact of depreciation eliminated on the previously 
sold infrastructure assets and the impact of foreign exchange on our non-U.S. dollar denominated operations. 

Income Taxes

We recorded an aggregate income tax recovery of $345 million in 2016, compared to a provision of $196 million in 2015 and 
$1.3 billion in 2014. 

The two largest factors contributing to the variance between 2015 and 2016 were the effect of a reorganization of the ownership 
of certain property assets that resulted in a reduction in the applicable tax rates and the statutory decrease in the tax rates in the 
U.K., which together reduced our deferred tax expense by $1.0 billion in the current year. Additionally, we recorded lower fair 
value gains on our investment properties in 2016 compared to 2015, which resulted in a reduction in the associated deferred income 
taxes. The prior year included a $464 million deferred income tax recovery arising from a change in tax laws in the first quarter 
of that year that affected our North American office property operations. 

Income tax expense includes current taxes of $213 million (2015 – $132 million) and a deferred tax recovery of $558 million 
(2015 – expense of $64 million). The current tax provision represents the portion of the provision that gives rise to a current tax 
liability. The deferred tax provision arises from income that is subject to tax in future periods (commonly referred to as timing 
differences) and the utilization of existing tax assets such as accumulated tax losses.

In our case, the deferred tax provision relates principally to fair value gains, which are not taxable until the assets are sold, and 
therefore do not give rise to a current tax liability, as well as the depreciation of assets that are depreciated for tax purposes at rates 
that differ from the rates used in our financial statements.

Our  income  tax  provision  does  not  include  a  number  of  non-income  taxes  paid  that  are  recorded  elsewhere  in  our  financial 
statements. For example, a number of our operations in Brazil are required to pay non-recoverable taxes on revenue, which are 
included in direct costs as opposed to income taxes. In addition, we pay considerable property, payroll and other taxes that represent 
an important component of the tax base in the jurisdictions in which we operate, which are also predominately recorded in direct 
costs.

      2016 ANNUAL REPORT     27

 
Our effective income tax rate is different from the Canadian domestic statutory income tax rate due to the following differences:

FOR THE YEARS ENDED DEC. 31
Statutory income tax rate ...........................................

Increase (reduction) in rate resulting from:

Change in tax rates and new legislation ..................

International operations subject to different

tax rates ...............................................................

Taxable income attributed to non-controlling

interests................................................................

Other........................................................................

2016

26 %

(35)

(5)

(2)

4

Effective income tax rate ...........................................

(12)%

2015

26%

(11)

(7)

(6)

2

4%

Change

2014

2016 vs 2015

2015 vs 2014

26%

— %

— %

4

(5)

(5)

—

(24)

(15)

2

4

2

(2)

(1)

2

20%

(16)%

(16)%

The most significant change in our annual effective tax rate was a change in tax rates arising from the reorganization of certain 
of our U.S. property operations and a reduction of the U.K. tax rate, which resulted in a reduction in the effective tax rate. The 
lower tax rates are applied to cumulative timing differences, such as fair value gains, and resulted in a $900 million reduction of 
deferred income tax liabilities that is recognized in the current period even though many of the timing differences occurred in 
prior periods.

We operate in countries with different tax rates, most of which vary from our domestic statutory rate and we also benefit from tax 
incentives introduced in various countries to encourage economic activity. Differences in global tax rates gave rise to a 5% decrease 
in our effective tax rate compared to a 7% reduction in 2015. The difference will vary from period to period depending on the 
relative proportion of income in each country. 

As an asset manager, many of our operations are held in partially owned “flow through” entities, such as partnerships, and any 
tax liability is incurred by the investors as opposed to the entity. As a result, while our consolidated net income includes income 
attributable to non-controlling ownership interests in these entities, our consolidated tax provision includes only our proportionate 
share of the tax provision of these entities. In other words, we are consolidating all of the net income, but only our share of their 
tax provision. This gave rise to a 2% and 6% reduction in the effective tax rate relative to the statutory tax rate in 2016 and 2015, 
respectively.

Non-controlling Interests 

Non-controlling interests represent the portion of net income of consolidated entities that is attributable to other investors. Non-
controlling interests totalled $1.7 billion in 2016 compared to $2.3 billion in 2015 and $2.1 billion in 2014, representing 51%, 
50% and 40% of consolidated net income, respectively, in each of these years. The change in the proportionate interest reflects 
the acquisitions of assets and business within fund entities in which we have a differing ownership interests as well as changes in 
the amount of income generated within entities with different ownership levels. On June 20, 2016, we completed the spin-off of 
BBU resulting in a decrease of ownership in our private equity operations, as these operations were previously wholly owned. 

In 2016, net income decreased in certain operations where we have a higher ownership, particularly in our office properties where 
we recorded a lower level of fair value gains compared to 2015 and 2014, and increased in certain operations where we have a 
higher ownership, particularly our infrastructure operations. We recorded $149 million of realized carried interest in the period, 
which resulted in the reattribution of income from non-controlling interests to common equity.

Other Comprehensive Income (“OCI”)

Revaluation of Property, Plant and Equipment 

The following table summarizes revaluations of property, plant and equipment: 

2015

2014

2016 vs 2015

2015 vs 2014

Change

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Renewable power..................................................... $
Infrastructure............................................................

Property and other....................................................

2016

333

396

95

$

1,305

$

1,966

$

(972) $

688

151

708

324

(292)

(56)

$

824

$

2,144

$

2,998

$

(1,320) $

28     BROOKFIELD ASSET MANAGEMENT

(661)

(20)

(173)

(854)

 
Revaluation gains on property, plant and equipment totalled $824 million in 2016, compared to a $2.1 billion recorded in 2015 
and $3.0 billion recorded in 2014. Revaluations of property, plant and equipment are primarily influenced by changes in estimated 
future cash flows and discount rates. Estimated future electricity prices are the primary determining factor of future cash flows in 
our renewable power operations. In our infrastructure operations, future cash flows are impacted by regulated rates of return on 
rate bases in our utility assets and tariffs or capacity charges in our transport and energy assets, while expected hotel stays and 
room rates increase or decrease cash flows in our hospitality assets within our property operations. In 2016, revaluation gains 
were driven by contributions from growth capital deployed and expansion, as well as higher projected cash flows, partially offset 
by the impact of rising long-term interest rates on our discount rates. In 2015 and 2014, long-term return expectations decreased, 
evidenced by comparable asset sales, resulting in an increase in valuations of these assets. Additionally, in each year expected 
future cash flows increased at most of our operations as a result of expansion projects, business growth and inflation-linked revenue 
assumptions.

We discuss the key valuation inputs on page 34. 

Financial Contracts and Other 

The following table presents the components of financial contracts and other: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Financial contracts and power sales agreements ..... $
Available-for-sale securities ....................................

Revaluation of pension obligations .........................

2016

2015

2014

2016 vs 2015

2015 vs 2014

Change

(113) $

(22) $

(301) $

(91) $

649

(40)

(485)

32

(105)

(77)

1,134

(72)

$

496

$

(475) $

(483) $

971

$

279

(380)

109

8

Losses on financial contracts reflect market position of hedge-designated trades at year end. In 2016, fixed-rate swaps in our 
renewable power operation incurred higher losses due to improving power prices compared to the prior year. The losses in 2014 
were a result of declining interest rates on the value of our interest rate contracts.

Changes in the fair value of financial investments that are designated as available-for-sale are recorded through OCI unless we 
believe that a permanent impairment in value has occurred in which case a provision is recorded in net income. The available-
for-sale  securities  reflects  a  reclassification  of  $447  million  related  to  unrealized  losses  previously  recorded  in  OCI  on  the 
restructuring  of  debt  securities  to  net  income.  The  available-for-sale  losses  in  2015  include  the  unrealized  losses  on 
the aforementioned securities.

Foreign Currency Translation

We record the impact of changes in foreign currencies on the carrying value of our net investments in non-U.S. operations in OCI. 
Changes in the value of currency contracts that qualify as hedges are also included in foreign currency translation. The following 
table disaggregates the impact of foreign currency translation on our equity by the most significant non-U.S. currencies: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Australian dollar......................................................... $
Brazilian real..............................................................

British pound..............................................................

Canadian dollar ..........................................................

Other ..........................................................................

Currency hedges.........................................................

Change

2016

2015

2014

2016 vs 2015

2015 vs 2014

(203) $

(496) $

(392) $

293

$

1,314

(1,434)

286

397

360

876

(2,432)

(360)

(1,415)

(349)

(5,052)

1,591

(736)

(327)

(922)

(337)

(2,714)

997

3,746

(1,074)

1,701

746

5,412

(715)

(104)

(1,696)

(33)

(493)

(12)

(2,338)

594

$

1,236

$

(3,461) $

(1,717) $

4,697

$

(1,744)

Currency hedges include financial contracts that we utilize to manage foreign currency exposures as well as foreign currency debt, 
which we have elected as a hedge. We hedged the majority of our exposure on the British pound and, accordingly, currency hedging 
gains include gains on these contracts. We typically do not hedge our Brazilian real equity due to the high cost associated with 
these contracts, which produced the majority of our net foreign currency translation gain in 2016 and loss in 2015. 

      2016 ANNUAL REPORT     29

 
Equity Accounted Other Comprehensive Income 

The following table disaggregates consolidated equity accounted OCI to facilitate analysis: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Infrastructure............................................................ $
Renewable power.....................................................

Property....................................................................

Private equity and other ...........................................

$

2016

2015

2014

2016 vs 2015

2015 vs 2014

486

$

303

$

164

$

183

$

9

8

(73)

430

$

76

54

82

58

11

(10)

(67)

(46)

(155)

515

$

223

$

(85) $

139

18

43

92

292

Change

Equity accounted OCI in our infrastructure operations includes revaluation surplus recorded within our Chilean transmission 
investment, our Brazilian toll road portfolio and, commencing in 2016, our European communications infrastructure investment. 
During 2016, the increase of $183 million mainly relates to an uplift in the property, plant and equipment revaluation of the 
European communications investment, resulting in a higher equity accounted OCI compared to the prior year.

In 2015, we purchased a western Australia oil and gas investment within our private equity operations and entered into financial 
contracts to lock in the price of its scheduled production. The decrease in commodity prices resulted in an $85 million gain on 
these contracts in that year. In 2016, the unrealized gains were reclassified into the income statement as the contracts were settled, 
resulting in a reduction in OCI. Additionally, we sold part of the business in 2016 which further decreased the previous unrealized 
gains.

FINANCIAL PROFILE

Consolidated Assets

The following table presents our consolidated assets at December 31, 2016, December 31, 2015, and December 31, 2014:

AS AT DEC. 31
(MILLIONS)
Investment properties................................................. $
Property, plant and equipment ...................................

Equity accounted investments....................................

Cash and cash equivalents .........................................

Financial assets ..........................................................

Accounts receivable and other ...................................

Inventory ....................................................................

Intangible assets .........................................................

Goodwill ....................................................................

Deferred income tax asset..........................................

Assets classified as held for sale................................

2016

2015

2014

2016 vs 2015

2015 vs 2014

Change

54,172

$

47,164

$

46,083

$

7,008

$

45,346

24,977

4,299

4,700

9,133

5,349

6,073

3,783

1,562

432

37,273

23,216

2,774

6,156

7,044

5,281

5,170

2,543

1,496

1,397

34,617

14,916

3,160

6,285

8,845

5,620

4,327

1,406

1,414

2,807

8,073

1,761

1,525

(1,456)

2,089

68

903

1,240

66

(965)

1,081

2,656

8,300

(386)

(129)

(1,801)

(339)

843

1,137

82

(1,410)

$

159,826

$

139,514

$

129,480

$

20,312

$

10,034

Consolidated assets at December 31, 2016 were $159.8 billion, an increase of $20.3 billion since December 31, 2015 and an 
increase of $10.0 billion from December 31, 2014 to 2015. The increase is primarily due to higher carrying values of our investment 
properties, property, plant and equipment and equity accounted investments which are discussed below and are predominantly 
due to acquisitions during the year. Our assets also increased as a result of the appreciation of the Brazilian real against the U.S. 
dollar, partially offset by a decrease in the value of the British pound. 

We present our consolidated balance sheets on a non-classified basis, meaning that we do not distinguish between current and 
long-term assets or liabilities. We believe this presentation is appropriate given the nature of our business strategy.

30     BROOKFIELD ASSET MANAGEMENT

Foreign Currency Translation

The most significant currency exchange rates that impact our balance sheet are shown in the following table:

AS AT DEC. 31

Australian dollar.........................................................

Brazilian real..............................................................

British pound..............................................................

Canadian dollar ..........................................................

Year-end Spot Rate

Change

2016

0.7197

3.2595

1.2357

0.7439

2015

0.7287

3.9604

1.4736

0.7227

2014

2016 vs 2015

2015 vs 2014

0.8172

2.6504

1.5578

0.8608

(1)%

18 %

(16)%

3 %

(11)%

(49)%

(5)%

(16)%

As at December 31, 2016, our IFRS net equity of $22.5 billion was invested in the following currencies: United States dollars – 
57%; Brazilian reais – 15%; British pounds – 13%; Australian dollars – 9%; Canadian dollars – 4%; and other currencies – 2%. 
From time to time, we utilize financial contracts to adjust these exposures.

Investment Properties

The following table presents the major contributors to the period-over-period variances for our investment properties:

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year ..................................................................................................................... $
Acquisitions and additions......................................................................................................................
Dispositions1 ...........................................................................................................................................
Fair value changes ..................................................................................................................................

Foreign currency translation ...................................................................................................................

Total change............................................................................................................................................

2016

47,164

$

10,810

(4,612)

960

(150)

7,008

Balance, end of year................................................................................................................................ $

54,172

$

2015

46,083

6,932

(5,924)

2,275

(2,202)

1,081

47,164

1. 

Includes reclassification of investment properties that are held for sale

Acquisitions  and  additions  of  $10.8  billion  include  $9.2  billion  of  acquisitions  within  our  property  operations.  Significant 
acquisitions in 2016 include a mixed-use property in South Korea, a U.S. self-storage business, a U.K. student housing portfolio 
and the reclassification of properties within a retail mall business in the U.S., which was equity accounted prior to our acquisition 
of full control during the year. Additions represent capital expenditures on existing properties and development projects. 

Dispositions in the current year include mature office properties such as properties in Sydney and Vancouver and the sale of partial 
interest in a building in New York. Dispositions also include the reclassification of $165 million of properties to assets held for 
sale as at year end, including two industrial assets in France, a portfolio of multifamily assets in the U.S. and several triple net 
lease assets in the U.S. 

The fair value of investment properties is generally determined by discounting the expected future cash flows of the properties, 
typically over a term of 10 years, using discount and terminal capitalization rates reflective of the characteristics, location and 
market of each property.

The  key  valuation  metrics  of  our  investment  properties  are  presented  in  the  following  table  on  a  weighted-average  basis, 
disaggregated into the principal operations of our Property segment for analysis purposes. The valuations are most sensitive to 
changes in cash flows, discount rates and terminal capitalization rates. 

AS AT DEC. 31
Discount rate...............................

Terminal capitalization rate........

Investment horizon (years).........

Core Office

2016

6.7%

5.6%

12

2015

6.8%

5.7%

11

Opportunistic 
and Other1
2016

7.6%

7.6%

10

2015

7.2%

7.6%

8

Weighted Average

2016

7.1%

6.2%

11

2015

6.9%

6.0%

11

1.  Valuation metrics for opportunistic and other as at December 31, 2016 includes Rouse, which was consolidated following our privatization of the business in the second 
half of 2016. Rouse was previously equity accounted and thus was not included in our valuation metrics for consolidated investment properties in the prior year. Excluding 
the impact of Rouse, discount rate, terminal capitalization rate and investment horizon in opportunistic and other were 7.3%, 7.4% and 9 years, respectively

      2016 ANNUAL REPORT     31

 
In determining the fair value of investment properties, management uses external information and observable conditions, where 
possible, supplemented by internal analysis, as required. The determination of fair value requires the use of estimates, which have 
been applied in a manner consistent with that in the prior year. There are currently no known trends, events or uncertainties that 
we  reasonably  believe  could  have  a  sufficiently  pervasive  impact  across  our  businesses,  which  is  diversified  by  asset  class, 
geography  and  market,  to  materially  affect  the  methodologies  or  assumptions  utilized  to  determine  the  estimated  fair  values 
reflected in this report. Discount rates and capitalization rates are inherently uncertain and may be impacted by, among other 
things, movements in interest rates in the geographies and markets in which the assets are located. Changes in estimates across 
different geographies and markets, such as discount rates and terminal capitalization rates, often move independently to one another 
and not necessarily in the same direction or to the same degree. Furthermore, impacts on our estimated values from changes in 
discount rates / terminal capitalization rates and cash flows are usually inversely correlated as the circumstances that typically 
give rise to increased interest rates (i.e. strong economic growth, inflation) usually give rise to increased cash flows at the asset 
level. 

The following table presents the impact on the fair value of our investment properties as at December 31, 2016 from a 25 basis 
point change to the relevant unobservable inputs. For properties valued using the discounted cash flow method, the basis point 
change in valuation metrics relates to a change in discount and terminal capitalization rates. For properties valued using the direct 
capitalization approach, the basis point change in valuation metrics relates to a change in the overall capitalization rate.

AS AT DEC. 31
(MILLIONS)
Core office

United States.............................................................................................................................................................. $

Canada .......................................................................................................................................................................

Australia ....................................................................................................................................................................

Europe........................................................................................................................................................................

Brazil .........................................................................................................................................................................

Opportunistic and other

Opportunistic office...................................................................................................................................................

Opportunistic retail....................................................................................................................................................

Industrial....................................................................................................................................................................

Multifamily................................................................................................................................................................

Triple net lease...........................................................................................................................................................

Self-storage................................................................................................................................................................

Student housing .........................................................................................................................................................

2016

780

285

122

21

9

200

373

63

174

188

62

25

32     BROOKFIELD ASSET MANAGEMENT

Property, Plant and Equipment

The following table presents the major components of the period-over-period variances for our property, plant and equipment 
(“PP&E”), disaggregated by operating business group for analysis purposes:

Renewable Power      

Infrastructure      

Property      

Private Equity 
and Other

Total      

AS AT AND FOR THE
 YEARS ENDED DEC. 31
2016
(MILLIONS)
Balance, beginning of year .... $ 19,738
Acquisitions and additions.....
Dispositions1 ..........................

6,099

(12)

Fair value changes..................

Depreciation...........................

317

(803)

Foreign currency translation ..

1,214

(2,090)

Total change...........................

6,815
Balance, end of year............... $ 26,553

1.    Includes reclassification to held for sale

2015

2016

2015

2016

2015

2016

2015

2016

2015

$ 19,970

$ 8,338

$ 9,061

$ 5,316

$ 2,872

$ 3,881

$ 2,714

$ 37,273

$ 34,617

1,444

1,618

(298)

1,324

(612)

(9)

388

(372)

(418)

(232)

1,207

571

(536)

654

(338)

(1,074)

(723)

874

26

82

(244)

(402)

336

2,708

(71)

161

(189)

(165)

162

(160)

—

(340)

53

2,081

8,753

6,804

(192)

(67)

(337)

(318)

(155)

(1,097)

787

2,072

(1,759)

(1,476)

447

(3,647)

2,444

(285)

1,167

8,073

2,656

$ 19,738

$ 9,545

$ 8,338

$ 5,652

$ 5,316

$ 3,596

$ 3,881

$ 45,346

$ 37,273

We measure PP&E in our renewable power and infrastructure operations, as well as hospitality properties within our property 
operations, using the revaluation method, which results in these assets being fair valued at the end of each fiscal year, and then 
depreciated quarterly, based on the carrying value. PP&E within our private equity and other operations is carried at amortized 
cost.

The impact of foreign exchange led to an increase in PP&E in the current year of $447 million due to positive foreign currency 
revaluation on non-U.S. assets, predominantly on those denominated in Brazilian reais and Colombian pesos, partially offset by 
the impact of the British pound on U.K. assets. 

In  determining  the  fair  value  of  PP&E,  management  uses  external  information  and  observable  conditions,  where  possible, 
supplemented by internal analysis as required. The determination of fair value requires the use of estimates, which have been 
applied in a manner consistent with the prior year. There are currently no known trends, events or uncertainties that we reasonably 
believe could have a sufficiently pervasive impact across our businesses, which is diversified by asset class, geography and market, 
to  materially  affect  the  methodologies  or  assumptions  utilized  to  determine  the  estimated  fair  values  reflected  in  this  report. 
Discount rates and capitalization rates are inherently uncertain and may be impacted by, among other things, movements in interest 
rates in the geographies and markets in which the assets are located. Changes in estimates across different geographies and markets, 
such as discount rates and terminal capitalization rates, often move independently to one another and not necessarily in the same 
direction or to the same degree. Furthermore, impacts on our estimated values from changes in discount rates / terminal capitalization 
rates and cash flows are usually inversely correlated as the circumstances that typically give rise to increased interest rates (i.e. strong 
economic growth, inflation) usually give rise to increased cash flows at the asset level.

Renewable Power 

Acquisitions and additions of $6.1 billion within our renewable power operations include a 3,032 megawatts (“MW”) hydroelectric 
portfolio in Colombia, a 51 MW hydroelectric portfolio in Brazil and a 296 MW hydroelectric portfolio in Pennsylvania. 

The revaluation of property, plant and equipment in our renewable power operations resulted in a $317 million increase in the 
recorded fair value, primarily attributed to the timing of operating cash flows being realized earlier compared to the prior year 
and operational improvements in our Brazilian business, offset by expansion of discount rates in North America. 

Valuations of our renewable power assets are impacted primarily by discount rates and long-term power prices. Discount rates 
are  based  on  after-tax  cost  of  capital and  reflect  whether  revenues  are  subject  to  long-term  contracts  or  spot  market  pricing. 
Projected cash flows are based on in-place contracts and expected market prices for non-contracted power. Forward market prices 
are used for the first four years and thereafter prices are determined using internal projections that reflect our view of future market 
capacity, cost of capital, costs of fuel for competing forms of generation and competitive attributes of renewable power. Our long-
term view of electricity prices reflects our views on the cost of developing new renewable power facilities, expected to be primarily 
wind facilities to meet future demand growth by the year 2023. This year is viewed as the point when generators in North America 
and Europe must build additional capacity to maintain system reliability and provide an adequate level of reserve generation based 
on the anticipated retirement of older coal fired plants and the Environmental Protection Agency emission compliance deadlines. 
We determine future prices by applying a discount to estimated new-build wind prices to determine renewable electricity prices 
for hydroelectric facilities. Our generation facilities in Brazil are held under concessions and authorizations which have a fixed 
maturity date and accordingly, we do not ascribe a terminal value to these assets under IFRS, although we believe these concessions 

      2016 ANNUAL REPORT     33

will be renewed upon maturity. Our estimated future electricity prices in Brazil are based on a similar approach as applied in North 
America using a forecast of the all-in cost of hydroelectric and wind development. The key valuation metrics of our hydro and 
wind generating facilities at the end of 2016 and 2015 are summarized below. 

AS AT DEC. 31
Discount rate

North America

Brazil

Europe

2016

2015

2016

2015

2016

2015

Contracted ............................. 4.8% – 5.5% 4.7% – 5.4%

Uncontracted ......................... 6.6% – 7.2% 6.4% – 7.1%
Terminal capitalization rate1 .... 6.3% – 6.9% 6.3% – 6.9%
Exit date ...................................
2035

2036

9.2%

10.5%

n/a

2031

9.2%  4.1% – 5.0%

10.5% 5.9% – 6.8%

n/a

2033

n/a

2031

5.0%

6.8%

n/a

2031

1.    The terminal capitalization rate applies only to hydroelectric assets in North America

The following table presents the impact on fair value of property, plant and equipment in our Renewable Power segment as at 
December 31, 2016 from a 25 basis point change in discount and terminal capitalization rates, as well as a 5% change in electricity 
prices:  

AS AT DEC. 31
(MILLIONS)
25 bps change in discount and terminal capitalization rates1

North America................................................................................................................................................................. $

Brazil...............................................................................................................................................................................

Europe.............................................................................................................................................................................

5% change in electricity prices

North America.................................................................................................................................................................

Brazil...............................................................................................................................................................................

Europe.............................................................................................................................................................................

1.  Terminal capitalization rate applies only to hydroelectric assets in in North America

2016

963

50

20

832

70

20

Terminal values are included in the valuation of hydroelectric assets in the United States and Canada. For the hydroelectric assets 
in Brazil, cash flows have been included based on the duration of the authorization or useful life of a concession asset without 
consideration of potential renewal value. The weighted-average remaining duration at December 31, 2016 is 15 years (2015 – 
18 years). Consequently, there is no terminal value attributed to the hydroelectric assets in Brazil.

Infrastructure 

Additions in our Infrastructure segment include investments in internal growth capital projects, as well as the acquisition of an 
Australian ports business ($229 million) and a U.S. gas storage business ($825 million).

We revalue our infrastructure assets on an annual basis using discounted cash flow analysis, which includes estimates of forecasted 
revenues,  operating  costs,  maintenance  and  other  capital  expenditures.  Discount  rates  are  selected  for  each  asset  giving 
consideration to the associated revenue streams and geography where they are located. The $388 million increase in value of our 
infrastructure assets was primarily due to growth capital deployed in the year, higher cash flows in our U.K. regulated distribution 
business and increased volumes following the completion of development initiatives across the portfolio. 

The key valuation metrics of our utilities, transport and energy operations are summarized below: 

Utilities

Transport

Energy

AS AT DEC. 31
Discount rate .......................................

2016

2015

2016

2015

2016

2015

 7% – 12%

 8% – 12%  10% – 17%  11% – 15%  9% – 14%  10% – 15%

Terminal capitalization multiples........

 7x – 18x

 8x – 17x

 8x – 14x

 10x – 14x

 10x – 12x

 7x – 12x

Investment horizon / Termination
valuation date (years) ..........................

 10 – 20  

 10 – 20 

 10 – 20 

 10 – 20 

10 

               10 

Property 
34     BROOKFIELD ASSET MANAGEMENT

                  
Property PP&E primarily consists of hotel and resort operations. The overall increase of $336 million primarily relates to the 
acquisition of a 5.4 million square foot mixed-use complex in South Korea with $303 million of PP&E, as well as the acquisition 
of a U.S. hospitality asset for $197 million. 

Key valuation assumptions for our hospitality operations included a weighted-average discount rate of 10.2% (2015 – 10.0%), 
terminal capitalization rate of 7.4% (2015 – 7.4%) and investment horizon of six years (2015 – seven years). 

Private Equity 

PP&E in our private equity operations decreased by $285 million, primarily relating to the reclassification of certain operations 
to assets held for sale. In addition, PP&E at our Canadian oil and gas properties decreased due to a change in the asset retirement 
obligation (“ARO”). We recorded a change in the timing of future remediation costs, resulting in a lower ARO liability and a 
corresponding reduction to the PP&E balance. 

Equity Accounted Investments

The following table presents the major components of the period-over-period variances for our equity accounted investments, 
disaggregated by operating business group for analysis purposes: 

AS AT AND FOR THE YEAR ENDED
DEC. 31, 2016 (MILLIONS)

Balance, beginning of year .........

Additions.....................................

Dispositions1 ...............................
Share of net income (loss)...........

Share of other comprehensive
    income (loss)...........................

Distributions received .................

Foreign currency translation 
    and other..................................

Total change................................

Balance, end of year....................

Property

GGP     

Canary
Wharf     

Renewable

Other     

Power     Infrastructure  

Private
Equity and

Other    

Total     

$

7,215

$

3,400

$

6,879

$

197

$

4,690

$

835

$

23,216

—

—

476

4

(266)

24

238

—

—

10

(4)

—

(540)

(534)

607

(1,465)

445

7

(242)

78

(570)

—

—

—

9

(6)

6

9

1,666

—

314

486

(85)

275

2,656

93

(126)

48

(72)

(76)

95

(38)

2,366

(1,591)

1,293

430

(675)

(62)

1,761

$

7,453

$

2,866

$

6,309

$

206

$

7,346

$

797

$

24,977

1. 

Includes reclassification of equity accounted investments that are held for sale

Our largest equity accounted investments are within our property operations and include a 29% interest in GGP with a carrying 
value of $7.5 billion at December 31, 2016 and our investment in Canary Wharf at $2.9 billion. Certain of our investee entities, 
including GGP and Canary Wharf, carry their assets at fair value, in which case we record our proportionate share of any fair 
value adjustments. Changes in the carrying values of equity accounted investments typically relate to the purchase or sale of shares 
and our share of their comprehensive income, including fair value changes, and are reduced by our share of any dividends and 
other distributions. 

Equity  accounted  investments  increased  by  $1.8  billion  during  the  year  ended  December 31,  2016  primarily  as  a  result  of 
investments we have made throughout the year of $2.4 billion, as well as our share of net income of $1.3 billion and revaluation 
gains in OCI of $430 million. Additions mainly included investments in a Brazilian toll road, a North American gas transmission 
business and an Australian ports and logistic business. These increases were partially offset by dispositions throughout the year, 
including  a  portfolio  of  hospitality  assets  in  Germany  and  two  industrial  assets  in  the  U.S.  Furthermore,  we  completed 
the privatization of a U.S. regional mall business during the year, resulting in these assets being consolidated and, therefore, a 
reclassification of our $354 million previously held equity accounted interest. 

Financial Assets

Financial assets decreased by $1.5 billion since December 31, 2015 primarily as a result of commencing equity accounting and 
consolidating investments in an Australian logistics operation and a North American gas storage business that were previously 
classified as financial assets, following increases in our ownership interests. We also recorded a valuation decline in a private 
equity financial asset investment. 

      2016 ANNUAL REPORT     35

 
 
 
 
 
Accounts Receivable and Other 

Accounts receivable and other assets increased by $2.1 billion. Our private equity operations balance increased by over $300 million 
primarily  due  to  increased  project  volumes  in  our  construction  services  and  facilities  management  business.  Our  Brazilian 
residential operations balance increased by $418 million as a result of higher home closings late in the current year as compared 
to the prior year. Acquisitions during the year throughout all our businesses have further increased the balance by $1.0 billion, 
particularly from our Colombian hydroelectric plants, North American gas storage business and our Peruvian toll roads. 

Intangible Assets

Intangible assets increased by $0.9 billion compared to December 31, 2015, which is primarily due to the acquisition of toll road 
businesses in Peru and India.

Goodwill

Goodwill increased by $1.2 billion compared to December 31, 2015 due to $808 million of goodwill arising from the acquisition 
of  hydroelectric  facilities  in  Colombia,  $210  million  on  the  acquisition  of  an  Australian  ports  and  logistics  business  and 
$139 million on the acquisition of a toll road business in Peru.

Assets Classified as Held for Sale 

Assets classified as held for sale as at December 31, 2016 included industrial assets in Europe and several portfolios of multifamily 
and triple net lease assets in the United States. The decrease of $965 million in the year is primarily a result of completion of sale 
of assets that were previously classified as held for sale as of last year end.

At December 31, 2015 assets classified as held for sale included $775 million of investment properties, which was mainly comprised 
of two office properties in Sydney and Vancouver, as well as a portfolio of industrial assets near the U.S.-Mexico border, two 
multifamily assets in the United States, and $580 million of infrastructure assets including a Canadian electricity transmission 
utility and a U.K. regulated distribution business. 

Borrowings and Other Non-Current Financial Liabilities

Assets and liabilities are disaggregated into current and long-term components in the relevant notes to our consolidated financial 
statements.

AS AT DEC. 31
(MILLIONS)
Corporate borrowings ................................................ $
Non-recourse borrowings

Property-specific borrowings ...............................

Subsidiary borrowings..........................................
Non-current accounts payable and other liabilities1 ..
Subsidiary equity obligations.....................................

2016

2015

2014

2016 vs 2015

2015 vs 2014

4,500

$

3,936

$

4,075

$

564

$

(139)

Change

52,442

7,949

4,194

3,565

46,044

8,303

3,806

3,331

40,364

8,329

4,354

3,541

6,398

(354)

388

234

5,680

(26)

(548)

(210)

$

72,650

$

65,420

$

60,663

$

7,230

$

4,757

1.  Excludes accounts payable and other liabilities that are due within one year. See Note 16 to our consolidated financial statements for 2016 and 2015 balances

Corporate borrowing increased by $564 million due to the $867 million issuance of corporate notes during the year, partially offset 
by a repayment of C$300 million of notes and the impact of foreign exchange on the Canadian dollar. 

Property-specific borrowings increased by $6.4 billion during 2016 due to $5.2 billion of debt assumed on acquisitions as well as 
debt arranged in individual businesses that we consolidate, partially offset by the elimination of debt associated with assets sold. 
Borrowings are generally denominated in the same currencies as the assets they finance and therefore changes in the value of the 
U.S. dollar during the period resulted in our non-U.S. dollar denominated borrowings increasing in value.

Subsidiary borrowings decreased by $354 million as a result of repayments of the credit facility balances outstanding at the end 
of the prior year, partially offset by draws on subsidiary credit facilities to fund acquisitions and development projects, as well as 
C$500 million issuance in BEP during the third quarter of 2016.

36     BROOKFIELD ASSET MANAGEMENT

Equity

Equity consists of the following components:

Common Equity

Preferred Equity

Non-Controlling
Interests

Total Equity

AS AT AND FOR THE YEARS ENDED DEC. 31
2016
(MILLIONS)
Balance, beginning of year................... $ 21,568
Net income ...........................................

1,651

Other comprehensive income (loss).....

Shareholder distributions .....................

Equity issuances, net of repurchase .....

Ownership changes and other ..............

821

(1,074)

(124)

(343)

Total change .........................................

931
Balance, end of year............................. $ 22,499

2015

2016

2015

2016

2015

2016

2015

$ 20,153

$ 3,739

$ 3,549

$ 31,920

$ 29,545

$ 57,227

$ 53,247

2,341

(780)

(584)

926

(488)

1,415

—

—

—

215

—

215

—

—

—

190

—

190

1,687

1,992

2,328

(945)

3,338

2,813

(1,722)

(1,500)

(2,796)

7,649

1,709

11,315

2,371

121

2,375

7,740

1,366

12,461

4,669

(1,725)

(2,084)

3,487

(367)

3,980

$ 21,568

$ 3,954

$ 3,739

$ 43,235

$ 31,920

$ 69,688

$ 57,227

Common equity increased by $0.9 billion to $22.5 billion during the year. Net income and other comprehensive income attributable 
to shareholders for the year totalled $1,651 million and $821 million, respectively. We distributed $633 million to shareholders 
as  common  and  preferred  share  dividends,  in  addition  to  a  21%  interest  in  BBU  through  a  special  non-cash  distribution  to 
shareholders in the second quarter of 2016. The special dividend of $441 million was accounted for as a distribution of equity 
to non-controlling  interests  and  represented  21%  of  the  IFRS  carrying  value  of  the  net  assets  spun-off  with  corresponding 
recognition of non-controlling interests.

Non-controlling interests increased by $11.3 billion in 2016. Net issuances of equity to non-controlling interests were $7.6 billion
and included $2.6 billion of equity raised in connection with the acquisition of a portfolio of Colombian hydroelectric facilities 
in the first quarter and $1.4 billion of non-controlling interests issued as part of the acquisitions in our property and infrastructure 
operations, which was partially offset by distributions totalling $1.7 billion.

We provide a more detailed discussion of our capitalization in Part 4 of the MD&A.

SUMMARY OF QUARTERLY RESULTS

Our condensed statements of operations for the eight most recent quarters are as follows:

FOR THE PERIODS ENDED
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
Revenues........................................... $
Net income........................................

Net income to shareholders ..............

Per share

2016

2015

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

6,935

$

6,285

$

5,973

$

5,218

$

5,538

$

5,056

$

4,923

$

4,396

97

173

2,021

1,036

584

185

636

257

1,187

678

845

289

1,199

645

1,438

729

- diluted .......................................... $
- basic .............................................

$

0.14

0.15

$

1.03

1.05

$

0.15

0.16

$

0.23

0.23

$

0.66

0.67

$

0.26

0.27

$

0.62

0.64

0.73

0.75

In the past two years, the quarterly variances in revenues were due primarily to acquisitions and dispositions. Variances in net 
income to shareholders relate primarily to the timing and amount of fair value changes and deferred tax provisions recognized, 
as well as seasonality and cyclical influences in certain businesses. Changes in ownership have resulted in the consolidation and 
deconsolidation of revenues from some of our assets, particularly in our property business. Other factors include the impact of 
foreign currency on non-U.S. revenues.

Our property operations typically generate consistent results on a quarterly basis due to the long-term nature of contractual lease 
arrangements subject to the intermittent recognition of disposition and lease termination gains, resulting in relatively consistent 
amounts of revenue on a quarterly basis. Our retail properties typically experience seasonally higher retail sales during the fourth 
quarter, and our resort hotels tend to experience higher revenues and costs as a result of increased visits during the first quarter. 
We fair value our property assets on a quarterly basis which results in variations in net income based on changes in the value of 
our property portfolio.

      2016 ANNUAL REPORT     37

 
Renewable hydroelectric power operations are seasonal in nature. Generation tends to be higher during the winter rainy season 
in Brazil and spring thaws in North America; however, this is mitigated to an extent by prices, which tend not to be as strong as 
they are in the summer and winter seasons due to the more moderate weather conditions and reductions in demand for electricity. 
Water and wind conditions may also vary from year to year. Our infrastructure operations are generally stable in nature as a result 
of long-term sales contracts with our clients, certain of which guarantee minimum volumes. Over the last two years we have been 
deploying more capital within these portfolios into businesses that benefit from increasing volumes and prices, to complement 
our investments in rate-regulated assets, which may lead to more volatility but also, we believe, to growth in revenues and net 
income.

Our residential development operations are seasonal in nature and a large portion is correlated with the ongoing U.S. housing 
recovery and, to a lesser extent, economic conditions in Brazil. Results in these businesses are typically higher in the third and 
fourth quarters compared to the first half of the year, as weather conditions are more favourable in the latter half of the year which 
tends to increase construction activity levels.

The following table shows fair value changes and income taxes for the last eight quarters, as well as their combined impact on 
net income:

FOR THE PERIODS ENDED
(MILLIONS)
Fair value changes ............................ $
Income taxes .....................................

2016

Q4

Q3

(488) $

(59) $

(211)

992

933

Q2

65

$

Q1

352

(234)

(202)

Q4

594

(218)

376

$

$

$

$

2015

Q3

389

(145)

244

$

$

Q2

70

368

438

Q1

$

1,113

(201)

$

912

Net impact......................................... $

(699) $

$

(169) $

150

Over the last eight completed quarters, the following factors caused variations in revenues and net income to shareholders on a 
quarterly basis:

In the fourth quarter of 2016, the effect of overall increases in revenues across our businesses were offset by an impairment of
$530 million on certain financial assets as a result of lower valuations based on stock market prices in our private equity operations. 

In the third quarter of 2016, we recognized a $900 million tax recovery which resulted from a reduction in effective tax rates 
arising from the restructuring of certain of our U.S. property operations, of which $600 million was attributable to shareholders. 

In  the  first  and  second  quarters  of  2016,  revenues  increased  from  the  acquisition  of  our  Colombian  hydroelectric  facilities, 
opportunistic property assets and private equity investments. The second quarter of 2016 also includes $208 million of revenue 
on  the  sale  of  three  multifamily  developments  and  additional  revenue  following  an  increase  in  the  scale  of  our  construction 
operations.

In the fourth quarter of 2015, we recorded $594 million of fair value gains related to our office properties. Our revenues also 
reflected completion of significant projects in our construction services business and home closings in our residential development 
business.

In the third quarter of 2015, we acquired a U.K. resort operator and U.S. multifamily portfolio in our institutional private fund 
which increased revenues by $146 million and $214 million, respectively, in the third and fourth quarters of 2015.

In the second quarter of 2015, we recognized a $464 million deferred income tax recovery as our office property operations 
reorganized  its  interest  in  certain  subsidiaries  that  resulted  in  a  change  in  the  tax  rate  applicable  to  those  entities,  of  which 
$314 million was attributable to shareholders.

In  the  first  quarter  of  2015,  we  recorded  a  higher  level  of  fair  value  changes  from  our  consolidated  investment  properties, 
particularly office properties in Manhattan and Sydney, where strong market conditions and leasing activities increased expected 
future cash flows, leading to increased appraisal values. In addition, we recognized $270 million of gains on the acquisition of 
control of two businesses, of which $132 million was attributable to shareholders.

38     BROOKFIELD ASSET MANAGEMENT

 
CORPORATE DIVIDENDS

The  dividends  paid  by  Brookfield  on  outstanding  securities  by  class  during  the  past  three  years  are  summarized  in  the 
following table:

Class A and B Limited Voting Shares (“Class A and B shares”)2  .................................. $
Special distribution to Class A and Class B shares3 .......................................................
Class A Preferred Shares

Series 2......................................................................................................................

Series 4 + Series 7.....................................................................................................

Series 8......................................................................................................................

Series 9......................................................................................................................
Series 124...................................................................................................................
Series 13....................................................................................................................
Series 145...................................................................................................................
Series 15....................................................................................................................

Series 17....................................................................................................................

Series 18....................................................................................................................
Series 226...................................................................................................................
Series 24....................................................................................................................
Series 257...................................................................................................................
Series 26....................................................................................................................

Series 28....................................................................................................................

Series 30....................................................................................................................

Series 32....................................................................................................................

Series 34....................................................................................................................

Series 36....................................................................................................................

Series 37....................................................................................................................
Series 388...................................................................................................................
Series 409...................................................................................................................
Series 4210 .................................................................................................................
Series 4411 .................................................................................................................

Distribution per Security

2016

0.52

0.45

$

20151
0.47

—

$

20141
0.45

—

0.36

0.36

0.48

0.75

—

0.36

0.11

0.23

0.90

0.90

—

0.80

0.27

0.85

0.87

0.90

0.85

0.80

0.92

0.92

0.83

0.85

0.85

0.94

0.39

0.39

0.55

0.74

—

0.38

1.40

0.24

0.93

0.93

—

1.06

—

0.88

0.90

0.94

0.88

0.82

0.95

0.96

0.86

0.88

0.88

0.23

0.48

0.48

0.68

0.86

0.33

0.47

1.71

0.38

1.08

1.08

1.20

1.22

—

1.02

1.04

1.09

1.02

0.95

1.10

1.11

0.80

0.58

0.23

—

1.  2015 and 2014 dividends to the Class A and Class B shares have been adjusted to reflect a three-for-two stock split on May 12, 2015
2.  Actual dividend per Class A and Class B share paid in Q1 2014 was $0.13 for the period from November to February, equivalent to $0.10 on a three-month basis
3.  Distribution of a 20.7% interest in Brookfield Business Partners on June 20, 2016, based on IFRS values
4.  Redeemed April 7, 2014
5.  Redeemed March 1, 2016
6.  Redeemed September 30, 2014
Issued July 1, 2016
7. 
Issued March 13, 2014
8. 
Issued June 5, 2014
9. 
10.  Issued October 8, 2014
11.  Issued October 2, 2015

Dividends on the Class A and Class B shares are declared in U.S. dollars whereas Class A Preferred share dividends are declared 
in Canadian dollars. 

      2016 ANNUAL REPORT     39

 
 
PART 3 – OPERATING SEGMENT RESULTS

BASIS OF PRESENTATION

How We Measure and Report Our Operating Segments

Our  operations  are  organized  into  our  asset  management  business,  five  operating  groups  and  our  corporate  activities,  which 
collectively represent seven operating segments for internal and external reporting purposes. We measure performance primarily 
using Funds from Operations (“FFO”) generated by each operating segment and the amount of capital invested by the Corporation 
in each segment using common equity by segment.

Our operating segments are as follows:

i.  Asset management operations include managing our listed partnerships, private funds and public securities on behalf of our 
clients and ourselves. We generate contractual base management fees for these activities as well as incentive distributions 
and performance income, including performance fees, transaction fees and carried interest. 

ii.  Property operations include the ownership, operation and development of office, retail, industrial, multifamily, hospitality 

and other properties.

iii.  Renewable power operations include the ownership, operation and development of hydroelectric, wind and other power 

generating facilities.

iv. 

Infrastructure operations include the ownership, operation and development of utilities, transport, energy, communications 
and agricultural assets.

v.  Private equity operations include a broad range of industries, and are mostly focused on construction, other business services, 

energy, and industrial operations.

vi.  Residential development operations consist of homebuilding, condominium development and land development.

vii.  Corporate  activities  include  the  investment  of  cash  and  financial  assets,  as  well  as  the  management  of  our  corporate 
capitalization, including corporate borrowings and preferred equity, which fund a portion of the capital invested in our other 
operations. Certain corporate costs such as technology and operations are incurred on behalf of our operating segments and 
allocated to each operating segment based on an internal pricing framework.

In  the  second  quarter  of  2016,  we  formed  Brookfield  Business  Partners  L.P.  (“BBU”)  and  distributed  a  partial  interest  to 
shareholders. BBU is the primary vehicle through which we own and operate businesses within our private equity business segment. 
In connection with the formation of BBU, we realigned the organizational and governance structure of the businesses held by 
BBU and changed how the company presents information for financial reporting and management decision making which resulted 
in a change in the company’s operating segments. Specifically, our private equity reportable segment now includes BBU, Norbord 
Inc. (“Norbord”) and certain other directly held investments; whereas at December 31, 2015, certain of the businesses within BBU 
were reported within a separate service activities segment, which is no longer considered a reportable segment.

Segment Financial Measures

FFO is a key measure of our financial performance and our segment measure of profit and loss. We use FFO to assess operating 
results and the performance of our businesses on a segmented basis. We define FFO as net income excluding fair value changes, 
depreciation and amortization and deferred income taxes, net of non-controlling interests. When determining FFO, we include 
our  proportionate  share  of  the  FFO  from  equity  accounted  investments  on  a  fully  diluted  basis.    FFO  also  includes  realized 
disposition  gains/losses,  which  are  gains  or  losses  arising  from  transactions  during  the  reporting  period,  adjusted  to  include 
associated fair value changes and revaluation surplus recorded in prior periods, taxes payable or receivable in connection with 
those transactions, as well as amounts that are recorded directly in equity, such as ownership changes.

We use FFO to assess our performance as an asset manager and separately as an investor in our assets. FFO includes the fees that 
we earn from managing capital as well as our share of revenues earned and costs incurred within our operations, which include 
interest expense and other costs. Specifically, FFO includes the impact of contracts that we enter into to generate revenue, including 
asset management agreements, power sales agreements and contracts that our operating businesses enter into such as leases and 
take or pay contracts, and sales of inventory. FFO also includes the impact of changes in leverage or the cost of that financial 
leverage as well as other costs incurred to operate our business.

40     BROOKFIELD ASSET MANAGEMENT

We use realized disposition gains/losses within FFO in order to provide additional insight regarding the performance of investments 
on a cumulative realized basis, including any unrealized fair value adjustments that were recorded in prior periods and not otherwise 
reflected in current period FFO, and believe it is useful to investors to better understand variances between reporting periods. 

We exclude depreciation and amortization from FFO, as we believe that the value of most of our assets typically increase over 
time, provided we make the necessary maintenance expenditures, the timing and magnitude of which may differ from the amount 
of depreciation recorded in any given period.  As noted above, unrealized fair value changes are excluded from FFO until the 
period in which the asset is sold.  We also exclude deferred income taxes from FFO because the vast majority of the company’s 
deferred income tax assets and liabilities are a result of the revaluation of our assets under IFRS.

Our definition of FFO may differ from the definition used by other organizations, as well as the definition of FFO used by the 
Real  Property  Association  of  Canada  (“REALPAC”)  and  the  National  Association  of  Real  Estate  Investment  Trusts,  Inc. 
(“NAREIT”), in part because the NAREIT definition is based on U.S. GAAP, as opposed to IFRS. The key differences between 
our definition of FFO and the determination of FFO by REALPAC and/or NAREIT are that we include the following: realized 
disposition gains or losses and cash taxes payable or receivable on those gains or losses, if any; foreign exchange gains or losses 
on monetary items not forming part of our net investment in foreign operations; and foreign exchange gains or losses on the sale 
of an investment in a foreign operation.

We illustrate how we derive FFO for each segment and reconcile the sum of reportable segment FFO to net income in Note 3 of 
the consolidated financial statements and on page 43. We do not use FFO as a measure of cash generated from our operations.

We measure segment assets based on common equity by segment, which we consider to be the amount of common equity allocated 
to  each  segment. We  utilize  common  equity  by  segment  to  analyze  our  deconsolidated  balance  sheet  and  to  assist  in  capital 
allocation decisions.

In assessing results, we separately identify the portion of FFO and common equity by segment that relates to our primary listed 
partnerships: Brookfield Property Partners (“BPY”), Brookfield Renewable Partners (“BEP”), Brookfield Infrastructure Partners 
(“BIP”)  and  Brookfield  Business  Partners  (“BBU”).  We  believe  that  identifying  the  FFO  and  common  equity  by  segment 
attributable to our listed partnerships enables investors to understand how the results of these public entities are integrated into 
our financial results and is helpful in analyzing variances in segment FFO between reporting periods. We also separately identify 
the components of our asset management FFO and realized disposition gains included within the FFO of each segment in order 
to facilitate analysis of variances in FFO between reporting periods.

Non-IFRS Measures, Operating Metrics and Other Performance Measures 

In addition to FFO and common equity by segment, the following sections also utilize certain non-IFRS measures, operating 
metrics  and  other  performance  measures  that  we  employ  to  describe  and  assess  our  performance  on  a  segmented  basis. The 
calculation of these measures may differ from others and as a result, may not be comparable to similar measures presented by 
others.

Non-IFRS Measures

Total Reportable Segment FFO is a non-IFRS measure that represents the sum of FFO for all segments. 

Unrealized Carried Interest is a non-IFRS measure that represents the amount of carried interest that we would be entitled to if 
private funds were wound up on the last day of the reporting period, based on the estimated value of the underlying investments. 
We use this measure to gain additional insight into how investment performance is impacting our potential to earn carried interest 
in future periods and believe that it is useful to investors for the same reason. 

Operating Metrics and Other Performance Measures

Below summarizes certain key definitions that are relevant to our business as an asset manager.

Base Management Fees are determined by contractual arrangements, are typically equal to a percentage of fee bearing capital, 
and are accrued quarterly. Private fund base fees are typically earned on fee bearing capital from third-party clients only and are 
typically, but not always, earned on both invested and uninvested capital. Base fees from listed partnerships are earned on the total 
capitalization of the listed partnerships which includes our investment.

Carried Interest is a contractual arrangement whereby we receive a fixed percentage of investment returns generated within a 
private fund provided that the investors receive a predetermined minimum return. Carried interest is typically paid towards the 
end of the life of a fund after the initial capital and minimum return has been returned to investors and is subject to variability 
until all investments have been monetized and minimum investment returns are sufficiently assured. We defer recognition of 
carried interest in our financial statements until they are no longer subject to adjustment based on future events. We typically only 
include carried interest earned in respect of third-party capital when determining our segment results.

      2016 ANNUAL REPORT     41

Fee Bearing Capital represents the capital committed, pledged or invested in the listed partnerships, private funds and public 
securities that we manage which entitle us to earn fee revenues and/or carried interest. Fee bearing capital includes both invested 
and uninvested (i.e. uncalled) amounts, as well as amounts invested directly by clients (co-investments). We believe this measure 
is useful to investors as it provides additional insight into the capital base upon which we earn asset management fees and other 
forms of compensation. 

Fee Related Earnings is comprised of fee revenues less direct costs associated with earning those fees. We use this measure to 
provide additional insight into the operating profitability of our asset management activities and believe that it is useful to investors 
for the same reason. 

Fee Revenues include base management fees, incentive distributions, performance fees and transaction fees presented within our 
asset  management  segment.  Many  of  these  items  are  not  included  in  consolidated  revenues  because  they  are  earned  from 
consolidated entities and are eliminated on consolidation. Fee revenues exclude carried interest. 

Incentive Distributions are determined by contractual arrangements and are paid to us by BPY, BEP and BIP and represent a 
portion of distributions paid by listed partnerships above a predetermined threshold. Incentive distributions are accrued on the 
record date of the associated distributions of the entity. 

Performance Fees are paid to us when we exceed predetermined investment returns within BBU and on certain portfolios managed 
in our public securities activities. BBU performance fees are accrued quarterly, whereas performance fees within public security 
funds are typically determined on an annual basis, and are not subject to clawback. 

Uninvested Capital represents capital that has been committed or pledged to private funds managed by us. We typically, but not 
always, earn base management fees on this capital from the time that the commitment or pledge to our private fund is effective. 
In certain cases, we earn fees only once the capital is invested or earn a higher fee on invested capital than committed capital. In 
certain cases, clients retain the right to approve individual investments before providing the capital to fund them. In these cases, 
we refer to the capital as pledged or allocated. 

Below summarizes certain key definitions that are relevant when analyzing segment results.

Average In-place Net Rents are a measure of leasing performance within our property segment, and calculated as the annualized 
amount of cash rent receivable from leases on a per square foot basis including tenant expense reimbursements, less operating 
expenses. This measure represents the amount of cash generated from leases in a given period and excludes the impact of rent 
escalations and free rent amortization. 

Economic Ownership Interest represents the company’s proportionate equity interest in BPY, BEP, BIP, and BBU which can 
include  redemption-exchange  units  (REUs),  Class A  limited  partnership  units,  special  limited  partnership  units  and  general 
partnership units in each subsidiary, where applicable. REUs share the same economic attributes with the Class A limited partnership 
units in all respects except for our redemption right, which the partnership can satisfy through the issuance of Class A limited 
partnership units. The REUs and general partnership units participate in earnings and distributions on a per unit basis equivalent 
to the per unit participation of the Class A limited partnership units of the subsidiary. The company’s economic ownership interest 
in BPY is determined after considering the conversion of BPY’s preferred equity units into limited partnership units. 

Long-term Average Generation (“LTA”) is determined based on assets in commercial operation during the year. For assets acquired 
or reaching commercial operation during the year, long-term generation is calculated from the acquisition or commercial operation 
date. In Brazil, assured generation levels are used as a proxy for long-term average. We compare long-term average generation to 
actual generation levels to assess the impact on revenues and FFO of hydrology and wind generation levels in our renewable 
power segment, which vary from one period to the next. 

Realized Disposition Gains/Losses include gains or losses arising from transactions during the reporting period together with any 
fair value changes and revaluation surplus recorded in prior periods, and are presented net of cash taxes payable or receivable. 
Realized disposition gains include amounts that are recorded in net income, other comprehensive income and as ownership changes 
in our consolidated statements of equity, and exclude amounts attributable to non-controlling interests unless otherwise noted. We 
use  realized  disposition  gains/losses  to  provide  additional  insight  regarding  the  performance  of  investments  on  a  cumulative 
realized basis, including any unrealized fair value adjustments that were recorded in prior periods and not otherwise reflected in 
current period FFO, and believe it is useful to investors to better understand variances between reporting periods. 

Same-Store or Same-Property analysis within this report represents the earnings contribution from assets or investments held 
throughout both the current and prior year on a constant ownership basis. We utilize same-store analysis to illustrate the growth 
in earnings excluding the impact of acquisitions or dispositions. 

42     BROOKFIELD ASSET MANAGEMENT

SUMMARY OF RESULTS BY OPERATING SEGMENT

The following table presents FFO and common equity by segment on a year-over-year basis for comparison purposes:

Funds from Operations

Common Equity by Segment

2016

2015

Change 

2016

2015

Change 

AS AT AND FOR THE YEARS ENDED
DEC. 31
(MILLIONS)
Asset management ................ $
Property.................................

Renewable power..................

Infrastructure.........................

Private equity ........................

Residential development .......

866

$

528

$

1,561

1,387

180

374

405

63

233

252

334

135

Corporate activities ...............

(212)

(310)

$

3,237

$

2,559

$

Impact of Foreign Currencies on Segment Results

338

174

(53)

122

71

(72)

98

678

64 % $

328

$

328

$

16,727

16,265

4,826

2,697

2,862

2,679

4,424

2,203

2,178

2,221

13 %

(23)%

48 %

21 %

(53)%

32 %

(7,620)

(6,051)

(1,569)

26 % $ 22,499

$ 21,568

$

931

—

462

402

494

684

458

— %

3 %

9 %

22 %

31 %

21 %

(26)%

4 %

Approximately half of our capital is invested in non-U.S. countries and the cash flow generated from these businesses, as well as 
our equity, is subject to changes in foreign currency exchange rates. From time to time, we utilize financial contracts to adjust 
these exposures. During the current year, local currencies in the jurisdictions where we hold the majority of our non-U.S. dollar 
investments strengthened relative to the U.S. dollar when compared to prevailing rates in 2015. Similarly, when compared to the 
prior year end, local currencies in which our equity is denominated appreciated against the U.S. dollar, with the exception of 
the British pound. Other factors being held constant, currency movements, net of hedging, increased total common equity by 
segment by $405 million since the prior year end and decreased total segment FFO by $25 million.

Reconciliation of Total Segment FFO to Net Income

The following table reconciles total segment FFO to net income:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Total segment FFO..................................................................................................................................

2016

$

3,237

$

Realized disposition gains recorded as fair value changes or prior periods ...........................................

Non-controlling interests in FFO............................................................................................................

Financial statement components not included in FFO

Equity accounted fair value changes and other non-FFO items ..........................................................

Fair value changes................................................................................................................................

Depreciation and amortization .............................................................................................................

Deferred income taxes..........................................................................................................................

(766)

2,917

(458)

(130)

(2,020)

558

Net income..............................................................................................................................................

$

3,338

$

2015

2,559

(847)

2,288

262

2,166

(1,695)

(64)

4,669

ASSET MANAGEMENT

Overview

Our asset management operations consist of managing listed partnerships, private funds and public securities portfolios. As at 
December 31, 2016, we managed $110 billion of fee bearing capital, of which $88 billion was from clients and $22 billion was 
from the Corporation.  

Listed Partnerships: We manage $49 billion of fee bearing capital through publicly listed perpetual capital entities, including BPY, 
BEP, BIP, BBU, Brookfield Canada Office Properties (“BOX”) and Acadian Timber Corp. We are compensated for managing 
these entities through base management fees, which are primarily determined by the market capitalization of these entities and 
incentive distributions and performance fees. Incentive distributions for BPY, BEP and BIP are equal to a portion of the increases 
in partnership distributions above predetermined hurdles. Performance fees for BBU are based on increases in the unit price of 
BBU above a high water mark.

      2016 ANNUAL REPORT     43

 
Private Funds: We manage $50 billion of fee bearing capital through 38 private funds. Closed-ended private fund capital is typically 
committed for 10 years from the inception of a fund with two one-year extension options. Open-ended private capital is committed 
in perpetuity, however, private fund investors may redeem their capital, subject to certain provisions, including that commitment 
being  replaced  by  another  client’s.  Our  private  fund  investor  base  consists  of  approximately  455 clients  with  an  average 
commitment of  $110  million.  We  are  compensated  for  managing  these  private  funds  through  base  fees  which  are  generally 
determined on both called and uncalled commitments, and are entitled to receive carried interest, which represent a portion of 
investment returns provided that clients receive a minimum predetermined return.

Public Securities: We manage $11 billion of fee bearing capital through numerous funds and separately managed accounts, focused 
on fixed income and equity securities. We act as both advisor and sub-advisor and earn base and performance fees.

Asset management revenues include fees earned by us in respect of capital managed for clients as well as the capital provided by 
Brookfield with respect to fees earned from listed partnerships. This is representative of how we manage the business and more 
appropriately measures the returns from our asset management activities. Fee bearing capital provided by Brookfield consists 
largely of the Corporation’s economic ownership interests in BPY, BEP, BIP and BBU. 

We do not recognize carried interest until the end of the relevant determination period under IFRS, which typically occurs at or 
near the end of a fund term. Please refer to accounting policies in note 2 of our Financial Statements. We do however, provide 
supplemental information on the estimated amount of unrealized carried interest that has accumulated based on fund performance 
up to the date of the financial statements. Unrealized carried interest is determined as if the fund was wound up at the reporting 
date, based on the estimated value of the underlying investments.

The following table disaggregates our asset management FFO into fee related earnings, realized carried interest and realized 
disposition gains to facilitate analysis. We have provided additional detail, where referenced, to explain significant movements 
from the prior period.  

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Funds from operations

Fee related earnings..............................................................................................................

Realized carried interest.......................................................................................................

Realized disposition gains....................................................................................................

Ref.

2016

2015

i

ii

$

$

$

712

149

5

866

$

496

32

—

528

i.  Fee Related Earnings

The following table further disaggregates fee related earnings in order to further facilitate analysis of this component of our segment 
FFO: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Fee revenues

Base management fees ........................................................................................................................ $
Incentive distributions .........................................................................................................................
Performance fees .................................................................................................................................
Transaction and advisory fees1............................................................................................................

Direct costs and other1..............................................................................................................................
Fee related earnings .................................................................................................................................. $

2016

2015

1,005
104
—
33

1,142
(430)
712

$

$

780
72
2
18

872
(376)
496

1.  Transaction and advisory fees and direct costs for 2016 and 2015 have been restated to advisory fee earnings derived from business activities that are owned by BBU 

and reported within our Private Equity segment

Fee related earnings increased by 44% to $712 million for the year, primarily as a result of the higher level of fee bearing capital 
which gave rise to higher base management fees. Operating margins, which are calculated as fee related earnings divided by fee 
revenues, were 62% for the year, compared to 57% in 2015, as we previously invested in our operations to enable us to expand 
our fee bearing capital.  Margins also benefitted from certain transaction fees and catch up fees received during the year that had 
no associated costs.

44     BROOKFIELD ASSET MANAGEMENT

Base management fees increased 29% to $1.0 billion for the year compared to $780 million in 2015. Our private funds contributed 
$495 million of base fees representing a 60% increase from the prior year. The increase in private fund base fees was due to higher 
levels of fee bearing capital as a result of private fund capital raised in the last 12 months. Base management fees from our listed 
partnerships totalled $418 million, and included $388 million of base management fees from BPY, BIP, and BEP, an increase of 
$58 million from the prior year as a result of higher capitalization levels, and base management fees from BBU, which contributed 
$12 million of fees after completing the spin-off on June 20, 2016.

We received $104 million of incentive distributions from BIP, BEP and BPY, representing a 44% increase from 2015. The growth 
represents our share as manager of increases in unit distributions by BIP, BEP and BPY of 11%, 7% and 6%, respectively, as well 
as the impact of equity issued by BIP and BEP. Both BIP and BEP’s distributions have surpassed both of their incentive distribution 
hurdles and, accordingly, we receive 25% of future distribution increases by those entities. BPY pays incentive distributions of 
15% as its current annual distribution of $1.18 per unit surpasses the first distribution hurdle of $1.10 per unit on an annualized 
basis. 

Transaction  and  advisory  fees  for  the  year  include  $21  million  (2015  –  $18  million)  of  fees  earned  on  co-investment 
transactions and a $12 million transaction fee.

Direct costs and other consist primarily of employee expenses and professional fees, as well as business related technology costs 
and  other  shared  services.  Direct  costs  increased  by  14%  year  over  year  due  to  expansion  of  our  operations  following  the 
aforementioned growth in fee bearing capital that we manage.

ii.  Realized Carried Interest

We realized the following carried interest during the years ended December 31, 2016 and 2015, which was included in segment 
FFO:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Realized carried interest revenue.............................................................................................................. $
Direct costs ...............................................................................................................................................
Realized carried interest ........................................................................................................................... $

2016
178
(29)
149

$

$

2015
49
(17)
32

We realized $178 million of carried interest during the year (2015 – $49 million), or $149 million (2015 – $32 million) net of 
directly related costs, as a result of dispositions in private equity and property funds that are approaching the end of the fund life, 
which sufficiently reduced the risk of any clawback of these amounts.

Favourable investment performance in our private funds generated $418 million of unrealized carried interest during the year of 
2016,  compared  with  $219  million  in  the  prior  year.  Of  this  generated  carried  interest,  $45  million  was  the  impact  of  the 
overall appreciation of foreign currencies or non-U.S. dollar fund investments. Accumulated unrealized carried interest totalled 
$898 million at December 31, 2016. We estimate that approximately $322 million of associated costs will arise on the realization 
of the amounts accumulated to date, of which $128 million relates to the carried interest generated in the period. The amounts of 
unrealized carried interest and associated costs are shown in the following table:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Unrealized balance, beginning of year ............... $
In-period change

Unrealized 
Carried 
Interest 
658

2016

Direct 
Costs 

$

(223) $

Generated.........................................................

Less: realized ...................................................

418

(178)

(128)

29

Unrealized 
Carried 
Interest 
488

$

2015

Direct 
Costs 

$

(174) $

219

(49)

(66)

17

Net 

435

290

(149)

Unrealized balance, end of year ......................... $

898

$

(322) $

576

$

658

$

(223) $

Net 

314

153

(32)

435

The funds that comprise the current unrealized carried interest have a weighted-average term to realization of six years. Recognition 
of carried interest is dependent on future investment performance. 

      2016 ANNUAL REPORT     45

Fee Bearing Capital

The following table summarizes our fee bearing capital:

AS AT DEC. 31
(MILLIONS)
Property ............................................................... $
Renewable power ................................................

Infrastructure .......................................................

Private equity.......................................................

Other....................................................................
December 31, 2016............................................. $
December 31, 2015 ............................................. $

Listed 
Partnerships1 
21,895

$

11,796

13,642

2,042

—

Private 
Funds1,2 
22,694

6,894

15,267

4,769

—

49,375

43,017

$

$

49,624

34,448

$

$

Public 
Securities 

Total 2016 

$

— $

44,589

$

Total 20152 
40,366

—

—

—

10,577

18,690

28,909

6,811

10,577

10,577

$

109,576

11,743

19,428

5,928

16,797

n/a 

16,797

n/a  $

94,262

Includes Brookfield capital of $22.0 billion (2015 – $18.2 billion) in listed partnerships and $0.3 billion (2015 – $1.9 billion) in private funds

1. 
2.  The private fund fee bearing capital for 2015 has been restated to eliminate $4.7 billion of capital invested by BPY in our private funds which was subject to a fee credit 

arrangement

Listed partnership fee bearing capital includes the total market capitalization of our listed issuers and also includes corporate debt 
and preferred shares, net of cash, issued by these entities at the partnership level to the extent these are included in determining 
base management fees.

In 2016, we closed approximately $20 billion of third-party private fund commitments including our flagship funds in property, 
infrastructure and private equity strategies, which were in aggregate more than double the size of the predecessor funds. Private 
fund capital includes $20 billion of third-party uninvested capital, which is available to deploy within each fund’s specific mandate. 
The uninvested capital includes $8 billion for property funds, $10 billion for infrastructure and renewable power funds and $2 billion
for private equity funds, and has an average term of approximately four years during which the capital can be invested. Fee bearing 
capital has a remaining average term of eight years (plus two one-year extension options on average) and includes approximately 
$6 billion of co-investment capital.

Fee bearing capital increased by $19.7 billion during the year of 2016. The principal changes are set out in the following table:

FOR THE YEAR ENDED DEC. 31 ,2016
(MILLIONS)
Balance, December 31, 2015 ............................................................... $
Inflows..................................................................................................

Outflows...............................................................................................

Launch of BBU ....................................................................................

Distributions.........................................................................................

Market activity .....................................................................................

Other.....................................................................................................

Total Change ........................................................................................

Sale of fixed income business ..............................................................
Balance, December 31, 2016.............................................................. $

Listed 
Partnerships 

43,017

$

2,207

—

2,300

(2,090)

4,517

(576)

6,358

—

Private 
Funds 
34,448

19,472

(2,370)

(1,805)

—

—

(121)

15,176

—

Public 
Securities 

$

16,797

$

1,959

(4,846)

—

—

1,090

—

(1,797)

(4,423)

Total 

94,262

23,638

(7,216)

495

(2,090)

5,607

(697)

19,737

(4,423)

49,375

$

49,624

$

10,577

$

109,576

Fee bearing capital increased by $19.7 billion during the year, primarily as a result of new private fund capital, which closed    
$19.5 billion of new third-party commitments. We also recorded higher capitalizations across our listed partnerships due to market 
value increases and the issuance of corporate debt and equity at the partnership level.

We completed the formation and spin-off of BBU during the year, resulting in the addition of $2.3 billion listed partnership fee 
bearing capital and a $1.8 billion decrease in private fund capital. The decrease in private fund capital is because the company’s 
investment in our private equity funds were transferred to BBU, and we now earn fees on BBU’s capital instead.

Listed partnership inflows of $2.2 billion includes equity issued by BIP, BEP and BBU during the year. Market prices in our listed 
partnerships improved, resulting in a $4.5 billion aggregate increase in the capitalization values. Increases were partially offset 
by $2.1 billion of distributions to unitholders during the year and increased cash on hand at period end.

Private fund inflows of $19.5 billion include $13.7 billion in our three flagship funds, $2.0 billion in our credit funds, $2.8 billion 
of co-investment capital and $1 billion in our first open-ended real estate fund. These were partially offset by the decrease in fee 

46     BROOKFIELD ASSET MANAGEMENT

bearing  capital  from  the  launch  of  BBU  and  outflows  of  $2.4  billion  as  a  result  of  disposition  activities  and  the  expiry  of 
commitments.

Public securities inflows of $2.0 billion and market appreciation of $1.1 billion in the year were more than offset by $4.8 billion
of redemptions across several fund strategies, in particular related to sub-advisory mandates. We also disposed of a low margin
securitized credit business which resulted in a $4.4 billion decrease in fee bearing capital and generated a $5 million realized 
disposition gain.  

Outlook and Growth Initiatives

Following the fundraising of our latest series of flagship funds in 2016, we are focused on the deployment of this capital.  Successful 
deployment of this capital will position us to launch successor funds over the coming years and to earn carried interest in the 
future. Our private fund client base continues to grow, increasing by 33% to 455 in 2016, and we look to develop and create new 
products to meet the demand from current and potential clients.  We launched our first open-ended fund and broadened our credit 
fund offerings this year and, going forward, will look to raise additional capital within these strategies and expand these types of 
product offerings. Finally, we will continue to expand our listed partnerships by executing on their growth plans and deploying 
capital accretively, leading to capital appreciation and distribution growth, which will help increase fee bearing capital and incentive 
distributions.

PROPERTY

Overview

We own virtually all of our commercial property assets through our 62% economic ownership interest in BPY, which is listed on 
the New York and Toronto Stock Exchanges and had an equity capitalization of $17.9 billion at December 31, 2016, based on public 
pricing. BPY owns property assets directly as well as through private funds that we manage. We also own $1.3 billion of preferred 
shares of BPY which yield 6.3% based on their redemption value.

BPY’s operations are principally organized as follows:

Core  office  properties:  We  own  interests  in  and  operate  commercial  office  portfolios,  consisting  of  142  properties  totalling 
99 million square feet of office space. The properties are located primarily in the world’s leading commercial markets, such as 
New York, London, Los Angeles, Washington, D.C., Sydney, Toronto and Berlin. We also develop office properties on a selective 
basis; active development projects consist of interests in 37 sites including totalling 11 million square feet. 

Core retail properties: Our core retail portfolio consists of interests in 127 regional malls and urban retail properties totalling 
125 million square feet in the United States, which are held through our 34% fully diluted equity accounted interest in GGP. Our 
retail mall portfolio has a redevelopment pipeline that exceeds $300 million of development cost on a proportionate basis.

Opportunistic: We own and operate a global portfolio of property investments which are targeted to achieve higher returns than 
our core office and retail portfolios. Our opportunistic portfolio consists of high quality assets with operational upside across the 
office, retail, multifamily, industrial, hospitality, triple net lease, self-storage and student housing sectors.

The following table disaggregates segment FFO and common equity into the amounts attributable to our ownership interests in 
BPY, the amounts represented by other property assets and liabilities, and realized disposition gains to facilitate analysis. We have 
provided additional detail, where referenced, to explain significant movements from the prior period.  

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Property Partners

Equity units1 .......................................................................
Preferred shares ..................................................................

Other investments .................................................................

Realized disposition gains.....................................................

ii

Funds from Operations

Common Equity by Segment

Ref.

2016

2015

2016

2015

i

$

635

$

534

$

15,371

$

76

711

27

823

76

610

(8)

785

1,265

16,636

91

—

14,888

1,275

16,163

102

—

1.  Brookfield’s equity units in BPY consist of 432.6 million redemption-exchange units, 50.3 million Class A limited partnership units, 4.8 million special limited 

partnership units and 0.1 million general partnership units; together representing an effective economic interest of 62% of BPY

$

1,561

$

1,387

$

16,727

$

16,265

      2016 ANNUAL REPORT     47

 
i.  Brookfield Property Partners

The following table disaggregates BPY’s FFO by business line to facilitate further analysis of the year-over-year variances in 
segment FFO: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Core office ................................................................................................................................................ $
Core retail .................................................................................................................................................

Opportunistic ............................................................................................................................................

Corporate ..................................................................................................................................................

Attributable to BPY unitholders ...............................................................................................................

Non-controlling interests ..........................................................................................................................

Segment reallocation and other ................................................................................................................

$

2016

630

459

341

(463)

967

(304)

(28)

Brookfield’s interest ................................................................................................................................. $

635

$

2015

612

452

245

(470)

839

(271)

(34)

534

BPY’s FFO for 2016 was $967 million, of which our share was $635 million. 

Core office FFO increased by $18 million to $630 million. Same-property FFO growth of 6.6% was primarily derived from lease 
commencements  at  Brookfield  Place  New York  and  other  leasing  activities  throughout  the  portfolio. This  year’s  results  also 
included FFO of $44 million from the recognition of a previously deferred development fee which was earned during the year. 
These positive variances were partially offset by the absence of FFO from recently sold assets as well as the negative impact of 
foreign exchange, particularly related to FFO earned in British pounds. 

We completed 5.6 million square feet of new and renewal leases during the year at an average in-place net rent of $33.82 per 
square foot (“psf”), 16% higher than expiring net rents of $29.24 psf. This resulted in a 4.3% increase in average overall in-place 
net rents to $33.03 psf compared to $31.67 psf at prior year end, including the impact of currency revaluation. Overall occupancy 
was 92.3% consistent with the prior year. Our overall in-place net rents are currently 15% below market net rents.

We currently have 10.9 million square feet of active development projects, including Manhattan West in New York, Brookfield 
Place in Calgary, as well as London Wall Place, Principal Place and 1 Bank Street in London and ICD Brookfield Place in Dubai. 
These office assets are 58% pre-leased in aggregate and we estimate an additional cost of $3.1 billion (at share) to complete 
construction.

BPY’s core retail FFO, which is derived from its ownership interest in GGP, remained relatively consistent as a 5% increase in 
same-property FFO was offset by the absence of FFO from assets sold. Our same-property retail portfolio occupancy rate was 
96.5% as at December 31, 2016, a decrease of 30 bps from December 31, 2015. Lease commencements on a same-property basis 
increased in-place rents to $62.12 psf at December 31, 2016 from $60.92 psf at December 31, 2015. Average lease spreads on 
signed leases commencing in 2016 and 2017 were 10% and 20% higher, respectively, than existing leases on a suite-to-suite basis. 

BPY’s opportunistic assets are held primarily through private funds that are managed by us. BPY’s share of the FFO from these 
assets increased $341 million from $245 million in the prior year. The increase of FFO is primarily attributable to capital deployed 
in the year, including the acquisitions of our self-storage operations, a student housing portfolio, and a U.S. multifamily business. 
The completion and sale of multifamily merchant development projects also contributed $31 million of FFO in the year.

BPY’s corporate expenses include interest expense, management fees paid and other costs. Corporate expenses decreased by 
$7 million to $463 million, as a result of lower management fees and lower interest expense, following the repayment of the BPO 
acquisition facility and subsidiary borrowings with proceeds from assets sales, partially offset by temporary drawdowns of credit 
facilities to fund investments.

ii.  Realized Disposition Gains

Realized disposition gains in the current year include $401 million of gains related to the disposition of office buildings in Sydney, 
Vancouver and New York, a $125 million gain related to partial sale of a shopping mall in Las Vegas, a $73 million gain related 
to the sale of a hotel portfolio in Germany, $59 million gain on the sale of a hospitality trademark and $165 million of net gains 
on the sale of more than 130 other investments.

Common Equity by Segment

Our Property segment consists largely of investments in commercial property businesses, whose assets are comprised mostly of 
investment properties that are carried at fair value and revalued on a quarterly basis. Common equity in our Property segment 

48     BROOKFIELD ASSET MANAGEMENT

increased to $16.7 billion (2015 – $16.2 billion) primarily due to our share of BPY’s net income, which includes revaluation gains 
and a $600 million (at share) deferred income tax recovery, partially offset by foreign currency revaluation and distributions paid.

Outlook and Growth Initiatives

Our property group remains focused on increasing the value of our properties through proactive leasing and select redevelopment 
initiatives,  as  well  as  recycling  capital  from  mature  properties  to  fund  new  higher  yielding  investments,  particularly  in  our 
opportunistic property business. 

In our office core business, we have approximately $6.1 billion of office developments underway and should continue to increase 
earnings for the next several years as these projects are completed. We also announced a proposal to acquire, through BPY, the 
remaining third-party interest in BOX, subject to approval from the BOX shareholders. This acquisition would allow us to fully 
integrate our North American offices operations and further simplify our structure.

In our core retail operations, we are focused on operating and developing high quality shopping centres as these destinations 
continue to provide an attractive physical location for retailers and continue to demonstrate meaningful outperformance, relative 
to lower tier malls, despite a changing retail landscape. 

In our opportunistic operations, we will continue to acquire properties through our global opportunistic private funds as these 
generally produce higher returns relative to core strategies.  These funds have a wide scope in terms of real estate asset classes 
and geographic reach.  Funding for these transactions will continue to include proceeds from asset sales as part of our capital 
recycling program.

RENEWABLE POWER

Overview

We hold our renewable power operations primarily through a 61% economic ownership interest in BEP, which is listed on the 
New York and Toronto Stock Exchanges and had an equity capitalization of $8.9 billion at December 31, 2016, based on public 
pricing. BEP owns one of the world’s largest publicly traded renewable power portfolio diversified across 15 power markets in 
North America, Colombia, Brazil and Europe. During the second quarter of 2016, BEP issued 23 million limited partnership units, 
of which we acquired 11 million units, increasing our capital invested in BEP, and diluting our economic ownership interest from 
63% to 61%.

BEP’s operations are principally organized as follows:

Hydroelectric: We  own  and  operate  217  hydroelectric  generating  stations  on  82  river  systems  in  North America,  Brazil  and 
Colombia. Our hydroelectric operations have 8,451 MW of installed capacity and long-term average generation of 20,004 gigawatt 
hours (“GWh”) on a proportionate basis.

Wind energy: We own and operate 38 wind facilities in North America, Europe and Brazil. Our wind energy operations have 
1,590 MW of installed capacity and long-term average generation of 2,630 GWh on a proportionate basis.

We arrange for the sale of North American power generated by BEP through our energy marketing business (“Brookfield Energy 
Marketing” or “BEMI”). We purchase a portion of BEP’s power pursuant to long-term contracts at predetermined prices, thereby 
increasing the stability of BEP’s revenue profile. We sell the power under long-term contracts as well as into the open market and 
also earn ancillary revenues, such as capacity fees and renewable power credits and premiums. This provides us with increased 
participation in future increases (or decreases) in power prices.

The following table disaggregates segment FFO and common equity into the amounts attributable to our ownership interest in 
BEP, the operations of BEMI and realized disposition gains. We have provided additional detail, where referenced, to explain 
significant movements from the prior period. 

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Renewable Partners1..........................................
Brookfield Energy Marketing..............................................

Ref.

i

ii

Realized disposition gains ...................................................

Funds from Operations

Common Equity by Segment

2016

2015

2016

249

$

272

$

3,793

$

(69)

—

(64)

25

1,033

—

180

$

233

$

4,826

$

2015

3,405

1,019

—

4,424

$

$

1.  Brookfield’s interest in BEP consists of 129.7 million redemption-exchange units, 51.1 million Class A limited partnership units and 2.7 million general partnership 

units; together representing an economic interest of 61% of BEP

      2016 ANNUAL REPORT     49

 
Realized disposition gains in the prior year included the disposition of two Brazilian hydroelectric facilities and the sale of a U.S. 
wind facility.

i.  Brookfield Renewable Partners

The following table disaggregates BEP’s generation and FFO by business line to facilitate further analysis of the year-over-year 
variances in segment FFO: 

Actual
Generation (GWh)1

Long-Term
Average (GWh)1

Funds from Operations

FOR THE YEARS ENDED DEC. 31
(GIGAWATT HOURS AND $MILLIONS)

Hydroelectric ...........................................

Wind energy.............................................

Corporate and other .................................

Attributable to BEP unitholders .................
Non-controlling interests and other2...........
Brookfield’s interest ...................................

2016

17,663

2,258

301

20,222

2015

14,931

2,238

493

17,662

2016

20,004

2,630

264

22,898

2015

2016

16,445

$

511

$

2,553

319

19,317

98

(190)

419

(170)

$

249

$

2015

526

113

(172)

467

(195)

272

1.  Proportionate to Brookfield Renewable Partners
2. 

Includes incentive distributions paid to Brookfield of $20 million (2015 – $8 million) as the general partner of BEP. The prior year also includes a reallocation of 
$18 million to disposition gains, net of NCI, related to the sale of a 102 MW wind facility in California and compensation for extinguished concession agreements relating 
to two Brazilian hydroelectric facilities

Generation for the year totalled 20,222 GWh, on a proportionate basis to BEP, 12% below the long-term average of 22,898 GWh 
and a 15% increase compared to the prior year. 

Hydroelectric generation was 12% below the long-term average of 20,004 GWh and 18% higher than the prior year. The increase 
in  generation  contributed  $61  million  of  additional  FFO.  Recently  acquired  facilities in  Colombia,  Brazil  and  Pennsylvania 
contributed 2,913 GWh of generation, and better water conditions improved generation in Brazil. This was partially offset by 
lower generation in the U.S. northeast. Lower pricing across our portfolio decreased FFO by $51 million. The 2015 results included 
$27 million in settlement gains relating to concession agreements for two Brazilian facilities and the delayed completion of a 
hydroelectric facility.

Generation from the wind portfolio was 14% below the long-term average, and remained relatively consistent with the prior year. 
Generation in our North American wind operations were flat as increases in California were offset by lower generation in northern 
U.S. and eastern Canada. Lower wind conditions and pricing in Europe, which decreased results by $8 million were partially offset 
by improved generation in Brazil. FFO in the previous year included a $12 million gain on the sale of a 102 MW wind facility in 
California. 

Corporate and other activities reduced FFO by $190 million (2015 – $172 million) and includes interest expense on corporate 
debentures, preferred share distributions as well as asset management fees paid. FFO from other activities includes the receipt of 
a $20 million payment during the year for co-gen assets pertaining to historic power purchase agreements in Ontario, which 
partially offset these unallocated corporate costs and the increase in asset management fees paid. 

ii.  Brookfield Energy Marketing

Our wholly owned energy marketing group has entered into long-term purchase agreements and price guarantees with BEP as 
described below. We are entitled to sell the power we purchase from BEP as well as any ancillary revenues, such as capacity and 
renewable power credits or premiums.

BEMI incurred a FFO deficit of $69 million during the year compared to a $64 million FFO deficit in the prior year. BEMI 
purchased approximately 7,862 GWh of electricity from BEP during the year, compared with 7,468 GWh in 2015, at an average 
price of $65 per megawatt hour (“MWh”) compared with $67 per MWh in 2015, and sold this power at an average price, including 
ancillary revenues, of $57 per MWh compared with $59 per MWh in 2015. The increase in volumes sold at a negative margin, 
resulted in a higher FFO deficit this year. 

Approximately 2,751 GWh of power sales were pursuant to long-term contracts at an average price of $76 per MWh (2015 – 
$78 per MWh). The balance of approximately 5,111 GWh was sold in the short-term market at an average price of $47 per MWh, 
including ancillary revenues (2015 – $50 per MWh). Ancillary revenues, which include capacity payments, green credits and other 
additional revenues, totalled $74 million, adding $9 per MWh to average realized prices on short-term power sales in the current 
year as compared to $12 per MWh in the prior year.

50     BROOKFIELD ASSET MANAGEMENT

 
Common Equity by Segment

Common equity in our Renewable Power segment was $4.8 billion at December 31, 2016 and increased from $4.4 billion at 
December 31, 2015 primarily due to our purchase of 11 million BEP units during the second quarter in 2016 for $313 million. 
The remaining increase is due to increased values of our portfolio, the contribution from earnings and the impact of foreign currency 
translation, partially offset by depreciation and amortization, and cash distributions received. Our invested capital is represented 
primarily by the PP&E deployed in our generation facilities. We record renewable power PP&E at fair value and revalue the assets 
annually at year end.

Outlook and Growth Initiatives

We completed several acquisition and development activities during the year, including a 3,032 MW hydroelectric portfolio in 
Colombia, which we estimate will contribute an additional $30 million of FFO in 2017. Our development pipeline represents over 
6,000 MW of potential capacity spread across all of our regions, of which 300 MW are currently under construction or in late 
stage development that we expect to contribute an incremental $45 to $50 million to BEP’s FFO when commissioned. Subsequent 
to year end, we announced an agreement to acquire, subject to customary closing conditions, 100% of TerraForm Global and 51% 
of TerraForm Power, collectively representing a 3,600 MW global renewable power portfolio, including wind and solar assets. 
This acquisition provides a platform for investing in solar power, an attractive pipeline for growth moving forward and exposure 
to new markets for our operations.

We maintain a long-term view that electricity prices and the demand for electricity from renewable sources will rise due to a 
growing level of acceptance around climate change, the legislated requirements in some areas to diversify away from fossil fuel 
based generation because they are becoming increasingly cost competitive. BEP has entered into long-term agreements that enable 
it to sell power at predetermined prices, including contracts with BEMI. These contracts have a weighted-average term of 16 years 
and represent 76% of our long-term average generation from North American operations over the next five years on a proportionate 
basis at an average price of $68 to $72 per MWh. To the extent that prices increase in the future, we will benefit from reselling 
this power in the open market.

INFRASTRUCTURE

Overview

Our infrastructure operations are held primarily through our 30% economic ownership interest in BIP, which is listed on the New 
York and Toronto Stock Exchanges and had an equity capitalization of $12 billion at December 31, 2016, based on public pricing. 
BIP owns infrastructure businesses directly as well as through private funds that we manage. We also have direct investments in 
sustainable resources operations.

BIP’s operations are organized as follows:

Utilities: consist of regulated distribution, regulated terminal and electricity transmission operations. These businesses typically 
earn a predetermined return based on their asset base, invested capital or capacity and the applicable regulatory frameworks and 
long-term contracts. Accordingly, the returns tend to be predictable and typically not impacted to any great degree by short-term 
volume or price fluctuations.

Transport: are comprised of open access systems that provide transportation for freight, bulk commodities and passengers, for 
which we are paid an access fee. Profitability is based on the volume and price achieved for the provision of these services. These 
operations are comprised of businesses with regulated tariff structures, such as our rail and toll road operations, as well as unregulated 
businesses, such as our ports. Approximately 80% of our transport operations are supported by long-term contracts or regulation.

Energy: consist of systems that provide energy transmission, distribution and storage services. Profitability is based on the volume 
and price achieved for the provision of these services. These operations are comprised of businesses that are subject to light 
regulation, such as our natural gas transmission business whose services are subject to price ceilings, and businesses that are 
essentially unregulated like our district energy business.

Communications  infrastructure:  consists  of  a  communication  tower  infrastructure  operation  located  in  France  that  provides 
essential  services  and  critical  infrastructure  to  the  telecom  and  media  broadcasting  sectors,  for  which  we  are  paid  fees. This 
operation generates stable, inflation-linked cash flows underpinned by long-term contracts.

      2016 ANNUAL REPORT     51

The following table disaggregates segment FFO and common equity into the amounts attributable to our economic ownership 
interest of BIP, directly held sustainable resources operations and realized disposition gains. We have provided additional detail, 
where referenced, to explain significant movements from the prior period.   

Funds from Operations

Common Equity by Segment

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Infrastructure Partners1......................................
Sustainable resources...........................................................

Realized disposition gains ...................................................

Ref.

2016

2015

2016

i

ii

$

$

254

$

217

$

1,934

$

25

95

28

7

763

—

374

$

252

$

2,697

$

2,203

2015

1,585

618

—

1.  Brookfield’s interest in BIP consist of 108.4 million redemption-exchange units, 0.2 million limited partnership units and 1.6 million general partnership units 

together representing an economic interest of 30% of BIP

i.  Brookfield Infrastructure Partners

The following table disaggregates BIP’s FFO by business line to facilitate further analysis of the year-over-year variances in 
segment FFO: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Utilities ..................................................................................................................................................... $
Transport...................................................................................................................................................

Energy.......................................................................................................................................................

Communications infrastructure ................................................................................................................

Corporate and other ..................................................................................................................................

Attributable to BIP unitholders.................................................................................................................
Non-controlling interests and other1.........................................................................................................
Brookfield’s interest ................................................................................................................................. $

$

2016

399

423

175

77

(130)

944

(690)

254

$

2015

387

398

90

60

(127)

808

(591)

217

1. 

Includes incentive distributions paid to Brookfield of $80 million (2015 – $66 million) as the general partner of BIP

BIP recorded $944 million of FFO in the year of 2016, a 17% increase from the prior year, benefitting from an increased ownership 
in a North American gas transmission operations and Brazilian toll roads, the contribution from new investments and internally 
generated growth across the business, as FFO increased by 10% on a same-store, constant currency basis.

FFO from our utilities operations increased by $12 million over the prior year to $399 million. FFO benefitted from additional 
connections activity and the contribution from smart meters in our U.K. operations, as well as inflation indexation and capital 
commissioned into rate base across the portfolio. This was partially offset by foreign exchange, a lower regulated return from our 
Australian operations in the second half of the year and the absence of FFO from two North American operations that were sold.

Transport  FFO  increased  by  $25  million  to  $423  million  primarily  driven  by  higher  tariffs  and  volumes  across  a  number  of 
operations, as well as contributions from investments, including recently acquired toll roads in India and Peru and a ports business 
in Australia. These positive factors were partially offset by foreign exchange, and decreased volumes at our Brazilian rail operations.

FFO from our energy operations increased by $85 million to $175 million due primarily to strong volumes combined with lower 
interest expense and increased ownership in our North American natural gas transmission business and contributions from our 
recently acquired North American gas storage operations.

Our communications infrastructure FFO increased by $17 million to $77 million due to a full year contribution from our European 
acquisition completed at the end of the first quarter of 2015. This was partially offset by an expected increase in interest expense 
as a result of refinancing of short-term debt with long-term borrowings during the first half of the year.

Corporate and other FFO was a deficit of $130 million compared to a deficit of $127 million in the prior year due to higher base 
management fees from increased market capitalization and increased borrowings used to fund new investments, partially offset 
by higher investment income due to higher return on financial assets.

52     BROOKFIELD ASSET MANAGEMENT

 
ii.  Realized Disposition Gains

Realized disposition gains in the current year include a $32 million gain on the sale of a Canadian utilities business, $43 million 
on the sale of a European gas distribution business and a $20 million realized disposition gain (our proportionate share) on the 
disposition of our toehold position in our Australian ports business during the year.

Common Equity by Segment

Common equity in our Infrastructure segment was $2.7 billion at December 31, 2016 (2015 – $2.2 billion) and primarily represents 
our net investment in infrastructure PP&E, as well as certain concessions. Infrastructure PP&E, which represents the majority of 
assets in the segment, are recorded at fair value and revalued annually. Concessions are considered intangible assets under IFRS 
and are recorded at historical cost and amortized over the term of the concession. Accordingly, a smaller portion of our equity is 
impacted  by  revaluation  than  in  our  Property  and  Renewable  Power  segments.  Segment  common  equity  increased  from 
December 31, 2015, as the contribution from earnings, positive PP&E revaluation and positive currency revaluation were partially 
offset by distributions paid to us.

Outlook and Growth Initiatives 

In the utilities operations, we expect to close the acquisition of the previously announced Brazilian gas transmission system in the 
first half of 2017 and earn a return on incremental investments in our existing business that is consistent with our current return 
on rate base. As at December 31, 2016 we have $1 billion of total capital to be commissioned into our rate base over the next two 
to three years. 

Within our transport businesses we intend to increase our investments in assets such as rail, ports and toll roads, as we see attractive 
valuations. As at December 31, 2016 capital to be commissioned of $1.1 billion consists of expansion and upgrades to our Brazilian 
rail business and projects to add additional capacity to our toll roads and ports. We also expect growth in the use of our systems 
by our customers as we meet demand by expanding the capacity of our systems. 

In our energy operations, we expect to benefit from forecasted increases in demand for energy and satisfying our customers’ growth 
requirements by increasing the utilization of our assets and expanding capacity in a capital efficient manner.  We continue to invest 
in our North American natural gas infrastructure in order to adapt to shifts in supply and demand dynamics and in order to capture 
future increases in prices and spreads.

Within our communications infrastructure business our objective is to benefit from the increased coverage requirements by mobile 
network operators and to acquire towers and other infrastructure that are not core to such operators. We have reached agreement 
to invest more than $650 million to acquire a portfolio of 40,000 telecommunication towers in India, which represents approximately 
10% of the country’s towers.

PRIVATE EQUITY

Our private equity operations are held primarily through our 75% interest in BBU. We distributed a 21% limited partnership 
interest in BBU as a special dividend to shareholders on June 20, 2016. The value of the dividend, based on IFRS values, was 
$441 million  or  $0.45  per  common  share.  BBU  is  listed  on  the  New York  and Toronto  Stock  Exchanges  and  had  an  equity 
capitalization of $2.6 billion at December 31, 2016. During the fourth quarter of 2016, BBU issued 16 million limited partnership 
units, of which we acquired 8 million units, increasing our capital invested in BBU, and diluting our economic ownership interest 
from 79% to 75%. We also own certain businesses directly, including a 41% interest in Norbord Inc., which is one of the world’s 
largest producers of oriented strand board (“OSB”).

BBU’s operations are principally organized as follows:

Construction services: We provide contracting services with a focus on high quality construction of large-scale and complex 
landmark buildings and social infrastructure. Construction projects are generally delivered through contracts whereby we take 
responsibility for design, program, procurement and construction at a defined price.

Other business services: Our business services operations consist primarily of commercial and residential real estate services and 
facilities management for corporate and government clients. These services are typically provided under medium to long-term 
contracts. Services activity is seasonal in nature and is affected by the general level of economic activity and related volume of 
services purchased by our clients.

Energy: Our energy operations are primarily comprised of oil and gas exploration and production, principally through an offshore 
oil and gas business in Western Australia and coal-bed methane operations in central Alberta, Canada. Our energy business also 
includes energy-related service operations in Canada.

      2016 ANNUAL REPORT     53

Other industrial operations: Our industrial operations consist primarily of manufacturing and mining activities, which are made 
up of capital intensive businesses with significant barriers to entry and requires technical expertise to build and operate profitably. 
Our manufacturing activities include a leading manufacturer of graphite electrodes and a comprehensive range of infrastructure 
products and engineered construction solutions. Our mining activities include interests in specialty metal and aggregates mining 
operations in Canada.

The following table disaggregates segment FFO and common equity into the amounts attributable to the capital we have invested 
in BBU, Norbord, and other investments as well as realized disposition gains.  We have provided additional detail, where referenced, 
to explain significant movements from the prior period.  

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Business Partners1 .............................................
Norbord................................................................................

Notes

i

ii

Other investments ................................................................

Realized disposition gains ...................................................

Funds from Operations

Common Equity by Segment

2016

177

133

95

—

2015

2016

$

240

$

1,865

$

21

48

25

276

721

—

2015

1,787

224

167

—

405

$

334

$

2,862

$

2,178

$

$

1.  Prior period figures for assets that are included in BBU have been reclassified to reflect current presentation

i.  Brookfield Business Partners

The following table disaggregates BBU’s FFO by business line to facilitate further analysis of the year-over-year variances in 
segment FFO: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Construction.............................................................................................................................................. $
Other business services.............................................................................................................................
Energy.......................................................................................................................................................
Other industrial operations .......................................................................................................................
Corporate and other ..................................................................................................................................
Attributable to BBU unitholders...............................................................................................................
Non-controlling interests ..........................................................................................................................
Segment reallocation and other ................................................................................................................
Brookfield’s interest ................................................................................................................................. $

2016
94
54
63
6
(17)
200
(23)
—
177

$

$

2015
105
43
69
14
—
231
—
9
240

BBU generated $200 million of FFO, representing a $31 million decrease from the prior period primarily due to corporate expenses 
incurred on its formation as a publicly traded partnership on June 20, 2016. Corporate expenses also include base management 
fees and other administrative costs that were previously incurred by BAM. 

Construction services FFO decreased by $11 million to $94 million as the prior year included incremental earnings upon finalization 
of a large project in the U.K. in addition to the impact of a weaker British pound on U.K. earnings throughout 2016. We also 
experienced lower margins on an Australian contract. These effects were partially offset by a positive contribution from a larger 
level of work performed throughout the year compared to the prior year. Our backlog now stands at $7.3 billion across 106 projects, 
representing nearly two years of activity. 

FFO from other business services increased by $11 million due to reduced costs at our real estate services business. In addition, 
FFO benefitted from a tuck-in acquisition closed in our facilities management business in the third quarter of 2016.

Our energy operations experienced a $6 million reduction in FFO as a result of weak commodity pricing in the first half of the 
year that affected our Canadian operations. This decrease was partially offset by a gain of $8 million on the disposition of investment 
securities and increased contribution from our Western Australian equity accounted operation as a result of hedging its oil exposure 
which significantly insulated it from commodity price volatility in 2016.

FFO from our other industrial investments decreased by $8 million due primarily to lower FFO contributions from our graphite 
electrode manufacturing operation. This decrease was partially offset by a realized gain of $9 million in relation to the sale of a 
short-term securities investment as well as increased margins at our bath and shower manufacturing business. 

54     BROOKFIELD ASSET MANAGEMENT

 
ii.  Norbord 

Our share of Norbord’s FFO increased by $112 million to $133 million as North American benchmark OSB prices have increased 
from this time last year as U.S. housing starts, particularly for single-family homes, continue to recover and are increasing 
OSB demand, a key product used in the residential construction industry. Average North American OSB prices increased by 
33% to $245 per thousand square feet (“Msf”) compared to an average pricing of $184 per Msf in 2015. FFO also benefitted from 
a 7% increase in North American yearly volumes from 5.5 billion square feet to 5.9 billion square feet.  

Common Equity by Segment

Common  equity  in  our  Private  Equity  segment  increased  by  $684  million  from  December 31,  2015  to  $2.9  billion  due  to 
$926 million additional capital invested in these operations during the year. This was partially offset by the $441 million distribution 
to shareholders of a 21% interest in BBU. Most of the assets held in the private equity operations are recorded at amortized cost, 
with depreciation recorded on a quarterly basis.

Outlook and Growth Initiatives

BBU completed its first year as a publicly listed partnership following its spin-off in June 2016 and continues to make progress 
across its operations through a number of strategic initiatives. In the construction services business, the focus continues to be on 
key clients who are looking to build high quality residential, office, retail, and hotel projects. Within the business services segment, 
we are executing our strategy to expand the global footprint and scale of the facilities management operations to increase efficiency 
and value. In the energy segment, ongoing exploration and development initiatives are underway to enhance base production and 
solidify future growth within Canada and Australia. In the industrials segment, we are focused on making continued operational 
improvements to further reduce costs and increase efficiency.

BBU  continues  to  pursue  new  opportunities  and  monetize  businesses  where  capital  can  be  redeployed  into  higher  returning 
opportunities. In partnership with our institutional partners, BBU entered into a definitive agreement to acquire a 70% controlling 
stake in Odebrecht Ambiental (“OA”), Brazil’s largest private water distribution, collection, and treatment company, and an 85% 
controlling  stake  in  Greenergy  Fuels  Holdings  Ltd  (“Greenergy”),  a  leading  U.K.-based  road  fuels  distributor.  Given  these 
businesses’ operational footprints and technical capabilities, we believe this acquisition will enable us to generate strong and stable 
long-term returns in the future. Subsequent to year end, we sold our bath and shower manufacturing business (“Maax”), which 
we acquired just prior to the U.S. housing and credit crisis and owned in a very challenging environment given the length and 
severity of the crisis. We were able to manage the ensuing challenges by applying our operating expertise to drive improved 
performance at Maax, culminating into a sale, which generated a strong multiple on our invested capital. 

RESIDENTIAL DEVELOPMENT

Our residential development businesses operate predominately in North America and Brazil.

Our North American business is conducted through Brookfield Residential Properties Inc., and is active in 10 principal markets 
in Canada and the U.S., and controls approximately 100,000 lots in these markets. Our major focus is on entitling and developing 
land for building homes or for the sale of lots to other builders.

Our Brazilian business includes land acquisition and development, construction, sales and marketing of a broad range of “for sale” 
residential  and  commercial  office  units,  with  a  primary  focus  on  middle  income  residential  units  in  Brazil’s  largest  markets, 
primarily São Paulo and Rio de Janeiro. 

The following table disaggregates segment FFO and common equity into the amounts attributable to our two principal operating 
regions:

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Residential

Funds from Operations

Common Equity by Segment

2016

2015

2016

2015

North America ................................................................................... $
Brazil and other .................................................................................

$

160

(97)

63

$

$

171

(36)

135

$

$

1,441

1,238

2,679

$

$

1,318

903

2,221

FFO from our North American operations decreased by $11 million primarily due to a decrease of $31 million in land gross margins 
arising from a shift in the mix of lots sold as well as an overall decrease in the number of lot closings as we continue to be affected 
by the impact of depressed energy prices in western Canada. This was partially offset by an increase in housing gross margins by 
$44 million as a result of 537 additional home closings, as eastern Canada and various U.S. markets have benefitted from strong 

      2016 ANNUAL REPORT     55

 
market conditions. Furthermore, the average home selling prices in Canada increased by 12% from $328,000 to $368,000 due to 
a larger proportion of higher priced homes closed throughout Ontario and in Calgary, where we have benefitted from increased 
average selling prices attributable to homes built by our luxury home builder that we had acquired in the fourth quarter of 2015. 
As at December 31, 2016, we have 29 (2015 – 31) active land communities and 85 (2015 – 68) active housing communities.

Our Brazilian operations delivered 41 projects during the year in comparison to 25 in 2015. Although deliveries were higher in 
the current year, FFO was a loss of $97 million in the current year compared to a loss of $36 million in the prior year. This was 
due to increased costs on certain projects and decreased pricing as a result of the weak economic environment in Brazil and its 
impact on the residential market. We currently have 26 projects under development as compared to 63 at the start of 2016 and 101 
at the start of 2015, as we have been focused on delivering our current inventory over the two past years. 

Common Equity by Segment

Common equity in our residential development segment was $2.7 billion at December 31, 2016 (2015 – $2.2 billion) and consists 
largely of residential development inventory. We invested $281 million in our Brazilian operations during the year. In Brazil, the 
investment was used to repay high cost debt, lowering leverage and associated interest expense. Our residential businesses are 
carried primarily at historical cost, or the lower of cost and market, notwithstanding the length of time that some of our assets 
have been held and the value created through the development process.

Outlook and Growth Initiatives

We believe our North American activities will continue to perform well due to the improving market conditions in several regions 
in which we operate. In Canada, we will continue to benefit from improved market conditions in eastern Canada, however, the 
impact of low commodity prices on our energy driven housing markets may have some offsetting impacts. Net new home orders 
increased 17% to 3,394 units in 2016, which increased the units and value of our backlog units by 15% and 37%, respectively, 
over the prior year, with much of the increase occurring within our U.S. operations where prices and product mix are contributing 
to higher margins. At the end of 2016, the North American backlog stood at 1,541 homes sold but not delivered, with a sales value 
of $783 million, compared to 1,340 homes with a value of $573 million at the same time last year.

Brazil is currently experiencing lower growth, which is having a negative impact on current returns. Although the market in Brazil 
remains challenging, consumer confidence levels are now rising, enhancing the value of our business and our ability to generate 
stronger results over time. Evidence of this confidence is seen through our recent launch of new products, after two years of not 
launching products into the market. We are continuing to restructure the company’s operations and refocus the company on higher 
margin projects in select key markets.

CORPORATE ACTIVITIES

Our corporate activities primarily consist of allocating capital to our operating business groups, principally through our listed 
partnerships (BPY, BEP, BIP and BBU) and directly held investments, as well as funding this capital through the issuance of 
corporate borrowings and preferred shares. We also hold cash and financial assets as part of our liquidity management operations 
and enter into financial contracts to manage our foreign currency and interest rate risks.

The following table disaggregates segment FFO and common equity into the principal assets and liabilities within our corporate 
operations and associated FFO to facilitate analysis:

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Cash and financial assets, net............................................................... $
Corporate borrowings...........................................................................
Preferred equity1...................................................................................
Corporate costs and taxes/net working capital.....................................

2016

2015

2016

151

$

30

$

1,207

$

(241)

—

(122)

(224)

—

(116)

(4,500)

(3,954)

(373)

2015

1,018

(3,936)

(3,739)

606

Funds from Operations

Common Equity by Segment

$

(212) $

(310) $

(7,620) $

(6,051)

1.  FFO excludes preferred share distributions of $133 million (2015 – $134 million)

56     BROOKFIELD ASSET MANAGEMENT

 
Our portfolio of cash and financial assets is generally recorded at fair value with changes recognized quarterly through net income, 
unless  the  underlying  financial  investments  are  classified  as  available-for-sale  securities,  in  which  case  changes  in  value  are 
recognized in other comprehensive income. Loans and receivables are typically carried at amortized cost. Our financial assets 
consist of $1.4 billion of cash and other financial assets (2015 – $1.3 billion), which are partially offset by $190 million (2015 – 
$280 million) of deposits and other liabilities.

FFO from these activities includes dividends and interests from our financial assets, mark-to-market gains or losses on our financial 
asset portfolio and realized disposition gains or losses. FFO from our cash and financial asset portfolio was $151 million in the 
current year, reflecting favourable market performance. 

Corporate borrowings are generally issued with fixed interest rates and held at amortized cost. Many of these borrowings are 
denominated in Canadian dollars and therefore the carrying value fluctuates with changes in the exchange rate. A number of these 
borrowings have been designated as hedges of our Canadian dollar net investments within our other segments, resulting in the 
majority of the currency revaluation being recognized in other comprehensive income. Preferred equity does not revalue under 
IFRS. The FFO deficit from our corporate borrowings reflects the interest expense on those borrowings, which increased from 
the prior year as a result of corporate debt issuances during the year. 

We describe cash and financial assets, corporate borrowings and preferred equity in more detail within Part 4 – Capitalization and 
Liquidity.

Common equity in our Corporate segment decreased by $1.6 billion to a deficit of $7.6 billion (2015 – $6.1 billion). The decrease 
is attributable to additional corporate borrowing from the $872 million issuance of corporate notes during the year, partially offset 
by repayment and weakening of Canadian dollars, as well as a repayment of a $632 million loan receivable from BPY that was 
part of the net working capital as of the prior year end. Net working capital also includes corporate accounts receivable, accounts 
payable,  other  assets  and  liabilities. These  items  are  partly  offset  by  net  deferred  income  tax  assets  of  $648  million  (2015  – 
$729 million). FFO includes corporate costs and cash taxes, which increased over the prior year due to a higher level of cash taxes 
in the current quarter.

      2016 ANNUAL REPORT     57

PART 4 – CAPITALIZATION AND LIQUIDITY

FINANCING STRATEGY 

The following are key elements of our capital strategy: 

•  Match our long-life assets with long-duration financings with a diversified maturity schedule; 

• 

• 

• 

Provide recourse only to the specific assets being financed, with limited cross collateralization or parental guarantees; 

Limit borrowings to investment-grade levels based on anticipated performance throughout a business cycle; and 

Structure our affairs to facilitate access to a broad range of capital and liquidity at multiple levels of the organization. 

Most of our borrowings are in the form of long-term, property-specific financings such as mortgages or project financings secured 
only by the specific assets. We attempt to diversify our maturity schedule so that financing requirements in any given year are 
manageable. Limiting recourse to specific assets or business group is intended to limit the impact of weak performance by one 
asset or business group and our ability to finance the balance of our operations. 

Most of our financings have investment-grade characteristics, which is intended to ensure that debt levels on any particular asset 
or business can typically be maintained throughout a business cycle, and to enable us to limit covenants and other performance 
requirements, thereby reducing the risk of early payment requirements or restrictions on the distribution of cash from the assets 
being financed. Furthermore, our ability to finance at the corporate, operating unit and asset level on a private or public basis is 
intended to lessen our dependence on any particular segment of the capital markets or the performance of any particular unit. 

We maintain sufficient liquidity at the corporate level and within our key operating business groups to enable us to react to attractive 
investment opportunities and deal with contingencies when they arise. Our primary sources of liquidity, which we refer to as core 
liquidity, consist of our cash and financial assets, net of deposits and other associated liabilities, and undrawn committed credit 
facilities. 

We historically generate substantial liquidity within our operations on an ongoing basis through our operating cash flow, as well 
as from the turnover of assets with shorter investment horizons and periodic monetization of our longer dated assets through 
dispositions and refinancings. Accordingly, we believe we have the necessary liquidity to manage our financial commitments and 
to capitalize on attractive investment opportunities. 

58     BROOKFIELD ASSET MANAGEMENT

CAPITALIZATION

Overview

We review key components of our consolidated capitalization in the following sections. In several instances we have disaggregated 
the balances into the amounts attributable to our operating segments in order to facilitate discussion and analysis.

The following table presents our capitalization on a consolidated corporate (i.e. deconsolidated), and proportionately consolidated 
basis:

AS AT DEC. 31
(MILLIONS)
Corporate borrowings ...................... $
Non-recourse borrowings

Property-specific mortgages .........

Subsidiary borrowings ..................

Accounts payable and other.............

Deferred tax liabilities .....................

Subsidiary equity obligations ..........

Equity

Non-controlling interests............

Preferred equity ..........................

Common equity ..........................

Consolidated1
2016

Corporate

2015

2016

2015

Proportionate1
2016

4,500

$

3,936

$

4,500

$

3,936

$

4,500

$

52,502

7,949

64,951

11,982

9,640

3,565

43,235

3,954

22,499

69,688

46,474

8,303

58,713

11,433

8,810

3,331

31,920

3,739

21,568

57,227

—

—

4,500

1,901

246

—

—

3,954

22,499

26,453

—

—

3,936

1,726

155

—

—

3,739

21,568

25,307

26,421

5,231

36,152

7,726

4,572

1,828

—

3,954

22,499

26,453

Total capitalization........................... $

159,826

$

139,514

$

33,100

$

31,124

$

76,731

$

1.  Reflects liabilities associated with assets held for sale on a consolidated basis and proportionate basis according to the nature of the balance

2015

3,936

26,730

5,303

35,969

7,537

4,904

1,895

—

3,739

21,568

25,307

75,612

Consolidated Capitalization

Consolidated capitalization reflects the full consolidation of wholly owned and partially owned entities. We note that in many 
cases our consolidated capitalization includes 100% of the debt of the consolidated entities, even though in most cases we only 
own a portion of the entity and therefore our pro rata exposure to this debt is much lower. In other cases, this basis of presentation 
excludes the debt of partially owned entities that are equity accounted, such as our investments in General Growth Properties and 
Canary Wharf and several of our infrastructure businesses.

Corporate Capitalization

Our corporate (deconsolidated) capitalization shows the amount of debt that has recourse to the Corporation. Common and preferred 
equity totals $26.5 billion (2015 – $25.3 billion) and represents approximately 80% of our corporate capitalization.

Corporate borrowings are further described on page 60.

Proportionate Capitalization

Proportionate capitalization, which reflects our proportionate interest in the underlying entities, depicts the extent to which our 
underlying assets are leveraged, which we believe is an important component of enhancing shareholder returns. We believe that 
the levels of debt relative to total capitalization are appropriate given the high quality of the assets, the stability of the associated 
cash flows and the level of financings that assets of this nature typically support, as well as our liquidity profile. 

      2016 ANNUAL REPORT     59

 
Consolidated to Proportionate Capitalization Reconciliation

Proportionate capitalization is a non-IFRS measure that presents our share of debt and other obligations based on our ownership 
of the related investments. We use this measure to enable analysis of our leverage levels relative to our common equity. This may 
differ from our consolidated leverage because of the varying ownership that we have in our consolidated and equity accounted 
investments.

The following table reconciles consolidated capitalization to proportionate capitalization:

AS AT DEC. 31
(MILLIONS)
Total consolidated capitalization............................................................................................................ $
Add: proportionate share of debt of investments in associates ..............................................................

2016

159,826

8,396

2015

139,514

9,026

Less: liabilities attributable to non-controlling interests ........................................................................

Non-recourse borrowings ....................................................................................................................

(37,146)

(31,539)

Liabilities associated with assets held for sale ....................................................................................

Accounts payable and other.................................................................................................................

Deferred tax liabilities .........................................................................................................................

Subsidiary equity obligations ..............................................................................................................

(49)

(4,256)

(5,068)

(1,737)

(231)

(3,896)

(3,906)

(1,436)

Non-controlling interests........................................................................................................................

(43,235)

(31,920)

Total proportionate capitalization........................................................................................................... $

76,731

$

75,612

Corporate Borrowings

Corporate borrowings at December 31, 2016 included term debt of $4.5 billion (2015 – $3.8 billion), which increased as a result 
of issuances of C$500 million and $500 million during the year and a $76 million impact of foreign exchange on Canadian dollar 
balances,  partially  offset  by  C$300  million  repayment  during  the  year.  We  had  no  commercial  paper  and  bank  borrowings 
outstanding at December 31, 2016 (2015 – $156 million). Commercial paper and bank borrowings are pursuant to, or backed by, 
$1.9 billion of committed revolving term credit facilities of which $1.5 billion have a five-year term, $170 million have a four-
year term and the remaining $300 million have a three-year term. As at December 31, 2016, approximately $61 million of the 
facilities were utilized for letters of credit (2015 – $101 million).

Term debt consists of public bonds, all of which are fixed rate and have maturities ranging from April 2017 until 2035. These 
financings provide an important source of long-term capital and an appropriate match to our long-term asset profile.

Our  corporate  term  debt  has  an  average  term  of  eight  years  (2015  –  eight  years). The  average  interest  rate  on  our  corporate 
borrowings was 4.8% at December 31, 2016 (2015 – 5.0%).

Property-Specific Borrowings

As part of our financing strategy, the majority of our debt capital is in the form of property-specific mortgages and project financings, 
denominated in local currencies that have recourse only to the assets being financed and have no recourse to the Corporation.

AS AT DEC. 31
($ MILLIONS)
Property ................................................................................................

Renewable power .................................................................................

Infrastructure ........................................................................................

Private equity and other .......................................................................

Residential development ......................................................................

Total......................................................................................................

Average Term

Consolidated

2016

2015

2016

2015

4

8

9

3

1

5

4

9

9

3

2

5

$

34,322

$

31,191

7,963

7,901

1,836

420

5,602

6,325

2,300

626

$

52,442

$

46,044

Property-specific borrowings increased by $6.4 billion during 2016 due to $5.2 billion of borrowings assumed on or issued in 
conjunction with acquisitions offset by repayment of amounts previously drawn on revolving or term bank facilities. The additional 
borrowings in our renewable power operations are primarily related to the acquisitions of hydroelectric facilities in Colombia and 
the  U.S.  The  additional  borrowings  in  our  infrastructure  operations  are  also  primarily  related  to  acquisitions,  including  the 
acquisitions of our Indian and Peruvian toll roads, North American gas storage operations and Australian ports business. Borrowings 
are generally denominated in the same currencies as the assets they finance and therefore the overall decrease in the value of the 
U.S. dollar during the period decreased the carrying value of our non-U.S. dollar borrowings.

60     BROOKFIELD ASSET MANAGEMENT

 
Subsidiary Borrowings

We endeavour to capitalize our principal subsidiary entities to enable continuous access to the debt capital markets, usually on an 
investment-grade basis, thereby reducing the demand for capital from the Corporation and sharing financing costs equally among 
equity holders in partially owned subsidiaries.

AS AT DEC. 31
($ MILLIONS)
Property ................................................................................................

Renewable power .................................................................................

Infrastructure ........................................................................................

Private equity and other .......................................................................

Residential development ......................................................................

Total......................................................................................................

Average Term

Consolidated

2016

2015

2016

2

6

3

2

6

4

1

6

4

3

7

4

$

2,765

$

2,029

1,002

538

1,615

$

7,949

$

2015

2,864

1,736

1,491

623

1,589

8,303

Subsidiary borrowings generally have no recourse to the Corporation but are recourse to its principal subsidiaries (primarily BPY, 
BEP, BIP and BBU).  Subsidiary borrowings decreased by $0.4 billion as our subsidiaries partially repaid their credit facilities 
used to fund investments and growth initiatives in the prior year, offset by the C$500 million issuance in BEP during the third 
quarter of 2016.

Subsidiary Equity Obligations

The following table disaggregates subsidiary equity obligations by type:

AS AT DEC. 31
(MILLIONS)
Subsidiary preferred equity units.............................................................................................................. $
Limited life funds and redeemable fund units ..........................................................................................

Subsidiary preferred shares ......................................................................................................................

2016

1,574

$

1,439

552

$

3,565

$

2015

1,554

1,274

503

3,331

Subsidiary preferred shares are mostly denominated in Canadian dollars and are classified as liabilities because the holders of the 
preferred shares have the right, after a fixed date, to convert the shares into common equity of the issuer based on the market price 
of the issuer common equity at that time unless they are previously redeemed by the issuer. The dividends paid on these securities 
are recorded in interest expense. 

Preferred Equity

Preferred equity is comprised of perpetual preferred shares and represents permanent non-participating equity that provides leverage 
to our common equity. The shares are categorized by their principal characteristics in the following table:

AS AT DEC. 31
($ MILLIONS)
Fixed rate-reset...........................................................

Fixed rate ...................................................................

Floating rate ...............................................................

Total ...........................................................................

Term 

Perpetual

Perpetual

Perpetual

Average Rate

2016

4.42%

4.82%

1.97%

4.17%

2015

2016

4.63% $

2,669

$

4.82%

1.92%

753

532

2015

2,506

753

480

4.32% $

3,954

$

3,739

Fixed rate-reset preferred shares are issued with an initial fixed rate coupon that is reset after an initial period, typically between 
five and seven years, at a predetermined spread over the Canadian five-year government bond yield. The average reset spread as 
at December 31, 2016 was 282 basis points. 

On November 18, 2016, the company issued 12.0 million Series 46 fixed rate-reset preferred shares with an initial dividend rate 
of 4.80% for gross proceeds of C$300 million.

During the year we repurchased 258,487 of our fixed rate-reset preferred shares with a face value of $6.4 million.

      2016 ANNUAL REPORT     61

 
 
 
 
Non-controlling Interests

Non-controlling interests in our consolidated results consists primarily of public interests in BPY, BEP, BIP and BBU, and third-
party interests in their consolidated operating entities as well as other participating interests in our consolidated listed and unlisted 
investments as follows:

AS AT DEC. 31
(MILLIONS)
Brookfield Property Partners .................................................................................................................... $
Brookfield Renewable Partners ................................................................................................................

Brookfield Infrastructure Partners ............................................................................................................

Brookfield Business Partners....................................................................................................................

Other participating interests......................................................................................................................

2016

2015

18,790

$

16,045

8,879

7,710

2,173

5,683

5,358

5,591

—

4,926

31,920

$

43,235

$

The increase in non-controlling interests is the result of the spin-off of BBU which contributed $2.2 billion as well as acquisitions 
made through private funds in the year, in particular the acquisition of a Colombian hydroelectric portfolio through a private fund 
and with co-investors, which contributed $2.7 billion of the increase in non-controlling interests in BEP, as well as the acquisition 
of self-storage operations, a U.S. retail mall portfolio, and a portfolio of student housing in our opportunistic real estate funds, 
which are consolidated by BPY, and the acquisitions of our North American gas storage operations, a portion of our Australian 
port operations and toll roads that are consolidated by BIP.

Class A Shares

Issued and Outstanding Shares

Changes in the number of issued and outstanding Class A common shares (“Class A shares”) during the years are as follows:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Outstanding, beginning of year ................................................................................................................

Issued (repurchased)

Issuances..............................................................................................................................................

Repurchases.........................................................................................................................................
Long-term share ownership plans1......................................................................................................
Dividend reinvestment plan and others...............................................................................................

Outstanding, end of year...........................................................................................................................
Unexercised options and other share-based plans1...................................................................................
Total diluted shares, end of year...............................................................................................................

2016

961.3

—

(4.7)

1.3

0.3

958.2

43.8

2015

928.2

32.9

(11.5)

11.4

0.3

961.3

42.0

1,002.0

1,003.3

1. 

Includes management share option plan and restricted stock plan

The company holds 27.8 million Class A shares (2015 – 26.3 million) purchased by consolidated entities in respect of long-term 
share ownership programs, which have been deducted from the total amount of shares outstanding at the date acquired. Diluted 
shares outstanding include 4.2 million (December 31, 2015 – 3.7 million) shares issuable in respect of these plans based on the 
market value of the Class A shares at December 31, 2016 and 2015, resulting in a net reduction of 23.6 million (2015 – 22.6 million) 
diluted shares outstanding.

During  2016,  2,713,259  options  were  exercised,  in  which  2,290,097  were  exercised  on  a  net-settled  basis,  resulting  in  the 
cancellation of 1,662,086 vested options.

The cash value of unexercised options is $901 million as at December 31, 2016 (2015 – $828 million) based on the proceeds that 
would be received on exercise of the options.

As of March 30, 2017, the Corporation had outstanding 958,869,814 Class A shares and 85,120 Class B shares.

62     BROOKFIELD ASSET MANAGEMENT

Basic and Diluted Earnings Per Share

The components of basic and diluted earnings per share are summarized in the following table:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Net income attributable to shareholders ................................................................................................... $
Preferred share dividends .........................................................................................................................

Net income available to shareholders....................................................................................................... $

Weighted-average shares..........................................................................................................................

Dilutive effect of the conversion of options and escrowed shares using 

treasury stock method1........................................................................................................................
Shares and share equivalents ....................................................................................................................

2016

1,651

(133)

1,518

$

$

959.0

17.6

976.6

2015

2,341

(134)

2,207

949.7

26.0

975.7

1. 

Includes management share option plan and escrowed stock plan

INTEREST RATE PROFILE 

As at December 31, 2016, our net floating rate liability position on a proportionate basis was $7.5 billion (2015 – $5.2 billion). 
As a result, a 50 basis-point increase in interest rates would decrease FFO by $37 million (2015 – $26 million). Notwithstanding 
our practice of matching funding of long-term assets with long-term debt, we believe that the values and cash flows of certain 
assets are more appropriately matched with floating rate liabilities. We utilize interest rate contracts to manage our overall interest 
rate profile so as to achieve an appropriate floating rate exposure while preserving a long-term maturity profile. 

The impact of a 50 basis-point increase in long-term interest rates on the carrying value of financial instruments recorded at market 
value is estimated to increase FFO by $26 million, based on our positions at December 31, 2016 (2015 – $16 million). 

We have continued to take advantage of low long-term rates to fix the coupons on floating rate debt and near-term maturities. This 
has resulted in an increase in our current borrowing expense but we believe this will result in lower costs in the long term. We 
completed approximately $31 billion of debt and preferred share financings during the year throughout our portfolio ($20 billion 
on a proportionate basis). These refinancing activities have enabled us to extend or maintain our average maturity term at favourable 
rates. Approximately $9 billion of the asset-specific financings and the $0.7 billion of preferred shares issued have fixed rate 
coupons. 

As at December 31, 2016, we held a $2.6 billion notional amount (2015 – $3.2 billion) of interest rate contracts, $1.7 billion on 
a proportionate basis (2015 – $2.0 billion), to lock in the risk-free component of interest rates for projected debt refinancings over 
the next three years at an average risk-free rate of 1.5% (2015 – 1.8%). The effective rate will be approximately 4.2% (2015 – 
4.1%) at the time of issuance, which reflects the premium relating to the slope of the yield curve during this period. This represents 
approximately 31% of expected issuance into the North American and U.K. markets (2015 – 38%) at our share in the next three 
years. The value of these contracts is correlated with changes in the reference interest rate, typically the U.S. 10-year government 
bond, such that a 50 basis-point increase in the interest rate would result in a $129 million positive mark to market (2015 – 
$137 million), of which $85 million net to Brookfield (2015 – $95 million) would be recorded in other comprehensive income.

LIQUIDITY

Overview

As  an  asset  manager,  most  of  our  investment  transactions  and  funding  activities  occur  within  our  private  funds  and  listed 
partnerships. We endeavour to structure these entities so that they are self-funding, preferably on an investment-grade basis, and 
in almost all circumstances do not rely on financial support from the Corporation. Our share of capital commitments to private 
funds are generally funded by the associated listed partnership, based on the investment strategy of each fund. From time to time, 
we will invest additional capital in these listed partnerships through participation in equity issuances or alternatively may sell units 
on a secondary basis.

Core Liquidity

Our principal sources of short-term liquidity are cash and financial assets together with undrawn committed credit facilities at the 
corporate and listed partnership level, which we refer to collectively as core liquidity. We maintain cash and financial assets, as 
well as undrawn credit facilities, to fund capital transactions. Our credit facilities are with a diversified range of major banking 
institutions, typically have five year terms and we endeavour to renew and extend the term annually.

      2016 ANNUAL REPORT     63

The following table presents our core liquidity on a corporate and consolidated basis:

AS AT DEC. 31
(MILLIONS)
Cash and financial assets, net ..................................... $
Undrawn committed credit facilities ..........................

$

Corporate

Principal Subsidiaries

Total

2016

1,207

1,869

3,076

$

$

2015

1,018

1,673

2,691

$

$

2016

1,385

4,506

5,891

$

$

2015

428

5,848

6,276

$

$

2016

2,592

6,375

8,967

$

$

2015

1,446

7,521

8,967

As at December 31, 2016, core liquidity at the corporate level was $3.1 billion, consisting of $1.2 billion in cash and financial 
assets, net of deposits and other liabilities, and $1.9 billion in undrawn credit facilities. Corporate level liquidity is readily available 
for use without any material tax consequences. We expect to fund corporate transactions and financial commitments with existing 
cash and financial asset balances and borrowing under corporate credit facilities as well as cash generated on an ongoing basis. 

We also have the ability to raise additional liquidity through the issuance of securities and sale of holdings of listed investments 
in our principal subsidiaries and other holdings including from those listed in the table below on this page.  However, this is not 
considered a core source of liquidity at the corporate level as we are generally able to finance our operations and capital requirements 
through other means.

Our primary sources of recurring cash flows at the corporate level are fee related earnings from our asset management activities 
and distributions from invested capital, in particular our listed partnerships. Recurring cash requirements at the corporate level 
include: ongoing corporate operating costs; interest payments on corporate borrowings; payments related to financial instruments 
such as interest rate and foreign currency contracts, to the extent that these are in a liability position; payments related to our 
energy marketing initiatives, when realized prices on power sales are less than the contracted price paid to BEP;  and preferred 
and common share dividend payments declared by our Board of Directors. 

Typical capital requirements for cash include debt principal repayments and preferred share redemptions, although we typically 
refinance these in advance of maturity; capital calls from funds to which we have committed capital, which typically is at our 
discretion  as  we  manage  the  funds;  discretionary  investments  to  fund  acquisitions  and  capital  expansion  projects,  including 
participation in equity issues by our principal investee companies.

During 2016 we earned $712 million of fee related earnings. We received $1.1 billion in distributions from our listed subsidiaries 
during 2016 and have the ability to distribute surplus cash flow of controlled, privately held investments.  In addition, income 
generated by our financial asset portfolio was $151 million. Interest expense and preferred share distributions totalled $241 million 
and $133 million, respectively, and corporate operating expenses and cash taxes totalled $122 million. We paid $500 million in 
dividends on our common equity in 2016.  

We hold much of the capital invested by the Corporation in the form of listed equity securities which provides us with an important 
source of liquidity and ongoing cash distributions. The following table shows the quoted market value of the company’s listed 
securities and annual cash distributions based on current distribution policies for each entity, excluding our cash and financial 
asset portfolio:

AS AT DEC. 31, 2016
(MILLIONS, EXCEPT PER UNIT AMOUNTS)
Brookfield Property Partners3....................................
Brookfield Renewable Partners.................................

Brookfield Infrastructure Partners.............................
Brookfield Business Partners ....................................

Norbord......................................................................

Acadian Timber Corp. ...............................................

Ownership %

68.8%

61.3%

29.6%

74.9%

40.8%

44.9%

Units 

487.8

183.4

110.3

80.9

35.0

7.5

Distributions 
Per Unit1 
1.18

$

$

Quoted 
Value2 
11,992

1.87

1.74

0.28

0.30

0.74

5,448

3,690

1,946

884

100

Distributions 
(Annual) 

$

652

343

192

20

11

6

$

24,060

$

1,224

1.  Based on current distribution policies as announced in February 2017
2.  Quoted value using December 31, 2016 public pricing
3.  Quoted value includes $1,265 million of preferred shares and distributions includes $76 million of preferred distributions. Fully diluted ownership is 62%, assuming 

conversion of convertible preferred shares held by a third party

We also receive capital distributions from time to time from asset sales by private funds that we hold direct interests in, such as 
our private equity funds, and from the sale of directly held assets. 

64     BROOKFIELD ASSET MANAGEMENT

 
The formation and spin-off of BBU has resulted in us providing a $500 million acquisition and liquidity facility to BBU to assist 
in its liquidity requirements in the short term, which has not been drawn. Subsequently, BBU obtained a $150 million credit facility 
from external lenders that is non-recourse to the Corporation. BBU now funds the commitments to our private equity private 
funds, which will decrease the liquidity requirements on the Corporation over time as BBU becomes self-financing.

Consolidated core liquidity includes the core liquidity of our principal subsidiaries, which consist of BPY, BEP, BIP, and BBU, 
and was $9.0 billion at the end of the period. This liquidity is available to fund ongoing investments in their respective areas of 
expertise and, accordingly, we include the resources of these entities in assessing our overall liquidity. Our principal subsidiaries 
are  publicly  listed  limited  partnerships  that  are  able  to  repatriate  cash  to  unitholders,  including  the  Corporation,  without  the 
imposition of material tax consequences on the partnerships themselves. As a unitholder, we receive distributions from these 
subsidiaries, which are not taxable to us. We recognize income taxes based on our share of the partnerships’ taxable income and 
we record this as part of our tax expense. 

Capital Requirements and Commitments

On a consolidated basis, our two largest normal course capital requirements are the funding of acquisitions and debt maturities. 
As a result of our financing strategy, the quality of our assets and emphasis on investment-grade borrowings and diversification 
of capital sources, we have consistently refinanced maturities in the normal course, even in difficult capital market environments, 
and frequently do so in advance of the scheduled maturity to lessen exposure to capital market disruptions. 

As noted above, most of our acquisitions are completed by private funds or listed partnerships that we manage. In the case of 
private funds, the necessary equity capital is obtained by calling on commitments made by the limited partners in each fund, which 
include commitments made by us or our managed entities such as our listed partnerships. In the case of listed partnerships, capital 
requirements are funded through their own resources and access to capital markets, which may be supported by us from time to 
time through participation in equity offerings or bridge financings. 

Our commitments to provide capital to the private funds that we manage are similar to the commitments that our clients make. In 
the case of our property, infrastructure and private equity funds, these commitments are expected to be funded by our listed 
partnerships, specifically BPY, BEP, BIP and BBU, although in certain circumstances the agreements provide that the Corporation 
will  fund  any  commitments  that  our  listed  entities  fail  to  fund. As  at  December 31,  2016  the  company  had  commitments  of 
$7.4 billion to funds, of which $7.0 billion is expected to be funded by managed entities and the balance of $468 million by the 
Corporation. In addition, we had $19.9 billion of private fund commitments from third-party clients to fund qualifying transactions. 
Investments and capital expansion projects are discretionary and require approval under our investment policies including, where 
appropriate, our Board of Directors. The approval of these activities takes into consideration the availability of capital to fund 
them. 

We schedule ongoing capital expenditure programs to maintain the operating capacity of our assets at existing levels, which we 
refer to as sustaining capital expenditures, and which are typically funded by, and represent a relatively small proportion of, the 
operating cash flows within each business. The timing of these expenditures is discretionary, however we believe it is important 
to maintain the productivity of our assets in order to optimize cash flows and value accretion and fund these expenditures with 
operating cash flow.

As discussed further on pages 74 and 75, we enter into financial instruments such as interest rate, foreign currency and power 
price contracts that require us to make or receive payments based on changes in value of the contracts, either to settle the contract 
or as collateral. We carefully monitor potential liquidity requirements to ensure that they remain within a reasonable amount and 
can easily be funded with core liquidity. 

Over the medium to longer term, we believe that our strategy of holding most of the capital we invest in our property, renewable 
power and infrastructure businesses through listed entities will significantly increase our aggregate capital resources and liquidity 
and reduce our corporate level capital requirements with respect to future investing activities. Our strategy calls for most of the 
capital invested in assets within these sectors, either directly or through commitments to private funds, to be funded by the listed 
entities with their own capital resources. We may, however, from time to time enter into commitments to provide financing to 
listed entities such as an equity subscription facility or loan facility. We may also underwrite the syndication of co-investments 
and joint venture investment transactions by our listed issuers and private funds.

The core liquidity of our listed partnerships, including proceeds of asset dispositions, private fund distributions and financings, 
is typically retained by each listed partnership and is not distributed to the Corporation or other unitholders.  Should we, through 
our controlling interest, choose to repatriate this liquidity, the Corporation would receive its proportionate share as a distribution 
from the principal subsidiaries. Such repatriations would not have any material tax consequences to the Corporation.

      2016 ANNUAL REPORT     65

REVIEW OF CONSOLIDATED STATEMENTS OF CASH FLOWS 

The following table summarizes the consolidated statements of cash flows within our consolidated financial statements:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Operating activities................................................................................................................................... $
Financing activities...................................................................................................................................

Investing activities....................................................................................................................................

2016

3,083

$

6,993

(8,557)

Change in cash and cash equivalents........................................................................................................ $

1,519

$

2015

2,788

8,222

(11,064)

(54)

This statement reflects activities within our consolidated operations and therefore excludes activities within non-consolidated 
entities such as our equity accounted investment in GGP.

Operating Activities

Cash flow from operating activities totalled $3.1 billion in 2016, a $295 million increase from 2015. These cash flows consist of 
net income, including the amount attributable to co-investors, less non-cash items such as undistributed equity accounted income, 
fair value changes, depreciation and deferred income taxes, and is adjusted for changes in non-cash working capital. Cash flow 
from operating activities includes the net amount invested or recovered through the ongoing investment in, and subsequent sale 
of, residential land, houses and condominiums, which represented an outflow of $243 million in 2016 (2015 – $128 million). 
Operating cash flow prior to non-cash working capital and residential inventory was $3.8 billion during the current year, which 
was $0.9 billion higher than 2015 due to the benefits of same-store growth from our existing operations and the contributions 
from assets acquired over the last twelve months.

Financing Activities

The company generated $7.0 billion of cash flows from financing activities during 2016, as compared to $8.2 billion in 2015. Our 
subsidiaries issued $23.8 billion (2015 – $15.6 billion) and repaid $20.4 billion (2015 – $11.5 billion) of property-specific and 
subsidiary borrowings, for a net issuance of $3.4 billion (2015 – $4.1 billion) during the year. We raised $10.6 billion of capital 
from our institutional private fund partners and other investors to fund their portion of acquisitions, including the repayment of 
$1.7 billion of short-term borrowings backed by private fund commitments, and returned $5.1 billion to our clients in the form 
of either distributions or return of capital. Most of the activity related to the acquisition of our Colombian hydroelectric portfolio 
and acquisitions within our  property and infrastructure funds. The  corporation issued  $0.9 billion of  medium-term notes, the 
proceeds of which were used to repay medium-term notes that came to maturity.

Investing Activities

During 2016, we invested $17.9 billion and generated proceeds of $9.4 billion from dispositions for net cash deployed in investing 
activities of $8.4 billion. This compares to net cash investments of $12.8 billion in 2015. We acquired $9.4 billion of consolidated 
subsidiaries across our various strategies. Disposition proceeds included over $4.0 billion from the sale of office properties. We 
invested $3.7 billion in financial assets, such as debt and equity securities. Investing activities were higher in the prior year due 
to particularly large investments in our property and private equity funds.

66     BROOKFIELD ASSET MANAGEMENT

CONTRACTUAL OBLIGATIONS

The following table presents the contractual obligations of the company by payment periods:

AS AT DEC. 31, 2016 (MILLIONS)
Corporate borrowings ................................................ $
Principal repayments

Non-recourse borrowings

Property-specific mortgages .................................

Other debt of subsidiaries .....................................

Subsidiary equity obligations ..................................

Accounts payable and other

Capital lease obligations..........................................

Other........................................................................

Commitments.............................................................
Operating leases1........................................................
Interest expense2

Corporate borrowings..............................................

Non-recourse borrowings........................................

Subsidiary equity obligations ..................................

Payments Due by Period

Less than 1
Year

1 – 3 
Years

4 – 5
Years 

After 5
Years 

425

$

447

$

260

$

3,368

$

7,655

866

421

27

7,694

695

105

201

2,776

198

13,965

2,699

143

6

1,629

431

222

375

4,549

376

13,467

1,955

1,217

2

262

29

28

342

3,219

318

17,355

2,429

1,784

1

2,294

301

447

878

4,378

378

Total 

4,500

52,442

7,949

3,565

36

11,879

1,456

802

1,796

14,922

1,270

1.  Operating land leases with agreements largely expiring after the year 2065 totalled $4.4 billion as at December 31, 2016
2.  Represents the aggregate interest expense expected to be paid over the term of the obligations. Variable interest rate payments have been calculated based on current 

rates

Commitments of $1.5 billion (2015 – $0.9 billion) represent various contractual obligations of the company and its subsidiaries 
assumed in the normal course of business. These included commitments to provide bridge financing, and letters of credit and 
guarantees provided in respect of power sales contracts and reinsurance obligations. The Corporation is required under certain 
circumstances to purchase BPY’s preferred equity units at redemption, as described below, accordingly, commitments in 2016 
include $226 million, which represents the carrying value of the exchange option at the time of issuance in respect of BPY’s 
subsidiary preferred units, and the remaining $1,574 million was recorded within subsidiary equity obligations. All other balances, 
with the exception of interest expense incurred in future periods, are included in our consolidated balance sheet. 

The Corporation entered into arrangements in 2014 with respect to $1.8 billion of exchangeable preferred equity units issued by 
BPY, which are redeemable in equal tranches of $600 million in 2021, 2024 and 2026, respectively. The preferred equity units 
are exchangeable into equity units of BPY at $25.70 per unit, at the option of the holder, at any time up to and including the 
maturity date. BPY may redeem the preferred equity units after specified periods if the BPY equity unit price exceeds predetermined 
amounts. At maturity, the preferred equity units will be converted into BPY equity units at the lower of $25.70 or the then market 
price of a BPY equity unit. In order to provide the purchaser with enhanced liquidity, the Corporation has agreed to purchase the 
preferred equity units for cash at the option of the holder, for the initial purchase price plus accrued and unpaid dividends. In order 
to decrease dilution risk to BPY, the Corporation has agreed with the holder and BPY that if the price of a BPY equity unit is less 
than 80% of the exchange price of $25.70 at the redemption date of the 2021 and 2024 tranches, the Corporation will acquire the 
preferred equity units subject to redemption, at the redemption price, and to exchange these preferred equity units for preferred 
equity units with similar terms and conditions, including redemption date, as the 2026 tranche. 

The company and its consolidated subsidiaries execute agreements that provide for indemnifications and guarantees to third parties 
in transactions or dealings such as business dispositions, business acquisitions, sales of assets, provision of services, securitization 
agreements, and underwriting and agency agreements. The company has also agreed to indemnify its directors and certain of its 
officers and employees. The nature of substantially all of the indemnification undertakings prevents the company from making a 
reasonable estimate of the maximum potential amount the company could be required to pay third parties, as in most cases the 
agreements do not specify a maximum amount, and the amounts are dependent upon the outcome of future contingent events, 
the nature and likelihood of which cannot be determined at this time. Neither the company nor its consolidated subsidiaries have 
made significant payments in the past, nor do they expect at this time to make any significant payments under such indemnification 
agreements in the future. 

      2016 ANNUAL REPORT     67

The company periodically enters into joint venture, consortium or other arrangements that have contingent liquidity rights in 
favour  of  the  company  or  its  counterparties.  These  include  buy  sell  arrangements,  registration  rights  and  other  customary 
arrangements. These agreements generally have embedded protective terms that mitigate the risk to us. The amount, timing and 
likelihood of any payments by the company under these arrangements is, in most cases, dependent on either future contingent 
events or circumstances applicable to the counterparty and therefore cannot be determined at this time. 

Our wholly owned energy marketing group has committed to purchase power and other wind generation produced by 61% owned 
BEP as previously described on page 50. 

EXPOSURES TO SELECTED FINANCIAL INSTRUMENTS 

As discussed elsewhere in this MD&A, we utilize various financial instruments in our business to manage risk and make better 
use of our capital. The fair values of these instruments that are reflected on our balance sheets are disclosed in Note 6 to our 
consolidated financial statements.

68     BROOKFIELD ASSET MANAGEMENT

PART 5 – OPERATING CAPABILITIES, ENVIRONMENT AND RISKS 

In this section we discuss elements of our operating strategies as they relate to the execution of our business strategy, as well as 
performance measurements. This section also contains a review of certain aspects of the business environment and risks that could 
affect our performance. 

OPERATING CAPABILITIES 

We believe that we have the necessary capabilities to execute our business strategy and achieve our performance targets. To this 
end, we strive for excellence and quality in each of our core operating business groups in the belief that this approach will produce 
strong returns over the long term. 

We endeavour to operate as a value investor and follow a disciplined investment approach. Our management team has considerable 
capabilities in investment analysis, mergers and acquisitions, divestitures and corporate finance that enable us to acquire assets 
for value, finance them effectively, and to realize the value created during our ownership. 

Our operating business groups and depth of experience in managing these assets differentiate us from those competitors that have 
shorter investment horizons and more of a speculative focus. These operating business groups have been established over the 
course  of  many  years  and  are  fully  integrated  into  our  organization.  This  has  required  considerable  investment  in  building 
the management teams and the necessary resources; however, we believe these business groups enable us to optimize the cash 
returns and values of the assets that we manage. 

We have established strong relationships with a number of leading institutional investors and believe we are well positioned to 
continue  increasing  the  amount  of  capital  managed  for  others  on  a  fee  bearing  basis. We  continue  to  invest  our  distribution 
capabilities to encourage existing and potential clients to commit capital to our investment strategies. To achieve this, we are 
continually expanding the breadth of resources we devote to these activities, and our efforts continue to be assisted by favourable 
investment performance. 

The diversification within our operations in terms of both asset classes and regions allows us to offer a broad range of products 
and investment strategies to our clients, enabling us to pursue a wide range of investment opportunities while focusing on assets 
and regions that offer the best value. We believe this is of considerable value to investors with large amounts of capital to deploy. 
In addition, our commitment to transparency and ethical business conduct, as well as our position in the market as a well-capitalized 
public company listed on major North American and European stock exchanges, positions us as a desirable long-term partner for 
our clients. We also manage several flagship specialty issuers publicly listed on major North American stock exchanges and with 
majority independent boards of directors, which further enhances the development of our business partnerships. 

Finally, our commitment to invest a meaningful amount of capital alongside our investors creates a strong alignment of interest 
between us and our investment partners and also differentiates us from many of our competitors. Accordingly, our strategy includes 
maintaining considerable surplus financial resources. This capital also supports our ability to commit to investment opportunities 
on our own account when appropriate or in anticipation of future syndications. 

RISK MANAGEMENT 

Managing risk is an integral part of Brookfield’s business and we have a disciplined and focused approach to risk management, 
which includes a risk management framework for managing risks across the organization. 

The assessment and management of risk is the responsibility of the company’s management. Given the diversified and decentralized 
nature of our operations, we seek to ensure that risk is managed as close to its source as possible, and by the management teams 
that have the most knowledge and expertise in the business or risk area. 

As  such,  business  specific  risks  are  generally  managed  at  the  operating  business  group  level,  as  the  risks  vary  based  on  the 
characteristics of each business. The specific manner and methodologies by which risks are addressed and mitigated vary based 
upon, among other things, the nature of the risks and of the assets and operations to which they apply, the geographic location of 
the assets, the economic, political and regulatory environment, and Brookfield’s assessment of the benefits to be derived from 
such mitigation strategies. 

At the same time, we utilize a co-ordinated approach among our corporate group and our operating business groups to risks that 
can be more pervasive and correlated in their impact across the organization, such as liquidity, foreign exchange and interest rate 
risks, and where we can bring together specialized knowledge to manage these risks. Management of strategic, reputational and 
regulatory compliance risks are similarly co-ordinated to ensure consistent focus and implementation across the organization. 

      2016 ANNUAL REPORT     69

The  company’s  Chief  Financial  Officer  has  ultimate  responsibility  for  the  risk  management  function  and  discharges  the 
responsibility with the assistance of the Risk Management Group, which works with various operational and functional groups 
within Brookfield to co-ordinate the risk management program and to develop and implement risk mitigation strategies that are 
appropriate for the company. 

These efforts leverage the work conducted by management committees that have been formed to bring together required expertise 
to manage and oversee key risk areas, and include: 

•  Risk  Management  Steering  Committee  to  support  the  overall  corporate  risk  management  program,  and  co-ordinate  risk 

assessment and mitigation on an enterprise-wide basis; 

• 

Investment Committees to oversee the investment process as well as monitor the ongoing performance of investments; 

•  Conflicts Committee to resolve potential conflict situations in the investment process and other corporate transactions; 

• 

• 

Financial Risk Oversight Committee to review and monitor financial exposures; 

Safety Steering Committee to focus on health, safety and environmental matters; and 

•  Disclosure Committee to oversee the public disclosure of material information. 

The Corporation’s Board of Directors has governance oversight for risk management with a focus on the more significant risks 
we  face,  and  builds  upon  management’s  risk  assessment  and  oversight  processes.  The  Board  of  Directors  has  delegated 
responsibility for the oversight of specific risks to board committees as follows: 

•  Risk  Management  Committee:  Oversees  the  management  of  Brookfield’s  significant  financial  and  non-financial  risk 
exposures, including market, credit, operational, reputational, strategic, regulatory and business risks. These responsibilities 
include reviewing risk assessment and risk management practices with management to ensure ongoing, effective mitigation 
of key organizational risks, as well as confirming that the company has an appropriate risk taking philosophy and suitable 
risk capacity. 

•  Audit Committee: Oversees the management of risks related to Brookfield’s systems and procedures for financial reporting 
as well as for associated audit processes (internal and external). Part of the Audit Committee’s responsibilities is the review 
and approval of the risk-based internal audit plan, which ensures alignment with risk management activities and organizational 
priorities. 

•  Management  Resources  and  Compensation  Committee:  Oversees  the  risks  related  to  Brookfield’s  management  resource 
planning, including succession planning, proposed senior management appointments, executive compensation, and the job 
descriptions and annual objectives of senior executives, as well as performance against those objectives. 

•  Governance  and  Nominating  Committee:  Oversees  the  risks  related  to  Brookfield’s  governance  structure,  including  the 
effectiveness of board and committee activities and potential conflicts of interest, as well as with respect to related party 
transactions. 

BUSINESS ENVIRONMENT AND RISKS 

The following is a review of certain risks that could adversely impact our financial condition, results of operations and the value 
of our equity. Additional risks and uncertainties not previously known to the company, or that the company currently deems 
immaterial, may also impact our operations and financial results. 

a)  Ownership of Class A Shares

The trading price of our Class A shares is subject to market volatility and cannot be predicted.

Our shareholders may not be able to sell their Class A shares at or above the price at which they purchased such shares due to 
trading price fluctuations in the capital markets. The trading price could fluctuate significantly in response to factors both related 
and unrelated to our operating performance and/or future prospects, including, but not limited to: (i) variations in our operating 
results  and  financial  condition;  (ii)  changes  in  government  laws,  rules  or  regulations  affecting  our  businesses;  (iii)  material 
announcements by our competitors; (iv) market conditions and events specific to the industries in which we operate; (v) changes 
in general economic conditions; (vi) changes in the values of our investments or changes in the amount of distributions, dividends 
or interest paid in respect of investments; (vii) differences between our actual financial and operating results and those expected 
by investors and analysts; (viii) changes in analysts’ recommendations or earnings projections; (ix) changes in the extent of analysts’ 
interest in covering the Corporation and its publicly traded affiliates; (x) the depth and liquidity of the market for our Class A 
shares; (xi) dilution from the issuance of additional equity; (xii) investor perception of our businesses and the industries in which 

70     BROOKFIELD ASSET MANAGEMENT

we operate; (xiii) investment restrictions; (xiv) our dividend policy; (xv) the departure of key executives; (xvi) sales of Class A 
shares by senior management or significant shareholders; and (xvii) the materialization of other risks described in this section.

b)  Reputation

Actions or conduct that have a negative impact on clients’ or stakeholders’ perception of us could adversely impact our ability to 
attract and/or retain client capital.

The growth of our asset management business relies on continuous fundraising for various private and public investment products. 
We depend on our business relationships and our reputation for integrity and high-calibre asset management services to attract 
and retain investors and advisory clients, and to pursue investment opportunities for us and the public and private entities we 
manage. If we are unable to continue to raise capital from third-party investors, either privately, publicly or both, this could 
materially reduce our revenue and cash flow and adversely affect our financial condition. 

Poor performance of any kind could damage our reputation with current and potential investors in our managed entities, making 
it more difficult for us to raise new capital. Investors may decline to invest in current and future managed entities and may withdraw 
their investments from our managed entities as a result of poor performance in the entity in which they are invested, and investors 
in our private funds may demand lower fees for new or existing funds, all of which would decrease our revenue. 

Because of our various lines of businesses and investment products, some of which have overlapping mandates, we may be subject 
to a number of actual, potential or perceived conflicts of interest than that to which we would otherwise be subject if we had just 
one line of business or investment product. These conflicts may be magnified for an asset manager that has many different capital 
sources available to pursue investment opportunities, including client capital and the Corporation’s own capital. In addition, the 
senior management team of the Corporation and its affiliates has their own capital invested in Class A shares, directly and indirectly, 
and may have financial exposures with respect to their own investments which could lead to potential conflicts if such investments 
are similar to those made by the Corporation or on behalf of clients in entities managed by the Corporation. In addressing these 
conflicts, we have implemented certain policies and procedures that may be ineffective at mitigating actual, potential or perceived 
conflicts of interest, or reduce the positive synergies that we cultivate across our businesses. It is also possible that actual, potential 
or  perceived  conflicts  of  the  type  outlined  in  this  paragraph  could  give  rise  to  investor  dissatisfaction,  litigation,  regulatory 
enforcement actions or other detrimental outcomes. Appropriately dealing with conflicts of interest for an asset manager like us 
is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with actual, potential 
or perceived conflicts of interest. There has been enhanced regulatory scrutiny of asset manager conflicts in the markets in which 
we operate and in the U.S. in particular. Such regulatory scrutiny can lead to fines, penalties and other negative consequences. 
Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation, 
business,  financial  condition  or  results  of  operations  in  a  number  of  ways,  including  an  inability  to  adequately  capitalize 
existing managed entities or raise new managed entities, including private funds, and a reluctance of counterparties to do business 
with us.

The governing agreements of our private funds provide that, subject to certain conditions, third-party investors in these funds will 
have the right to remove us as general partner or to accelerate the liquidation date of the fund for convenience. Any negative impact 
to our reputation would be expected to increase the likelihood that a private fund could be terminated by investors for convenience. 
Such an event, were it to occur, would result in a reduction in the fees we would earn from such fund, particularly if we are unable 
to maximize the value of the fund’s investments during the liquidation process or in the event of the triggering of a “clawback” 
for fees already paid out to us as general partner. 

We could be negatively impacted if there is misconduct or alleged misconduct by our personnel or those of our portfolio companies 
in which we and our managed entities invest. We may face increased risk of misconduct to the extent our capital allocated to 
emerging markets increases. If we face allegations of improper conduct by private litigants or regulators, whether the allegations 
are valid or invalid or whether the ultimate outcome is favourable or unfavourable to us, such allegations may result in negative 
publicity and press speculation about us, our investment activities or the asset management industry in general, which could harm 
our reputation and may be more damaging to our business than to other types of businesses. 

We are subject to a number of obligations and standards arising from our asset management business and our authority over the 
assets we manage. The violation of these obligations and standards by any of our employees may adversely affect our partners 
and our business and reputation. Our business often requires that we deal with confidential matters of great significance to the 
companies in which we may invest and to other third parties. If our employees were to improperly use or disclose confidential 
information, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is 
not always possible to detect or deter employee misconduct, and the precautions we take in this regard may not be effective. 

Implementation of new investment and growth strategies involves a number of risks that could result in losses and harm our 
professional reputation, including the risk that the expected results are not achieved, that new strategies are not appropriately 
planned for or integrated, that new strategies may conflict, detract from or compete against our existing businesses, and that the 

      2016 ANNUAL REPORT     71

investment  process,  controls  and  procedures  that  we  have  developed  will  prove  insufficient  or  inadequate.  Furthermore,  our 
strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that we 
may be dependent upon and subject to liability, losses or reputational damage relating to systems, controls and personnel that are 
not under our complete control or under the control of another.

c)  Asset Management

Investment  returns  could  be  lower  than  target  returns  due  to  inappropriate  allocation  of  capital  or  ineffective  investment 
management, or growth in fee bearing capital could be adversely impacted by poor product development or marketing efforts.

Our value investing strategy focuses on acquiring high quality businesses on a value basis, executing operational improvements 
and exiting through a competitive process that optimizes value. The successful execution of our investing strategy is uncertain as 
it requires suitable opportunities, careful timing and business judgment, as well as the resources to complete asset purchases and 
restructure them, if required, notwithstanding difficulties experienced in a particular industry.

Our approach to investing entails adding assets to our existing businesses when the competition for assets is weakest; typically, 
when depressed economic conditions exist in the market relating to a particular entity or industry. Such an investing style carries 
with it inherent risks when investments are made in either markets or industries that are undergoing some form of dislocation. In 
addition, there is no certainty that we will be able to identify suitable or sufficient opportunities that meet our investment criteria 
and be able to acquire additional high quality assets at attractive prices to supplement our growth in a timely manner, or at all. We 
may fail to value opportunities accurately or to consider all relevant factors that may be necessary or helpful in evaluating an 
opportunity; or we may underestimate the costs necessary to bring an acquisition up to standards established for its intended market 
position or be unable to quickly and effectively integrate new acquisitions into our existing operations.

In addition, liabilities may exist that we or our managed entities do not discover in due diligence prior to the consummation of an 
acquisition, or circumstances may exist with respect to the entities or assets acquired that could lead to future liabilities and, in 
each case, we or our managed entities may not be entitled to sufficient, or any, recourse against the contractual counterparties to 
an acquisition. The failure of a newly acquired business to perform according to expectations could have a material adverse effect 
on our assets, liabilities, business, financial condition, results of operations and cash flow. Alternatively, we may be required to 
sell a business before it has realized our expected level of returns for such business.

We pursue investment opportunities that involve business, regulatory, legal and other complexities. Our tolerance for complexity 
presents risks, as such transactions can be more difficult, expensive and time consuming to finance and execute, and have a higher 
risk of execution failure. It can also be more difficult to manage or realize value from the assets acquired in such transactions and 
such transactions sometimes entail a higher level of regulatory scrutiny or a greater risk of contingent liabilities. 

If any of our managed entities perform poorly, our fee-based revenue and cash flow would decline. Moreover, we could experience 
losses on our own capital invested in our managed entities. Certain of our investments may be concentrated in particular asset 
types or geographic regions, which could exacerbate any negative performance of one or more of our managed entities to the 
extent those concentrated investments are in assets or regions that experience a market dislocation. 

Competition from other asset managers for raising public and private capital is intense and poor investment performance could 
hamper our ability to compete for these sources of capital or force us to reduce our management fees. If poor investment returns 
prevent us from raising further capital from our existing partners, we may need to identify and attract new investors in order to 
maintain or increase the size of our private funds, and there are no assurances that we can find new investors. If we cannot raise 
capital from third-party investors, we may be unable to deploy capital into investments and collect management fees, and potentially 
collect transaction fees or carried interest, which would materially reduce our revenue and cash flow and adversely affect our 
financial condition. 

In pursuing investment returns, we and our managed entities face competition from other investors. Each of our businesses is 
subject to competition in varying degrees and our competitors may have certain competitive advantages over us. Some of our 
competitors may have higher risk tolerances, different risk assessments, lower return thresholds, a lower cost of capital, or a lower 
effective tax rate (or no tax rate at all), all of which could allow them to consider a wider variety of investments and to bid more 
aggressively than us for investments. We may lose investment opportunities in the future if we do not match investment prices, 
structures and terms offered by our competitors, some of whom may have synergistic businesses which allow them to consider 
bidding a higher price than we can reasonably offer. Moreover, if we are forced to compete with other investment firms on the 
basis  of  price,  we  may  not  be  able  to  maintain  our  current  asset  management  fee  structures,  including  with  respect  to  base 
management fees, carried interest or other terms. These pressures could reduce investment returns and negatively affect our overall 
revenues, operating cash flows and financial condition. While we attempt to deal with competitive pressures by leveraging our 
asset management strengths and operating capabilities and compete on more than just price, there is no guarantee these measures 
will be successful and we may have difficulty competing for investment opportunities, particularly those offered through auction 
processes.

72     BROOKFIELD ASSET MANAGEMENT

d)  Temporary Investments 

We may be unable to syndicate, assign or transfer financial commitments entered into in support of our asset management franchise.

We periodically enter into agreements that commit us to acquire assets or securities in order to support our asset management 
franchise. For example, we may acquire an asset suitable for a particular managed entity that we are fundraising and warehouse 
that asset through the fundraising period before transferring the asset to the managed entity for which it was intended. Or, as 
another example, for a particular acquisition transaction we may commit capital as part of a consortium alongside certain of our 
managed entities with the expectation that we will syndicate or assign all or a portion of our own commitment to other investors 
prior to, at the same time as, or subsequent to, the anticipated closing of the transaction. In all of these cases, our support is intended 
to be of a temporary nature and we engage in this activity in order to further the growth and development of our asset management 
franchise.  By  leveraging  the  Corporation’s  financial  position  to  make  temporary  investments  we  can  execute  on  investment 
opportunities prior to obtaining all third-party equity financing that we seek, and these opportunities may otherwise not be available 
without the Corporation’s initial equity participation. 

While it is often our intention in these arrangements that the Corporation’s direct participation be of a temporary nature, we may 
be unable to syndicate, assign or transfer our interest as we intended and be required to take or keep ownership of an asset for an 
extended period. This would increase the amount of our own capital deployed to certain assets and could have an adverse impact 
on our liquidity, which may reduce our ability to pursue further acquisitions or meet other financial commitments. 

e)  Laws, Rules and Regulations

Failure to comply with regulatory requirements could result in financial penalties, loss of business, and/or damage to our reputation.

There are many laws, governmental rules and regulations and listing exchange rules that apply to us, our affiliates, our assets and 
our businesses. Changes in these laws, rules and regulations, or their interpretation by governmental agencies or the courts, could 
adversely affect our business, assets or prospects, or those of our affiliates, customers, clients or partners. The failure of us or our 
publicly listed affiliates to comply with the rules and registration requirements of the respective stock exchanges on which we 
and they are listed could adversely affect our reputation and financial condition. 

Our  asset  management  business,  including  our  investment  advisory  and  broker-dealer  business,  is  subject  to  substantial  and 
increasing regulatory compliance and oversight, and this higher level of scrutiny may lead to more regulatory enforcement actions. 
There continues to be uncertainty regarding the appropriate level of regulation and oversight of asset management businesses in 
a number of jurisdictions in which we operate. The introduction of new legislation and increased regulation may result in increased 
compliance costs and could materially affect the manner in which we conduct our business and adversely affect our profitability. 

Our asset management business is not only regulated in the United States, but also in other jurisdictions where we conduct operations 
including the EU, the U.K., Canada, Brazil and Australia. Similar to the environment in the U.S., the current environment in 
jurisdictions outside the U.S. in which we operate has become subject to further regulation. Governmental agencies around the 
world have proposed or implemented a number of initiatives and additional rules and regulations that could adversely affect our 
asset  management  business,  and  governmental  agencies  may  propose  or  implement  further  regulations  in  the  future.  These 
regulations may impact how we market our managed entities in these jurisdictions, and introduce compliance obligations with 
respect to disclosure and transparency, as well as restrictions on investor distributions. Such regulations may also prescribe certain 
capital requirements on our managed entities, and conditions on the leverage our managed entities may employ and the liquidity 
these managed entities must have. Compliance with additional regulatory requirements will impose additional compliance burdens 
and expense for us and could reduce our operating flexibility and fundraising opportunities.

We acquire and develop primarily property, renewable power, infrastructure, business services and industrial assets. In doing so, 
we must comply with extensive and complex municipal, state or provincial, national and international regulations. These regulations 
can result in uncertainty and delays, and impose on us additional costs, which may adversely affect our results of operations. 
Changes in these laws may negatively impact us and our businesses or may benefit our competitors or their businesses. 

Additionally, liability under such laws, rules and regulations may occur without our fault. In certain cases, parties can pursue legal 
actions against us to enforce compliance as well as seek damages for non-compliance or for personal injury or property damage. 
Our insurance may not provide sufficient coverage in the event that a successful claim is made against us. 

Our broker-dealer business is regulated by the SEC, the various Canadian provincial securities commissions, as well as self-
regulatory  organizations. These  regulatory  bodies  may  conduct  administrative  or  enforcement  proceedings  that  can  result  in 
censure, fine, suspension or expulsion of a broker-dealer, its directors, officers or employees. Such proceedings, whether or not 
resulting in adverse findings, can require substantial expenditures and can have an adverse impact on the reputation of a broker-
dealer. 

      2016 ANNUAL REPORT     73

The advisors of certain of our managed entities are registered as investment advisors with the SEC. Registered investment advisors 
are subject to the requirements and regulations of the Investment Advisors Act of 1940, which grants U.S. supervisory agencies 
broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with laws 
or regulations. If such powers are exercised, the possible sanctions that may be imposed include the suspension of individual 
employees, limitations on the activities in which the investment advisor may engage, suspension or revocation of the investment 
advisor’s registration, censure and fines. Compliance with these requirements and regulations results in the expenditure of resources, 
and a failure to comply could result in investigations, financial or other sanctions, and reputational damage. 

The Investment Company Act of 1940 (the “40 Act”) and the rules promulgated thereunder provide certain protections to investors 
and impose certain restrictions on entities that are deemed “investment companies” under the 40 Act. We are not currently nor do 
we intend to become registered as an investment company under the 40 Act. To ensure that we are not deemed to be an investment 
company, we may be required to materially restrict or limit the scope of our operations or plans and the types of acquisitions that 
we may make; and we may need to modify our organizational structure or dispose of assets that we would not otherwise dispose 
of. If we were required to register as an investment company, we would, among other things, be restricted from engaging in certain 
business activities (or have conditions placed on our business activities) and issuing certain securities, be required to limit the 
amount of investments that we make as principal, and face other limitations on our activities. 

f)  Governmental Investigations and Anti-Bribery and Corruption

Our policies and procedures designed to ensure compliance with applicable laws, including anti-bribery and corruption laws, 
may not be effective in all instances to prevent violations and as a result we may be subject to related governmental investigations.

We  are  from  time  to  time  subject  to  various  governmental  investigations,  audits  and  inquiries,  both  formal  and  informal 
(“investigations”). These investigations, regardless of their outcome, can be costly, divert management attention, and damage our 
reputation. The unfavourable resolution of such investigations could result in criminal liability, fines, penalties or other monetary 
or non-monetary sanctions and could materially affect our business or results of operations. 

There is an increasing global focus on the implementation and enforcement of anti-bribery and corruption legislation, and this 
focus has heightened the risks that we face in this area, particularly as we expand our operations globally. We are subject to a 
number of laws and regulations governing payments and contributions to public officials or other third parties, including restrictions 
imposed by the U.S. Foreign Corrupt Practices Act and similar laws in non-U.S. jurisdictions, such as the U.K. Bribery Act and 
the Canadian Corruption of Foreign Public Officials Act. This increased global focus on anti-bribery and corruption enforcement 
may also lead to more investigations, both formal and informal in this area, the results of which cannot be predicted. 

Different laws and regulations that are applicable to us may contain conflicting provisions, making our compliance more difficult. 
If we fail to comply with such laws and regulations, we could be exposed to claims for damages, financial penalties, reputational 
harm, incarceration of our employees, restrictions on our operations and other liabilities, which could negatively affect our operating 
results and financial condition. In addition, we may be subject to successor liability for violations under these laws and regulations 
or other acts of bribery committed by entities in which we or our managed entities invest. 

Instances of bribery, fraud, accounting irregularities and other improper, illegal or corrupt practices can be difficult to detect, and 
fraud and other deceptive practices can be widespread in certain jurisdictions. We invest in emerging market countries that may 
not have established stringent anti-bribery and corruption laws and regulations, where existing laws and regulations may not be 
consistently enforced, or that are perceived to have materially higher levels of corruption according to international rating standards. 
Due diligence on investment opportunities in these jurisdictions is frequently more challenging because consistent and uniform 
commercial practices in such locations may not have developed or do not meet international standards. Bribery, fraud, accounting 
irregularities and corrupt practices can be especially difficult to detect in such locations.

g)  Foreign Exchange 

Foreign exchange rate fluctuations could adversely impact our aggregate foreign currency exposure.

We have pursued and intend to continue to pursue growth opportunities in international markets, and often invest in countries 
where the U.S. dollar is not the local currency. As a result, we are subject to foreign currency risk due to potential fluctuations in 
exchange rates between foreign currencies and the U.S. dollar. A significant depreciation in the value of the currency utilized 
in one or more countries where we have a significant presence may have a material adverse effect on our results of operations and 
financial position. In addition, we are active in certain markets whose economic growth is dependent on the price of commodities 
and the currencies in these markets can be more volatile as a result.

Our businesses are impacted by changes in currency rates, interest rates, commodity prices and other financial exposures. We 
selectively utilize financial instruments to manage these exposures, including credit default swaps and other derivatives to hedge 
certain of our financial positions. However, a significant portion of these risks may remain unhedged. We may also choose to 
establish unhedged positions in the ordinary course of business. 

74     BROOKFIELD ASSET MANAGEMENT

There is no assurance that hedging strategies, to the extent they are used, will fully mitigate the risks they are intended to offset. 
Additionally, derivatives that we use are also subject to their own unique set of risks, including counterparty risk with respect to 
the financial well-being of the party on the other side of these transactions and a potential requirement to fund mark-to-market 
adjustments. Our financial risk management policies may not ultimately be effective at managing these risks.

The Dodd-Frank Act and similar laws in other jurisdictions impose rules and regulations governing oversight of the over-the-
counter derivatives market and its participants. These regulations may impose additional costs and regulatory scrutiny on us. If 
our derivative transactions are required to be executed through exchanges or regulated facilities we will face incremental collateral 
requirements in the form of initial margin, and require variation margin to be cash settled on a daily basis. Such an increase in 
margin requirements (relative to bilateral agreements), were it to occur, perhaps combined with a more restricted list of securities 
that qualify as eligible collateral, would require us to hold larger positions in cash and treasuries, which could reduce income. 

We cannot predict the effect of changing derivatives legislation on our hedging costs, our hedging strategy or its implementation, 
or the risks that we hedge. Regulation of derivatives may increase the cost of derivative contracts, reduce the availability of 
derivatives to protect against operational risk and reduce the liquidity of the derivatives market, all of which may reduce our use 
of derivatives and result in the increased volatility and decreased predictability of our cash flows. 

h)  Interest Rates

Rising interest rates could increase our interest costs.

A number of our long-life assets are interest rate sensitive. Increases in interest rates will, absent all else, decrease the value of an 
asset by reducing the present value of the cash flows expected to be produced by such asset. As the value of an asset declines as 
a result of interest rate increases, certain financial and other covenants under credit agreements governing such asset could be 
breached,  even  if  we  have  satisfied  and  continue  to  satisfy  our  payment  obligations.  Such  a  breach  could  result  in  negative 
consequences on our financial performance and results of operations.

Additionally, any of our debt or preferred shares that are subject to variable interest rates, either as an obligation with a variable 
interest rate or as an obligation with a fixed interest rate that resets into a variable interest rate in the future, are subject to interest 
rate risk.  Further, the value of any debt or preferred share that is subject to a fixed interest rate will be determined based on the 
prevailing interest rates and, accordingly, this type of debt or preferred share is also subject to interest rate risk. 

In addition, interest rates are at historically low levels in many jurisdictions. These rates may remain relatively low, but they may 
rise significantly at some point in the future, either gradually or abruptly. A sudden or unexpected increase in interest rates may cause 
certain market dislocations that could negatively impact our financial performance. Interest rate increases would also increase the 
amount of cash required to service our obligations and our earnings could be adversely impacted. 

i)  Human Capital 

Ineffective maintenance of our culture, or ineffective management of human capital could adversely impact our asset management 
business.

In all of our markets, we face competition in connection with the attraction and retention of qualified employees. Our ability to 
compete effectively in our businesses will depend upon our ability to attract new employees and retain and motivate our existing 
employees. If we are unable to attract and retain qualified employees this could limit our ability to compete successfully and 
achieve our business objectives, which could negatively impact our business, financial condition and results of operations. 

Our senior management team has a significant role in our success and oversees the execution of our value investing strategy. Our 
ability to retain and motivate our management team or attract suitable replacements should any members of our management team 
leave is dependent on, among other things, the competitive nature of the employment market and the career opportunities and 
compensation that we can offer. 

We may experience departures of key professionals in the future. We cannot predict the impact that any such departures will have 
on  our  ability  to  achieve  our  objectives,  and  such  departures  could  adversely  impact  our  financial  condition  and  cash  flow. 
Competition for the best human capital is intense and the loss of services from key members of the management team or a limitation 
in their availability could adversely impact our financial condition and cash flow. Furthermore, such a loss could be negatively 
perceived in the capital markets. Our human capital risks may be exacerbated by the fact that we do not maintain any key person 
insurance. 

Our senior management team possesses substantial experience and expertise and has strong business relationships with investors 
in our managed entities and other members of the business communities and industries in which we operate. As a result, the loss 
of these personnel could jeopardize our relationships with investors in our managed entities and other members of the business 
communities and industries in which we operate and result in the reduction of our assets under management or fewer investment 
opportunities. The conduct of our businesses and the execution of our strategy rely heavily on teamwork. Our continued ability 

      2016 ANNUAL REPORT     75

to respond promptly to opportunities and challenges as they arise depends on co-operation and co-ordination across our organization 
and our team-oriented management structure, which may not materialize in the way we expect. 

A portion of the workforce in some of our businesses is unionized. If we are unable to negotiate acceptable collective bargaining 
agreements with any of our unions, as existing agreements expire we could experience a work stoppage, which could result in a 
significant  disruption  to  the  affected  operations,  higher  ongoing  labour  costs  and  restrictions  on  our  ability  to  maximize  the 
efficiency of our operations, all of which could have an adverse effect on our financial results. 

j)  Tax 

Reassessments by tax authorities or changes in tax laws could create additional tax costs for us.

Our structure is based on prevailing taxation law and practice in the local jurisdictions in which we operate. Any change in tax 
policy, tax legislation (including in relation to taxation rates), the interpretation of tax policy or legislation or practice in these 
jurisdictions could adversely affect the return we earn on our investments, the level of capital available to be invested by us or 
our managed entities, and the willingness of investors to invest in our managed entities. This risk would include any reassessments 
by tax authorities on our tax returns if we were to incorrectly interpret or apply any tax policy, legislation or practice. 

Taxes and other constraints that would apply to our operating entities in such jurisdictions may not apply to local institutions or 
other parties such as state-owned enterprises, and such parties may therefore have a significantly lower effective cost of capital 
and a corresponding competitive advantage in pursuing acquisitions. There are a number of factors that could increase our effective 
tax rates, which would have a negative impact on our net income, including, but not limited to, changes in the valuation of our 
deferred tax assets and liabilities, and any reassessment of taxes by a taxation authority. 

Governments around the world are increasingly seeking to regulate multinational companies and their use of differential tax rates 
between jurisdictions. This effort includes a greater emphasis by various nations to co-ordinate and share information regarding 
companies and the taxes they pay. Governmental taxation policies and practices could adversely affect us and, depending on the 
nature of such policies and practices, could have a greater impact on us than on other companies. As a result of this increased 
focus on the use of tax planning by multinational companies, we could also face reputational risk as a result of negative media 
coverage of our tax planning or otherwise. 

The Corporation endeavours to be considered a “qualified foreign corporation” for U.S. federal income tax purposes and for the 
Corporation’s  dividends  to  therefore  be  considered  generally  eligible  for  “qualified  dividend”  treatment  in  the  U.S. Whether 
dividends paid by the Corporation will in fact be treated as “qualified dividends” for U.S. federal income tax purposes for a 
particular shareholder of the Corporation will depend on that shareholder’s specific circumstances, including, but not limited to, 
the shareholder’s holding period for shares of the Corporation on which dividends are received. The Corporation provides no 
assurances that any or all of its dividends paid to shareholders will be treated as “qualified dividends” for U.S. federal income tax 
purposes.

k)  Financial and Liquidity

Cash may not be available to meet our financial obligations when due or enable us to capitalize on investment opportunities when 
they arise.

We employ debt and other forms of leverage in the ordinary course of business to enhance returns to our investors and finance 
our operations. We attempt to match the profile of any leverage to the associated assets. We are therefore subject to the risks 
associated with debt financing and refinancing, including but not limited to the following: (i) our cash flow may be insufficient 
to meet required payments of principal and interest; (ii) payments of principal and interest on borrowings may leave us with 
insufficient cash resources to pay operating expenses and dividends; (iii) if we are unable to obtain committed debt financing for 
potential  acquisitions  or  can  only  obtain  debt  at  an  increased  interest  rate  or  on  unfavourable  terms,  we  may  have  difficulty 
completing acquisitions or may generate profits that are lower than would otherwise be the case; (iv) we may not be able to 
refinance indebtedness on our assets at maturity due to company and market factors such as the estimated cash flow produced by 
our assets, the value of our assets, liquidity in the debt markets, and/or financial, competitive, business and other factors; and (v) if 
we  are  able  to  refinance  our  assets,  the  terms  of  a  refinancing  may  not  be  as  favourable  as  the  original  terms  of  the  related 
indebtedness. If we are unable to refinance our indebtedness on acceptable terms, or at all, we may need to utilize available liquidity, 
which would reduce our ability to pursue new investment opportunities, or we may need to dispose of one or more of our assets 
on disadvantageous terms, or raise equity causing dilution to existing shareholders. Regulatory changes, including, for example, 
standards for banks under Basel, may also result in higher borrowing costs and reduced access to credit. 

The terms of our various credit agreements and other financing documents require us to comply with a number of customary 
financial and other covenants, such as maintaining debt service coverage and leverage ratios, adequate insurance coverage and 
certain credit ratings. These covenants may limit our flexibility in conducting our operations and breaches of these covenants 

76     BROOKFIELD ASSET MANAGEMENT

could result in defaults under the instruments governing the applicable indebtedness, even if we have satisfied and continue to 
satisfy our payment obligations. 

A large proportion of our capital is invested in physical assets and securities that can be hard to sell, especially if market conditions 
are poor. A lack of liquidity could limit our ability to vary our portfolio or assets promptly in response to changing economic or 
investment conditions. Additionally, if financial or operating difficulties of other owners result in distress sales, such sales could 
depress asset values in the markets in which we operate. The restrictions inherent in owning physical assets could reduce our 
ability to respond to changes in market conditions and could adversely affect the performance of our investments, our financial 
condition and results of operations. 

Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid or non-public investments, 
the fair values of such investments do not necessarily reflect the prices that would actually be obtained when such investments 
are realized. Realizations at values significantly lower than the values at which investments have been recorded would result in 
losses, a decline in asset management fees and the potential loss of carried interest and incentive fees. 

We enter into financing commitments in the normal course of business, which we may be required to fund. Additionally, in the 
ordinary course of business we guarantee the obligations of other entities that we manage and/or invest in. If we are required to 
fund these commitments and are unable to do so, this could result in damages being pursued against us or a loss of opportunity 
through default under contracts that are otherwise to our benefit. 

l)  Financial Reporting and Disclosures 

Deficiencies in our public company financial reporting and disclosures could adversely impact our reputation.

As we expand the size and scope of our business, there is a greater susceptibility that our financial reporting and other public 
disclosure documents may contain material misstatements and that the controls we maintain to attempt to ensure the complete 
accuracy of our public disclosures may fail to operate as intended. The occurrence of such events could adversely impact our 
reputation and financial condition.

Management  is  responsible  for  establishing  and  maintaining  adequate  internal  controls  over  financial  reporting  to  give  our 
stakeholders assurance regarding the reliability of our financial reporting and the preparation of financial statements for external 
purposes in accordance with international financial reporting standards. However, the process for establishing and maintaining 
adequate internal controls over financial reporting has inherent limitations, including the possibility of human error. Our internal 
controls over financial reporting may not prevent or detect misstatements in our financial disclosures on a timely basis, or at all. 
Some of these processes may be new for certain subsidiaries in our structure and may take time to be fully ingrained. 

Our disclosure controls and procedures are designed to provide assurance that information required to be disclosed by us in reports 
filed or submitted under Canadian, U.S. and Dutch securities laws is recorded, processed, summarized and reported within the 
time periods specified. Our policies and procedures governing disclosures may not ensure that all material information regarding 
us is disclosed in a proper and timely fashion, or that we will be successful in preventing the disclosure of material information 
to a single person or a limited group of people before such information is generally disseminated. 

m)  Geopolitical 

Political  instability,  changes  in  government  policy,  or  unfamiliar  cultural  factors  could  adversely  impact  the  value  of  our 
investments.

We make investments in businesses that are based outside of North America and we may pursue investments in unfamiliar markets, 
which may expose us to additional risks not typically associated with investing in North America. We may not properly adjust to 
the local culture and business practices in such markets, and there is the prospect that we may hire personnel or partner with local 
persons who might not comply with our culture and ethical business practices; either scenario could result in the failure of our 
initiatives in new markets and lead to financial losses for us and our managed entities. There are risks of political instability in 
several of our major markets from factors such as political conflict, income inequality, refugee migration, terrorism, the potential 
break-up of political-economic unions (or the departure of a union member) and political corruption; the materialization of one 
or more of these risks could negatively affect our financial performance. 

Any existing or new operations may be subject to significant political, economic and financial risks, which vary by country, and 
may include: (i) changes in government policies or personnel; (ii) changes in general economic conditions; (iii) restrictions on 
currency transfer or convertibility; (iv) changes in labour relations; (v) political instability and civil unrest; (vi) less developed or 
efficient  financial  markets  than  in  North America;  (vii)  the  absence  of  uniform  accounting,  auditing  and  financial  reporting 
standards, practices and disclosure requirements; (viii) less government supervision and regulation; (ix) a less developed legal or 
regulatory environment; (x) heightened exposure to corruption risk; (xi) political hostility to investments by foreign investors; 
(xii) less publicly available information in respect of companies in non-North American markets; (xiii) adversely higher or lower 

      2016 ANNUAL REPORT     77

rates of inflation; (xiv) higher transaction costs; (xv) difficulty in enforcing contractual obligations and expropriation or confiscation 
of assets; and (xvi) fewer investor protections. 

Unforeseen political events in markets where we own and operate assets and may look to for further growth of our businesses, 
such as the U.S. and European markets, may create economic uncertainty that has a negative impact on our financial performance. 
Such uncertainty could cause disruptions to our businesses, including affecting the business of and/or our relationships with our 
customers and suppliers, as well as altering the relationship among tariffs and currencies, including the value of the British pound 
and the Euro relative to the U.S. dollar. Disruptions and uncertainties could adversely affect our financial condition, operating 
results and cash flows. In addition, political outcomes in the markets in which we operate may also result in legal uncertainty and 
potentially divergent national laws and regulations, which can contribute to general economic uncertainty. Economic uncertainty 
impacting us and our managed entities could be exacerbated by near-term political events, including those in the U.S., Europe 
and elsewhere.

n)  Economic Conditions

Unfavourable  economic  conditions  or  changes  in  the  industries  in  which  we  operate  could  adversely  impact  our  financial 
performance.

We are exposed to local, regional, national and international economic conditions and other events and occurrences beyond our 
control, including, but not limited to, the following: credit and capital market volatility, business investment levels, government 
spending  levels,  consumer  spending  levels,  changes  in  laws,  rules  or  regulations,  trade  barriers,  commodity  prices,  currency 
exchange rates and controls, national and international political circumstances (including wars, terrorist acts or security operations), 
changes in interest rates, inflation rates, the rate and direction of economic growth, and general economic uncertainty. On a global 
basis, certain industries and sectors have created capacity that anticipated higher growth, which has caused depressed commodity 
prices and volatility across all markets, which may have a negative impact on our financial performance.

Unfavourable economic conditions could affect the jurisdictions in which our entities are formed and where we own assets and 
operate businesses, and may cause a reduction in: (i) securities prices; (ii) the liquidity of investments made by us and our managed 
entities; (iii) the value or performance of the investments made by us and our managed entities; and (iv) the ability of us and our 
managed entities to raise or deploy capital, each of which could adversely impact our financial condition. 

In general, a decline in economic conditions, either in the markets or industries in which we participate, or both, will result in 
downward pressure on our operating margins and asset values as a result of lower demand and increased price competition for 
the services and products that we provide. In particular, given the importance of the U.S. to our operations, an economic downturn 
in this market could have a significant adverse effect on our operating margins and asset values. 

Our private funds have a finite life that may require us to exit an investment made in a fund at an inopportune time. Volatility in 
the exit markets for these investments, increasing levels of capital required to finance companies to exit, and rising enterprise 
value thresholds to go public or complete a strategic sale can all contribute to the risk that we will not be able to exit a private 
fund investment successfully. We cannot always control the timing of our private fund investment exits or our realizations upon 
exit. 

If global economic conditions deteriorate, our investment performance could suffer, resulting in, for example, the payment of less 
or no carried interest to us. The payment of less or no carried interest to us could cause our cash flow from operations to decrease, 
which could materially adversely affect our liquidity position and the amount of cash we have on hand to conduct our operations. 
A reduction in our cash flow from operations could, in turn, require us to rely on other sources of cash (such as the capital markets 
which may not be available to us on acceptable terms, or debt and other forms of leverage). 

o)  Health, Safety and the Environment 

Inadequate or ineffective health and safety programs could result in injuries to employees or the public and, as with ineffective 
management of environmental and sustainability issues, could damage our reputation, adversely impact our financial performance 
and may lead to regulatory action.

The ownership and operation of our assets carry varying degrees of inherent risk or liability related to worker health and safety 
and the environment, including the risk of government imposed orders to remedy unsafe conditions and contaminated lands, and 
potential civil liability. Compliance with health, safety and environmental standards and the requirements set out in our licenses, 
permits and other approvals are material to our businesses. 

We have incurred and will continue to incur significant capital and operating expenditures to comply with health, safety and 
environmental standards, to obtain and comply with licenses, permits and other approvals, and to assess and manage potential 
liability exposure. Nevertheless, we may be unsuccessful in obtaining or maintaining an important license, permit or other approval 

78     BROOKFIELD ASSET MANAGEMENT

or become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health, 
safety and environmental matters, any of which could have a material adverse effect on us.

Health, safety and environmental laws and regulations can change rapidly and significantly and we may become subject to more 
stringent laws and regulations in the future. The occurrence of any adverse health and safety or environmental event, or any 
changes, additions to, or more rigorous enforcement of, health, safety and environmental standards, licenses, permits or other 
approvals could have a significant impact on our operations and/or result in material expenditures. 

As an owner and operator of real assets, we may become liable for the costs of removal and remediation of certain hazardous 
substances released or deposited on or in our properties, or at other locations regardless of whether or not we were responsible 
for the release or deposit of such hazardous materials. These costs could be significant and could reduce cash available for our 
businesses. The failure to remove or remediate such substances, if any, could adversely affect our ability to sell our assets or to 
borrow using these assets as collateral, and could potentially result in claims or other proceedings against us.

Certain of our businesses are involved in using, handling or transporting substances that are toxic, combustible or otherwise 
hazardous to the environment and may be in close proximity to environmentally sensitive areas or densely populated communities. 
If a leak, spill or other environmental incident occurred, it could result in substantial fines or penalties being imposed by regulatory 
authorities, revocation of licenses or permits required to operate the business or the imposition of more stringent conditions in 
those licenses or permits, or legal claims for compensation (including punitive damages) by affected stakeholders.

There is increasing stakeholder interest in environmental sustainability issues, including among the investors and potential investors 
in our managed entities. If we are unable to successfully manage our environmental sustainability compliance, this could have a 
negative impact on our ability to raise future public and private capital and could be detrimental to our economic value and the 
value of our managed entities.

p)  Catastrophic Event/Loss and Cyber Terrorism

Catastrophic events (or combination of events), such as earthquakes, tornadoes, floods, terrorism/sabotage, or fire, as well as 
deliberate cyber terrorism, could adversely impact our financial performance.

Our  assets  under  management could  be  exposed  to  effects  of  catastrophic  events,  such  as  severe  weather  conditions,  natural 
disasters, major accidents, acts of malicious destruction, sabotage or terrorism, which could adversely impact our operations. 

Ongoing changes to the physical climate in which we operate may have an impact on our businesses. Changes in weather patterns 
or extreme weather (such as floods, hurricanes and other storms) may impact hydrology and/or wind levels, thereby influencing 
power generation levels, affect other of our businesses or damage our assets. Further, rising sea levels could, in the future, affect 
the value of any low-lying coastal real assets that we may own or develop, result in the imposition of new property taxes, or 
increase property insurance rates. Climate change may also give rise to changes in regulations and consumer sentiment that could 
impact other areas of our operations. Climate change regulation at provincial or state, federal and international levels could have 
an adverse effect on our business, financial position, results of operations or cash flows. 

Our commercial office portfolio is concentrated in large metropolitan areas, some of which have been or may be perceived to be 
threatened by terrorist attacks. Furthermore, many of our properties consist of high-rise buildings, which may also be subject to 
this actual or perceived threat. The perceived threat of a terrorist attack could negatively impact our ability to lease office space 
in our real estate portfolio. Renewable power and infrastructure assets, such as roads, railways, power generation facilities and 
ports,  may  also  be  targeted  by  terrorist  organizations. Any  damage  or  business  interruption  costs  as  a  result  of  uninsured  or 
underinsured acts of terrorism could result in a material cost to us and could adversely affect our business, financial condition 
or results of operation. Adequate terrorism insurance may not be available at rates we believe are reasonable in the future. All of 
the risks indicated in this paragraph could be heightened by foreign policy decisions of the U.S. (where we have significant 
operations) and other influential countries or general geopolitical conditions. 

We rely on certain information technology systems which may be subject to cyber terrorism intended to obtain unauthorized access 
to our proprietary information, destroy data or disable, degrade or sabotage our systems, through the introduction of computer 
viruses, cyber attacks and other means, and could originate from a variety of sources including our own employees or unknown 
third parties. There can be no assurance that measures implemented to protect the integrity of our systems will provide adequate 
protection. If our information systems are compromised, we could suffer a disruption in one or more of our businesses. This could 
have a negative impact on our operating results and cash flows, or result in reputational damage. 

      2016 ANNUAL REPORT     79

q)  Dependence on Information Technology Systems 

The failure of our information technology systems could adversely impact our reputation and financial performance.

We operate in businesses that are dependent on information systems and technology. Our information systems and technology 
may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase from its current 
level, either of which could have a material adverse effect on us. 

We rely on third-party service providers to manage certain aspects of our business, including for certain information systems and 
technology, data processing systems, and the secure processing, storage and transmission of information. Any interruption or 
deterioration in the performance of these third parties or failures of their information systems and technology could impair the 
quality of our operations and could adversely affect our business and reputation.

r)  Litigation 

We and our affiliates may become involved in legal disputes in Canada, the U.S. and internationally that could adversely impact 
our financial performance and reputation.

In the normal course of our operations, we become involved in various legal actions, including claims relating to personal injury, 
property damage, property taxes, land rights and contract and other commercial disputes. The investment decisions we make in 
our asset management business and the activities of our investment professionals on behalf of the portfolio companies of our 
managed entities may subject us, our managed entities and our portfolio companies to the risk of third-party litigation. Further, 
we have significant operations in the U.S. which may, as a result of the prevalence of litigation in the U.S., be more susceptible 
to legal action than certain of our other operations. 

Management of our litigation matters is generally handled by legal counsel in the business unit most directly impacted by the 
litigation, and not by a centralized legal department. As a result, the management of litigation that we face may not always be 
appropriate or effective. 

The final outcome with respect to outstanding, pending or future litigation cannot be predicted with certainty, and the resolution 
of such actions may have an adverse effect on our financial position or results of our operations in a particular quarter or fiscal 
year. Any litigation may consume substantial amounts of our management’s time and attention, and that time and the devotion of 
these resources to litigation may, at times, be disproportionate to the amounts at stake in the litigation. Even if ultimately unsuccessful 
against us, any litigation has the potential to adversely affect our business, including by damaging our reputation.

s) 

Insurance

Losses not covered by insurance may be large, which could adversely impact our financial performance.

We carry various insurance policies on our assets. These policies contain policy specifications, limits and deductibles that may 
mean that such policies do not provide coverage or sufficient coverage against all potential material losses. We may also self-
insure a portion of certain of these risks, and therefore the company may not be able to recover from a third-party insurer in the 
event that the company, if it had asset insurance coverage from a third party, could make a claim for recovery. There are certain 
types of risk (generally of a catastrophic nature such as war or environmental contamination) which are either uninsurable or not 
economically insurable. Further, there are certain types of risk for which insurance coverage is not equal to the full replacement 
cost of the insured assets. Should any uninsured or underinsured loss occur, we could lose our investment in, and anticipated 
profits and cash flows from, one or more of our assets or operations. 

We also carry directors and officers liability insurance, or D&O insurance, for losses or advancement of defense costs in the event 
a legal action is brought against the company’s directors, officers or employees for alleged wrongful acts in their capacity as 
directors, officers or employees. Our D&O insurance contains certain customary exclusions that may make it unavailable for the 
company in the event it is needed; and in any case our D&O insurance may not be adequate to fully protect the company against 
liability for the conduct of its directors, officers or employees. We may also self-insure a portion of our D&O insurance, and 
therefore the company may not be able to recover from a third-party insurer in the event that the company, if it had D&O insurance 
from a third-party insurer, could make a claim for recovery. 

For economic efficiency and other reasons, the Corporation and its affiliates may enter into insurance policies as a group which 
are intended to provide coverage for the entire group. Since they are group policies, any payments under a policy could have a 
negative impact on other entities covered under the policy since they may not be able to access adequate insurance in the event it 
is needed. While management attempts to design coverage limits under group policies to ensure that all entities covered under a 
policy have access to sufficient insurance coverage, there are no guarantees that these efforts will be effective in obtaining this 
result.

80     BROOKFIELD ASSET MANAGEMENT

t)  Credit 

Inability to collect amounts owing to us could adversely impact financial performance.

Third parties may not fulfill their payment obligations to us, which could include money, securities or other assets, thereby impacting 
our  operations  and  financial  results.  These  parties  include  deal  and  trading  counterparties,  governmental  agencies,  portfolio 
company customers and financial intermediaries. Third parties may default on their obligations to us due to bankruptcy, lack of 
liquidity, operational failure or other reasons. 

We have business lines whose model is to earn investment returns by loaning money to distressed companies, either privately or 
via an investment in publicly traded debt securities. As a result, we actively take heightened credit risk in other entities from time 
to time and whether we realize satisfactory investment returns on these loans is uncertain and may be beyond our control. If some 
of these debt investments fail, our financial performance could be negatively impacted. 

Investors in our private funds make capital commitments to these vehicles through the execution of subscription agreements. 
When a private fund makes an investment, these capital commitments are then satisfied by our investors via capital contributions. 
Investors in our private funds may default on their capital commitment obligations, which could have an adverse impact on our 
earnings or result in other negative implications to our businesses such as the requirement to redeploy our own capital to cover 
such obligations.

u)  Property 

We face risks specific to our property activities.

We  invest  in  commercial  properties  and  are  therefore  exposed  to  certain  risks  inherent  in  the  commercial  property  business. 
Commercial property investments are subject to varying degrees of risk depending on the nature of the property. These risks 
include changes in general economic conditions (such as the availability and cost of mortgage capital), local conditions (such as 
an oversupply of space or a reduction in demand for real estate in the markets in which we operate), the attractiveness of the 
properties to tenants, competition from other landlords and our ability to provide adequate maintenance at an economical cost. 

Certain expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must 
be made whether or not a property is producing sufficient income to service these expenses. Our commercial properties are typically 
subject to mortgages which require debt service payments. If we become unable or unwilling to meet mortgage payments on any 
property, losses could be sustained as a result of the mortgagee’s exercise of its rights of foreclosure or of sale. 

Continuation of rental income is dependent on favourable leasing markets to ensure expiring leases are renewed and new tenants 
are found promptly to fill vacancies. It is possible that we may face a disproportionate amount of space expiring in any one year. 
Additionally, rental rates could decline, tenant bankruptcies could increase and tenant renewals may not be achieved, particularly 
in the event of an economic slowdown. 

Our retail property operations are susceptible to any economic factors that have a negative impact on consumer spending. Lower 
consumer spending would have an unfavourable effect on the sales of our retail tenants, which could result in their inability or 
unwillingness to make all payments owing to us, and on our ability to keep existing tenants and attract new tenants. Significant 
expenditures  associated  with  each  equity  investment  in  real  estate  assets,  such  as  mortgage  payments,  property  taxes  and 
maintenance costs, are generally not reduced when there is a reduction in income from the investment, so our income and cash 
flow would be adversely affected by a decline in income from our retail properties. In addition, low occupancy or sales at our 
retail properties, as a result of competition or otherwise, could result in termination of or reduced rent payable under certain of 
our retail leases, which could adversely affect our retail property revenues. 

Our hospitality and multifamily business are subject to a range of operating risks common to these industries. The profitability of 
our investments in these industries may be adversely affected by a number of factors, many of which are outside our control. For 
example,  our  hospitality  business  faces  risks  relating  to  hurricanes,  earthquakes,  tsunamis,  and  other  natural  and  man-made 
disasters,  the  potential  spread  of  contagious  diseases  such  as  the  Zika  virus,  and  insect  infestations  more  common  to  rental 
accommodations. Such factors could limit or reduce the demand for or the prices our hospitality properties are able to obtain for 
their accommodations, or could increase our costs and therefore reduce the profitability of our hospitality businesses. There are 
numerous housing alternatives which compete with our multifamily properties, including other multifamily properties as well as 
condominiums and single family homes. This competitive environment could have a material adverse effect on our ability to lease 
apartment homes at our present properties or any newly developed or acquired property, as well as on the rents realized. 

      2016 ANNUAL REPORT     81

v)  Renewable Power

We face risks specific to our renewable power activities.

Our renewable power operations are subject to changes in the weather, hydrology and price, but also include risks related to 
equipment or dam failure, counterparty performance, water rental costs, land rental costs, changes in regulatory requirements and 
other material disruptions. 

The revenues generated by our power facilities are correlated to the amount of electricity generated, which in turn is dependent 
upon available water flows, wind and other elements beyond our control. Hydrology and wind levels vary naturally from year to 
year and may also change permanently because of climate change or other factors. It is therefore possible that low water and wind 
levels at certain of our power generating operations could occur at any time and potentially continue for indefinite periods. 

A  significant  portion  of  our  renewable  power  revenue  is  tied,  either  directly  or  indirectly,  to  the  wholesale  market  price  for 
electricity, which is impacted by a number of external factors beyond our control. Additionally, a significant portion of the power 
we generate is sold under long-term power purchase agreements, shorter-term financial instruments and physical electricity and 
natural gas contracts, some or all of which may be above market. These contracts are intended to mitigate the impact of fluctuations 
in wholesale electricity prices; however, they may not be effective in achieving this outcome. 

In our renewable power operations there is a risk of equipment failure due to wear and tear, latent defect, design error or operator 
error, among other things. The occurrence of such failures could result in a loss of generating capacity and repairing such failures 
could require the expenditure of significant capital and other resources. Failures could also result in exposure to significant liability 
for damages due to harm to the environment, to the public generally or to specific third parties. 

In certain cases, some catastrophic events may not excuse us from performing our obligations pursuant to agreements with third 
parties and we may be liable for damages or suffer further losses as a result. 

w)  Infrastructure

We face risks specific to our infrastructure activities.

Our  infrastructure  operations  include  utilities,  transport,  energy,  communications  infrastructure,  timberlands  and  agriculture 
operations. Our infrastructure assets include toll roads, telecommunication towers, electricity transmission systems, coal terminal 
operations,  electricity  and  gas  distribution  companies,  rail  networks  and  ports.  The  principal  risks  facing  the  regulated  and 
unregulated businesses comprising our infrastructure operations relate to government regulation, general economic conditions 
and other material disruptions, counterparty performance, capital expenditure requirements and land use. 

Many of our infrastructure operations are subject to forms of economic regulation, including with respect to revenues. If any of 
the respective regulators in the jurisdictions in which we operate decide to change the tolls or rates we are allowed to charge, or 
the amounts of the provisions we are allowed to collect, we may not be able to earn the rate of return on our investments that we 
had planned or we may not be able to recover our initial cost. 

General economic conditions affect international demand for the commodities handled and services provided by our infrastructure 
operations and the goods produced and sold by our timberlands and agriculture businesses. A downturn in the economy generally, 
or specific to any of our infrastructure businesses, may lead to bankruptcies or liquidations of one or more large customers, which 
could reduce our revenues, increase our bad debt expense, reduce our ability to make capital expenditures or have other adverse 
effects on us. 

Some of our infrastructure operations have customer contracts as well as concession agreements in place with public and private 
sector clients. Our operations with customer contracts could be adversely affected by any material change in the assets, financial 
condition or results of operations of such customers. Protecting the quality of our revenue streams through the inclusion of take-
or-pay or guaranteed minimum volume provisions into our contracts, is not always possible or fully effective. 

Our infrastructure operations may require substantial capital expenditures to maintain our asset base. Any failure to make necessary 
expenditures to maintain our operations could impair our ability to serve existing customers or accommodate increased volumes. 
In addition, we may not be able to recover investments in capital expenditures based upon the rates our operations are able to 
charge. 

82     BROOKFIELD ASSET MANAGEMENT

x)  Private Equity

We face risks specific to our private equity activities.

The principal risks for our private equity businesses are potential loss of invested capital as well as insufficient investment or fee 
income to cover operating expenses and cost of capital. In addition, these investments are typically illiquid and may be difficult 
to monetize, limiting our flexibility to react to changing economic or investment conditions. 

Unfavourable economic conditions could have a significant adverse impact on the ability of investee companies to repay debt and 
on the value of our equity investments and the level of income that they generate. Even with our support, adverse economic or 
business conditions facing our investee companies may adversely impact the value of our investments or deplete our financial 
or management resources. These investments are also subject to the risks inherent in the underlying businesses, some of which 
are facing difficult business conditions and may continue to do so for the foreseeable future. 

Our private equity funds may invest in companies that are experiencing significant financial or business difficulties, including 
companies  involved  in  work-outs,  liquidations,  spin-offs,  reorganizations,  bankruptcies  and  similar  transactions.  Such  an 
investment entails the risk that the transaction in which the business is involved will be unsuccessful, will take considerable time 
or will result in a distribution of cash or new securities the value of which may be less than the purchase price of the securities or 
other financial instruments in respect of which such distribution is received. In addition, if an anticipated transaction does not 
occur, the private equity business may be required to sell its investment at a loss. Investments in some of the businesses we target 
may become subject to legal and/or regulatory proceedings and therefore our investment may be adversely affected by external 
events beyond our control. 

Our private equity businesses include industrial operations that are substantially dependent upon the prices we receive for the 
resources we produce. Those prices depend on factors beyond our control, and commodity price declines can have a significant 
negative  impact  on  these  operations.  Sustained  depressed  levels  or  future  declines  of  the  price  of  resources  such  as  oil,  gas, 
limestone and palladium and other metals may adversely affect our operating results and cash flows.

We have several companies that operate in the highly competitive service industry. The revenues and profitability of these companies 
are largely dependent on the awarding of new contracts, which may not materialize, and they face uncertainty related to contract 
award timing. A wide variety of micro and macroeconomic factors affecting our clients and over which we have no control can 
impact whether and when these companies receive new contracts. In our construction business, the ability of the private or public 
sector to fund projects could adversely affect the awarding or timing of new contracts and margins. If an expected contract award 
is delayed or not received, or if an ongoing contract is cancelled, our construction business could incur significant costs.

y)  Residential Development

We face risks specific to our residential development activities.

Our residential homebuilding and land development operations are cyclical and significantly affected by changes in general and 
local economic and industry conditions, such as consumer confidence, employment levels, availability of financing for homebuyers, 
household debt, levels of new and existing homes for sale, demographic trends and housing demand. Competition from rental 
properties and resale homes, including homes held for sale by investors and foreclosed homes, may reduce our ability to sell new 
homes, depress prices and reduce margins for the sale of new homes. 

Virtually all of our homebuilding customers finance their home acquisitions through mortgages. Even if potential customers do 
not need financing, changes in interest rates or the unavailability of mortgage capital could make it harder for them to sell their 
homes to potential buyers who need financing, resulting in a reduced demand for new homes. Rising mortgage rates or reduced 
mortgage availability could adversely affect our ability to sell new homes and the prices at which we can sell them. 

We hold land for future development and may in the future acquire additional land holdings. The risks inherent in purchasing, 
owning and developing land increase as the demand for new homes decreases. Real estate markets are highly uncertain and the 
value of undeveloped land has fluctuated significantly and may continue to fluctuate. In addition, land carrying costs can be 
significant and can result in losses or reduced profitability. As a result, we hold certain land, and may acquire additional land, in 
our development pipeline at a cost we may not be able to fully recover or at a cost which precludes profitable development. 

      2016 ANNUAL REPORT     83

PART 6 – ADDITIONAL INFORMATION

ACCOUNTING POLICIES AND INTERNAL CONTROLS

Accounting Policies, Judgments and Estimates

The preparation of financial statements requires management to select appropriate accounting policies and to make judgments 
and estimates that affect the carried amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date 
of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual 
amounts could differ from those estimates.

In  making  judgments  and  estimates,  management  relies  on  external  information  and  observable  conditions,  where  possible, 
supplemented by internal analysis as required. These estimates have been applied in a manner consistent with that in the prior 
year and there are no known trends, commitments, events or uncertainties that we believe will materially affect the methodology 
or assumptions utilized in this report.

For further reference on accounting policies, judgments and estimates, see our significant accounting policies contained in Note 2 
of the December 31, 2016 consolidated financial statements.

i.  Estimates 

The significant estimates used in determining the recorded amount for assets and liabilities in the consolidated financial statements 
include the following: 

a. 

Investment Properties 

The assumptions and estimates used when determining the fair value of commercial properties include: the timing of rental income 
from future leases reflecting current market conditions, less assumptions of future cash costs in respect of current and future leases; 
maintenance and other capital expenditures; discount rates; terminal capitalization rates; and terminal valuation dates. Properties 
under development are recorded at fair value using a discounted cash flow model which includes estimates in respect of the timing 
and cost to complete the development. 

b.  Revaluation Method for Property, Plant and Equipment 

When  determining  the  carrying  value  of  property,  plant  and  equipment  using  the  revaluation  method,  the  company  uses  the 
following assumptions and estimates: the timing of forecasted revenues; future sales prices and associated expenses; future sales 
volumes; future regulatory rates; maintenance and other capital expenditures; discount rates; terminal capitalization rates; terminal 
valuation  dates;  useful  lives;  and  residual  values.  Determination  of  the  fair  value  of  property,  plant  and  equipment  under 
development includes estimates in respect of the timing and cost to complete the development. 

c.  Sustainable Resources 

The  fair  value  of  standing  timber  and  agricultural  assets  is  based  on  the  following  estimates  and  assumptions:  the  timing  of 
forecasted revenues and prices; estimated selling costs; sustainable felling plans; growth assumptions; silviculture costs; discount 
rates; terminal capitalization rates; and terminal valuation dates. 

d.  Financial Instruments 

Estimates and assumptions used in determining the fair value of financial instruments are: equity and commodity prices; future 
interest rates; the credit worthiness of the company relative to its counterparties; the credit risk of the company’s counterparties; 
estimated future cash flows; the amount of the liability and equity components of compound financial instruments; discount rates 
and volatility utilized in option valuations. 

e. 

Inventory 

The company estimates the net realizable value of its inventory using estimates and assumptions about future selling prices and 
future development costs. 

f. 

Inventory and Other 

Other estimates and assumptions utilized in the preparation of the company’s consolidated financial statements are: the assessment 
or determination of net recoverable amount; including oil and gas reserves; depreciation and amortization rates and useful lives; 
estimation of recoverable amounts of cash-generating units for impairment assessments of goodwill and intangible assets; ability 
to  utilize  tax  losses  and  other  tax  measurements;  fair  value  of  assets  held  as  collateral  and  the  percentage  of  completion  for 
construction contracts. 

84     BROOKFIELD ASSET MANAGEMENT

ii.  Judgments 

Management is required to make critical judgments when applying its accounting policies. The following judgments have the 
most significant effect on the consolidated financial statements:

a.  Control or Level of Influence 

When determining the appropriate basis of accounting for the company’s investees, the company makes judgments about the 
degree of influence that the company exerts directly or through an arrangement over the investees’ relevant activities. This may 
include the ability to elect investee directors or appoint management. Control is obtained when the company has the power to 
direct the relevant investing, financing and operating decisions of an entity and does so in its capacity as principal of the operations, 
rather than as an agent for other investors. Operating as a principal includes having sufficient capital at risk in any investee and 
exposure to the variability of the returns generated by the decisions of the company as principal. Judgment is used in determining 
the sufficiency of the capital at risk or variability of returns. In making these judgments, the company considers the ability of other 
investors to remove the company as a manager or general partner in a controlled partnership. 

b. 

Investment Properties 

When applying the company’s accounting policy for investment properties, judgment is applied in determining whether certain 
costs are additions to the carrying amount of the property and, for properties under development, identifying the point at which 
practical completion of the property occurs and identifying the directly attributable borrowing costs to be included in the carrying 
value of the development property. 

c.  Property, Plant and Equipment 

The company’s accounting policy for its property, plant and equipment requires critical judgments over the assessment of its 
carrying value, whether certain costs are additions to the carrying amount of the property, plant and equipment as opposed to 
repairs and maintenance, and for assets under development the identification of when the asset is capable of being used as intended 
and identifying the directly attributable borrowing costs to be included in the asset’s carrying value. 

For assets that are measured using the revaluation method, judgment is required when estimating future prices, volumes and 
discount and capitalization rates. Judgment is applied when determining future electricity prices considering market data for years 
that a liquid market is available and estimates of electricity prices from renewable sources that would allow new entrants into the 
market in subsequent years. 

d.  Common Control Transactions 

The purchase and sale of businesses or subsidiaries between entities under common control are not specifically addressed in the 
IFRS  and  accordingly,  management  uses  judgment  when  determining  a  policy  to  account  for  such  transactions  taking  into 
consideration other guidance in the IFRS framework and pronouncements of other standard-setting bodies. The company’s policy 
is to record assets and liabilities recognized as a result of transfers of businesses or subsidiaries between entities under common 
control at carrying value. Differences between the carrying amount of the consideration given or received and the carrying amount 
of the assets and liabilities transferred are recorded directly in equity. 

e. 

Indicators of Impairment 

Judgment is applied when determining whether indicators of impairment exist when assessing the carrying values of the company’s 
assets, including: the determination of the company’s ability to hold financial assets; the estimation of a cash-generating unit’s 
future revenues and direct costs; and the determination of discount and capitalization rates, and when an asset’s carrying value is 
above the value derived using publicly traded prices which are quoted in a liquid market. 

f. 

Income Taxes 

The company makes judgments when determining the future tax rates applicable to subsidiaries and identifying the temporary 
difference that relate to each subsidiary. Deferred income tax assets and liabilities are measured at the tax rates that are expected 
to apply during the period when the assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively 
enacted at the consolidated balance sheet dates. The company measures deferred income taxes associated with its investment 
properties based on its specific intention with respect to each asset at the end of the reporting period. Where the company has a 
specific intention to sell a property in the foreseeable future, deferred taxes on the building portion of an investment property are 
measured based on the tax consequences following from the disposition of the property. Otherwise, deferred taxes are measured 
on the basis the carrying value of the investment property will be recovered substantially through use. 

      2016 ANNUAL REPORT     85

g.  Classification of Non-Controlling Interests in Limited-Life Funds 

Non-controlling interests in limited-life funds are classified as liabilities (interests of others in consolidated funds) or equity (non-
controlling interests) depending on whether an obligation exists to distribute residual net assets to non-controlling interests on 
liquidation in the form of cash or other financial assets or assets delivered in kind. Judgment is required to determine what the 
governing documents of each entity require or permit in this regard. 

h.  Other 

Other critical judgments include the determination of effectiveness of financial hedges for accounting purposes; the likelihood 
and timing of anticipated transactions for hedge accounting and the determination of functional currency.

Adoption of Accounting Standards

The company has applied new and revised standards issued by the IASB that are effective for the period beginning on or after 
January 1, 2016 as follows:

Property, Plant and Equipment and Intangible Assets

IAS 16 Property, Plant and Equipment (“IAS 16”) and IAS 38 Intangible Assets (“IAS 38”) were amended to clarify the appropriate 
method of amortization for intangible assets. Amendments to IAS 16 prohibit entities from using a revenue-based depreciation 
method for items of property, plant, and equipment; the amendments to IAS 38 introduces a rebuttable presumption that revenue 
is not an appropriate basis for amortization of an intangible asset, with only limited circumstances where the presumption can be 
rebutted. The company adopted the amendments to IAS 16 and IAS 38 on January 1, 2016, on a prospective basis, the adoption 
did not have a significant impact on the company’s consolidated financial statements.

Investments in Associates and Joint Ventures

The amendments to IFRS 10 Consolidated Financial Statements (“IFRS 10”), and IAS 28 Investments in Associates and Joint 
Ventures (2011) (“IAS 28”) address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, 
in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments are 
effective for transactions occurring in annual periods beginning on or after January 1, 2016 with earlier application permitted. The 
impacts of the amendments to IFRS 10 and IAS 28 on the consolidated financial statements are not significant.

Future Changes in Accounting Standards

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. This standard supersedes IAS 18 Revenue, IAS 11 Construction Contracts
and a number of revenue-related interpretations. Application of the Standard is mandatory and it applies to nearly all contracts 
with customers: the main exceptions are leases, financial instruments and insurance contracts. The IASB has tentatively deferred 
mandatory adoption of IFRS 15 until periods beginning on or after January 1, 2018 with early application permitted. The company 
is in the process to determine the impact of IFRS 15 on its consolidated financial statements.

Financial Instruments

In July 2014, the IASB issued the final publication of IFRS 9 Financial Instruments (“IFRS 9”), superseding IAS 39 Financial 
Instruments. 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 risk management. It does not fully change the types of hedging relationships or the requirement to 
measure and recognize ineffectiveness, however, it will allow more hedging strategies that are used for risk management to qualify 
for  hedge  accounting  and  introduce  more  judgment  to  assess  the  effectiveness  of  a  hedging  relationship. The  standard  has  a 
mandatory effective date for annual periods beginning on or after January 1, 2018 with early adoption permitted. The company 
has not yet determined the impact of IFRS 9 on its consolidated financial statements.

Leases

In January 2016, the IASB published a new standard – IFRS 16 Leases (“IFRS 16”). The new standard brings most leases on 
balance sheets, 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, with earlier adoption permitted if IFRS 15 has 
also been applied. The company has not yet determined the impact of IFRS 16 on its consolidated financial statements.

86     BROOKFIELD ASSET MANAGEMENT

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. Since the 
amendments are being issued less than one year before the effective date, the company is not required to provide comparative 
information  when  it  first  applies  the  amendments.  The  company  has  not  yet  determined  the  impact  of  amendments  on  its 
consolidated financial statements.

Income Taxes

The amendment to IAS 12, Income Taxes (“IAS 12”) clarifies the following aspects: (i) unrealized losses on debt instruments 
measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether 
the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use; (ii) the carrying 
amount of an asset does not limit the estimation of probable future taxable profits; (iii) estimates for future taxable profits exclude 
tax deductions  resulting from  the reversal of  deductible temporary differences; (iv) an  entity assesses  a  deferred  tax asset in 
combination with other deferred tax assets. The amendment to IAS 12 is effective for annual periods beginning January 1, 2017. 
The amendment will not have any significant impact to the consolidated financial statements of the company.

Foreign Currency Transactions and Advance Consideration

IFRIC 22, Foreign Currency Transactions and Advance Consideration (“IFRIC 22”) clarifies that the date of foreign currency 
transactions for purposes 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 is effective for periods beginning on or after January 1, 2018 and 
may  be  applied  either  retrospectively  or  prospectively.  The  company  has  not  yet  determined  the  impact  of  IFRIC  22  to  its 
consolidated financial statements.

Assessment and Changes in Internal Control Over Financial Reporting 

Management has evaluated the effectiveness of the company’s internal control over financial reporting as of December 31, 2016
and based on that assessment concluded that, as of December 31, 2016, our internal control over financial reporting was effective. 
Refer to Management’s Report on Internal Control Over Financial Reporting. There have been no changes in our internal control 
over  financial  reporting  during  the  year  ended  December 31,  2016  that  have  materially  affected,  or  are  reasonably  likely  to 
materially affect, our internal control over financial reporting.

Disclosure Controls and Procedures 

Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure 
controls and procedures (as defined in the applicable U.S. and Canadian securities laws) as of December 31, 2016. Based on that 
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures were 
effective as of December 31, 2016 in providing reasonable assurance that material information relating to the company and our 
consolidated subsidiaries would be made known to them by others within those entities. 

Declarations Under the Dutch Act of Financial Supervision

The members of the Corporate Executive Board, as defined in the Dutch Act of Financial Supervision (“Dutch Act”), as required 
by section 5:25c, paragraph 2, under c of the Dutch Act confirm that to the best of their knowledge: 

• 

• 

The 2016 consolidated financial statements accompanied by this MD&A give a true and fair view of the assets, liabilities, 
financial position, and profit or loss of the company and the undertakings included in the consolidated financial statements 
taken as whole; and

The management report included in this MD&A gives a true and fair review of the information required under the Dutch Act 
regarding  the  company  and  the  undertakings  included  in  the  consolidated  financial  statements  taken  as  a  whole  as  of 
December 31, 2016, and of the development and performance of the business for the financial year then ended.

      2016 ANNUAL REPORT     87

RELATED PARTY TRANSACTIONS 

In the normal course of operations, we enter into transactions on market terms with related parties, including consolidated and 
equity accounted entities, which have been measured at exchange value and are recognized in the consolidated financial statements, 
including,  but  not  limited  to:  manager  or  partnership  agreements;  base  management  fees,  performance  fees  and  incentive 
distributions; loans, interest and non-interest bearing deposits; power purchase and sale agreements; capital commitments to private 
funds; the acquisition and disposition of assets and businesses; derivative contracts; and the construction and development of 
assets. 

The following is a list of significant related party transactions of the Corporation during the years ended December 31, 2016 and 
December 31, 2015: 

In connection with our newly launched open-ended real estate fund, BPY contributed certain operating buildings and development 
projects for net proceeds of approximately $500 million, which was received in the form of cash and limited partner interest in 
the fund. The company is the general partner of the fund and will earn fees for the management of this fund. This fund is equity 
accounted for in the consolidated financial statements of the company. 

In April 2015, the Corporation issued 32.9 million Class A shares. Current officers, directors and shareholders of Brookfield, and 
entities controlled by them, purchased an aggregate of 2.1 million Class A shares as part of this issuance. The aggregate gross 
proceeds of the issuance was $1.2 billion.                     

88     BROOKFIELD ASSET MANAGEMENT

INTERNAL CONTROL OVER FINANCIAL REPORTING 

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 

Management of Brookfield Asset Management Inc. (Brookfield) is responsible for establishing and maintaining adequate internal 
control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the 
Chief Executive Officer and the Chief Financial Officer and effected by the Board of Directors, management and other personnel 
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for 
external  purposes  in  accordance  with  International  Financial  Reporting  Standards  as  issued  by  the  International Accounting 
Standards Board as defined in Regulation 240.13a-15(f) or 240.15d-15(f). 

Management assessed the effectiveness of Brookfield’s internal control over financial reporting as of December 31, 2016, based 
on the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations 
of the Treadway Commission. Based on this assessment, management concludes that, as of December 31, 2016, Brookfield’s 
internal control over financial reporting is effective. Management excluded from its design and assessment of internal control over 
financial reporting for Rouse, IFC Seoul, Simply Storage, City Point, U.K. Student Housing, Isagen, Holtwood, Rutas de Lima, 
Niska and Linx which were acquired during 2016, and whose total assets, net assets, revenues and net income on a combined 
basis constitute approximately 11%, 12%, 6% and 4%, respectively, of the consolidated financial statement amounts as of and for 
the year ended December 31, 2016. 

Brookfield’s internal control over financial reporting as of December 31, 2016, has been audited by Deloitte LLP, the Independent 
Registered  Public  Accounting  Firm,  who  also  audited  Brookfield’s  consolidated  financial  statements  for  the  year  ended 
December 31,  2016. As  stated  in  the  Report  of  Independent  Registered  Public Accounting  Firm,  Deloitte  LLP  expressed  an 
unqualified opinion on the effectiveness of Brookfield’s internal control over financial reporting as of December 31, 2016. 

J. Bruce Flatt
Chief Executive Officer

Brian D. Lawson
Chief Financial Officer

March 31, 2017
Toronto, Canada 

      2016 ANNUAL REPORT     89

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors and Shareholders of Brookfield Asset Management Inc.

We  have  audited  the  internal  control  over  financial  reporting  of  Brookfield  Asset  Management  Inc.  and  subsidiaries  (the 
"Company") as of December 31, 2016, based on the criteria established in Internal Control-Integrated Framework (2013) issued 
by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal 
Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Rouse, 
IFC Seoul, Simply Storage, City Point, UK Student Housing, Isagen, Holtwood, Rutas de Lima, Niska and Linx, which were 
acquired during 2016 and whose total assets, net assets, revenues and net income on a combined basis constitute approximately 
11%, 12%, 6% and 4%, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 
2016. Accordingly, our audit did not include the internal control over financial reporting at Rouse, IFC Seoul, Simply Storage, 
City Point, UK Student Housing, Isagen, Holtwood, Rutas de Lima, Niska and Linx. The Company’s management is responsible 
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control 
over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our 
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control 
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control 
over  financial  reporting,  assessing  the  risk  that  a  material  weakness  exists,  testing  and  evaluating  the  design  and  operating 
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in 
the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal 
executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, 
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation 
of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the 
International Accounting  Standards  Board. A  company’s  internal  control  over  financial  reporting  includes  those  policies  and 
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions 
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to 
permit  preparation  of  financial  statements  in  accordance  with  International  Financial  Reporting  Standards  as  issued  by  the 
International Accounting Standards Board, and that receipts and expenditures of the company are being made only in accordance 
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or 
timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the 
financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper 
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. 
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject 
to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the 
policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 
31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring 
Organizations of the Treadway Commission.

We have also audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company 
Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 
2016  of  the  Company  and  our  report  dated  March 31,  2017  expressed  an  unmodified/unqualified  opinion  on  those  financial 
statements.

Chartered Professional Accountants 
Licensed Public Accountants 

March 31, 2017
Toronto, Canada 

90     BROOKFIELD ASSET MANAGEMENT

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS 

The accompanying consolidated financial statements and other financial information in this Annual Report have been prepared 
by  the  company’s  management  which  is  responsible  for  their  integrity,  consistency,  objectivity  and  reliability. To  fulfill  this 
responsibility, the company maintains policies, procedures and systems of internal control to ensure that its reporting practices 
and accounting and administrative procedures are appropriate to provide a high degree of assurance that is relevant and reliable 
financial information is produced and assets are safeguarded. These controls include the careful selection and training of employees, 
the establishment of well-defined areas of responsibility and accountability for performance, and the communication of policies 
and code of conduct throughout the company. In addition, the company maintains an internal audit group that conducts periodic 
audits of the company’s operations. The Chief Internal Auditor has full access to the Audit Committee. 

These consolidated financial statements have been prepared in conformity with International Financial Reporting Standards as 
issued by the International Accounting Standards Board and, where appropriate, reflect estimates based on management’s judgment. 
The financial information presented throughout this Annual Report is generally consistent with the information contained in the 
accompanying consolidated financial statements. 

Deloitte LLP, the Independent Registered Public Accounting Firm appointed by the shareholders, have audited the consolidated 
financial statements set out on pages 93 through 168 in accordance with Canadian generally accepted auditing standards and the 
standards of the Public Company Accounting Oversight Board (United States) to enable them to express to the board of directors 
and shareholders their opinion on the consolidated financial statements. Their report is set out on the following page. 

The consolidated financial statements have been further reviewed and approved by the Board of Directors acting through its Audit 
Committee, which is comprised of directors who are neither officers nor employees of the company. The Audit Committee, which 
meets  with  the  auditors  and  management  to  review  the  activities  of  each  and  reports  to  the  Board  of  Directors,  oversees 
management’s responsibilities for the financial reporting and internal control systems. The auditors have full and direct access to 
the Audit Committee and meet periodically with the committee both with and without management present to discuss their audit 
and related findings. 

J. Bruce Flatt
Chief Executive Officer

Brian D. Lawson
Chief Financial Officer

March 31, 2017
Toronto, Canada 

      2016 ANNUAL REPORT     91

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors and Shareholders of Brookfield Asset Management Inc.

We have audited the accompanying consolidated financial statements of Brookfield Asset Management Inc. and subsidiaries (the 
“Company”),  which  comprise  the  consolidated  balance  sheets  as  at  December  31,  2016  and  December  31,  2015,  and  the 
consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of changes in 
equity, and consolidated statements of cash flows for the years then ended, and a summary of significant accounting policies and 
other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with 
International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal 
control as management determines is necessary to enable the preparation of consolidated financial statements that are free from 
material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits 
in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight 
Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain 
reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves 
performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The 
procedures  selected  depend  on  the  auditor’s  judgment,  including  the  assessment  of  the  risks  of  material  misstatement  of  the 
consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal 
control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit 
procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies 
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the 
consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit 
opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company 
as at December 31, 2016 and December 31, 2015, and their financial performance and their cash flows for the years then ended 
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Other Matter

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 
Company’s internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control 
– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our 
report dated March 31, 2017 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Chartered Professional Accountants 
Licensed Public Accountants 

March 31, 2017
Toronto, Canada 

92     BROOKFIELD ASSET MANAGEMENT

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

AS AT DEC. 31
(MILLIONS)
Assets

Note  

2016

Cash and cash equivalents.....................................................................................................

Other financial assets ............................................................................................................

Accounts receivable and other ..............................................................................................

Inventory ...............................................................................................................................

Assets classified as held for sale ...........................................................................................

Equity accounted investments...............................................................................................

Investment properties............................................................................................................

Property, plant and equipment ..............................................................................................

Intangible assets ....................................................................................................................

Goodwill ...............................................................................................................................

Deferred income tax assets ...................................................................................................

Total Assets..........................................................................................................................

Liabilities and Equity

Accounts payable and other ..................................................................................................

Liabilities associated with assets classified as held for sale .................................................

Corporate borrowings ...........................................................................................................

Non-recourse borrowings

Property-specific mortgages...............................................................................................

Subsidiary borrowings........................................................................................................

Deferred income tax liabilities..............................................................................................

Subsidiary equity obligations................................................................................................

Equity

Preferred equity ..................................................................................................................

Non-controlling interests....................................................................................................

Common equity ..................................................................................................................

Total equity.........................................................................................................................

6

6

7

8

9

10

11

12

13

14

15

16

9

17

18

18

15

19

21

21

21

$

4,299

$

4,700

9,133

5,349

432

24,977

54,172

45,346

6,073

3,783

1,562

2015

2,774

6,156

7,044

5,281

1,397

23,216

47,164

37,273

5,170

2,543

1,496

$

$

159,826

$

139,514

11,915

$

11,366

127

4,500

52,442

7,949

9,640

3,565

3,954

43,235

22,499

69,688

522

3,936

46,044

8,303

8,785

3,331

3,739

31,920

21,568

57,227

Total Liabilities and Equity................................................................................................

$

159,826

$

139,514

      2016 ANNUAL REPORT     93

 
Note  

2016

$

24,411

$

(17,718)

482

1,293

(3,233)

(92)

(130)

(2,020)

345

3,338

1,651

1,687

3,338

1.55

1.58

$

$

$

$

$

$

$

$

2015

19,913

(14,433)

145

1,695

(2,820)

(106)

2,166

(1,695)

(196)

4,669

2,341

2,328

4,669

2.26

2.32

CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE YEARS ENDED DEC. 31
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
Revenues ...............................................................................................................................

Direct costs............................................................................................................................

Other income and gains.........................................................................................................

22

23

Equity accounted income ......................................................................................................

10

Expenses

Interest ................................................................................................................................

Corporate costs ...................................................................................................................

Fair value changes.................................................................................................................

24

Depreciation and amortization ..............................................................................................

Income taxes .........................................................................................................................

15

Net income ............................................................................................................................

Net income attributable to:

Shareholders .......................................................................................................................

Non-controlling interests....................................................................................................

Net income per share:

Diluted ................................................................................................................................

Basic ...................................................................................................................................

21

21

94     BROOKFIELD ASSET MANAGEMENT

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Net income ............................................................................................................................

Note  

2016

$

3,338

$

2015

4,669

Other comprehensive income (loss)

Items that may be reclassified to net income

Financial contracts and power sale agreements .................................................................

Available-for-sale securities...............................................................................................

Equity accounted investments ............................................................................................

10

Foreign currency translation...............................................................................................

Income taxes.......................................................................................................................

15

Items that will not be reclassified to net income

Revaluations of property, plant and equipment..................................................................

Revaluation of pension obligations ....................................................................................

Equity accounted investments ............................................................................................

Income taxes.......................................................................................................................

16

10

15

Other comprehensive income (loss)......................................................................................

Comprehensive income.........................................................................................................

Attributable to:

Shareholders

Net income.......................................................................................................................

Other comprehensive income (loss) ................................................................................

Comprehensive income ...................................................................................................

Non-controlling interests

Net income.......................................................................................................................

Other comprehensive income (loss) ................................................................................

Comprehensive income ...................................................................................................

$

$

$

$

$

(113)

649

(52)

1,236

(60)

1,660

824

(40)

482

(113)

1,153

2,813

6,151

$

1,651

821

2,472

1,687

1,992

3,679

$

$

$

$

(22)

(485)

(33)

(3,461)

(31)

(4,032)

2,144

32

548

(417)

2,307

(1,725)

2,944

2,341

(780)

1,561

2,328

(945)

1,383

      2016 ANNUAL REPORT     95

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

Accumulated Other
Comprehensive Income

FOR THE
YEAR ENDED
DEC. 31, 2016
(MILLIONS)

Balance as at
December 31, 2015 ......

Changes in year:

Net income ...................

Other comprehensive
income..........................

Comprehensive income

Shareholder
distributions

Common equity........

Preferred equity........

Non-controlling
interests ....................

Other items

Equity issuances, net
of redemptions .........

Share-based
compensation ...........

Ownership changes ..

Total change in year.....

Balance as at
December 31, 2016 ......

Common
Share
Capital

Contributed
Surplus

Retained
Earnings

Ownership     
Changes1 

Revaluation
Surplus

Currency
Translation

Other
Reserves2

Common
Equity

Preferred
Equity

Non-
controlling
Interests

Total
Equity

$

4,378

$

192

$

11,045

$

1,500

$

6,787

$

(1,796)

$

(538)

$

21,568

$

3,739

$

31,920

$

57,227

—

—

—

—

—

—

12

—

—

12

—

—

—

—

—

—

1,651

—

1,651

(997)

(133)

—

(11)

(125)

53

—

42

(25)

74

445

—

—

—

—

—

—

—

—

—

157

157

—

—

—

—

—

(301)

(301)

(194)

(37)

—

405

405

54

—

—

—

—

81

540

—

259

259

2

—

—

—

—

(31)

230

1,651

821

2,472

(941)

(133)

—

(124)

28

(371)

931

—

—

—

—

—

—

215

—

—

215

1,687

1,992

3,679

441

—

3,338

2,813

6,151

(500)

(133)

(2,163)

(2,163)

7,649

7,740

7

1,702

11,315

35

1,331

12,461

$

4,390

$

234

$

11,490

$

1,199

$

6,750

$

(1,256)

$

(308)

$

22,499

$

3,954

$

43,235

$

69,688

1. 
2. 

Includes gains or losses on changes in ownership interests of consolidated subsidiaries
Includes available-for-sale securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated 
income taxes

Accumulated Other
Comprehensive Income

Common
Share
Capital

Contributed
Surplus

Retained
Earnings

Ownership
Changes1 

Revaluation
Surplus

Currency
Translation

Other
Reserves2

Common
Equity

Preferred
Equity

Non-
controlling
Interests

Total
Equity

$

3,031

$

185

$

9,702

$

1,979

$

6,133

$

(441)

$

(436)

$

20,153

$

3,549

$

29,545

$

53,247

—

—

—

—

—

—

—

—

—

—

—

—

2,341

—

2,341

(450)

(134)

—

1,347

(32)

(389)

—

—

39

—

7

(61)

36

1,343

—

—

—

—

—

—

—

—

(479)

(479)

—

631

631

—

—

—

—

—

23

—

—

2,341

(1,308)

(1,308)

(103)

(103)

(780)

1,561

—

—

—

—

—

(47)

—

—

—

—

—

1

(450)

(134)

—

926

(22)

(466)

654

(1,355)

(102)

1,415

—

—

—

—

—

—

190

—

—

190

2,328

4,669

(945)

1,383

(1,725)

2,944

—

—

(450)

(134)

(1,500)

(1,500)

2,371

3,487

19

102

2,375

(3)

(364)

3,980

Total change in year.....

1,347

Balance as at
December 31, 2015 ......

$

4,378

$

192

$

11,045

$

1,500

$

6,787

$

(1,796)

$

(538)

$

21,568

$

3,739

$

31,920

$

57,227

1. 
2. 

Includes gains or losses on changes in ownership interests of consolidated subsidiaries
Includes available-for-sale securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated 
income taxes

96     BROOKFIELD ASSET MANAGEMENT

FOR THE
YEAR ENDED
DEC. 31, 2015
(MILLIONS)

Balance as at 
December 31, 2014 ......

Changes in year:

Net income ...................

Other comprehensive
income..........................

Comprehensive income

Shareholder
distributions

Common equity........

Preferred equity........

Non-controlling
interests ....................

Other items

Equity issuances, net
of redemptions .........

Share-based
compensation ...........

Ownership changes ..

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Operating activities

Note  

2016

2015

Net income ....................................................................................................................................................

$

3,338

$

Other income and gains ................................................................................................................................

Share of undistributed equity accounted earnings .........................................................................................

Fair value changes ........................................................................................................................................

24

Depreciation and amortization ......................................................................................................................

Deferred income taxes ..................................................................................................................................

15

Investments in residential inventory .............................................................................................................

Net change in non-cash working capital balances ........................................................................................

Financing activities

Corporate borrowings arranged ....................................................................................................................

Corporate borrowings repaid ........................................................................................................................

Commercial paper and bank borrowings, net ...............................................................................................

Non-recourse borrowings arranged ...............................................................................................................

Non-recourse borrowings repaid ...................................................................................................................

Non-recourse credit facilities, net .................................................................................................................

Subsidiary equity obligations issued .............................................................................................................

Subsidiary equity obligations redeemed .......................................................................................................

Capital provided from non-controlling interests ...........................................................................................

Capital repaid to non-controlling interests ....................................................................................................

Preferred equity issuance ..............................................................................................................................

Preferred equity redemption .........................................................................................................................

Common shares issued .................................................................................................................................

Common shares repurchased ........................................................................................................................

Distributions to non-controlling interests .....................................................................................................

Distributions to shareholders ........................................................................................................................

Investing activities

Acquisitions

Investment properties ................................................................................................................................

Property, plant and equipment ...................................................................................................................

Equity accounted investments ...................................................................................................................

Financial assets and other ..........................................................................................................................

Acquisition of subsidiaries ........................................................................................................................

Dispositions

Investment properties ................................................................................................................................

Property, plant and equipment ...................................................................................................................

Equity accounted investments ...................................................................................................................

Financial assets and other ..........................................................................................................................

Disposition of subsidiaries .........................................................................................................................

Restricted cash and deposits .........................................................................................................................

Cash and cash equivalents

Change in cash and cash equivalents ............................................................................................................

Foreign exchange revaluation .......................................................................................................................

Balance, beginning of year ...........................................................................................................................

Balance, end of year .....................................................................................................................................

Supplemental cash flow disclosures

Income taxes paid .........................................................................................................................................

Interest paid ..................................................................................................................................................

(482)

(618)

130

2,020

(558)

(243)

(504)

3,083

869

(232)

(171)

23,826

(20,373)

(1,690)

9

(177)

10,554

(2,905)

219

(6)

14

(148)

(2,163)

(633)

6,993

(1,969)

(1,472)

(1,237)

(3,747)

(9,442)

4,014

65

1,050

3,955

360

(134)

(8,557)

1,519

6

2,774

$

$

4,299

$

371

$

3,062

4,669

(145)

(1,215)

(2,166)

1,695

64

(128)

14

2,788

776

—

(384)

15,645

(11,549)

2,409

41

(110)

4,998

(2,627)

185

—

1,346

(424)

(1,500)

(584)

8,222

(2,918)

(1,114)

(4,136)

(4,589)

(7,812)

2,544

196

1,842

2,823

347

1,753

(11,064)

(54)

(332)

3,160

2,774

226
2,931  

      2016 ANNUAL REPORT     97

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

1.  CORPORATE INFORMATION

Brookfield Asset Management Inc. (the “Corporation”) is a global alternative asset management company. References in these 
financial statements to “Brookfield,” “us,” “we,” “our” or “the company” refer to the Corporation and its direct and indirect 
subsidiaries  and  consolidated  entities.  The  company  owns  and  operates  assets  with  a  focus  on  property,  renewable  power, 
infrastructure and private equity. The Corporation is listed on the New York, Toronto and Euronext stock exchanges under the 
symbols BAM, BAM.A and BAMA, respectively. The Corporation was formed by articles of amalgamation under the Business 
Corporations Act (Ontario) and is registered in Ontario, Canada. The registered office of the Corporation is Brookfield Place, 
181 Bay Street, Suite 300, Toronto, Ontario, M5J 2T3.

2.  SIGNIFICANT ACCOUNTING POLICIES

a)  Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) 
as issued by the International Accounting Standards Board (IASB). 

These financial statements were authorized for issuance by the Board of Directors of the company on March 31, 2017. 

b)  Adoption of Accounting Standards

The company has applied new and revised standards issued by the IASB that are effective for the period beginning on or after 
January 1, 2016 as follows:

i.  Property, Plant and Equipment and Intangible Assets

IAS 16 Property, Plant and Equipment (“IAS 16”) and IAS 38 Intangible Assets (“IAS 38”) were amended to clarify the appropriate 
method of amortization for intangible assets. Amendments to IAS 16 prohibit entities from using a revenue-based depreciation 
method for items of property, plant and equipment; the amendments to IAS 38 introduces a rebuttable presumption that revenue 
is not an appropriate basis for amortization of an intangible asset, with only limited circumstances where the presumption can be 
rebutted. The company adopted the amendments to IAS 16 and IAS 38 on January 1, 2016, on a prospective basis; the adoption 
did not have a significant impact on the company’s consolidated financial statements.

ii. 

Investments in Associates and Joint Ventures

The amendments to IFRS 10 Consolidated Financial Statements (“IFRS 10”), and IAS 28 Investments in Associates and Joint 
Ventures (2011) (“IAS 28”) address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, 
in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments are 
effective for transactions occurring in annual periods beginning on or after January 1, 2016 with earlier application permitted. The 
impacts of the amendments to IFRS 10 and IAS 28 on the consolidated financial statements are not significant.

iii.  Joint Arrangements

The company adopted the amendments to IFRS 11 Joint Arrangements (“IFRS11”) effective January 1, 2016. The amendments 
add new guidance to IFRS 11 on accounting for the acquisition of an interest in a joint operation in which the activity of the joint 
operation constitutes a business, as defined in IFRS 3, Business Combinations (“IFRS 3”). Acquirers of such interests are to apply 
the relevant principles on business combination accounting in IFRS 3 and other standards, as well as disclosing the relevant 
information specified in these standards for business combinations. The adoption of the amendments to this standard did not have 
a significant impact on the partnership’s consolidated financial statements.

c)  Future Changes in Accounting Standards

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. This standard supersedes IAS 18 Revenue, IAS 11 Construction Contracts
and a number of revenue-related interpretations. Application of the Standard is mandatory and it applies to nearly all contracts 
with customers: the main exceptions are leases, financial instruments and insurance contracts. The IASB has deferred mandatory 
adoption of IFRS 15 until periods beginning on or after January 1, 2018 with early application permitted. The company is in the 
process of determining the impact of IFRS 15 on its consolidated financial statements.

98     BROOKFIELD ASSET MANAGEMENT

ii.  Financial Instruments

In July 2014, the IASB issued the final publication of IFRS 9 Financial Instruments (“IFRS 9”), superseding IAS 39 Financial 
Instruments. IFRS 9 establishes principles for 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 risk management. It does not fully change the types of hedging relationships or the requirement to measure and 
recognize ineffectiveness, however, it will allow more hedging strategies that are used for risk management to qualify for hedge 
accounting and introduce more judgment to assess the effectiveness of a hedging relationship. The standard has a mandatory 
effective date for annual periods beginning on or after January 1, 2018 with early adoption permitted. The company is in the 
process of determining the impact of IFRS 9 on its consolidated financial statements.

iii.  Leases

In January 2016, the IASB published a new standard – IFRS 16 Leases (“IFRS 16”). The new standard brings most leases on 
balance sheets, 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, with earlier adoption permitted if IFRS 15 has 
also been applied. The company is in the process of determining the impact of IFRS 16 on its consolidated financial statements.

iv.  Statement of Cash Flows

In January 2016, the IASB issued amendments to IAS 7 Statement of Cash Flows (“IAS 7”), 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. Since the 
amendments are being issued less than one year before the effective date, the company is not required to provide comparative 
information when it first applies the amendments. The company is in the process of determining the impact of the amendments 
on its consolidated financial statements.

v. 

Income Tax

The amendment to IAS 12, Income Taxes (“IAS 12”) clarifies the following aspects: (i) unrealized losses on debt instruments 
measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether 
the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use; (ii) the carrying 
amount of an asset does not limit the estimation of probable future taxable profits; (iii) estimates for future taxable profits exclude 
tax deductions  resulting from  the reversal of  deductible temporary differences; (iv) an  entity assesses  a  deferred  tax asset in 
combination with other deferred tax assets. The amendment to IAS 12 is effective for annual periods beginning January 1, 2017. 
The amendment will not have any significant impact to the consolidated financial statements of the company.

vi.  Foreign Currency Transactions and Advance Consideration

IFRIC 22, Foreign Currency Transactions and Advance Consideration (“IFRIC 22”) clarifies that the date of foreign currency 
transactions for purposes 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 is effective for periods beginning on or after January 1, 2018 and 
may  be  applied  either  retrospectively  or  prospectively.  The  company  has  not  yet  determined  the  impact  of  IFRIC  22  to  its 
consolidated financial statements.

d)  Basis of Presentation 

The consolidated financial statements are prepared on a going concern basis. 

i. 

Subsidiaries 

The consolidated financial statements include the accounts of the company and its subsidiaries, which are the entities over which 
the company exercises control. Control exists when the company has the power to direct the relevant activities, exposure or rights 
to variable returns from involvement with the investee, and the ability to use its power over the investee to affect the amount of 
its returns. Subsidiaries are consolidated from the date the control is obtained, and continue to be consolidated until the date when 
control is lost. The company continually reassesses whether or not it controls an investee, particularly if facts and circumstances 
indicate there is a change to one or more of the control criteria previously mentioned. In certain circumstances when the company 
has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to 
give it the practical ability to direct the relevant activities of the investee unilaterally. The company considers all relevant facts 
and circumstances in assessing whether or not the company’s voting rights are sufficient to give it power. 

      2016 ANNUAL REPORT     99

Non-controlling interests in the equity of the company’s subsidiaries are included within equity on the Consolidated Balance 
Sheets. All intercompany balances, transactions, unrealized gains and losses are eliminated in full. 

Certain of the company’s subsidiaries are subject to profit sharing arrangements between the company and the non-controlling 
equity holders, whereby the company is entitled to a participation in profits, as determined under the agreements. The attribution 
of net income amongst equity holders in these subsidiaries reflects the impact of these profit sharing arrangements when the 
attribution of profits as determined in the agreement is no longer subject to adjustment based on future events. 

Gains or losses resulting from changes in the company’s ownership interest of a subsidiary that do not result in a loss of control 
are accounted for as equity transactions and are recorded within ownership changes as a component of equity. When control of a 
subsidiary is lost, the difference between the carrying value and the proceeds from disposition is recognized within other income 
and gains in the Consolidated Statements of Operations. 

Transaction costs incurred in connection with the acquisition of control of a subsidiary are expensed immediately within fair value 
changes in the Consolidated Statements of Operations. 

Refer to Note 4 for additional information on subsidiaries of the company with significant non-controlling interests. 

ii.  Associates and Joint Ventures 

Associates are entities over which the company exercises significant influence. Significant influence is the power to participate 
in the financial and operating policy decisions of the investee but without control or joint control over those policies. Joint ventures 
are joint arrangements whereby the parties that have joint control of the arrangement have the rights to the net assets of the joint 
arrangement. Joint control is the contractually agreed sharing of control over an arrangement, which exists only when decisions 
about the relevant activities require unanimous consent of the parties sharing control. The company accounts for associates and 
joint ventures using the equity method of accounting within equity accounted investments on the Consolidated Balance Sheets. 

Interests in associates and joint ventures accounted for using the equity method are initially recognized at cost. At the time of 
initial recognition, if the cost of the associate or joint venture is lower than the proportionate share of the investment’s underlying 
fair value, the company records a gain on the difference between the cost and the underlying fair value of the investment in net 
income. If the cost of the associate or joint venture is greater than the company’s proportionate share of the underlying fair value, 
goodwill relating to the associate or joint venture is included in the carrying amount of the investment. Subsequent to initial 
recognition, the carrying value of the company’s interest in an associate or joint venture is adjusted for the company’s share of 
comprehensive income and distributions of the investee. Profit and losses resulting from transactions with an associate or joint 
venture are recognized in the consolidated financial statements based on the interests of unrelated investors in the investee. The 
carrying value of associates or joint ventures is assessed for impairment at each balance sheet date. Impairment losses on equity 
accounted investments may be subsequently reversed in net income. Further information on the impairment of long-lived assets 
is available in Note 2(j).

iii.  Joint Operations 

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, 
and obligations for the liabilities, related to the arrangement. Joint control is the contractually agreed sharing of control of an 
arrangement, which exists only when decisions about the relevant activities require unanimous consent of parties sharing control. 
The company recognizes only its assets, liabilities and share of the results of operations of the joint operation. The assets, liabilities 
and results of joint operations are included within the respective line items of the Consolidated Balance Sheets, Consolidated 
Statements of Operations and Consolidated Statements of Comprehensive Income. 

e)  Foreign Currency Translation 

The U.S. dollar is the functional and presentation currency of the company. Each of the company’s subsidiaries, associates, joint 
ventures and joint operations determines its own functional currency and items included in the consolidated financial statements 
of each subsidiary, associate, joint venture and joint operation are measured using that functional currency. 

Assets and liabilities of foreign operations having a functional currency other than the U.S. dollar are translated at the rate of 
exchange prevailing at the reporting date and revenues and expenses at average rates during the period. Gains or losses on translation 
are accumulated as a component of equity. On the disposal of a foreign operation, or the loss of control, joint control or significant 
influence, the component of accumulated other comprehensive income relating to that foreign operation is reclassified to net 
income. Gains or losses on foreign currency denominated balances and transactions that are designated as hedges of net investments 
in these operations are reported in the same manner. 

Foreign currency denominated monetary assets and liabilities of the company is translated using the rate of exchange prevailing 
at the reporting date and non-monetary assets and liabilities measured at fair value are translated at the rate of exchange prevailing at 
the date when the fair value was determined. Revenues and expenses are measured at average rates during the period. Gains or 

100     BROOKFIELD ASSET MANAGEMENT

losses on translation of these items are included in net income. Gains or losses on transactions which hedge these items are also 
included in net income. Foreign currency denominated non-monetary assets and liabilities, measured at historic cost, are translated 
at the rate of exchange at the transaction date. 

f)  Cash and Cash Equivalents 

Cash and cash equivalents include cash on hand, demand deposits and highly liquid short-term investments with original maturities 
of three months or less. 

g)  Related Party Transactions 

In the normal course of operations, the company enters into various transactions on market terms with related parties, which have 
been measured at their exchange value and are recognized in the consolidated financial statements. Related party transactions are 
further described in Note 28. The company’s subsidiaries with significant non-controlling interests are described in Note 4 and 
its associates and joint ventures are described in Note 10. 

h)  Operating Assets 

i. 

Investment Properties 

The company uses the fair value method to account for real estate classified as an investment property. A property is determined 
to be an investment property when it is principally held either to earn rental income or for capital appreciation, or both. Investment 
properties  also  include  properties  that  are  under  development  or  redevelopment  for  future  use  as  investment  property. 
Investment property is initially measured at cost including transaction costs, or at fair values if acquired in a business combination. 
Subsequent to initial recognition, investment properties are carried at fair value. Gains or losses arising from changes in fair value 
are included in net income during the period in which they arise. Fair values are primarily determined by discounting the expected 
future cash flows of each property, generally over a term of 10 years, using discount and terminal capitalization rates reflective 
of the characteristics, location and market of each property. The future cash flows of each property are based upon, among other 
things, rental income from current leases and assumptions about rental income from future leases reflecting current conditions, 
less future cash outflows relating to such current and future leases. The company determines fair value using internal valuations. 
The company uses external valuations to assist in determining fair value, but external valuations are not necessarily indicative of 
fair value. 

ii.  Revaluation Method for Property, Plant and Equipment 

The company uses the revaluation method of accounting for certain classes of property, plant and equipment as well as certain 
assets which are under development for future use as property, plant and equipment. Property, plant and equipment measured 
using the revaluation method is initially measured at cost, or at fair values if acquired in a business combination, and subsequently 
carried at its revalued amount, being the fair value at the date of the revaluation less any subsequent accumulated depreciation 
and any accumulated impairment losses. Revaluations are performed on an annual basis at the end of each fiscal year, commencing 
in the first year subsequent to the date of acquisition, unless there is an indication that assets are impaired. Where the carrying 
amount of an asset increases as a result of a revaluation, the increase is recognized in other comprehensive income and accumulated 
in equity in revaluation surplus, unless the increase reverses a previously recognized impairment recorded through net income, in 
which case that portion of the increase is recognized in net income. 

Where the carrying amount of an asset decreases, the decrease is recognized in other comprehensive income to the extent of any 
balance  existing  in  revaluation  surplus  in  respect  of  the  asset,  with  the  remainder  of  the  decrease  recognized  in  net  income. 
Depreciation of an asset commences when it is available for use. On loss of control or partial disposition of an asset measured 
using the revaluation method, all accumulated revaluation surplus or the portion disposed of, respectively, is transferred into 
retained earnings or ownership changes, respectively. 

iii.  Renewable Power Generation 

Renewable power generating assets, including assets under development, are classified as property, plant and equipment and are 
accounted for using the revaluation method. The company determines the fair value of its renewable power generating assets using 
discounted cash flow analysis, which includes estimates of forecasted revenue, operating costs, maintenance and other capital 
expenditures.  Discount  rates  are  selected  for  each  facility  giving  consideration  to  the  expected  proportion  of  contracted  to 
uncontracted revenue and markets into which power is sold. 

Generally, the first 20 years of cash flow are discounted with a residual value based on the terminal value cash flows. The fair 
value and estimated remaining service lives are reassessed on an annual basis. The company determines fair value using internal 
valuations with the assistance of external appraisers. 

      2016 ANNUAL REPORT     101

Depreciation on renewable power generating assets is calculated on a straight-line basis over the estimated service lives of the 
assets, which are as follows: 

(YEARS)

Dams ........................................................................................................................................................................
Penstocks .................................................................................................................................................................

Powerhouses ............................................................................................................................................................

Hydroelectric generating units.................................................................................................................................

Wind generating units..............................................................................................................................................

Other assets..............................................................................................................................................................

Useful Lives

Up to 115

Up to 60

Up to 115

Up to 115

Up to 30

Up to 60

Cost is allocated to the significant components of power generating assets and each component is depreciated separately. 

The depreciation of property, plant and equipment in our Brazilian renewable power operations is based on the duration of the 
authorization or the useful life of a concession. The weighted-average remaining duration at December 31, 2016 is 15 years (2015 – 
18 years). Land rights are included as part of the concession or authorization and are subject to depreciation. 

iv.  Sustainable Resources 

Sustainable resources consist of standing timber and other agricultural assets and are measured at fair value after deducting the 
estimated selling costs and are recorded in accounts receivable and other on the Consolidated Balance Sheets. Estimated selling 
costs include commissions, levies, delivery costs, transfer taxes and duties. The fair value of standing timber is calculated using 
the present value of anticipated future cash flows for standing timber before tax and terminal dates of 30 years. Fair value is 
determined based on felling plans, assessments regarding growth, timber prices and felling and silviculture costs. Changes in fair 
value are recorded in net income in the period of change. The company determines fair value of its standing timber using external 
valuations on an annual basis. 

Harvested timber is included in inventory and is measured at the lower of fair value less estimated costs to sell at the time of 
harvest and net realizable value. 

Land under standing timber, bridges, roads and other equipment used in sustainable resources production are accounted for using 
the revaluation method and included in property, plant and equipment. Bridges, roads and equipment are depreciated over their 
useful lives, generally 3 to 30 years. 

v. 

Infrastructure 

Utilities, transport and energy assets within our infrastructure operations as well as assets under development classified as property, 
plant and equipment on the Consolidated Balance Sheets are accounted for using the revaluation method. The company determines 
the fair value of its utilities, transport and energy assets using discounted cash flow analysis, which includes estimates of forecasted 
revenue, operating costs, maintenance and other capital expenditures. Valuations are performed internally on an annual basis. 
Discount rates are selected for each asset, giving consideration to the volatility and geography of its revenue streams.

Depreciation on utilities and transport and energy assets is calculated on a straight-line basis over the estimated service lives of 
the components of the assets, which are as follows: 

(YEARS)

Buildings..................................................................................................................................................................

Leasehold improvements .........................................................................................................................................

District energy systems and gas storage assets........................................................................................................
Machinery, equipment, network system, transmission stations and towers ............................................................

Rail and transport assets ..........................................................................................................................................

Useful Lives

Up to 70

Up to 50

Up to 50

Up to 40

Up to 40

The fair value and the estimated remaining service lives are reassessed on an annual basis. 

Public service concessions that provide the right to charge users for a service in which the service and fee is regulated by the 
grantor are accounted for as intangible assets. 

102     BROOKFIELD ASSET MANAGEMENT

vi.  Hospitality Assets 

Hospitality operating assets within our property operations are classified as property, plant and equipment and are accounted for 
using the revaluation method. The company determines the fair value for these assets by discounting the expected future cash 
flows. The company determines fair value using internal valuations. The company uses external valuations to assist in determining 
fair value, but external valuations are not necessarily indicative of fair value. 

Depreciation on hotel assets is calculated on a straight-line basis over the estimated useful lives of the components of the assets, 
which range from 7 to 50 years for buildings and 3 to 20 years for other equipment. 

vii.  Other Property, Plant and Equipment 

The company accounts for its other property, plant and equipment using the revaluation method or the cost model, depending on 
the nature of the asset and the operating segment. Other property, plant and equipment measured using the revaluation method is 
initially measured at cost and subsequently carried at its revalued amount, being the fair value at the date of the revaluation less 
any subsequent accumulated depreciation and any accumulated impairment losses. Under the cost method, assets are initially 
recorded at cost and are subsequently depreciated over the assets’ useful lives, unless an impairment is identified requiring a write-
down to estimated fair value. 

Oil and natural gas pre-licensing costs incurred before the legal right to explore a specific area have been obtained are expensed 
in the period in which they are incurred. Once the legal right to explore has been acquired and development and exploration costs 
commence, attributable costs are capitalized. The net carrying value of oil and gas properties is depleted using the production 
method based on estimated proved plus probable oil and natural gas reserves. 

viii.  Residential Development 

Residential development lots, homes and residential condominium projects are recorded in inventory. Residential development 
lots are recorded at the lower of cost, including pre-development expenditures and capitalized borrowing costs, and net realizable 
value, which the company determines as the estimated selling price of the inventory in the ordinary course of business in its 
completed state, less estimated expenses, including holding costs, costs to complete and costs to sell. 

Homes and other properties held for sale, which include properties subject to sale agreements, are recorded at the lower of cost 
and net realizable value in inventory. Costs are allocated to the saleable acreage of each project or subdivision in proportion to 
the anticipated revenue. 

ix.  Other Financial Assets 

Other financial assets are classified as either fair value through profit or loss or available-for-sale based on their nature and use 
within the company’s business. Changes in the fair values of financial instruments classified as fair value through profit or loss 
and available-for-sale are recognized in net income and other comprehensive income, respectively. The cumulative changes in 
the fair values of available-for-sale securities previously recognized in accumulated other comprehensive income are reclassified 
to net income when the security is sold, or there is a significant or prolonged decline in fair value or when the company acquires 
a controlling or significant interest in the underlying investment and commences equity accounting or consolidating the investment. 
Other financial assets are recognized on their trade date and initially recorded at fair value with changes in fair value recorded in 
net  income  or  other  comprehensive  income  in  accordance  with  their  classification.  Fair  values  for  financial  instruments  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. 

The company assesses the carrying value of available-for-sale securities for impairment when there is objective evidence that the 
asset is impaired. When objective evidence of impairment exists, the cumulative loss in other comprehensive income is reclassified 
to net income.

Other financial assets also include loans and notes receivable which are recorded initially at fair value and, with the exception of 
loans and notes receivable designated as fair value through profit or loss, are subsequently measured at amortized cost using the 
effective interest method, less any applicable provision for impairment. A provision for impairment is established when there is 
objective evidence that the company will not be able to collect all amounts due according to the original terms of the receivables. 
Loans and receivables designated as fair value through profit or loss are recorded at fair value, with changes in fair value recorded 
in net income in the period in which they arise. 

i)  Fair Value Measurement 

Fair value 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, regardless of whether that price is directly observable or estimated using another valuation 

      2016 ANNUAL REPORT     103

technique. In estimating the fair value of an asset or a liability, the company takes into account the characteristics of the asset or 
liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement 
date. 

Fair value measurement is disaggregated into three hierarchical levels: Level 1, 2 or 3. Fair value hierarchical levels are directly 
based on the degree to which the inputs to the fair value measurement are observable. The levels are as follows: 

Level 1 –  Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. 

Level 2 –  Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability 
through correlation with market data at the measurement date and for the duration of the asset or liability’s anticipated 
life. 

Level 3 –  Inputs are unobservable and reflect management’s best estimate of what market participants would use in pricing the 
asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and 
the risk inherent in the inputs in determining the estimate. 

In determining the fair value of investment properties and property plant and equipment, management uses external information 
and observable conditions, where possible, supplemented by internal analysis as required. The determination of fair value requires 
the use of estimates, which have been applied in a manner consistent with that in the prior year. There are currently no known 
trends, events or uncertainties that we reasonably believe could have a sufficiently pervasive impact across our businesses, which 
is diversified by asset class, geography and market, to materially affect the methodologies or assumptions utilized to determine 
the estimated fair values reflected in this report. Discount rates and capitalization rates are inherently uncertain and may be impacted 
by, among other things, movements in interest rates in the geographies and markets in which the assets are located. Changes in 
estimates  across  different  geographies  and  markets,  such  as  discount  rates  and  terminal  capitalization  rates,  often  move 
independently  to  one  another  and  not  necessarily  in  the  same  direction  or  to  the  same  degree.  Furthermore,  impacts  on  our 
estimated values from changes in discount rates / terminal capitalization rates and cash flows are usually inversely correlated as 
the circumstances that typically give rise to increased interest rates (i.e. strong economic growth, inflation) usually give rise to 
increased cash flows at the asset level.

Further information on fair value measurements is available in Notes 6, 7, 11 and 12. 

j) 

Impairment of Long-Lived Assets 

At each balance sheet date the company assesses whether its assets, other than those measured at fair value with changes in value 
recorded in net income, have any indication of impairment. An impairment is recognized if the recoverable amount, determined 
as the higher of the estimated fair value less costs of disposal and the discounted future cash flows generated from use and eventual 
disposal from an asset or cash-generating unit, is less than their carrying value. Impairment losses are recorded as fair value changes 
within the Consolidated Statements of Operations. The projections of future cash flows take into account the relevant operating 
plans and management’s best estimate of the most probable set of conditions anticipated to prevail. Where an impairment loss 
subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the lesser of the revised estimate 
of  its  recoverable  amount  and  the  carrying  amount  that  would  have  been  recorded  had  no  impairment  loss  been  recognized 
previously. 

k)  Accounts Receivable 

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest 
method, less any allowance for uncollectability. 

l) 

Intangible Assets 

Finite life intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses, and are 
amortized on a straight-line basis over their estimated useful lives. Amortization is recorded within depreciation and amortization 
in the Consolidated Statements of Operations. 

Certain of the company’s intangible assets have an indefinite life, as there is no foreseeable limit to the period over which the 
asset is expected to generate cash flows. Indefinite life intangible assets are recorded at cost unless an impairment is identified 
which requires a write-down to its recoverable amount. 

Indefinite life intangible assets are evaluated for impairment annually or more often if events or circumstances indicate there may 
be an impairment. Any impairment of the company’s indefinite life intangible assets is recorded in net income in the period in 
which the impairment is identified. Impairment losses on intangible assets may be subsequently reversed in net income. 

104     BROOKFIELD ASSET MANAGEMENT

m)  Goodwill 

Goodwill represents the excess of the price paid for the acquisition of an entity over the fair value of the net identifiable tangible 
and intangible assets and liabilities acquired. Goodwill is allocated to the cash-generating unit to which it relates. The company 
identifies cash-generating units as identifiable groups of assets that are largely independent of the cash inflows from other assets 
or groups of assets.

Goodwill is evaluated for impairment annually or more often if events or circumstances indicate there may be an impairment. 
Impairment is determined for goodwill by assessing if the carrying value of a cash-generating unit, including the allocated goodwill, 
exceeds its recoverable amount determined as the greater of the estimated fair value less costs to sell and the value in use. Impairment 
losses recognized in respect of a cash-generating unit are first allocated to the carrying value of goodwill and any excess is allocated 
to the carrying amount of assets in the cash-generating unit. Any goodwill impairment is recorded in income in the period in which 
the  impairment  is  identified.  Impairment  losses  on  goodwill  are  not  subsequently  reversed.  On  disposal  of  a  subsidiary,  any 
attributable amount of goodwill is included in determination of the gain or loss on disposal. 

n)  Subsidiary Equity Obligations 

Subsidiary equity obligations include subsidiary preferred equity units, subsidiary preferred shares and capital securities, limited-
life funds and redeemable fund units. 

Subsidiary preferred equity units and capital securities are preferred shares that may be settled by a variable number of common 
equity units upon their conversion by the holders or the company. These instruments, as well as the related accrued distributions, 
are classified as liabilities on the Consolidated Balance Sheets. Dividends or yield distributions on these instruments are recorded 
as interest expense. To the extent conversion features are not closely related to the underlying liability the instruments are bifurcated 
into debt and equity components. 

Limited-life funds represent the interests of others in the company’s consolidated funds that have a defined maximum fixed life 
where the company has an obligation to distribute the residual interests of the fund to fund partners based on their proportionate 
share of the fund’s equity in the form of cash or other financial assets at cessation of the fund’s life. 

Redeemable fund units represent interests of others in consolidated subsidiaries that have a redemption feature that requires the 
company to deliver cash or other financial assets to the holders of the units upon receiving a redemption notice. 

Limited-life  funds  and  redeemable  fund  units  are  classified  as  liabilities  and  recorded  at  fair  value  within  subsidiary  equity 
obligations on the Consolidated Balance Sheets. Changes in the fair value are recorded in net income in the period of the change. 

o)  Revenue Recognition 

i.  Asset Management 

Asset  management  revenues  consist  of  base  management  fees,  advisory  fees,  incentive  distributions  and  performance-based 
incentive fees which arise from the rendering of services. Revenues from base management fees, advisory fees and incentive 
distributions are recorded on an accrual basis based on the amounts receivable at the balance sheet date and are recorded within 
revenues in the Consolidated Statements of Operations. 

Revenues from performance-based incentive fees and profit sharing arrangements are recorded on the accrual basis based on the 
amount that would be due under the formula established by the contract where it is no longer subject to adjustment based on future 
events, and are recorded within revenues in the Consolidated Statements of Operations. 

ii.  Property Operations 

Property revenues primarily consist of rental revenues from leasing activities and hospitality revenues and interest and dividends 
from unconsolidated real estate investments. 

Property rental income is recognized when the property is ready for its intended use. Office and retail properties are considered 
to be ready for their intended use when the property is capable of operating in the manner intended by management, which generally 
occurs upon completion of construction and receipt of all occupancy and other material permits. 

The company has retained substantially all of the risks and benefits of ownership of its investment properties and therefore accounts 
for leases with its tenants as operating leases. Revenue recognition under a lease commences when the tenant has a right to use 
the leased asset. The total amount of contractual rent to be received from operating leases is recognized on a straight-line basis 
over the term of the lease; a straight-line or free rent receivable, as applicable, is recorded as a component of investment property 
for the difference between the amount of rental revenue recorded and the contractual amount received. Rental revenue includes 
percentage participating rents and recoveries of operating expenses, including property, capital and similar taxes. Percentage 

      2016 ANNUAL REPORT     105

participating rents are recognized when tenants’ specified sales targets have been met. Operating expense recoveries are recognized 
in the period that recoverable costs are chargeable to tenants. 

Revenue from the sales of land and buildings not classified as investment properties is recognized at the time that the risks and 
rewards of ownership have been transferred, possession or title passes to the purchaser, all material conditions of the sales contract 
have been met, and a significant cash down payment or appropriate security is received. 

Revenue from hospitality operations are recognized when the services are provided and collection is reasonably assured. 

iii.  Renewable Power Operations 

Renewable power revenues are derived from the sale of electricity and are recorded at the time power is provided based upon the 
output delivered and capacity provided at rates specified under either contract terms or prevailing market rates. Costs of generating 
electricity are recorded as incurred.

iv.  Sustainable Resources Operations 

Revenue from timberland operations is derived from the sale of logs and related products. The company recognizes sales to external 
customers when the product is shipped, title passes and collectability is reasonably assured. Revenue from agricultural development 
operations is recognized at the time that the risks and rewards of ownership have transferred. 

v.  Utility Operations 

Revenue from utility operations is derived from the distribution and transmission of energy as well as from the company’s coal 
terminal. Distribution and transmission revenue is recognized when services are rendered based upon usage or volume during that 
period. Terminal infrastructure charges are charged at set rates per tonne of coal based on each customer’s annual contracted 
tonnage and is then recognized on a pro rata basis each month. The company’s coal terminal also recognizes variable handling 
charges based on tonnes of coal shipped through the terminal. 

vi.  Transport Operations 

Revenue from transport operations consists primarily of freight and transportation services revenue. Freight and transportation 
services revenue is recognized at the time of the provision of services. 

vii.  Energy Operations 

Revenue from energy operations consists primarily of energy transmission, distribution and storage income. Energy revenue is 
recognized when services are provided and are rendered based upon usage or volume throughput during the period. 

viii.  Private Equity Operations 

Revenue from our private equity operations primarily consists of revenues from the sale of goods or products and rendering of 
services. Sales are recognized when the product is shipped, title passes and collectability is reasonably assured. Service revenues 
are recognized when the services are provided.

Revenues  from  construction  contracts  are  recognized  using  the  percentage-of-completion  method  once  the  outcome  of  the 
construction contract can be estimated reliably, in proportion to the stage of completion of the contract, and to the extent to which 
collectability is reasonably assured. The stage of completion is measured by reference to actual costs incurred as a percentage of 
estimated total costs of each contract. When the outcome cannot be reliably determined, contract costs are expensed as incurred 
and revenue is only recorded to the extent that the costs are determined to be recoverable. Where it is probable that a loss will 
arise from a construction contract, the excess of total expected costs over total expected revenue is recognized as an expense 
immediately.

ix.  Residential Developments Operations 

Revenue from residential land sales is recognized at the time that the risks and rewards of ownership have been transferred, which 
is generally when possession or title passes to the purchaser, all material conditions of the sales contract have been met, and a 
significant cash down payment or appropriate security is received. 

Revenue from the sale of homes and residential condominium projects is recognized upon completion, when title passes to the 
purchaser upon closing and at which time all proceeds are received or collectability is reasonably assured. 

x. 

Investments in Financial Assets 

Dividend and interest income from other financial assets are recorded within revenues when declared or on an accrual basis using 
the effective interest method. 

106     BROOKFIELD ASSET MANAGEMENT

Revenue from loans and notes receivable, less a provision for uncollectible amounts, is recorded on the accrual basis using the 
effective interest method. 

xi.  Other Income and Gains 

Other income and gains represent the excess of proceeds over carrying values on the disposition of subsidiaries, investments or 
assets, or the settlement of liabilities for less than carrying values. 

p)  Derivative Financial Instruments and Hedge Accounting 

The company selectively utilizes derivative financial instruments primarily to manage financial risks,  including interest rate, 
commodity  and  foreign  exchange  risks.  Derivative  financial  instruments  are  recorded  at  fair  value  within  the  company’s 
consolidated financial statements. Hedge accounting is applied when the derivative is designated as a hedge of a specific exposure 
and there is assurance that it will continue to be effective as a hedge based on an expectation of offsetting cash flows or fair values. 
Hedge accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the hedging relationship is 
terminated.  Once  discontinued,  the  cumulative  change  in  fair  value  of  a  derivative  that  was  previously  recorded  in  other 
comprehensive income by the application of hedge accounting is recognized in net income over the remaining term of the original 
hedging  relationship.  The  assets  or  liabilities  relating  to  unrealized  mark-to-market  gains  and  losses  on  derivative  financial 
instruments are recorded in accounts receivable and other or accounts payable and other, respectively.

i. 

Items Classified as Hedges 

Realized and unrealized gains and losses on foreign exchange contracts, designated as hedges of currency risks relating to a net 
investment in a subsidiary or an associate, are included in equity. Gains or losses are reclassified into net income in the period in 
which the subsidiary or associate is disposed of or to the extent that the hedges are ineffective. Where a subsidiary is partially 
disposed and control is retained, any associated gains or costs are reclassified within equity to ownership changes. Derivative 
financial instruments that are designated as hedges to offset corresponding changes in the fair value of assets and liabilities and 
cash flows are measured at their estimated fair value with changes in fair value recorded in net income or as a component of equity, 
as applicable. 

Unrealized gains and losses on interest rate contracts designated as hedges of future variable interest payments are included in 
equity as a cash flow hedge when the interest rate risk relates to an anticipated variable interest payment. The periodic exchanges 
of payments on interest rate swap contracts designated as hedges of debt are recorded on an accrual basis as an adjustment to 
interest expense. The periodic exchanges of payments on interest rate contracts designated as hedges of future interest payments 
are amortized into net income over the term of the corresponding interest payments. 

Unrealized gains and losses on electricity contracts designated as cash flow hedges of future power generation revenue are included 
in equity as a cash flow hedge. The periodic exchanges of payments on power generation commodity swap contracts designated 
as hedges are recorded on a settlement basis as an adjustment to power generation revenue. 

ii. 

Items Not Classified as Hedges 

Derivative financial instruments that are not designated as hedges are carried at their estimated fair value, and gains and losses 
arising from changes in fair value are recognized in net income in the period in which the change occurs. Realized and unrealized 
gains and losses on equity derivatives used to offset the change in share prices in respect of vested Deferred Share Units and 
Restricted Share Units are recorded together with the corresponding compensation expense. Realized and unrealized gains on 
other derivatives not designated as hedges are recorded in revenues, direct costs or corporate costs, as applicable. Realized and 
unrealized gains and losses on derivatives which are considered economic hedges, and where hedge accounting is not able to be 
elected, are recorded in fair value changes in the Consolidated Statements of Operations. 

q)  Income Taxes 

Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries, based 
on the tax rates and laws enacted or substantively enacted at the balance sheet date. Current and deferred income tax relating to 
items recognized directly in equity are also recognized in equity. Deferred income tax liabilities are provided for using the liability 
method on temporary differences between the tax bases and carrying amounts of assets and liabilities. Deferred income tax assets 
are recognized for all deductible temporary differences, and carry forward of unused tax credits and unused tax losses, to the extent 
that it is probable that deductions, tax credits and tax losses can be utilized. The carrying amount of deferred income tax assets is 
reviewed at each balance sheet date and reduced to the extent it is no longer probable that the income tax assets will be recovered. 
Deferred income tax assets and liabilities are measured using the tax rates that are expected to apply to the year when the asset is 
realized or the liability settled, based on the tax rates and laws that have been enacted or substantively enacted at the balance sheet 
date. 

      2016 ANNUAL REPORT     107

r)  Business Combinations 

Business combinations are accounted for using the acquisition method. The cost of a business acquisition is measured at the 
aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments issued 
in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at 
their fair values at the acquisition date, except for non-current assets that are classified as held-for-sale which are recognized and 
measured at fair value less costs to sell. The interest of non-controlling shareholders in the acquiree is initially measured at the 
non-controlling  shareholders’  proportion  of  the  net  fair  value  of  the  identifiable  assets,  liabilities  and  contingent  liabilities 
recognized. 

To the extent the fair value of consideration paid exceeds the fair value of the net identifiable tangible and intangible assets, the 
excess is recorded as goodwill. To the extent the fair value of consideration paid is less than the fair value of net identifiable 
tangible and intangible assets, the excess is recognized in net income. 

When a business combination is achieved in stages, previously held interests in the acquired entity are re-measured to fair value 
at the acquisition date, which is the date control is obtained, and the resulting gain or loss, if any, is recognized in net income, 
other than amounts transferred directly to retained earnings. Amounts arising from interests in the acquiree prior to the acquisition 
date that have previously been recognized in other comprehensive income are reclassified to net income. Transaction costs are 
recorded as an expense within fair value changes in the Consolidated Statements of Operations. 

s)  Other Items 

i.  Capitalized Costs 

Capitalized costs related to assets under development and redevelopment include all eligible expenditures incurred in connection 
with the acquisition, development and construction of the asset until it is available for its intended use. These expenditures consist 
of costs that are directly attributable to these assets.

Borrowing costs are capitalized when such costs are directly attributable to the acquisition, construction or production of a qualifying 
asset. A qualifying asset is an asset that takes a substantial period of time to prepare for its intended use. 

ii.  Share-based Payments 

The company issues share-based awards to certain employees and non-employee directors. The cost of equity-settled share-based 
transactions, comprised of share options, restricted shares and escrowed shares, is determined as the fair value of the award on 
the grant date using a fair value model. The cost of equity-settled share-based transactions is recognized as each tranche vests and 
is  recorded  in  contributed  surplus  as  a  component  of  equity. The  cost  of  cash-settled  share-based  transactions,  comprised  of 
Deferred Share Units and Restricted Share Units, is measured as the fair value at the grant date, and expensed on a proportionate 
basis consistent with the vesting features over the vesting period with the recognition of a corresponding liability. The liability is 
recorded as a provision within accounts payable and other and measured at each reporting date at fair value with changes in fair 
value recognized in net income. 

iii.  Provisions 

A provision is a liability of uncertain timing that is recognized when the company has a present obligation as a result of a past 
event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of 
the amount of the obligation. The company’s significant provisions consist of pensions and other long-term and post-employment 
benefits, warranties on some products or services, obligations to retire or decommission tangible long-lived assets and the cost of 
legal claims arising in the normal course of operations. 

a.  Pensions and Other Post-Employment Benefits 

The company offers pension and other post-employment benefit plans to employees of certain of its subsidiaries, with certain of 
these subsidiaries offering defined benefit plans. Defined benefit pension expense, which includes the current year’s service cost, 
is included in Direct costs. For each defined benefit plan, we recognize the present value of our defined benefit obligations less 
the fair value of the plan assets, as a defined benefit liability reported in accounts payable and other on our Consolidated Balance 
Sheets. The company’s obligations under its defined benefit pension plans are determined periodically through the preparation of 
actuarial valuations. 

b.  Other Long-Term Incentive Plans 

The company provides long-term incentive plans to certain employees whereby the company allocates a portion of the amounts 
realized through subsidiary profit sharing agreements to its employees. The cost of these plans is recognized over the requisite 
service period, provided it is probable that the vesting conditions will be achieved, based on the underlying subsidiary profit 

108     BROOKFIELD ASSET MANAGEMENT

sharing arrangement. The liability is recorded within accounts payable and other and measured at each reporting date with the 
corresponding expense recognized in direct costs. 

c.  Warranties, Asset Retirement, Legal and Other 

Certain consolidated entities offer warranties on the sale of products or services. A provision is recorded to provide for future 
warranty costs based on management’s best estimate of probable warranty claims. 

Certain consolidated entities have legal obligations to retire tangible long-lived assets. A provision is recorded at each reporting 
date to provide for the estimated fair value of the asset retirement obligation upon decommissioning of the asset period. 

In the normal course of operations, the company may become involved in legal proceedings. Management analyzes information 
about these legal matters and provides provisions for probable contingent losses, including estimated legal expenses to resolve 
the matters. Internal and external legal counsel are used in order to estimate the probability of an unfavourable outcome and the 
amount of loss. 

t)  Critical Judgments and Estimates 

The preparation of financial statements requires management to make estimates and judgments that affect the carried amounts of 
certain assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses 
recorded during the period. Actual results could differ from those estimates. 

In  making  estimates  and  judgments,  management  relies  on  external  information  and  observable  conditions  where  possible, 
supplemented by internal analysis as required. These estimates have been applied in a manner consistent with prior periods and 
there are no known trends, commitments, events or uncertainties that the company believes will materially affect the methodology 
or assumptions utilized in making these estimates in these consolidated financial statements. 

i.  Critical Estimates 

The significant estimates used in determining the recorded amount for assets and liabilities in the consolidated financial statements 
include the following:

a. 

Investment Properties 

The critical assumptions and estimates used when determining the fair value of commercial properties are: the timing of rental 
income from future leases reflecting current market conditions, less assumptions of future cash costs in respect of current and 
future leases; maintenance and other capital expenditures; discount rates; terminal capitalization rates; and terminal valuation 
dates. Properties under development are recorded at fair value using a discounted cash flow model which includes estimates in 
respect of the timing and cost to complete the development. 

Further information on investment property estimates is provided in Note 11. 

b.  Revaluation Method for Property, Plant and Equipment 

When  determining  the  carrying  value  of  property,  plant  and  equipment  using  the  revaluation  method,  the  company  uses  the 
following critical assumptions and estimates: the timing of forecasted revenues; future sales prices and associated expenses; future 
sales volumes; future regulatory rates; maintenance and other capital expenditures; discount rates; terminal capitalization rates; 
terminal valuation dates; useful lives; and residual values. Determination of the fair value of property, plant and equipment under 
development includes estimates in respect of the timing and cost to complete the development. 

Further information on estimates used in the revaluation method for property, plant and equipment is provided in Note 12. 

c.  Financial Instruments 

Estimates and assumptions used in determining the fair value of financial instruments are: equity and commodity prices; future 
interest rates; the credit worthiness of the company relative to its counterparties; the credit risk of the company’s counterparties; 
estimated future cash flows; the amount of the liability and equity components of compound financial instruments; discount rates 
and volatility utilized in option valuations. 

Further information on estimates used in determining the carrying value of financial instruments is provided in Notes 6, 25 and 26. 

d. 

Inventory 

The company estimates the net realizable value of its inventory using estimates and assumptions about future development costs, 
costs to hold and future selling costs. 

      2016 ANNUAL REPORT     109

e.  Other 

Other estimates and assumptions utilized in the preparation of the company’s consolidated financial statements are: the assessment 
or determination of net recoverable amount; oil and gas reserves; depreciation and amortization rates and useful lives; estimation 
of recoverable amounts of cash-generating units for impairment assessments of goodwill and intangible assets; ability to utilize 
tax losses and other tax measurements; fair value of assets held as collateral and the percentage of completion for construction 
contracts. 

ii.  Critical Judgments 

Management is required to make critical judgments when applying its accounting policies. The following judgments have the 
most significant effect on the consolidated financial statements: 

a.  Control or Level of Influence 

When determining the appropriate basis of accounting for the company’s investees, the company makes judgments about the 
degree of influence that the company exerts directly or through an arrangement over the investees’ relevant activities. This may 
include the ability to elect investee directors or appoint management. Control is obtained when the company has the power to 
direct the relevant investing, financing and operating decisions of an entity and does so in its capacity as principal of the operations, 
rather than as an agent for other investors. Operating as a principal includes having sufficient capital at risk in any investee and 
exposure to the variability of the returns generated by the decisions of the company as principal. Judgment is used in determining 
the sufficiency of the capital at risk or variability of returns. In making these judgments, the company considers the ability of other 
investors to remove the company as a manager or general partner in a controlled partnership. 

b. 

Investment Properties 

When applying the company’s accounting policy for investment properties, judgment is applied in determining whether certain 
costs are additions to the carrying amount of the property and, for properties under development, identifying the point at which 
practical completion of the property occurs and identifying the directly attributable borrowing costs to be included in the carrying 
value of the development property. 

c.  Property, Plant and Equipment 

The company’s accounting policy for its property, plant and equipment requires critical judgments over the assessment of carrying 
value, whether certain costs are additions to the carrying amount of the property, plant and equipment as opposed to repairs and 
maintenance,  and  for  assets  under  development  the  identification  of  when  the  asset  is  capable  of  being  used  as  intended 
and identifying the directly attributable borrowing costs to be included in the asset’s carrying value. 

For assets that are measured using the revaluation method, judgment is required when estimating future prices, volumes and 
discount and capitalization rates. Judgment is applied when determining future electricity prices considering market data for years 
that a liquid market is available and estimates of electricity prices from renewable sources that would allow new entrants into the 
market in subsequent years. 

d.  Common Control Transactions 

The purchase and sale of businesses or subsidiaries between entities under common control are not specifically addressed in IFRS 
and accordingly, management uses judgment when determining a policy to account for such transactions taking into consideration 
other guidance in the IFRS framework and pronouncements of other standard-setting bodies. The company’s policy is to record 
assets and liabilities recognized as a result of transfers of businesses or subsidiaries between entities under common control at 
carrying value. Differences between the carrying amount of the consideration given or received and the carrying amount of the 
assets and liabilities transferred are recorded directly in equity. 

e. 

Indicators of Impairment 

Judgment is applied when determining whether indicators of impairment exist when assessing the carrying values of the company’s 
assets, including: the determination of the company’s ability to hold financial assets; the estimation of a cash-generating unit’s 
future revenues and direct costs; the determination of discount and capitalization rates; and when an asset’s carrying value is above 
the value derived using publicly traded prices which are quoted in a liquid market. 

f. 

Income Taxes 

The company makes judgments when determining the future tax rates applicable to subsidiaries and identifying the temporary 
difference that relate to each subsidiary. Deferred income tax assets and liabilities are measured at the tax rates that are expected 

110     BROOKFIELD ASSET MANAGEMENT

to apply during the period when the assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively 
enacted at the consolidated balance sheet dates. The company measures deferred income taxes associated with its investment 
properties based on its specific intention with respect to each asset at the end of the reporting period. Where the company has a 
specific intention to sell a property in the foreseeable future, deferred taxes on the building portion of an investment property are 
measured based on the tax consequences following from the disposition of the property. Otherwise, deferred taxes are measured 
on the basis the carrying value of the investment property will be recovered substantially through use.

g.  Classification of Non-Controlling Interests in Limited-Life Funds 

Non-controlling interests in limited-life funds are classified as liabilities (subsidiary equity obligations) or equity (non-controlling 
interests) depending on whether an obligation exists to distribute residual net assets to non-controlling interests on liquidation in 
the form of cash or another financial asset or assets delivered in kind. Judgment is required to determine what the governing 
documents of each entity require or permit in this regard. 

h.  Other 

Other critical judgments include the determination of effectiveness of financial hedges for accounting purposes; the likelihood 
and timing of anticipated transactions for hedge accounting; and the determination of functional currency. 

3.  SEGMENTED INFORMATION

a)  Operating Segments 

Our operations are organized into five operating business groups in addition to our corporate and asset management activities, 
which collectively represent seven operating segments for internal and external reporting purposes. We measure performance 
primarily using Funds from Operations ("FFO") generated by each operating segment and the amount of capital invested by the 
Corporation in each segment using common equity by segment.

Our operating segments are as follows:

i.  Asset management operations include managing our listed partnerships, private funds and public securities on behalf of our 
clients and ourselves. We generate contractual base management fees for these activities as well as incentive distributions 
and performance income, including performance fees, transaction fees and carried interest. 

ii.  Property operations include the ownership, operation and development of office, retail, industrial, multifamily, hospitality 

and other properties.

iii.  Renewable power operations include the ownership, operation and development of hydroelectric, wind and other power 

generating facilities.

iv. 

Infrastructure operations include the ownership, operation and development of utilities, transport, energy, communications 
and agricultural assets.

v.  Private equity operations include a broad range of industries, and are mostly focused on construction, other business services, 

energy, and industrial operations.

vi.  Residential development operations consist of homebuilding, condominium development and land development.

vii.  Corporate  activities  include  the  investment  of  cash  and  financial  assets,  as  well  as  the  management  of  our  corporate 
capitalization, including corporate borrowings and preferred equity, which fund a portion of the capital invested in our other 
operations. Certain corporate costs such as technology and operations are incurred on behalf of our operating segments and 
allocated to each operating segment based on an internal pricing framework.

On June 20, 2016 we formed a listed issuer called Brookfield Business Partners L.P. (“BBU”) by way of a special dividend to 
shareholders. BBU is the primary vehicle through which we own and operate businesses within our private equity business group. 
In connection with the formation of  BBU, we realigned the organizational and governance structure of these businesses  and 
changed how the company presents information for financial reporting and management decision making which resulted in a 
change in the private equity and service activities segments. Specifically, our private equity reportable segment includes our 
investments within BBU, Norbord Inc. and certain other directly held investments. Accordingly, effective the first quarter 2016, 
we combined our private equity and service activities operating segments into a single operating segment, and a single reportable 
segment, called Private Equity. The company has retrospectively applied this segment change for all periods presented.

      2016 ANNUAL REPORT     111

b)  Segment Financial Measures

FFO is a key measure of our financial performance and our segment measure of profit and loss. We use FFO to assess operating 
results and the performance of our businesses on a segmented basis. We define FFO as net income excluding fair value changes, 
depreciation and amortization and deferred income taxes, net of non-controlling interests. When determining FFO, we include 
our proportionate share of the FFO from equity accounted investments on a fully diluted basis. FFO also includes realized disposition 
gains/losses, which are gains or losses arising from transactions during the reporting period, adjusted to include associated fair 
value changes and revaluation surplus recorded in prior periods, taxes payable or receivable in connection with those transactions, 
as well as amounts that are recorded directly in equity, such as ownership changes. 

We use FFO to assess our performance as an asset manager and separately as an investor in our assets, as well as to understand 
the financial impact of our operating decisions. FFO includes the fees that we earn from managing capital as well as our share of 
revenues earned and costs incurred within our operations, which include interest expense and other costs. Specifically, FFO includes 
the impact of contracts that we enter into to generate revenue, including asset management agreements, power sales agreements 
and contracts that our operating businesses enter into such as leases and take or pay contracts, and sales of inventory. FFO also 
includes the impact of changes in leverage or the cost of that financial leverage as well as other costs incurred to operate our 
business.

We use realized disposition gains/losses within FFO in order to provide additional insight regarding the performance of investments 
on a cumulative realized basis, including any unrealized fair value adjustments that were recorded in prior periods and not otherwise 
reflected in current period FFO, and believe it is useful to investors to better understand variances between reporting periods. 

We exclude depreciation and amortization from FFO, as we believe that the value of most of our assets typically increase over 
time, provided we make the necessary maintenance expenditures, the timing and magnitude of which may differ from the amount 
of depreciation recorded in any given period.  In addition, the depreciated cost base of our assets is reflected in the ultimate realized 
disposition gain or loss on disposal. As noted above, unrealized fair value changes are excluded from FFO until the period in 
which the asset is sold.  We also exclude deferred income taxes from FFO because the vast majority of the company’s deferred 
income tax assets and liabilities are a result of the revaluation of our assets under IFRS. Cash taxes are included within FFO.

Our definition of FFO may differ from the definition used by other organizations, as well as the definition of FFO used by the 
Real  Property  Association  of  Canada  (“REALPAC”)  and  the  National  Association  of  Real  Estate  Investment  Trusts,  Inc. 
(“NAREIT”), in part because the NAREIT definition is based on U.S. GAAP, as opposed to IFRS. The key differences between 
our definition of FFO and the determination of FFO by REALPAC and/or NAREIT are that we include the following: realized 
disposition gains or losses and cash taxes payable or receivable on those gains or losses, if any; foreign exchange gains or losses 
on monetary items not forming part of our net investment in foreign operations; and foreign exchange gains or losses on the sale 
of an investment in a foreign operation.

We illustrate how we derive funds from operations for each operating segment and reconcile total reportable segment FFO to net 
income in Note 3 (c)(iv) of the consolidated financial statements. We do not use FFO as a measure of cash generated from our 
operations.

We measure segment assets based on common equity by segment to review our deconsolidated balance sheet, which we consider 
to be the amount of common equity allocated to each segment.

i. 

Segment Balance Sheet Information

The  company  uses  common  equity  by  segment  as  its  measure  of  segment  assets,  because  it  is  utilized  by  the  company's 
Chief Operating Decision Maker for capital allocation decisions.

ii.  Segment Allocation and Measurement

Segment measures include amounts earned from consolidated entities that are eliminated on consolidation. The principal adjustment 
is to include asset management revenues charged to consolidated entities as revenues within the company’s asset management 
segment with the corresponding expense recorded as corporate costs within the relevant segment. These amounts are based on 
the in-place terms of the asset management contracts amongst the consolidated entities. Inter-segment revenues are determined 
under terms that approximate market value.

The company allocates the costs of shared functions, which would otherwise be included within its corporate activities segment 
such as information technology and internal audit, pursuant to formal policies.

112     BROOKFIELD ASSET MANAGEMENT

c)  Reportable Segment Measures

AS AT AND
FOR THE YEAR ENDED
DEC. 31, 2016
(MILLIONS)

Asset
Management

Property

Renewable
Power

Infrastructure

Private
Equity

Residential
Development

Corporate
Activities

Total
Segments

Notes

External revenues ............ $

Inter-segment revenues....

Segmented revenues ........

FFO from equity

accounted investments ..

Interest expense ...............

Current income taxes .......

Funds from operations .....

Common equity ...............

Equity accounted

investments....................

Additions to non-current 
assets1 ............................

348

972

1,320

—

—

—

866

328

—

—

$

6,324

$

2,474

$

2,414

$

9,603

$

3,019

$

229

$

24,411

14

6,338

896

(1,736)

(21)

1,561

16,727

16,628

—

2,474

9

(615)

(43)

180

4,826

206

12,311

6,899

—

2,414

683

(409)

(35)

374

2,697

7,346

5,105

359

9,962

163

(147)

(40)

405

—

3,019

6

(91)

(51)

63

6

235

(6)

(241)

(23)

(212)

2,862

2,679

(7,620)

336

359

374

93

87

59

1,351

i

ii

iii

iv

25,762

1,751

(3,239)

(213)

3,237

22,499

24,977

24,826

1. 

Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill

AS AT
FOR THE YEAR ENDED
DEC. 31, 2015
(MILLIONS)

Asset
Management

Property

Renewable
Power

Infrastructure

Private
Equity

Residential
Development

Corporate
Activities

Total
Segments

Notes

$

5,431

$

1,632

$

2,126

$

8,167

$

2,329

$

External revenues ............ $

Inter-segment revenues....

Segmented revenues ........

FFO from equity

accounted investments ..

Interest expense ...............

Current income taxes .......

Funds from operations .....

Common equity ...............

Equity accounted

investments....................

Additions to non-current 
assets1 ............................

178

743

921

—

—

—

528

328

—

—

13

5,444

759

(1,559)

(37)

1,387

16,265

17,494

—

1,632

20

(429)

(22)

233

4,424

197

19,016

1,444

—

2,126

539

(378)

(19)

252

2,203

4,690

2,527

413

8,580

99

(138)

(14)

334

2,178

412

3,092

—

2,329

21

(118)

(23)

135

2,221

(6,051)

358

114

65

352

50

28

78

(5)

(226)

(17)

(310)

$

19,913

1,197

i

ii

iii

iv

21,110

1,433

(2,848)

(132)

2,559

21,568

23,216

26,545

1. 

Includes equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill

i. 

Inter-Segment Revenues

For the year ended December 31, 2016, the adjustment to external revenues, when determining segmented revenues, consists of 
management fees and leasing revenues earned from consolidated entities totalling $986 million (2015 – $756 million), revenues 
earned on construction projects between consolidated entities totalling $359 million (2015 – $413 million) and interest income 
on loans between consolidated entities totalling $6 million (2015 – $28 million), which were eliminated on consolidation to arrive 
at the company’s consolidated revenues. 

ii.  FFO from Equity Accounted Investments

The company determines FFO from its equity accounted investments by applying the same methodology utilized in adjusting net 
income of consolidated entities. The following table reconciles the sum of FFO from equity accounted investments on a segmented 
basis to the company’s consolidated equity accounted income:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Sum of FFO from equity accounted investments on a segmented basis.............................................. $
Fair value changes and other non-FFO items ......................................................................................

Equity accounted income ..................................................................................................................... $

2016

1,751

(458)

1,293

$

$

2015

1,433

262

1,695

iii.  Interest Expense

For the year ended December 31, 2016, the adjustment to interest expense consists of interest on loans between consolidated 
entities totalling $6 million (2015 – $28 million) that is eliminated on consolidation, along with the associated revenue.

      2016 ANNUAL REPORT     113

iv.  Reconciliation of Total Segment FFO to Net Income

The following table reconciles total segment FFO to net income:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Total segment FFO................................................................................................................

Note

2016

$

3,237

$

Realized disposition gains in fair value changes or prior periods.........................................

v

Non-controlling interests in FFO ..........................................................................................

Financial statement components not included in FFO

Equity accounted fair value changes and other non-FFO items.........................................

Fair value changes ..............................................................................................................

Depreciation and amortization ...........................................................................................

Deferred income taxes........................................................................................................

(766)

2,917

(458)

(130)

(2,020)

558

Net income ............................................................................................................................

$

3,338

$

2015

2,559

(847)

2,288

262

2,166

(1,695)

(64)

4,669

v.   Realized Disposition Gains

Realized disposition gains include gains and losses recorded in net income arising from transactions during the current period 
adjusted to include fair value changes and revaluation surplus recorded in prior periods in connection with the assets disposed. 
Realized disposition gains also include amounts that are recorded directly in equity as changes in ownership, as opposed to net 
income, because they result from a change in ownership of a consolidated entity.

The  realized  disposition  gains  recorded  in  fair  value  changes  or  revaluation  surplus  were  $766  million  for  the  year  ended 
December 31, 2016 (2015 – $847 million), of which $732 million relates to prior periods (2015 – $537 million). There were no 
realized disposition gains recorded directly in equity as changes in ownership.

d)  Geographic Allocation

The company’s revenues by location of operations are as follows:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
United States ........................................................................................................................................ $
Canada..................................................................................................................................................
Europe ..................................................................................................................................................
Australia ...............................................................................................................................................
Brazil ....................................................................................................................................................
Colombia ..............................................................................................................................................
Other.....................................................................................................................................................

$

The company’s consolidated assets by location of assets are as follows:

AS AT DEC. 31
(MILLIONS)
United States ........................................................................................................................................ $
Canada..................................................................................................................................................

Europe ..................................................................................................................................................

Australia ...............................................................................................................................................

Brazil ....................................................................................................................................................

Colombia ..............................................................................................................................................

Other.....................................................................................................................................................

2016
8,073
4,427
3,323
3,843
1,737
975
2,033
24,411

$

$

2016

75,556

$

19,324

20,200

12,920

12,807

7,296

11,723

2015
6,621
3,838
2,776
3,577
1,124
154
1,823
19,913

2015

68,438

18,805

20,762

13,549

9,968

676

7,316

$

159,826

$

139,514

114     BROOKFIELD ASSET MANAGEMENT

e)  Revenues Allocation

Total external revenues within our operating segments are as follows:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Asset management ............................................................................................................................... $
Property

2016

348

$

Core office .........................................................................................................................................

Opportunistic and other .....................................................................................................................

Renewable power

Hydroelectric .....................................................................................................................................

Wind energy.......................................................................................................................................

Co-generation and other ....................................................................................................................

Infrastructure

Utilities ..............................................................................................................................................

Transport............................................................................................................................................

Energy................................................................................................................................................

Sustainable resources and other.........................................................................................................

Private equity

Construction services.........................................................................................................................

Other business services......................................................................................................................

Energy................................................................................................................................................

Industrial and other operations ..........................................................................................................

Residential development ......................................................................................................................

Corporate activities ..............................................................................................................................

2,170

4,154

2,055

373

46

825

892

398

299

4,028

2,006

441

3,128

3,019

229

2015

178

2,519

2,912

1,232

366

34

864

649

342

271

3,420

1,691

390

2,666

2,329

50

$

24,411

$

19,913

4.  SUBSIDIARIES 

The following table presents the details of the company’s subsidiaries with significant non-controlling interests: 

AS AT DEC. 31
(MILLIONS)
Brookfield Property Partners L.P. (“BPY”)............

Brookfield Renewable Partners L.P. (“BEP”)........

Brookfield Infrastructure Partners L.P. (“BIP”).....
Brookfield Business Partners L.P. (“BBU”)3 .........

Jurisdiction
of Formation

Bermuda

Bermuda

Bermuda

Bermuda

Voting Rights Held by 
Non-Controlling Interests1

Ownership Interest Held by 
Non-Controlling Interests2

2016

—%

—%

—%

—%

2015

—%

—%

—%

n/a

2016

31.2%

38.7%

70.2%

25.1%

2015

32.1%

37.5%

70.4%

n/a

1.  Control of the limited partnerships (BPY, BEP, BIP and BBU) resides with their respective general partners which are wholly owned subsidiaries of the company. The 

company’s general partner interest is entitled to earn base management fees and incentive distribution rights

2.  The company’s ownership interest in BPY, BEP, BIP and BBU includes holding a combination of redemption-exchange units (REUs), Class A limited partnership units, 
special limited partnership units and general partnership units in each subsidiary, where applicable. Each of BPY, BEP, BIP and BBU’s partnership capital includes its 
Class A limited partnership units whereas REUs and general partnership units are considered non-controlling interests for the respective partnerships. REUs share the 
same economic attributes in all respects except for the redemption right attached thereto. The REUs and general partnership units participate in earnings and distributions 
on a per unit basis equivalent to the per unit participation of the Class A limited partnership units of the subsidiary

3.  BBU was formed during 2016 through a special dividend of approximately 19 million limited partnership units, equivalent to a 20.7% economic interest in BBU, to the 

shareholders of the company’s Class A shares and Class B shares

During 2016, BEP, BIP and BBU completed equity issuances which the company participated in. The BEP and BBU issuance 
decreased the company’s interest by 1.1% and 4.4%, respectively, as the company participated at a lower interest than its ownership 
at  the  time  of  issuance. The  BIP  issuance  had  minimal  impact  on  the  company’s  interest  as  the  company  participated  at  its 
proportionate interest.

      2016 ANNUAL REPORT     115

The  table  below  presents  the  exchanges  on  which  the  company’s  subsidiaries  with  significant  non-controlling  interests  were 
publicly listed as of December 31, 2016: 

BPY ......................................................................................................................................................

BEP.......................................................................................................................................................

BIP........................................................................................................................................................

BBU .....................................................................................................................................................

TSX

BPY.UN

BEP.UN

BIP.UN

BBU.UN

NYSE

BPY

BEP

BIP

BBU

The following table outlines the composition of accumulated non-controlling interests presented within the company’s consolidated 
financial statements: 

AS AT DEC. 31
(MILLIONS)
BPY ...................................................................................................................................................... $
BEP.......................................................................................................................................................

BIP........................................................................................................................................................

BBU .....................................................................................................................................................

Individually immaterial subsidiaries with non-controlling interests....................................................

2016

18,790

$

8,879

7,710

2,173

5,683

$

43,235

$

2015

16,045

5,358

5,591

—

4,926

31,920

All publicly listed entities are subject to independent governance. Accordingly, the company has no direct access to the assets of 
these subsidiaries. Summarized financial information with respect to the company’s subsidiaries with significant non-controlling 
interests are set out below. The summarized financial information represents amounts before intra-group eliminations: 

BPY

BEP

BIP

BBU

AS AT AND FOR THE YEARS ENDED DEC. 31
2016
(MILLIONS)
Current assets........................................... $ 4,198
Non-current assets ...................................

73,929

2015

2016

2015

2016

2015

2016

2015

$ 3,064

$

907

$

600

$ 1,632

$ 1,553

$ 4,076

$

68,802

26,830

18,907

19,643

16,182

(1,210)

(9,349)

(5,591)

4,117

(2,556)

(1,599)

(2,173)

Current liabilities .....................................

(8,276)

(11,964)

(1,733)

(1,245)

(1,515)

Non-current liabilities..............................

(35,690)

(28,969)

(13,332)

(9,499)

(10,116)

Non-controlling interests .........................

(18,790)
Equity attributable to Brookfield ............. $ 15,371

Revenues.................................................. $ 5,352
Net income attributable to:

(16,045)

(8,879)

(5,358)

(7,710)

$ 14,888

$ 3,793

$ 3,405

$ 1,934

$ 1,585

$ 1,865

$ 4,853

$ 2,516

$ 1,750

$ 2,115

$ 1,855

$ 7,960

$

$

Non-controlling interests....................... $ 1,501
Shareholders..........................................

1,216

$ 1,795

1,971

$ 2,717

$ 3,766

$

$

97

(57)

40

Other comprehensive (loss) income
attributable to:

Non-controlling interests....................... $
Shareholders..........................................

(36) $

(416) $

(210)

(265)

915

414

$

(246) $

(681) $ 1,329

$

$

$

$

95

8

103

$

$

26

$

(124)

(98) $

408

120

528

426

150

576

$

$

$

$

260

131

391

$

$

(170) $

(32)

(202) $

(166) $

(36)

(202) $

101

32

133

$

$

116     BROOKFIELD ASSET MANAGEMENT

—

—

—

—

—

—

—

—

—

—

—

—

—

The summarized cash flows of the company’s subsidiaries with material non-controlling interests are as follows: 

BPY

BEP

BIP

BBU

2016

2015

2016

2015

2016

2015

2016

2015

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Cash flows from (used in):

Operating activities ............................... $
Financing activities ...............................

Investing activities ................................

(3,234)

(3,934)

(3,191)

745

$

590

$

632

$

588

$

2,906

3,178

2,709

753

899

$

632

$

1,764

(1,058)

(2,346)

$

229

586

(96)

—

—

—

(33)

(623)

Distributions paid to non-controlling
interests in common equity.................... $

250

$

202

$

201

$

170

$

383

$

340

$

2

$

—

5.  ACQUISITIONS OF CONSOLIDATED ENTITIES

The company 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)  Completed During 2016 

The following table summarizes the balance sheet impact as a result of business combinations that occurred in the year ended 
December 31, 2016. No material changes were made to the provisional allocations:

(MILLIONS)
Cash and cash equivalents........................................................... $
Accounts receivable and other ....................................................
Inventory .....................................................................................
Equity accounted investments.....................................................
Investment properties ..................................................................
Property, plant and equipment.....................................................
Intangible assets ..........................................................................
Goodwill......................................................................................
Deferred income tax assets..........................................................
Total assets ..................................................................................
Less:

Accounts payable and other......................................................
Non-recourse borrowings .........................................................
Deferred income tax liabilities .................................................
Non-controlling interests1.........................................................

Net assets acquired ...................................................................... $

Property 
119
155
10
—
9,234
652
2
17
2
10,191

(413)
(2,859)
(35)
(33)

(3,340)
6,851

Consideration2 ............................................................................. $

6,824

Renewable 
Power 
117
177
15
—
—
5,741
—
799
—
6,849

$

Infrastructure 
and Other
155
672
39
115
—
1,067
1,225
470
12
3,755

(385)
(1,130)
(1,020)
(1,417)

(3,952)
2,897

2,897

$

$

(318)
(1,161)
(263)
(1,402)

(3,144)
611

611

$

$

$

$

$

$

Total 
391
1,004
64
115
9,234
7,460
1,227
1,286
14
20,795

(1,116)
(5,150)
(1,318)
(2,852)

(10,436)
10,359

10,332

1. 

Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the assets and liabilities on the date of 
acquisition

2.  Total consideration, including amounts paid by non-controlling interests that participated in the acquisition

Brookfield  recorded  $1.7  billion  of  revenue  and  $223  million  of  net  income  from  the  acquired  operations  as  a  result  of  the 
acquisitions made during the year. If the acquisitions had occurred at the beginning of the year, they would have contributed an 
additional $3.0 billion and $230 million to total revenue and net income, respectively.

      2016 ANNUAL REPORT     117

The following table summarizes the balance sheet impact as a result of significant business combinations that occurred in 2016: 

Property

Renewable Power

Infrastructure

Rouse

IFC 
Seoul

Simply 
Storage

City 
Point

Student 
Housing

Isagen Holtwood

Rutas

Niska

Linx

(MILLIONS)

Cash and cash

equivalents............ $

32

$

25

$

16

$

$

33

$

113

$

— $

115

$

15

$

12

3,010

1,911

1,044

742

608

Accounts receivable

and other ...............
Inventory...................

Equity accounted

investments ...........
Investment properties

Property, plant and

equipment .............
Intangible assets........

Goodwill ...................

Deferred income tax
assets.....................
Total assets................

Less:

Accounts payable

and other ............

Non-recourse

94

—

—

13

—

—

28

2

—

13

—

—

—

303

2

—

2

—

—

—

—

3,149

2,256

1,090

(231)

(107)

(12)

borrowings .........

(1,840)

—

(592)

Deferred income

tax liabilities ......

Non-controlling 

interests1 ............

—

(15)

(2,086)

(35)

—

—

(142)

(15)

(619)

1

5

—

—

—

—

12

—

760

(6)

—

—

—

(6)

3

—

—

—

1

5

—

650

174

15

—

—

4,772

—

799

—

5,873

(49)

(381)

(202)

(1,130)

—

(1,019)

(2)

(253)

(1,417)

(3,947)

1

—

—

—

859

—

—

—

860

(1)

—

—

—

(1)

121

—

—

—

6

973

139

—

99

39

—

—

825

—

82

—

1,354

1,060

232

—

115

—

229

69

210

—

867

(7)

(71)

(148)

(441)

(337)

(181)

(153)

(77)

(33)

(626)

(1,227)

(348)

(833)

(360)

(722)

Net assets acquired ... $

1,063

$

2,114

$

471

$

754

$

397

$

1,926

$

859

$

127

$

227

$

145

Consideration2 .......... $

1,063

$

2,114

$

471

$

754

$

397

$

1,926

$

859

$

127

$

227

$

145

1. 

Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the assets and liabilities on the date of 
acquisition

2.  Total consideration, including amounts paid by non-controlling interests

Significant acquisitions completed in 2016 are as follows:

In January 2016, a subsidiary of the company acquired an initial 57.6% interest in Isagen S.A. E.S.P. (“Isagen”) from the Colombian 
government for total consideration of $1.9 billion with a cash contribution of $510 million funded by non-recourse borrowings 
and $1.2 billion from the subsidiary's institutional partners. Isagen is Colombia’s third-largest power generation company which 
owns and operates a 3,032 megawatt (“MW”) portfolio, consisting predominantly of six, largely reservoir-based, hydroelectric 
facilities.

Following the acquisition, the subsidiary of the company was required to conduct two mandatory tender offers (the “MTOs”) for 
the remaining publicly held shares at the same price per share paid for the 57.6% controlling interest. The first MTO closed in 
May 2016, in which the subsidiary acquired an additional 26% of economic interest for $929 million. The second MTO closed 
in September 2016 with total consideration of $605 million, and the subsidiary effectively owns 99.64% of Isagen as of September 
30, 2016 after giving effect to the initial acquisition and the two MTOs. The company is accounting for the initial acquisition of 
the 57.6% controlling interest and the MTOs as separate transactions. The acquisition resulted in $799 million of goodwill due to 
the recognition of a deferred tax liability because the tax bases of the Isagen net assets are significantly lower than their acquisition 
date fair value. Total revenue and net income that would have been recorded if the transaction had occurred at the beginning of 
the year would have been $886 million and $120 million, respectively.

In March 2016, a subsidiary of the company completed the acquisition of a self-storage (“Simply Storage”) operation for total 
consideration of $471 million with a cash contribution of $372 million. Total revenue and net income that would have been 
recorded if the transaction had occurred at the beginning of the year would have been $105 million and $71 million, respectively.

118     BROOKFIELD ASSET MANAGEMENT

In April 2016, a subsidiary of the company completed the acquisition of a portfolio of student housing assets (“Student Housing”) 
for total consideration of $397 million with a cash contribution of $209 million. Total revenue and net income that would have 
been recorded if the transaction had occurred at the beginning of the year would have been $42 million and $5 million, respectively.

In April 2016, a subsidiary of the company completed the acquisition of hydroelectric facilities in Pennsylvania (“Holtwood”) for 
total cash consideration of $859 million. Total revenue and net loss that would have been recorded if the transaction had occurred 
at the beginning of the year would have been $46 million and $1 million, respectively.

In  June  2016,  a  subsidiary  of  the  company  completed  the  acquisition  of  a  portfolio  of  toll  roads  in  Peru  (“Rutas”)  for  total 
consideration of $127 million with a cash contribution of $118 million. Total revenue and net loss that would have been recorded 
if the transaction had occurred at the beginning of the year would have been $122 million and $6 million, respectively.

In July 2016, a subsidiary of the company completed the acquisition of a North American gas storage business (“Niska”) for total 
consideration of $227 million with a cash contribution of $67 million and senior notes already owned by the subsidiary. The 
subsidiary remeasured its existing senior notes to fair value of $141 million at the acquisition date with a remeasurement gain of 
$24 million recorded in the income. Total revenue and net income that would have been recorded if the transaction had occurred 
at the beginning of the year would have been $136 million and $29 million, respectively.

In July 2016, a subsidiary of the company completed the acquisition of a retail mall business (“Rouse”) for total consideration of 
$1.1 billion with a cash contribution of $587 million. The subsidiary accounted for the acquisition as a step acquisition, and 
remeasured  its  existing  33%  equity  interest  in  Rouse  to  fair  value  of  $354  million  at  the  acquisition  date  with  no  material 
remeasurement gain or loss. Total revenue and net loss that would have been recorded if the transaction had occurred at the 
beginning of the year would have been $335 million and $58 million, respectively.

In August 2016, a subsidiary of the company completed the acquisition of an Australia port business (“Linx”) for total consideration 
of $145 million, comprising $13 million in cash and a portion of the subsidiary’s previously existing interest with an acquisition 
date fair value of $132 million. Total revenue and net income that would have been recorded if the transaction had occurred at the 
beginning of the year would have been $504 million and $12 million, respectively.

In December 2016, a subsidiary of the company completed the acquisition of a mixed-use property in South Korea (“IFC Seoul”) 
and an office tower in U.K. (“City Point”) for total consideration of $2.1 billion with a cash contribution of $875 million and 
$754 million with a cash contribution of $147 million, respectively. The subsidiary accounts for the City Point acquisition as a 
step acquisition and remeasured its existing loan interest to fair value at acquisition date of $93 million with a remeasurement loss 
of $34 million. If the transactions had occurred at the beginning of the year, total revenue and net loss for IFC Seoul would have 
been $170 million and $18 million, whereas total revenue and net loss for City Point would have been $49 million and $35 million.

      2016 ANNUAL REPORT     119

b)  Completed During 2015 

The following table summarizes the balance sheet impact as a result of business combinations that occurred in 2015. No material 
changes were made to the provisional allocation disclosed in the 2015 consolidated financial statements:

(MILLIONS)
Cash and cash equivalents ............................................... $
Accounts receivable and other.........................................

Inventory..........................................................................

Equity accounted investments .........................................

Investment properties.......................................................

Property, plant and equipment.........................................

Intangible assets...............................................................

Goodwill ..........................................................................

Deferred income tax assets ..............................................

Total assets.......................................................................

Less:

Accounts payable and other ..........................................

Non-recourse borrowings..............................................

Deferred income tax liabilities......................................
Non-controlling interests1 .............................................

Net assets acquired .......................................................... $

Property

90

$

169

5

71

4,120

2,622

1,099

941

22

9,139

(370)

(2,457)

(519)

(10)

(3,356)

5,783

Renewable
Power

Private
Equity

Other

Total

$

19

41

—

—

—

41

309

405

—

—

1,160

1,767

—

—

—

160

173

36

1,220

2,891

(41)

(391)

(28)

(16)

(476)

744

744

$

$

(441)

(483)

(140)

—

(1,064)

1,827

1,656

$

$

$

$

27

125

135

3

—

5

203

188

4

690

(161)

(39)

(24)

—

(224)
466 2 $

177

644

545

74

4,120

5,554

1,462

1,302

62

13,940

(1,013)

(3,370)

(711)

(26)

(5,120)

8,820

266

$

8,446

$

$

Consideration3.................................................................. $

5,780

1. 

Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the assets and liabilities on the date of 
acquisition
2. 
Includes previously held $200 million equity accounted investment
3.  Total consideration, including amounts paid by non-controlling interests

Brookfield  recorded  $1.5  billion  of  revenue  and  $221  million  of  net  income  from  the  acquired  operations  as  a  result  of  the 
acquisitions made during the year. If the acquisitions had occurred at the beginning of the year, they would have contributed 
$3.5 billion and $91 million to total revenue and net income, respectively. 

120     BROOKFIELD ASSET MANAGEMENT

The following table summarizes the balance sheet impact as a result of significant business combinations that occurred in 2015: 

Property

Renewable
Power

Private Equity

(MILLIONS)
Cash and cash equivalents........................... $
Accounts receivable and other ....................

Inventory .....................................................

Equity accounted investments.....................

Investment properties ..................................

Property, plant and equipment.....................

Intangible assets ..........................................

Goodwill......................................................

Deferred income tax assets..........................

Total assets ..................................................

Less:

Accounts payable and other......................

Non-recourse borrowings .........................

Deferred income tax liabilities .................
Non-controlling interests1.........................

Net assets acquired ...................................... $

Center
Parcs

72

46

5

—

—

2,618

1,099

941

20

4,801

(254)

(2,139)

(450)

—

(2,843)

1,958

Consideration2 ............................................. $

1,958

$

$

AEC

11

72

—

71

2,468

—

—

—

—

2,622

(61)

—

—

(2)

(63)

$

$

2,559

2,559

$

$

Brazil
Office
Properties

Brazil
Renewables

GrafTech

Clearwater

1

36

—

—

626

—

—

—

—

663

(21)

(177)

(69)

—

(267)

396

396

$

$

$

19

32

—

—

—

854

—

—

—

905

$

25

$

161

347

—

—

644

158

170

36

1,541

(21)

(280)

—

(16)

(317)

588

588

$

$

(214)

(387)

(86)

—

(687)

854

854

$

$

—

—

—

—

—

806

—

—

—

806

(97)

—

(57)

—

(154)

652

481

1. 

Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the assets and liabilities on the date of 
acquisition

2.  Total consideration, including amounts paid by non-controlling interests

In January 2015, a subsidiary of the company completed the acquisition of a natural gas production operation (“Clearwater”) for 
total consideration of $481 million. A bargain purchase gain that arose based on the difference between the fair value of net assets 
acquired  and  the  consideration  paid  was  recorded  in  fair  value  changes  in  the  Consolidated  Statements  of  Operations.  The 
identifiable net assets acquired primarily consisted of natural gas reserves, net of the associated decommissioning liability. Total 
revenue and net income that would have been recorded if the transaction had occurred at the beginning of the year would have 
been $163 million and $78 million, respectively. The subsidiary also completed the acquisition of a facilities management business 
in February 2015 and accounted for the acquisition as a step acquisition, and remeasured its existing equity interest to fair value 
at acquisition date of $200 million with a remeasurement gain of $101 million recorded in net income.

In March 2015, a subsidiary of the company completed the acquisition of a renewable power generation portfolio in Brazil (“Brazil 
Renewables”).  Total  consideration  of  R$1,867  million  ($588  million)  included  cash  consideration  of  R$1,717  million 
($541 million) and a deferred consideration amount. Total revenue and net income that would have been recorded if the transaction 
had occurred at the beginning of the year would have been $93 million and $7 million, respectively. The purchase price allocation 
has been completed on a preliminary basis. 

In August 2015, a subsidiary of the company acquired 100% of the voting equity interests in a U.S. multifamily properties company 
(“AEC”) for consideration of $2,559 million. Total revenue and net income that would have been recorded if the transaction had 
occurred at the beginning of the year would have been $192 million and $63 million, respectively. 

In August 2015, a subsidiary of the company completed the acquisition of a U.K. resort operation (“Center Parcs”) for a consideration 
of $1,958 million with a cash contribution of $1.5 billion. Total revenue and net income that would have been recorded if the 
transaction occurred at the beginning of the year would have been $629 million and $35 million, respectively. 

In  August  2015,  a  subsidiary  of  the  company  completed  the  acquisition  of  an  industrial  operation  (“GrafTech”)  for  total 
consideration of $854 million. Total revenue and net loss that would have been recorded if the transaction occurred at the beginning 
of the year would have been $685 million and $147 million, respectively. 

      2016 ANNUAL REPORT     121

In November 2015, a subsidiary of the company acquired a portfolio of office properties in Brazil (“Brazil Office Properties”) for 
total cash consideration of $396 million. Total revenue and net income that would have been recorded if the transaction occurred 
at the beginning of the year would have been $42 million and $20 million, respectively. 

6.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables list the company’s financial instruments by their respective classification as at December 31, 2016 and 2015: 

a)  Financial Instrument Classification 

AS AT DEC. 31, 2016
(MILLIONS)
MEASUREMENT BASIS
Financial assets1
Cash and cash equivalents ....................... $
Other financial assets

Government bonds ................................
Corporate bonds ....................................
Fixed income securities and other.........
Common shares and warrants ...............
Loans and notes receivable ...................

Accounts receivable and other2 ...............

Fair Value 
Through 
Profit and Loss
(Fair Value)

Available-
for-Sale
(Fair Value)

Loans and 
Receivables/Other 
Financial Liabilities 
(Amortized Cost)

— $

— $

4,299

$

22
13
170
1,630
62
1,897
1,501

32
342
335
952
—
1,661
—

—
—
—
—
1,142
1,142
5,298

$

3,398

$

1,661

$

10,739

Financial liabilities
Corporate borrowings .............................. $
Property-specific mortgages ....................
Subsidiary borrowings .............................
Accounts payable and other2 ...................
Subsidiary equity obligations ..................

$

— $
—
—
2,019
1,439
3,458

$

— $
—
—
—
—
— $

4,500
52,442
7,949
9,896
2,126
76,913

$

$

$

Total

4,299

54
355
505
2,582
1,204
4,700
6,799

15,798

4,500
52,442
7,949
11,915
3,565
80,371

1. 
2. 

Total financial assets include $2.5 billion of assets pledged as collateral
Includes derivative instruments which are elected for hedge accounting, totalling $1.0 billion included in accounts receivable and other and $528 million included in 
accounts payable and other, for which changes in fair value are recorded in other comprehensive income

122     BROOKFIELD ASSET MANAGEMENT

AS AT DEC. 31, 2015
(MILLIONS)
MEASUREMENT BASIS
Financial assets1
Cash and cash equivalents ....................... $
Other financial assets

Fair Value Through 
Profit and Loss
(Fair Value)

Available-
for-Sale
(Fair Value)

Loans and 
Receivables/Other 
Financial Liabilities 
(Amortized Cost)

— $

— $

2,774

$

Government bonds ................................
Corporate bonds ....................................
Fixed income securities and other.........
Common shares and warrants ...............
Loans and notes receivable ...................

Accounts receivable and other2 ...............

100
16
188
1,588
82
1,974
1,241

22
1,258
208
1,397
—
2,885
—

$

3,215

$

2,885

$

Financial liabilities
Corporate borrowings .............................. $
Property-specific mortgages ....................
Subsidiary borrowings .............................
Accounts payable and other2 ...................
Subsidiary equity obligations ..................

$

— $
—
—
2,279
1,274
3,553

$

— $
—
—
—
—
— $

—
—
—
—
1,297
1,297
4,327

8,398

3,936
46,044
8,303
9,087
2,057
69,427

$

$

$

Total

2,774

122
1,274
396
2,985
1,379
6,156
5,568

14,498

3,936
46,044
8,303
11,366
3,331
72,980

1. 
2. 

Total financial assets include $2.2 billion of assets pledged as collateral
Includes derivative instruments which are elected for hedge accounting, totalling $831 million included in accounts receivable and other and $874 million included 
in accounts payable and other, for which changes in fair value are recorded in other comprehensive income

Gains or losses arising from changes in the fair value of fair value through profit and loss ("FVTPL") financial assets are presented 
in the Consolidated Statements of Operations in the period in which they arise. Dividends on FVTPL and available-for-sale financial 
assets are recognized when the company’s right to receive payment is established. Interest on available-for-sale financial assets 
is calculated using the effective interest method. 

Available-for-sale securities are recorded on the balance sheet at fair value, and are assessed for permanent impairment at each 
reporting date. As at December 31, 2016, the unrealized gains and losses relating to the fair value of available-for-sale securities 
amounted to $286 million (2015 – $102 million) and $28 million (2015 – $575 million), respectively. 

During the year ended December 31, 2016, $391 million of net deferred loss (2015 – $12 million of net deferred gain) previously 
recognized in accumulated other comprehensive income were reclassified to net income as a result of the disposition or impairment 
of available-for-sale financial assets. 

Included in cash and cash equivalents is $3.8 billion (2015 – $2.3 billion) of cash and $454 million (2015 – $450 million) of short-
term deposits as at December 31, 2016.

      2016 ANNUAL REPORT     123

b)  Carrying and Fair Value 

The following table provides the carrying values and fair values of financial instruments as at December 31, 2016 and 2015:

2016

Carrying 
Value 

Fair Value 

2015

Carrying 
Value 

Fair Value 

4,299

$

4,299

$

2,774

$

2,774

122
1,274
396
2,985
1,379
6,156
5,568

14,498

3,936
46,044
8,303
11,366
3,331
72,980

2016
3,229
1,471
4,700

$

$

$

$

$

122
1,274
396
2,985
1,379
6,156
5,568

14,498

4,229
47,081
8,376
11,366
3,331
74,383

2015
1,194
4,962
6,156

AS AT DEC. 31
(MILLIONS)
Financial assets
Cash and cash equivalents........................................................... $
Other financial assets

Government bonds....................................................................
Corporate bonds........................................................................
Fixed income securities and other ............................................
Common shares and warrants...................................................
Loans and notes receivable.......................................................

Accounts receivable and other ....................................................

54
355
505
2,582
1,204
4,700
6,799

$

15,798

Financial liabilities
Corporate borrowings.................................................................. $
Property-specific mortgages........................................................
Subsidiary borrowings.................................................................
Accounts payable and other ........................................................
Subsidiary equity obligations ......................................................

$

4,500
52,442
7,949
11,915
3,565
80,371

$

$

$

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

54
355
505
2,582
1,204
4,700
6,799

15,798

4,771
53,512
8,103
11,915
3,567
81,868

$

$

$

AS AT DEC. 31
(MILLIONS)
Current.................................................................................................................................................. $
Non-current ..........................................................................................................................................
Total...................................................................................................................................................... $

124     BROOKFIELD ASSET MANAGEMENT

 
c)  Fair Value Hierarchy Levels

The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the fair value hierarchy 
levels:

2016

Level 1

Level 2

Level 3

Level 1

2015
Level 2

Level 3

AS AT DEC. 31
(MILLIONS)
Financial assets

Other financial assets

Government bonds.......................................... $
Corporate bonds..............................................

Fixed income securities and other ..................

Common shares and warrants .........................

Loans and notes receivables ...........................

Accounts receivable and other...........................

$

1,533

Financial liabilities

Accounts payable and other............................... $
Subsidiary equity obligations ............................

$

98

—

98

11

$

43

$

— $

175

36

1,309

—

2

173

178

—

51

1,342

1,787

1,859

52

1,911

$

$

$

7

291

1,273

11

157

1,739

62

1,387

1,449

$

$

$

$

$

$

74

9

67

1,613

—

4

1,767

103

—

103

$

48

$

1,263

152

—

70

1,109

2,642

2,138

51

$

$

2,189

$

$

$

$

—

2

177

1,372

12

128

1,691

38

1,223

1,261

During the year ended December 31, 2016, there were no transfers between Level 1, 2 or 3. During the year ended December 31, 
2015, $769 million of financial assets were transferred from Level 1 to Level 2 due to the elimination of an active market for those 
financial assets. 

Fair values for financial instruments 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 for instruments with similar characteristics and risk profiles or internal 
or external valuation models, such as option pricing models and discounted cash flow analysis, using observable market inputs.

The following table summarizes the valuation techniques and key inputs used in the fair value measurement of Level 2 financial 
instruments:

(MILLIONS)
Type of Asset/Liability
Derivative assets/Derivative

liabilities (accounts receivable/
accounts payable).....................

$

Redeemable fund units

(subsidiary equity obligations)

Other financial assets...................

Carrying Value

Dec. 31, 2016 Valuation Technique(s) and Key Input(s)

1,342/ Foreign currency forward contracts – discounted cash flow model – forward 
exchange rates (from observable forward exchange rates at the end of the 
reporting period) and discounted at credit adjusted rate

(1,859)

Interest rate contracts – discounted cash flow model – forward interest rates 
(from observable yield curves) and applicable credit spreads discounted at a 
credit adjusted rate

Energy  derivatives  –  quoted  market  prices,  or  in  their  absence  internal 
valuation models corroborated with observable market data

52 Aggregated market prices of underlying investments

445 Valuation models based on observable market data

Fair values determined using valuation models require the use of unobservable inputs (Level 3 financial assets and liabilities), 
including assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining those 
unobservable inputs, the company uses observable external market inputs such as interest rate yield curves, currency rates, and 
price and rate volatilities, as applicable, to develop assumptions regarding those unobservable inputs.

      2016 ANNUAL REPORT     125

 
 
 
The following table summarizes the valuation techniques and significant unobservable inputs used in the fair value measurement 
Level 3 financial instruments:

(MILLIONS)
Type of Asset/Liability
Fixed income securities and

other .....................................

Carrying Value
Dec. 31, 2016

Valuation
Technique(s)

$

291 Discounted cash

Significant
Unobservable Input(s)
•  Future cash flows

flows

•  Discount rate

Warrants (common shares and
warrants) ..............................

1,273 Black-Scholes
model

•  Volatility

Relationship of Unobservable
Input(s) to Fair Value
•  Increases (decreases) in 

future cash flows increase 
(decrease) fair value

•  Increases (decreases) in 
discount rate decrease 
(increase) fair value

•  Increases (decreases) in

volatility increase (decrease)
fair value

Limited-life funds (subsidiary
equity obligations) ...............

1,387 Discounted cash
flows

•  Future cash flows

•  Increases (decreases) in 

•  Discount rate

•  Terminal 

capitalization rate

•  Investment horizon

future cash flows increase 
(decrease) fair value

•  Increases (decreases) in 
discount rate decrease 
(increase) fair value

•  Increases (decreases) in 
terminal capitalization 
rate decrease (increase) fair 
value

•  Increases (decreases) in the 
investment horizon increase 
(decrease) fair value

Derivative assets/Derivative

liabilities (accounts
receivable/payable) ..............

157/   Discounted cash

  •  Future cash flows

  •  Increases (decreases) in 

flows

(62)

•  Forward exchange 

rates (from 
observable forward 
exchange rates at the 
end of the reporting 
period)

•  Discount rate

future cash flows increase 
(decrease) fair value

•  Increases (decreases) in the 
forward exchange rate 
increase (decrease) fair value

•  Increases (decreases) in 
discount rate decrease 
(increase) fair value

The following table presents the change in the balance of financial assets and liabilities classified as Level 3 as at December 31, 
2016 and 2015:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year ............................................................................... $
Fair value changes in net income .....................................................................
Fair value changes in other comprehensive income1........................................
Additions, net of disposals................................................................................

Financial 
Assets 

Financial 
Liabilities 

2016

2015

2016

1,691

$

3,627

$

1,261

$

(102)

(12)

162

134

(2)

(2,068)

48

35

105

2015

1,429

(50)

(104)

(14)

Balance, end of year ......................................................................................... $

1,739

$

1,691

$

1,449

$

1,261

1. 

Includes foreign currency translation

126     BROOKFIELD ASSET MANAGEMENT

The following table categorizes liabilities measured at amortized cost, but for which fair values are disclosed: 

2016

2015

AS AT DEC. 31
(MILLIONS)
Corporate borrowings......................................... $
Property-specific mortgages...............................

Subsidiary borrowings........................................

Subsidiary equity obligations .............................

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

4,771

$

— $

— $

4,229

$

— $

—

1,360

2,872

—

16,724

2,451

—

35,428

2,780

2,128

583

3,246

—

14,205

2,252

—

32,293

2,878

2,057

Fair values for Level 2 and Level 3 liabilities measured at amortized cost but for which fair values are disclosed are determined 
using valuation techniques such as adjusted public pricing and discounted cash flows. 

d)  Hedging Activities 

The company uses derivatives and non-derivative financial instruments to manage or maintain exposures to interest, currency, 
credit and other market risks. For certain derivatives which are used to manage exposures, the company determines whether hedge 
accounting can be applied. When hedge accounting may be applied, a hedge relationship may be designated as a fair value hedge, 
cash flow hedge or a hedge of foreign currency exposure of a net investment in a foreign operation. To qualify for hedge accounting, 
the derivative must be highly effective in accomplishing the objective of offsetting changes in the fair value or cash flows attributable 
to the hedged risk both at inception and over the life of the hedge. If it is determined that the derivative is not highly effective as 
a hedge, hedge accounting is discontinued prospectively. 

i.  Cash Flow Hedges 

The company uses the following cash flow hedges: energy derivative contracts to hedge the sale of power; interest rate swaps to 
hedge the variability in cash flows or future cash flows related to a variable rate asset or liability; and equity derivatives to hedge 
long-term compensation arrangements. For the year ended December 31, 2016, pre-tax net unrealized gains of $149 million (2015
–  $197 million) were recorded in other comprehensive income for the effective portion of the cash flow hedges. As at December 31, 
2016, there was an unrealized derivative asset balance of $260 million relating to derivative contracts designated as cash flow 
hedges (2015 – $86 million liability). The unrealized gains on cash flow hedges are expected to be realized in net income by 2025. 

ii.  Net Investment Hedges 

The company uses foreign exchange contracts and foreign currency denominated debt instruments to manage its foreign currency 
exposures arising from net investments in foreign operations. For the year ended December 31, 2016, unrealized pre-tax net gains 
of $129 million (2015 – $75 million) were recorded in other comprehensive income for the effective portion of hedges of net 
investments in foreign operations. As at December 31, 2016, there was an unrealized derivative asset balance of $236 million 
relating to derivative contracts designated as net investment hedges (2015 – $31 million).

e)  Netting of Financial Instruments

Financial assets and liabilities are offset with the net amount reported in the Consolidated Balance Sheets where the company 
currently has a legally enforceable right to offset and there is an intention to settle on a net basis or realize the asset and settle the 
liability simultaneously. 

The company enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting 
agreements. In general, under such agreements the amounts owed by each counterparty on a single day are aggregated into a single 
net amount that is payable by one party to the other. The agreements provide the company with the legal and enforceable right to 
offset these amounts and accordingly the following balances are presented net in the consolidated financial statements: 

Accounts Receivable 
and Other

Accounts Payable 
and Other

AS AT DEC. 31
(MILLIONS)
Gross amounts of financial instruments before netting .................................................. $
Gross amounts of financial instruments set-off in Consolidated Balance Sheets...........

2016

2015

2016

2015

1,625

$

1,429

$

1,186

$

2,310

(124)

(188)

(154)

(165)

Net amount of financial instruments in Consolidated Balance Sheets ........................... $

1,501

$

1,241

$

1,032

$

2,145

No financial instruments that were subject to master netting agreements or for which collateral has been posted were not set off 
in the Consolidated Balance Sheets. 

      2016 ANNUAL REPORT     127

 
 
7.   ACCOUNTS RECEIVABLE AND OTHER 

AS AT DEC. 31
(MILLIONS)
Accounts receivable .................................................................................................
Prepaid expenses and other assets............................................................................
Restricted cash .........................................................................................................
Sustainable resources ...............................................................................................
Total..........................................................................................................................

Note
(a)
(a)
(b)
(c)

$

$

The current and non-current balances of accounts receivable and other are as follows: 

AS AT DEC. 31
(MILLIONS)
Current ............................................................................................................................................. $
Non-current......................................................................................................................................
Total................................................................................................................................................. $

2016
4,294
3,448
1,004
387
9,133

2016
6,490
2,643
9,133

$

$

$

$

2015
3,384
2,361
944
355
7,044

2015
4,746
2,298
7,044

a)  Accounts Receivable and Other Assets

Acquisitions throughout the year increased the balance by $1.0 billion, particularly from our Colombian hydro plants, North 
American gas storage business and our Peruvian toll roads. Our private equity operations increased approximately $300 million 
primarily due to increased project volumes in our construction services and facilities management business. Accounts receivable 
includes $302 million (2015 – $207 million) of unrealized mark-to-market gains on energy sales contracts and $663 million (2015 
–  $322 million)  of  completed  contracts  and  work-in-progress  related  to  contracted  sales  from  the  company’s  residential 
development operations. 

b)  Restricted Cash 

Restricted cash primarily relates to the company’s property, renewable power, private equity and residential development financing 
arrangements including defeasement of debt obligations, debt service accounts and deposits held by the company’s insurance 
operations. 

c)  Sustainable Resources 

The company held 1.7 million acres of consumable freehold timberlands at December 31, 2016 (2015 – 1.7 million), representing 
40.8 million cubic metres (2015 – 34.6 million) of mature timber and available for harvest. Additionally, the company provides 
management services to approximately 1.3 million acres (2015 – 1.3 million) of licensed timberlands. 

The following table presents the change in the balance of timberlands and other agricultural assets: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year .............................................................................................................. $
Additions, net of disposals...............................................................................................................
Fair value adjustments .....................................................................................................................
Decrease due to harvest ...................................................................................................................
Foreign currency changes ................................................................................................................
Balance, end of year ........................................................................................................................ $

2016
355
58
30
(76)
20
387

$

$

2015
446
7
34
(68)
(64)
355

128     BROOKFIELD ASSET MANAGEMENT

The carrying values are based on external appraisals that are completed annually as at December 31. The appraisals utilize a 
combination  of  the  discounted  cash  flow  and  sales  comparison  approaches  to  arrive  at  the  estimated  value.  The  significant 
unobservable inputs (Level 3) included in the discounted cash flow models used when determining the fair value of standing 
timber and agricultural assets include: 

Valuation
Technique(s)
Discounted
cash flow
analysis

Significant
Unobservable Input(s)
•  Future cash flows 

Relationship of Unobservable Input(s)
to Fair Value
•  Increases  (decreases)  in  future  cash 

flows increase

•  Timber/Agricultural 

•  Increases (decreases) in price increase 

prices

(decrease) fair value

Mitigating Factors
•  Increases (decreases) in cash flows tend to 
be accompanied by increases (decreases) in 
discount  rates  that  may  offset  changes  in 
fair value from cash flows

•  Increases (decreases) in discount rates tend 
to be accompanied by increases (decreases) 
in cash flows that may offset changes in fair 
value from discount rates

•  Discount rate/

terminal
capitalization rate

•  Increases (decreases) in discount rate or 
terminal  capitalization  rate  decrease 
(increase) fair value

•  Decreases 

in 

(increases) 

terminal 
capitalization rates tend to be accompanied 
by increases (decreases) in cash flows that 
may  offset  changes  in  fair  value  from 
terminal capitalization rates

Key valuation assumptions include a weighted-average discount and terminal capitalization rate of 5.9% (2015 – 5.9%), and 
terminal valuation dates of 30 years (2015 – 30 years). Timber and agricultural asset prices were based on a combination of forward 
prices available in the market and price forecasts. 

8.   INVENTORY 

AS AT DEC. 31
(MILLIONS)
Residential properties under development....................................................................................... $

Land held for development..............................................................................................................

Completed residential properties .....................................................................................................

Industrial products and other ...........................................................................................................

2016

2,215

$

1,609

952

573

Total................................................................................................................................................. $

5,349

$

The current and non-current balances of inventory are as follows: 

AS AT DEC. 31
(MILLIONS)
Current ............................................................................................................................................. $
Non-current......................................................................................................................................
Total................................................................................................................................................. $

2016
2,987
2,362
5,349

$

$

2015

1,837

1,806

747

891

5,281

2015
3,198
2,083
5,281

During the year ended December 31, 2016, the company recognized as an expense $4.7 billion (2015 – $4.0 billion) of inventory 
relating to cost of goods sold and $85 million (2015 – $83 million) relating to impairments of inventory. The carrying amount of 
inventory pledged as security at December 31, 2016 was $2.4 billion (2015 – $2.3 billion).

      2016 ANNUAL REPORT     129

9.  HELD FOR SALE

The  following  is  a  summary  of  the  assets  and  liabilities  that  were  classified  as  held  for  sale  as  at  December 31,  2016  and 
December 31, 2015:

AS AT DEC. 31
(MILLIONS)
Assets

Cash and cash equivalents.................................................................. $
Accounts receivables and other..........................................................

Investment properties .........................................................................

Property, plant and equipment............................................................

Other long-term assets........................................................................

Assets classified as held for sale ........................................................... $
Liabilities

Accounts payable and other ............................................................... $
Property-specific mortgages...............................................................

Deferred income tax liabilities ...........................................................

Liabilities associated with assets classified as held for sale ................. $

Property 

Private Equity
and Other 

2016
Total 

— $

8

$

8

$

1

146
—
—

147

1

60

—

61

$

$

$

133

19

58

67

285

66

—

—

66

$

$

$

134

165

58

67

432

67

60

—

$

$

127

$

2015
Total

8

70

775

542

2

1,397

69

430

23

522

The company classified the following significant asset groups or investments as held for sale:

a)  Property

As at December 31, 2016 a subsidiary of the company classified two industrial assets in France, a portfolio of multifamily 
assets in the United States and seven triple net lease assets in the United States, as held for sale assets. The company intends 
to sell controlling interests in these properties to third parties in the next 12 months.

b)  Private Equity

As at December 31, 2016, assets held for sale by our private equity operations included a bath and shower manufacturer. In January 
2017, together with its institutional partners, the company sold the 100% interest for gross proceeds of approximately $400 million 
before transaction and other costs.

130     BROOKFIELD ASSET MANAGEMENT

10.  EQUITY ACCOUNTED INVESTMENTS 

The following table presents the voting interests and carrying values of the company’s investments in associates and joint ventures, 
all of which are accounted for using the equity method: 

AS AT DEC. 31
(MILLIONS)
Property

Investment
Type

Voting Interest

Carrying Value

2016

2015

2016

2015

General Growth Properties.............................................................
Canary Wharf ................................................................................. Joint Venture
Manhattan West, New York1 .......................................................... Joint Venture
Other property joint ventures1 ........................................................ Joint Venture
Other property investments1...........................................................

Associate

Associate

29%

50%

56%

50%

56%

12 – 90% 13 – 83%

19 – 90% 23 – 90%

2,866

1,214

3,651

1,444

7,215

3,400

1,073

3,929

1,877

29% $

7,453

$

Renewable power

Other renewable power investments ..............................................

Associate

14 – 50% 14 – 50%

206

197

16,628

17,494

Infrastructure

Brazilian toll road1..........................................................................
South American transmission operations .......................................
North American natural gas transmission operations..................... Joint Venture
Brazilian rail and port operations ...................................................
European communications business...............................................
Australian ports operation ..............................................................
Other infrastructure investments ....................................................

Associate

Associate

Associate

Associate

Associate

Associate

57%

28%

50%

27%

45%

50%

49%

28%

50%

27%

31%

—

11 – 50% 11 – 50%

1,703

699

806

901

1,313

693

1,231

7,346

Other joint ventures1 ......................................................................... Joint Venture
Other investments1 ............................................................................
166
Total...................................................................................................................................................................... $ 24,977

15 – 95% 17 – 95%

9 – 89% 28 – 50%

Associate

631

944

651

425

622

1,106

—

942

4,690

769

66

$ 23,216

1. 

Includes investments in which the company’s ownership interest is greater than 50% represent investments in equity accounted joint ventures or associates where control 
is either shared or does not exist resulting in the investment being equity accounted 

The following table presents the change in the balance of investments in associates and joint ventures: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year................................................................................................................... $
Additions, net of disposals (including reclassifications to and from held for sale) .............................

Acquisitions through business combinations .......................................................................................

Share of net income..............................................................................................................................

Share of other comprehensive income .................................................................................................

Distributions received ..........................................................................................................................

Foreign exchange .................................................................................................................................

2016

23,216

$

660

115

1,293

430

(675)

(62)

Balance, end of year............................................................................................................................. $

24,977

$

2015

14,916

7,503

74

1,695

515

(480)

(1,007)

23,216

      2016 ANNUAL REPORT     131

The  following  table  presents  current  and  non-current  assets  as  well  as  current  and  non-current  liabilities  of  the  company’s 
investments in associates and joint ventures: 

AS AT DEC. 31
(MILLIONS)

Property

2016

2015

Current
Assets

Non-
Current
Assets

Current
Liabilities

Non-
Current
Liabilities

Current
Assets

Non-
Current
Assets

Current
Liabilities

Non-
Current
Liabilities

General Growth Properties ................ $ 1,547
Canary Wharf ....................................
Manhattan West, New York...............

776

244

$ 38,460

$ 2,540

$ 12,656

$ 2,390

$ 44,126

$ 1,130

$ 21,544

11,641

3,374

461

733

6,224

718

853

251

12,643

2,681

896

71

5,799

945

Other property joint ventures and
investments ......................................

Renewable power

657

20,986

2,119

6,908

1,223

24,962

2,110

9,407

Other renewable power investments .

45

934

42

532

45

913

37

533

Infrastructure

Brazilian toll road ..............................

South American transmission
operations ........................................

North American natural gas
transmission operations ...................

Brazilian rail and port operations ......
European communications business..
Australian ports operation .................
Other infrastructure investments .......
Other.....................................................

263

221

122

460

328

171

360

1,640

4,977

5,519

5,767

5,265

5,437

2,166

4,378

3,909

823

142

1,353

674

443

66

515

775

1,665

3,234

2,925

1,645

2,528

1,229

1,827

3,571

230

148

136

512

416

—

284

1,846

3,745

5,150

5,565

3,386

4,790

—

3,586

3,394

656

333

226

164

370

—

212

1,152

1,636

2,814

4,623

1,324

2,421

—

1,738

3,328

$ 6,834

$112,813

$ 10,686

$ 45,662

$ 8,334

$114,941

$ 7,357

$ 56,112

Certain of the company’s investments in associates are subject to restrictions over the extent to which they can remit funds to the 
company in the form of cash dividends, or repayment of loans and advances as a result of borrowing arrangements, regulatory 
restrictions and other contractual requirements.

132     BROOKFIELD ASSET MANAGEMENT

The following table presents total revenues, net income, and other comprehensive income (“OCI”) of the company’s investments 
in associates and joint ventures and dividends received by the company from these investments: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)

Property

2016

Net
Income

Revenue

OCI Revenue

2015

Net
Income

$ 1,735

$

4

$ 3,208

$ 1,857

$

General Growth Properties ...................................................... $ 2,427
Canary Wharf...........................................................................
Manhattan West, New York.....................................................
Other property joint ventures and investments........................

654

78

1,727

19

188

1,110

Renewable power

Other renewable power investments........................................

74

—

Infrastructure

766

Brazilian toll road ....................................................................
South American transmission operations.................................
North American natural gas transmission operations..............
Brazilian rail and port operations ............................................
European communications business ........................................
Australian ports operation........................................................
Other infrastructure investments..............................................
Other...........................................................................................
1,595
Total............................................................................................ $ 11,373

1,091

1,024

433

164

767

573

185

38

133

70

121

(31)

54

174

(4)

—

34

18

382

217

5

976

376

(81)

280

(136)

606

12

2,054

89

758

432

522

1,074

579

—

947

933

1,004

21

3,050

19

(12)

75

(29)

136

62

—

94

(106)

OCI

(12)

(102)

—

168

76

4

229

—

313

72

—

212

199

$ 3,796

$ 2,071

$ 11,214

$ 6,171

$ 1,159

The following table presents distributions from equity accounted investments by operating segments:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Property ................................................................................................................................................ $
Renewable power .................................................................................................................................

Infrastructure ........................................................................................................................................

Private equity and other .......................................................................................................................

2016

508

$

6

85

76

$

675

$

2015

270

19

126

65

480

Certain of the company’s investments are publicly listed entities with active pricing in a liquid market. The fair value based on 
the publicly listed price of these equity accounted investments in comparison to the company’s carrying value is as follows: 

AS AT DEC. 31
(MILLIONS)
General Growth Properties.......................................................... $
Rouse Properties..........................................................................

Other............................................................................................

2016

2015

Public Price

Carrying
Value

Public Price

Carrying
Value

6,379

$

7,453

$

6,948

$

—

44

—

—

282

39

$

6,423

$

7,453

$

7,269

$

7,215

380

2

7,597

At December 31, 2016, the company performed a review to determine whether there is any objective evidence that the investment 
in GGP is impaired. As a result of this review, management determined that there is no objective evidence of impairment of GGP 
at December 31, 2016.

      2016 ANNUAL REPORT     133

11.  INVESTMENT PROPERTIES 

The following table presents the change in the fair value of investment properties, all of which are considered Level 3 within the 
fair value hierarchy: 

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Fair value, beginning of year .................................................................................................................. $

2016

47,164

$

Additions.................................................................................................................................................

Acquisitions through business combinations..........................................................................................

Disposals and reclassified to assets held for sale....................................................................................

Fair value changes ..................................................................................................................................

Foreign currency translation ...................................................................................................................

1,576

9,234

(4,612)

960

(150)

Fair value, end of year ............................................................................................................................ $

54,172

$

2015

46,083

2,812

4,120

(5,924)

2,275

(2,202)

47,164

Investment properties include the company’s office, retail, multifamily, industrial and other properties as well as higher-and-better- 
use land within the company’s sustainable resource operations. Investment properties generated $4.1 billion (2015 – $3.8 billion) 
in rental income, and incurred $1.6 billion (2015 – $1.6 billion) in direct operating expenses. Our investment properties are pledged 
as collateral for the non-recourse mortgages at their respective properties.

The following table presents our investment properties measured at fair value: 

AS AT DEC. 31
(MILLIONS)
Core office

2016

2015

United States.......................................................................................................................................... $

16,529

$

17,580

Canada ...................................................................................................................................................

Australia ................................................................................................................................................

Europe....................................................................................................................................................

Brazil .....................................................................................................................................................

Opportunistic and other

Opportunistic office...............................................................................................................................

Opportunistic retail................................................................................................................................

Industrial................................................................................................................................................

Multifamily............................................................................................................................................

Triple net lease.......................................................................................................................................

Self-storage............................................................................................................................................

Student housing .....................................................................................................................................

Other investment properties ..................................................................................................................

4,613

2,112

1,830

315

5,853

4,217

2,678

3,574

4,790

1,624

649

5,388

$

54,172

$

4,340

2,504

2,027

224

2,565

916

2,377

4,458

4,608

—

—

5,565

47,164

134     BROOKFIELD ASSET MANAGEMENT

Significant unobservable inputs (Level 3) are utilized when determining the fair value of investment properties. The significant 
Level 3 inputs include:

Valuation 
Technique(s)
Discounted cash
flow analysis

Significant Unobservable
Input(s)
•  Future cash flows 

primarily driven by net 
operating income

•  Discount rate

Relationship of
Unobservable Input(s) to
Fair Value
•  Increases (decreases) in 

future cash flows increase 
(decrease) fair value

•   Increases (decreases) in 
discount rate decrease 
(increase) fair value

Mitigating Factor(s)
•  Increases (decreases) in cash flows tend to be 
accompanied  by  increases  (decreases)  in 
discount rates that may offset changes in fair 
value from cash flows

•  Increases (decreases) in discount rates tend to 
be  accompanied  by  increases  (decreases)  in 
cash flows that may offset changes in fair value 
from discount rates

•  Terminal capitalization 

•   Increases (decreases) in 

rate

terminal capitalization rate 
decrease (increase) fair 
value

•  Decreases 

(increases) 

terminal 
capitalization rates tend to be accompanied by 
increases (decreases) in cash flows that may 
offset  changes  in  fair  value  from  terminal 
capitalization rates

in 

In addition to the above, the company’s investment properties are diversified across asset type, asset class, geography and markets.  
As such, there may be mitigating factors, such as changes to these assumptions that vary in direction and magnitude across these 
geographies and markets.

The following table presents our investment properties measured at fair value: 

AS AT DEC. 31

Core office

United States .................................

Canada...........................................

Australia ........................................

Europe ...........................................

Brazil.............................................

Opportunistic and other

Opportunistic office ......................

Opportunistic retail .......................

Industrial .......................................

Multifamily ...................................

Triple net lease ..............................

Self-storage ...................................

Student housing.............................

Other investment properties ..........

2016

Terminal
Capitalization
Rate

Discount Rate

Investment
Horizon (years)

Discount Rate

2015

Terminal
Capitalization
Rate

Investment
Horizon (years)

6.8%

6.2%

7.3%

6.0%

9.3%

9.9%

10.2%

7.4%

4.9%

6.1%

6.2%

5.9%

5.4%

5.6%

5.5%

6.1%

5.0%

7.5%

7.6%

8.1%

6.6%

n/a

n/a

n/a

n/a

n/a

12

10

10

12

10

7

12

10

n/a

n/a

n/a

n/a

n/a

6.9%

6.1%

7.6%

6.0%

9.3%

11.5%

11.3%

7.6%

5.1%

6.3%

n/a

n/a

5.3%

5.7%

5.5%

6.2%

5.1%

7.5%

8.3%

8.5%

6.8%

n/a

n/a

n/a

n/a

n/a

12

10

10

12

10

6

10

10

n/a

n/a

n/a

n/a

n/a

      2016 ANNUAL REPORT     135

12.  PROPERTY, PLANT AND EQUIPMENT

The company’s property, plant and equipment relates to the operating segments as shown below:

Renewable 
Power (a) 

Infrastructure (b)

Property (c)

Private Equity 
and Other (d)

Total

2016

AS AT DEC. 31
(MILLIONS)
Costs .............................. $ 18,031
Accumulated fair value 
changes1 .......................
Accumulated
depreciation .................

12,298

(3,776)

2015

2016

2015

2016

2015

2016

2015

2016

2015

$ 10,950

$ 8,045

$ 6,725

$ 5,783

$ 5,300

$ 5,268

$ 5,309

$ 37,127

$ 28,284

11,650

2,690

2,513

694

612

(243)

(231)

15,439

14,544

(2,862)

(1,190)

(900)

(825)

(596)

(1,429)

(1,197)

(7,220)

(5,555)

Total ............................... $ 26,553

$ 19,738

$ 9,545

$ 8,338

$ 5,652

$ 5,316

$ 3,596

$ 3,881

$ 45,346

$ 37,273

1.  The accumulated fair value changes for private equity and other represent accumulated impairment charges, as assets in these segments are carried at amortized cost

Renewable Power, Infrastructure and Property segments carry property plant and equipment assets at fair value, classified as Level 
3 in the fair value hierarchy due to the use of significant unobservable inputs when determining fair value. Private Equity and 
other segments carry property plant and equipment assets at amortized cost. As at December 31, 2016, $29.6 billion (2015 – 
$25.1 billion) of property, plant and equipment were pledged as collateral for the property debt at their respective properties. 

a)  Renewable Power

Our renewable power property, plant and equipment consists of the following:

Hydroelectric 
and Other

Wind Energy

Total

AS AT DEC. 31
(MILLIONS)
Cost, beginning of year .................................................................... $ 7,738

2016

2015

2016

2015

2016

2015

$ 7,997

$ 3,212

$ 3,079

$ 10,950

$ 11,076

Additions, net of disposals and assets reclassified as held for sale..

Acquisitions through business combinations ...................................

Foreign currency translation ............................................................

267

5,731

1,006

Cost, end of year ..............................................................................

14,742

191

537

(987)

7,738

65

10

2

623

(238)

(252)

332

5,741

1,008

814

299

(1,239)

3,289

3,212

18,031

10,950

Accumulated fair value changes, beginning of year ........................

11,089

10,877

Fair value changes............................................................................

Dispositions and assets reclassified as held for sale ........................

Foreign currency translation and other ............................................

133

—

309

1,283

—

(1,071)

Accumulated fair value changes, end of year ..................................

11,531

11,089

Accumulated depreciation, beginning of year .................................

(2,298)

(2,187)

Depreciation expenses......................................................................

(603)

(411)

Dispositions and assets reclassified as held for sale ........................

Foreign currency translation and other ............................................

13

(125)

—

300

561

184

—

22

767

(564)

(200)

1

—

657

11,650

11,534

41

(4)

(133)

317

—

331

1,324

(4)

(1,204)

561

12,298

11,650

(453)

(201)

37

53

(2,862)

(2,640)

(803)

14

(125)

(612)

37

353

Accumulated depreciation, end of year............................................

(3,013)

(2,298)

(763)

(564)

(3,776)

(2,862)

Balance, end of year......................................................................... $ 23,260

$16,529

$ 3,293

$ 3,209

$ 26,553

$ 19,738

136     BROOKFIELD ASSET MANAGEMENT

The following table presents our renewable power property, plant and equipment measured at fair value: 

AS AT DEC. 31
(MILLIONS)
North America.......................................................................................................................................... $

2016

17,132

$

Brazil ........................................................................................................................................................
Colombia1.................................................................................................................................................
Europe ......................................................................................................................................................

2,893

5,275

1,253

$

26,553

$

2015

16,339

2,198

—

1,201

19,738

1.  Colombian property, plant and equipment were acquired in 2016 and are carried at the acquisition value less depreciation; thus, Colombia has been excluded from all 

valuation-related tables below.

Renewable power assets are accounted for under the revaluation model and the most recent date of revaluation was December 31, 
2016. Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of renewable power assets. The 
significant Level 3 inputs include:

Valuation
Technique(s)
Discounted cash
flow analysis

Significant
Unobservable Input(s)
•  Future cash flows – 
primarily driven by 
future electricity price 
assumptions

Relationship of Unobservable Input(s) 
to Fair Value
•  Increases  (decreases)  in  future  cash 
flows increase (decrease) fair value

•  Discount rate

•  Increases  (decreases)  in  discount  rate 

decrease (increase) fair value

•  Terminal 

capitalization rate

•  Increases 

(decreases) 

terminal 
capitalization  rate  decrease  (increase) 
fair value

in 

 Mitigating Factor(s)
•  Increases  (decreases)  in  cash  flows 
tend to be accompanied by increases 
(decreases) in discount rates that may 
offset changes in fair value from cash 
flows

•  Increases (decreases) in discount rates 
tend to be accompanied by increases 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
discount rates

•  Decreases  (increases)  in  terminal 
to  be 
rates 
capitalization 
increases 
by 
accompanied 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
terminal capitalization rates

tend 

The company’s estimate of future renewable power pricing is based on management’s estimate of the cost of securing new energy 
from renewable sources to meet future demand by 2023 (Dec. 31, 2015 – 2023), which will maintain system reliability and 
provide adequate levels of reserve generations.

Key valuation metrics of the company’s hydro and wind generating facilities at the end of 2016 and 2015 are summarized below.

AS AT DEC. 31

Discount rate

North America

Brazil

Europe

2016

2015

2016

2015

2016

2015

Contracted .............................. 4.8% – 5.5% 4.7% – 5.4%

Uncontracted .......................... 6.6% – 7.2% 6.4% – 7.1%
Terminal capitalization rate1 ..... 6.3% – 6.9% 6.3% – 6.9%
2035
Exit date ....................................

2036

9.2%

10.5%

n/a

2031

9.2%  4.1% – 5.0%
10.5% 5.9% – 6.8%

n/a

2033

n/a

2031

5.0%

6.8%

n/a

2031

1.   Terminal capitalization rate applies only to hydroelectric assets in in North America

Terminal values are included in the valuation of hydroelectric assets in the United States and Canada. For the hydroelectric assets 
in Brazil, cash flows have been included based on the duration of the authorization or useful life of a concession asset without 
consideration of potential renewal value. The weighted-average remaining duration at December 31, 2016 is 15 years (2015 – 
18 years). Consequently, there is no terminal value attributed to the hydroelectric assets in Brazil.

      2016 ANNUAL REPORT     137

The following table summarizes the percentage of total generation contracted under power purchase agreements, the power prices 
from long-term power purchase agreements that are linked specifically to the related power generating assets and the estimates 
of future electricity prices:

Total Generation Contracted
under Power Purchase
Agreements

Power Prices from Long-
Term Power Purchase 
Agreements 
(weighted average)

Estimates of Future 
Electricity Prices
(weighted average)

AS AT DECEMBER 31, 2016

1 – 10 years

11 – 20 years

1 – 10 years

11 – 20 years

1 – 10 years

11 – 20 years

North America (prices in US$/MWh).

Brazil (prices in R$/MWh) .................

Europe (prices in €/MWh) ..................

37%

65%

85%

18%

58%

34%

93

270

90

104

387

109

69

289

84

127

454

101

b)  Infrastructure

Our infrastructure property, plant and equipment consists of the following:

Utilities (i)

Transport (i)

Energy (i)

Sustainable
Resources (ii)

Total

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Cost, beginning of year ............................................ $2,945

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

$3,122

$1,953

$2,187

$1,487

$1,653

$ 340

$ 480

$6,725

$7,442

Additions, net of disposals and assets reclassified

as held for sale .......................................................

Acquisitions through business combinations...........

367

—

127

—

Foreign currency translation ....................................

(418)

(304)

78

242

88

134

—

89

825

(368)

(19)

(72)

—

(94)

5

—

63

4

539

— 1,067

193

—

(144)

(286)

(910)

Cost, end of year ......................................................

2,894

2,945

2,361

1,953

2,382

1,487

408

340

8,045

6,725

Accumulated fair value changes, beginning of year

Fair value changes....................................................

Dispositions and assets reclassified as held for sale

946

184

—

729

392

(111)

973

25

—

Foreign currency translation and other ....................

(86)

(64)

(216)

Accumulated fair value changes, end of year ..........

1,044

946

782

Accumulated depreciation, beginning of year .........

Depreciation expense ...............................................

Dispositions and assets reclassified as held for sale

Foreign currency translation and other ....................

(291)

(128)

1

34

(214)

(138)

48

13

(418)

(126)

1

26

725

62

—

186

973

(210)

(110)

—

(98)

209

123

—

19

351

210

180

(150)

(31)

209

385

519

2,513

2,183

56

—

72

20

—

388

—

(154)

(211)

654

(261)

(63)

513

385

2,690

2,513

(172)

(118)

(99)

—

13

(82)

53

(25)

(19)

(19)

1

6

(22)

(8)

2

9

(900)

(372)

3

79

(564)

(338)

103

(101)

(900)

Accumulated depreciation, end of year ...................

(384)

(291)

(517)

(418)

(258)

(172)

(31)

(19)

(1,190)

Balance, end of year................................................. $3,554

$3,600

$2,626

$2,508

$2,475

$1,524

$ 890

$ 706

$9,545

$8,338

i. 

Infrastructure – Utilities, Transport and Energy

Infrastructure's  PP&E  assets  are  accounted  for  under  the  revaluation  model,  and  the  most  recent  date  of  revaluation  was 
December 31, 2016. The company determined fair value to be the current replacement cost. The company’s utility assets consist 
of  terminals  and  energy  transmission  and  distribution  networks,  which  are  operated  primarily  under  regulated  rate  base 
arrangements. In the company’s transport operations, the PP&E assets consist of railroads, toll roads and ports. For PP&E in the 
energy operations, the assets are comprised of energy transmission, distribution and storage and district energy assets. 

138     BROOKFIELD ASSET MANAGEMENT

Valuations  for  infrastructure's  utilities,  transport  and  energy  assets  utilize  significant  unobservable  inputs  (Level  3)  when 
determining the fair value of utility assets. The significant Level 3 inputs include:

Valuation
Technique(s)
Discounted cash
flow analysis

Significant
Unobservable Input(s)
•  Future cash flows

Relationship of Unobservable Input(s) 
to Fair Value
•  Increases  (decreases)  in  future  cash 
flows increase (decrease) fair value

•  Discount rate

•  Increases  (decreases)  in  discount  rate 

decrease (increase) fair value

•  Terminal 

capitalization rate

•  Increases 

(decreases) 

terminal 
capitalization  rate  decrease  (increase) 
fair value

in 

•  Investment horizon

•  Increases (decreases) in the investment 
horizon decrease (increase) fair value

 Mitigating Factor(s)
•  Increases  (decreases)  in  cash  flows 
tend to be accompanied by increases 
(decreases) in discount rates that may 
offset changes in fair value from cash 
flows

•  Increases (decreases) in discount rates 
tend to be accompanied by increases 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
discount rates

•  Decreases  (increases)  in  terminal 
to  be 
rates 
capitalization 
accompanied 
increases 
by 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
terminal capitalization rates

tend 

•  Increases 

in 

(decreases) 

the  
investment  horizon 
to  be 
the result  of  changing  cash  flow 
profiles  that  may  result  in  higher 
(lower) growth in cash flows prior to 
stabilizing in the terminal year

tend 

ii. 

Infrastructure – Sustainable Resources

Sustainable resources assets represent timberlands and other agricultural land. Investment properties within our sustainable resource 
operations are accounted for under the revaluation model and the most recent date of revaluation was December 31, 2016. 

Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of sustainable resource assets. The 
significant Level 3 inputs include:

Valuation
Technique(s)
Discounted cash
flow analysis

Significant
Unobservable Input(s)
•  Future cash flows – 
primarily driven by 
avoided cost or future 
replacement value

Relationship of Unobservable Input(s) 
to Fair Value
•  Increases  (decreases)  in  future  cash 
flows increase (decrease) fair value

•  Discount rate

•  Increases  (decreases)  in  discount  rate 

decrease (increase) fair value

•  Terminal 

capitalization rate

•  Increases 

(decreases) 

terminal 
capitalization  rate  decrease  (increase) 
fair value

in 

•  Exit date

•  Increases  (decreases)  in  the  exit  date 

decrease (increase) fair value

 Mitigating Factor(s)
•  Increases  (decreases)  in  cash  flows 
tend to be accompanied by increases 
(decreases) in discount rates that may 
offset changes in fair value from cash 
flows

•  Increases (decreases) in discount rates 
tend to be accompanied by increases 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
discount rates

•  Decreases  (increases)  in  terminal 
to  be 
rates 
capitalization 
accompanied 
increases 
by 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
terminal capitalization rates

tend 

•  Increases (decreases) in the exit date 
tend to be the result of changing cash 
flow profiles that may result in higher 
(lower) growth in cash flows prior to 
stabilizing in the terminal year

      2016 ANNUAL REPORT     139

Terminal capitalization
multiples ....................

Investment horizon /

Termination valuation
date (years) ................

Key valuation metrics of the company’s utilities, transport, energy and sustainable resource assets 2016 and 2015 are summarized 
below.

Utilities

Transport

Energy

Sustainable Resources

AS AT DEC. 31

2016

2015

2016

2015

2016

2015

Discount rates ..............

 7% – 12% 8% – 12%  10% – 17% 11% – 15%  9% – 14% 10% – 15%

2016
6%1

n/a

2015
6%1

n/a

 7x – 18x

8x – 17x

 8x – 14x

10x – 14x

 10x – 12x

7x – 12x

 10 – 20

10 – 20

 10 – 20

10 – 20

10

10

3 – 30

3 – 20

1.  Based on weighted-average discount rate

c)  Property

Cost

Accumulated Fair
Value Changes

Accumulated
Depreciation

Total

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year.............................. $ 5,300
Additions/(dispositions)1, net of assets 
reclassified as held for sale............................

2016

254

Acquisitions through business combinations ..

Foreign currency translation............................

Fair value changes...........................................

Depreciation expense ......................................

652

(423)

—

—

2015

2016

2015

2016

2015

2016

2015

$ 2,859

$

612

$

455

$

(596) $ (442) $ 5,316

$ 2,872

15

2,622

(196)

—

—

—

—

—

82

—

—

—

(4)

161

—

(6)

—

21

—

—

—

35

—

248

652

(402)

82

(244)

(189)

(244)

15

2,622

(165)

161

(189)

Balance, end of year ........................................ $ 5,783

$ 5,300

$

694

$

612

$

(825) $ (596) $ 5,652

$ 5,316

1.  For accumulated depreciation, (additions)/dispositions

The company’s property assets include hotel assets accounted for under the revaluation model, with the most recent revaluation 
as at December 31, 2016. The company determines fair value for these assets by discounting the expected future cash flows using 
internal valuations. Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of property assets. 
The significant Level 3 inputs include:

140     BROOKFIELD ASSET MANAGEMENT

Valuation
Technique(s)
Discounted cash
flow analysis

Significant
Unobservable Input(s)
•  Future cash flows – 
primarily driven by 
pricing, volumes and 
direct operating costs

Relationship  of  Unobservable  Input(s) 
to Fair Value
•  Increases  (decreases)  in  future  cash 
flows increase (decrease) fair value

•  Discount rate

•  Increases  (decreases)  in  discount  rate 

decrease (increase) fair value

 Mitigating Factor(s)
•  Increases  (decreases)  in  cash  flows 
tend to be accompanied by increases 
(decreases) in discount rates that may 
offset changes in fair value from cash 
flows

•  Increases  (decreases)  in  discount 
rates  tend  to  be  accompanied  by 
increases  (decreases)  in  cash  flows 
that may offset changes in fair value 
from discount rates

•  Terminal 

capitalization rate

•  Increases 

(decreases) 

terminal 
capitalization  rate  decrease  (increase) 
fair value

in 

•  Decreases  (increases)  in  terminal 
to  be 
capitalization 
accompanied 
increases 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
terminal capitalization rates

rates 
by 

tend 

•  Investment horizon

•  Increases (decreases) in the investment 
horizon decrease (increase) fair value

•  Increases 

in 

the 
(decreases) 
investment  horizon  tend  to  be  the 
result of changing cash flow profiles 
that  may  result  in  higher  (lower) 
growth 
to 
stabilizing in the terminal year

in  cash  flows  prior 

Key valuation assumptions included a weighted-average discount rate of 10.2% (2015 – 10.0%), terminal capitalization rate of 
7.4% (2015 – 7.4%), and investment horizon of six years (2015 – seven years).

d)  Private Equity and Other

Other property, plant and equipment includes assets owned by the company’s private equity and residential development operations 
held directly or consolidated through funds. These assets are accounted for under the cost model, which requires the assets to be 
carried at cost less accumulated depreciation and any accumulated impairment losses. The following table presents the changes 
to the carrying value of the company’s property, plant and equipment assets included in these operations:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year.............................. $ 5,309
Additions/(Dispositions)1, net of assets 
reclassified as held for sale............................

2016

(101)

Acquisitions through business combinations ..

Foreign currency translation............................

Depreciation expense ......................................

Impairment charges .........................................

—

60

—

—

Cost

Accumulated Fair 
Value Changes2
2016

2015

2015

Accumulated
Depreciation

Total

2016

2015

2016

2015

$ 3,960

$ (231) $

(194) $ (1,197) $ (1,052) $ 3,881

$ 2,714

59

1,772

(482)

—

—

4

—

(16)

—

—

2

—

28

—

(67)

125

—

(14)

(343)

—

56

—

136

(337)

—

28

—

30

(343)

—

117

1,772

(318)

(337)

(67)

Balance, end of year ........................................ $ 5,268

$ 5,309

$ (243) $

(231) $ (1,429) $ (1,197) $ 3,596

$ 3,881

1.  For accumulated depreciation, (Additions)/Dispositions
2.  The ending balance of accumulated fair value changes represent accumulated impairment charges, as assets in these segments are carried at amortized cost

      2016 ANNUAL REPORT     141

13.  INTANGIBLE ASSETS

The following table presents the breakdown of, and changes to, the balance of the company’s intangible assets:

Cost

Accumulated
Amortization and
Impairment

Total

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year........................................ $

2016

2015

2016

2015

2016

5,764

$

4,864

$

(594) $

(537) $

5,170

$

Additions, net of disposals ........................................

Acquisitions through business combinations............

Amortization .............................................................

Foreign currency translation .....................................

(36)

1,227

—

(222)

49

1,462

—

(611)

91

—

(166)

9

7

—

(119)

55

55

1,227

(166)

(213)

2015

4,327

56

1,462

(119)

(556)

Balance, end of year.................................................. $

6,733

$

5,764

$

(660) $

(594) $

6,073

$

5,170

The following table presents intangible assets by geography:

AS AT DEC. 31
(MILLIONS)
United States ........................................................................................................................................... $

Canada ....................................................................................................................................................

Australia..................................................................................................................................................

Europe.....................................................................................................................................................

Chile........................................................................................................................................................

Peru .........................................................................................................................................................

Brazil and other.......................................................................................................................................

Intangible assets are allocated to the following operating segments:

AS AT DEC. 31
(MILLIONS)
Infrastructure – Utilities.......................................................................................................

Infrastructure – Transport ....................................................................................................

Property................................................................................................................................

Private equity .......................................................................................................................

Other ....................................................................................................................................

Note

(a)

(b)

(c)

$

$

$

2016

340

230

1,945

1,273

1,054

1,050

181

2015

394

264

1,927

1,499

1,040

—

46

6,073

$

5,170

2016

1,817

$

2,504

1,141

426

185

2015

1,840

1,357

1,321

453

199

$

6,073

$

5,170

a) 

Infrastructure – Utilities

The company’s Australian regulated terminal operation has access agreements with the users of the terminal which entails 100% 
take or pay contracts at a designated tariff rate based on the asset value. The concession arrangement has an expiration date of 
2051 and the company has an option to extend the arrangement an additional 49 years. The aggregate duration of the arrangement 
and the extension option represents the remaining useful life of the concession. 

b)  Infrastructure – Transport

The company’s toll road concession provides the right to charge a tariff to users of the road over the term of the concession. The 
Chilean, Peruvian and Indian concession arrangements have an expiration date of 2033, 2043 and 2027, respectively, which is 
the basis for the company’s determination of its remaining useful life. Also included within the company’s transport operations 
is $265 million (2015 – $316 million) of indefinite life intangible assets which represent perpetual conservancy rights associated 
with the company’s U.K. port operation.

142     BROOKFIELD ASSET MANAGEMENT

c)  Property

The company's intangible assets in its Property segment are attributable to indefinite life trademarks associated with its hospitality 
assets, primarily Center Parcs in the U.K. The Center Parcs trademark assets have been determined to have an indefinite useful 
life as the company has the legal right to operate these trademarks exclusively in certain territories and in perpetuity. The business 
model of Center Parcs is not subject to technological obsolescence or commercial innovations in any material way.

Intangible assets, including trademarks, concession agreements and conservancy rights, are recorded at amortized cost and are 
tested for impairment using a discounted cash flow valuation annually or when an indicator of impairment is identified. This 
valuation utilizes the following significant unobservable inputs assumptions:

Valuation
Technique
Discounted cash
flow models

Significant
Unobservable Input(s)
•  Future cash flows

Relationship of Unobservable Input(s) 
to Fair Value
•  Increases  (decreases)  in  future  cash 
flows  will  increase  (decrease)  the 
recoverable amount

•  Discount rate

•  Increases  (decreases)  in  discount  rate 
will decrease (increase) the recoverable 
amount

•  Terminal capitalization 

•  Increases 

(decreases) 

terminal 
in 
rate  will  decrease 

capitalization 
(increase) the recoverable amount

rate

•  Exit date

•  Increases  (decreases)  in  the  exit  date 
will decrease (increase) the recoverable 
amount

Mitigating Factor(s)
•  Increases  (decreases)  in  cash  flows 
tend to be accompanied by increases 
(decreases) in discount rates that may 
offset changes in fair value from cash 
flows

•  Increases  (decreases)  in  discount 
rates  tend  to  be  accompanied  by 
increases  (decreases)  in  cash  flows 
that may offset changes in fair value 
from discount rates

•  Increases  (decreases)  in  terminal 
to  be 
rates 
capitalization 
increases 
by 
accompanied 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
terminal capitalization rates

tend 

•  Increases (decreases) in the exit date 
tend to be the result of changing cash 
flow profiles that may result in higher 
(lower) growth in cash flows prior to 
stabilizing in the exit date

      2016 ANNUAL REPORT     143

14.  GOODWILL

The following table presents the breakdown of, and changes to, the balance of goodwill:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year......................................... $

2016

2015

2016

2015

2016

2,806

$

1,579

$

(263) $

(173) $

2,543

$

Cost

Accumulated
Impairment

Total

Acquisitions through business combinations .............

1,286

1,302

Disposals ....................................................................

Impairment losses.......................................................
Foreign currency translation and other1 .....................
Balance, end of year ................................................... $

—

—

70

(7)

—

(68)

—

—

(65)

(51)

—

—

(112)

22

1,286

—

(65)

19

4,162

$

2,806

$

(379) $

(263) $

3,783

$

2,543

2015

1,406

1,302

(7)

(112)

(46)

1. 

Includes adjustment to goodwill based on final purchase price allocation

The following table presents goodwill by geography:

AS AT DEC. 31
(MILLIONS)
United States ........................................................................................................................................... $

Canada ....................................................................................................................................................

Australia..................................................................................................................................................

Colombia.................................................................................................................................................

Brazil.......................................................................................................................................................

Europe.....................................................................................................................................................

Other .......................................................................................................................................................

$

2016

388

192

950

907

123

894

329

Goodwill is allocated to the following operating segments:

AS AT DEC. 31
(MILLIONS)
Private equity ...............................................................................................................

Renewable power.........................................................................................................

Property........................................................................................................................

Infrastructure................................................................................................................

Asset management .......................................................................................................

Other ............................................................................................................................

Note

(a)

(b)

(c)

(d)

$

3,783

$

2016

$

1,155

$

896

780

502

328

122

2015

366

91

764

10

103

1,015

194

2,543

2015

1,127

—

906

79

328

103

Total.............................................................................................................................

$

3,783

$

2,543

a)  Private Equity

Goodwill in our Private Equity segment is primarily attributable to our construction business. Goodwill in our construction business 
is tested for impairment using a discounted cash flow analysis to determine the recoverable amount. The recoverable amount for 
the year ended 2016 and 2015 were determined to be in excess of its carrying value. The valuation assumptions used to determine 
the recoverable amount are a discount rate of 12% (2015 – 15%), terminal growth rate of 4% (2015 – 5%) and terminal year of 
2021 for cash flows included in assumption (2015 – 2020). The discount rate represents the market-based weighted-average cost 
of  capital  adjusted  for  risks  specific  to  each  operating  regions  and  the  terminal  growth  rate  represents  the  regional  five-year 
forecasted  average  growth  rate  from  leading  industry  organizations,  weighted  by  our  geographic  exposure  which  can  vary 
year over year.

144     BROOKFIELD ASSET MANAGEMENT

b)  Renewable Power

Goodwill in our Renewable Power segment relates to the acquisition of Isagen by a subsidiary of Brookfield in 2016, and is due 
to the recognition of a deferred tax liability arising from the acquisition because the tax bases of the Isagen net assets are significantly 
lower than their acquisition date fair value. The purchase price allocation for this acquisition has been completed on a preliminary 
basis.

c)  Property

Goodwill in our Property segment is primarily attributable to Center Parcs. Goodwill impairment is tested annually by assessing 
if the carrying value of the cash-generating unit, including the allocated goodwill, exceeds its recoverable amount determined 
as the greater of the estimated fair value less costs to sell or the value in use. The recoverable amount for the year ended 2016 
was determined to be in excess of its carrying value (2015 was excluded from testing as Center Parcs was acquired during that 
year). The valuation assumptions used to determine the recoverable amount are a discount rate of 8.3%, based on a market-based-
weighted-average cost of capital, and a long-term growth rate of 2.25%. 

d)  Infrastructure

In 2016, a subsidiary of Brookfield completed several acquisitions, including a port business, gas storage business and toll roads, 
and allocated $431 million of the purchase price of these acquisitions to goodwill, which makes up the majority of the goodwill 
balance attributable to our Infrastructure segment. The purchase price allocation for these acquisitions has been completed on a 
preliminary basis.

The recoverable amounts used in goodwill impairment testing are calculated using discounted cash flow models based on the 
following significant unobservable inputs:

Valuation
Technique
Discounted cash
flow models

Significant
Unobservable Input(s)
•  Future cash flows

Relationship of Unobservable Input(s) 
to Fair Value
•  Increases  (decreases)  in  future  cash 
flows  will  increase  (decrease)  the 
recoverable amount

•  Discount rate

•  Increases  (decreases)  in  discount  rate 
will decrease (increase) the recoverable 
amount

Mitigating Factor(s)
•  Increases  (decreases)  in  cash  flows 
tend to be accompanied by increases 
(decreases) in discount rates that may 
offset changes in fair value from cash 
flows

•  Increases  (decreases)  in  discount 
rates  tend  to  be  accompanied  by 
increases  (decreases)  in  cash  flows 
that may offset changes in fair value 
from discount rates

•  Terminal capitalization 

•  Increases 

rate

(decreases) 

terminal 
in 
rate  will  decrease 

capitalization 
(increase) the recoverable amount

•  Increases  (decreases)  in  terminal 
to  be 
capitalization 
accompanied 
increases 
(decreases)  in  cash  flows  that  may 
offset  changes  in  fair  value  from 
terminal capitalization rates

rates 
by 

tend 

•  Exit date/terminal year 

of cash flows

•  Increases  (decreases)  in  the  exit  date/
terminal  year  of  cash  flows  will 
decrease  (increase)  the  recoverable 
amount

•  Increases (decreases) in the exit date/
terminal year of cash flows tend to be 
the  result  of  changing  cash  flow 
profiles  that  may  result  in  higher 
(lower) growth in cash flows prior to 
stabilizing in the exit date

      2016 ANNUAL REPORT     145

15.  INCOME TAXES

The major components of income tax expense for the years ended December 31, 2016 and December 31, 2015 are set out below:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Current income taxes .............................................................................................................................. $

2016

213

$

Deferred income tax expense/(recovery)

Origination and reversal of temporary differences ..............................................................................

Recovery arising from previously unrecognized tax assets .................................................................

Change of tax rates and new legislation...............................................................................................

Total deferred income taxes....................................................................................................................

384

27

(969)

(558)

Income taxes ........................................................................................................................................... $

(345) $

2015

132

537

13

(486)

64

196

The company’s Canadian domestic statutory income tax rate has remained consistent at 26% throughout both of 2016 and 2015. 
The company’s effective income tax rate is different from the company’s domestic statutory income tax rate due to the following 
differences set out below:

FOR THE YEARS ENDED DEC. 31

Statutory income tax rate ........................................................................................................................

2016

26 %

2015

26 %

Increase (reduction) in rate resulting from:

Change in tax rates and new legislation...............................................................................................

(35)

International operations subject to different tax rates ..........................................................................

Taxable income attribute to non-controlling interests..........................................................................

Portion of gains subject to different tax rates.......................................................................................

Recognition of previously unrecorded deferred tax assets ..................................................................

Non-recognition of the benefit of current year’s tax losses .................................................................

Other.....................................................................................................................................................

(5)

(2)

(1)

1

6

(2)

(11)

(7)

(6)

—

—

4

(2)

Effective income tax rate ........................................................................................................................

(12)%

4 %

Deferred income tax assets and liabilities as at December 31, 2016 and 2015 relate to the following:

AS AT DEC. 31
(MILLIONS)
Non-capital losses (Canada) ................................................................................................................... $

Capital losses (Canada)...........................................................................................................................

Losses (U.S.)...........................................................................................................................................

Losses (International) .............................................................................................................................

$

2016

814

100

492

481

Difference in basis ..................................................................................................................................

(9,965)

Total net deferred tax liabilities .............................................................................................................. $

(8,078) $

2015

720

105

472

381

(8,967)

(7,289)

The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax liabilities have 
not been recognized as at December 31, 2016 is approximately $5 billion (2015 – approximately $6 billion).

The company regularly assesses the status of open tax examinations and its historical tax filing positions for the potential for 
adverse  outcomes  to  determine  the  adequacy  of  the  provision  for  income  and  other  taxes. The  company  believes  that  it  has 
adequately provided for any tax adjustments that are more likely than not to occur as a result of ongoing tax examinations or 
historical filing positions.

The dividend payment on certain preferred shares of the company results in the payment of cash taxes in Canada and the company 
obtaining a deduction based on the amount of these taxes.

146     BROOKFIELD ASSET MANAGEMENT

The following table details the expiry date, if applicable, of the unrecognized deferred tax assets:

AS AT DEC. 31
(MILLIONS)
One year from reporting date.................................................................................................................. $

Two years from reporting date................................................................................................................

Three years from reporting date..............................................................................................................

After three years from reporting date .....................................................................................................

Do not expire ..........................................................................................................................................

$

2016

26

—

59

555

845

2015

20

6

9

642

671

Total ........................................................................................................................................................ $

1,485

$

1,348

The components of the income taxes in other comprehensive income for the years ended December 31, 2016 and 2015 are set out 
below:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Revaluation of property, plant and equipment........................................................................................ $

2016

120

$

Financial contracts and power sale agreements......................................................................................

Available-for-sale securities....................................................................................................................

Foreign currency translation ...................................................................................................................

Revaluation of pension obligation ..........................................................................................................

(37)

38

59

(7)

Total deferred tax in other comprehensive income................................................................................. $

173

$

2015

414

17

(37)

51

3

448

16.  ACCOUNTS PAYABLE AND OTHER

AS AT DEC. 31
(MILLIONS)
Accounts payable.................................................................................................................

Note

Provisions ............................................................................................................................

(a)

Other liabilities ....................................................................................................................

Total.....................................................................................................................................

2016

6,028

$

1,427

4,460

2015

5,050

883

5,433

11,915

$

11,366

$

$

The current and non-current balances of accounts payable and other liabilities are as follows:

AS AT DEC. 31
(MILLIONS)
Current .................................................................................................................................................... $

Non-current.............................................................................................................................................

2016

7,721

4,194

Total ........................................................................................................................................................ $

11,915

2015

7,560

3,806

11,366

$

$

a)  Post-Employment Benefits

The company offers pension and other post-employment benefit plans to employees of certain of its subsidiaries. The company’s 
obligations under its defined benefit pension plans are determined periodically through the preparation of actuarial valuations. 
The benefit plans’ in-year valuation change was a decrease of $40 million (2015 – $32 million). The discount rate used was 4% 
(2015 – 5%) with an increase in the rate of compensation of 3% (2015 – 3%), and an investment rate of 4% (2015 – 4%).

AS AT DEC. 31
(MILLIONS)
Plan assets ............................................................................................................................................... $

2016

592

$

Less accrued benefit obligation:

Defined benefit pension plan ...............................................................................................................

Other post-employment benefits ..........................................................................................................

Net liability .............................................................................................................................................

Less: net actuarial gains (losses).............................................................................................................

(790)

(88)

(286)

2

Accrued benefit liability ......................................................................................................................... $

(284) $

2015

576

(736)

(76)

(236)

6

(230)

      2016 ANNUAL REPORT     147

17.  CORPORATE BORROWINGS

AS AT DEC. 31
(MILLIONS)
Term debt

Maturity

Annual Rate

Currency

2016

2015

Public – Canadian ...........................

Sept. 8, 2016

Public – U.S. ...................................

Apr. 25, 2017

Public – Canadian ...........................

Apr. 25, 2017

Public – Canadian ...........................

Apr. 9, 2019

Public – Canadian ...........................

Mar. 1, 2021

Public – Canadian ........................... Mar. 31, 2023

Public – Canadian ...........................

Mar. 8, 2024

Public – U.S. ...................................

Jan. 15, 2025

Public – Canadian ...........................

Jan. 28, 2026

Public – U.S. ...................................

Jun. 2, 2026

Public – Canadian ........................... Mar. 16, 2027

Public – U.S. ...................................

Mar. 1, 2033

Public – Canadian ...........................

Jun. 14, 2035

5.20%

5.80%

5.29%

3.95%

5.30%

4.54%

5.04%

4.00%

4.82%

4.25%

3.80%

7.38%

5.95%

C$

$

US$

C$

C$

C$

C$

C$

US$

C$

US$

C$

US$

C$

Commercial paper and bank borrowings..........................
US$/C$
Deferred financing costs1................................................................................................................
Total ................................................................................................................................................ $

—%

1.  Deferred financing costs are amortized to interest expense over the term of the borrowing following the effective interest method 

— $

239

186

447

260

448

372

500

646

495

372

250

313

217

239

180

435

253

436

362

500

629

—

—

250

304

4,528

—

(28)

4,500

$

3,805

156

(25)

3,936

Corporate  borrowings  have  a  weighted-average  interest  rate  of  4.8%  (2015  –  4.8%),  and  include  $3,044  million  (2015 –
$2,917 million) repayable in Canadian dollars of C$4,093 million (2015 – C$4,036 million).

18.  NON-RECOURSE BORROWINGS

a)  Property-Specific Mortgages

Principal repayments on property-specific mortgages due over the next five calendar years and thereafter are as follows:

(MILLIONS)

Property

Renewable
Power

Infrastructure

Private Equity

Residential
Development

2017 ................................ $

5,418

$

1,048

$

2018 ................................

2019 ................................

2020 ................................

2021 ................................

Thereafter .......................

4,984

6,298

4,130

5,743

7,749

Total – Dec. 31, 2016..... $

Total – Dec. 31, 2015 ..... $

34,322

31,191

$

$

300

552

1,021

933

4,109

7,963

5,602

$

$

307

510

537

716

648

5,183

7,901

6,325

$

$

$

$

639

350

270

238

26

314

1,837

2,300

$

$

243

106

58

8

4

—

419

626

$

$

$

Total

7,655

6,250

7,715

6,113

7,354

17,355

52,442

46,044

The weighted-average interest rate on property-specific mortgages as at December 31, 2016 was 4.9% (2015 – 4.6%). 

The current and non-current balances of property-specific mortgages are as follows:

AS AT DEC. 31
(MILLIONS)
Current .................................................................................................................................................... $

Non-current.............................................................................................................................................

Total ........................................................................................................................................................ $

2016

7,655

44,787

52,442

$

$

2015

9,426

36,618

46,044

148     BROOKFIELD ASSET MANAGEMENT

Property specific borrowings by currency include the following:

(MILLIONS)

2016

Local Currency

2015

Local Currency

31,804

$

30,184

U.S. dollars .............................................. $

31,804

British pounds..........................................

Canadian dollars ......................................

Australian dollars.....................................

Colombian pesos......................................

Brazilian reais ..........................................

Korean won..............................................

European Union euros .............................

Chilean unidades de fomento...................

Indian rupees............................................

Peruvian nuevo soles ...............................

New Zealand dollars ................................

5,251

4,427

3,066

1,693

1,569

1,317

1,217

901

715

435

47

US$

£

C$

A$

4,250

5,951

4,260

COP$

5,086,971

R$

€$

UF$

S

NZD$

5,117

1,589,450

1,157

23

48,603

1,459

60

4,622

4,168

3,215

126

1,381

—

1,271

861

216

—

—

US$

£

C$

A$

COP$

R$

€$

UF$

S

NZD$

Total......................................................... $

52,442

$

46,044

b)  Subsidiary Borrowings 

Principal repayments on subsidiary borrowings due over the next five calendar years and thereafter are as follows:

(MILLIONS)

2017 ................................ $

2018 ................................

2019 ................................

2020 ................................

2021 ................................

Thereafter .......................

558

861

1,295

6

45

—

Total – Dec. 31, 2016..... $

Total – Dec. 31, 2015 ..... $

2,765

2,864

$

$

Property

Renewable
Power

Infrastructure

Private Equity

Residential
Development

$

— $

295

$

13

$

— $

149

—

346

462

1,073

2,030

1,736

$

$

93

—

279

—

335

1,002

1,491

$

$

301

—

222

—

—

536

623

—

—

595

—

1,021

1,616

1,589

$

$

$

$

30,814

3,137

5,767

4,412

400,155

5,469

—

1,171

24

14,312

—

—

Total

866

1,404

1,295

1,448

507

2,429

7,949

8,303

The weighted-average interest rate on subsidiary borrowings as at December 31, 2016 was 4.1% (2015 – 4.0%).

The current and non-current balances of subsidiary borrowings are as follows:

AS AT DEC. 31
(MILLIONS)
Current .................................................................................................................................................... $

Non-current.............................................................................................................................................

Total ........................................................................................................................................................ $

2016

866

7,083

7,949

$

$

2015

1,839

6,464

8,303

      2016 ANNUAL REPORT     149

Subsidiary borrowings by currency include the following:

AS AT DEC. 31
(MILLIONS)
U.S. dollars................................................................... $

Canadian dollars...........................................................

Australian dollars .........................................................

European Union euros..................................................

Brazilian reais...............................................................

British pounds ..............................................................

2016

4,441

3,364

143

1

—

—

Local Currency

US$

4,441

$

C$

A$

€$

R$

£

4,525

200

1

—

—

2015

4,859

3,185

146

—

84

29

Local Currency

US$

C$

A$

€$

R$

£

4,859

4,407

200

—

326

20

Total.............................................................................. $

7,949

$

8,303

19.  SUBSIDAIRY EQUITY OBLIGATIONS

Subsidiary equity obligations consist of the following:

AS AT DEC. 31
(MILLIONS)
Subsidiary preferred equity units.........................................................................................

Note

(a)

Limited-life funds and redeemable fund units.....................................................................

Subsidiary preferred shares..................................................................................................

(b)

Total.....................................................................................................................................

2016

1,574

$

1,439

552

3,565

$

2015

1,554

1,274

503

3,331

$

$

a)  Subsidiary Preferred Equity Units

In 2014, BPY issued $1,800 million of exchangeable preferred equity units in three $600 million tranches redeemable in 2021, 
2024 and 2026, respectively. The preferred equity units are exchangeable into equity units of BPY at $25.70 per unit, at the option 
of the holder, at any time up to and including the maturity date. BPY may redeem the preferred equity units after specified periods 
if the BPY equity unit price exceeds predetermined amounts. At maturity, the preferred equity units will be converted into BPY 
equity units at the lower of $25.70 or the then market price of a BPY equity unit. The preferred equity units represent a compound 
financial  instrument. The  Corporation  is  required  under  certain  circumstances  to  purchase  the  preferred  equity  units  at  their 
redemption value in equal amounts in 2021 and 2024 and may be required to purchase the 2026 tranche, as further described in 
Note 29(a).

AS AT DEC. 31
(MILLIONS, EXCEPT PER SHARE INFORMATION)

Shares
Outstanding

Cumulative
Dividend Rate

Local Currency

Series 1 ........................................................

24,000,000

Series 2 ........................................................

24,000,000

Series 3 ........................................................

24,000,000

6.25%

6.50%

6.75%

$

US$

US$

US$

$

2016

541

522

511

Total...................................................................................................................................................

$

1,574

$

2015

532

516

506

1,554

150     BROOKFIELD ASSET MANAGEMENT

b)  Subsidiary Preferred Shares

Preferred shares are classified as liabilities if the holders of the preferred shares have the right, after a fixed date, to convert the 
shares into common equity of the issuer based on the market price of the common equity of the issuer at that time unless they are 
previously redeemed by the issuer. The dividends paid on these securities are recorded in interest expense. As at December 31, 
2016 and 2015, the balance are obligations of BPY and its subsidiaries. 

AS AT DEC. 31
(MILLIONS, EXCEPT PER SHARE INFORMATION)

BPO Class AAA preferred shares................

Shares
Outstanding

Cumulative
Dividend Rate

Local Currency

2016

2015

Series G .....................................................

3,236,308

Series H .....................................................

Series J.......................................................

Series K .....................................................

—

6,592,443

4,995,414

Brookfield Property Split Corp 
(“BOP Split”) senior preferred shares

Series 1 ......................................................

Series 2 ......................................................

Series 3 ......................................................

Series 4 ......................................................

924,390

699,165

913,194

984,586

Rouse Series A preferred shares..................

5,600,000

BSREP II Vintage Estate Partners LLC
(“Vintage Estates”) preferred shares .........

10,000

5.25%

—%

5.00%

5.20%

5.25%

5.75%

5.00%

5.20%

5.00%

5.00%

US$

$

C$

C$

C$

US$

C$

C$

C$

US$

US$

$

81

—

122

93

24

14

17

18

143

40

Total...................................................................................................................................................

$

552

$

84

128

125

90

23

18

17

18

—

—

503

The BPO Class AAA preferred shares, Series H were redeemed during the year.

The BPO Class AAA preferred shares and BOP Split senior preferred shares are redeemable at the option of either the issuer or 
the holder, at any time after the following dates:

BPO Class AAA preferred shares

Series G .................................................................................

Series J ..................................................................................

Series K .................................................................................

BOP Split senior preferred shares

Series 1..................................................................................

Series 2..................................................................................

Series 3..................................................................................

Series 4..................................................................................

Earliest Permitted
Redemption Date

Company’s
Conversion Option

Holder’s Conversion
Option

Jun. 30, 2011

Jun. 30, 2010

Dec. 31, 2012

Jun. 30, 2014

Dec. 31, 2014

Jun. 30, 2014

Dec. 31, 2015

Jun. 30, 2011

Jun. 30, 2010

Dec. 31, 2012

Jun. 30, 2014

Dec. 31, 2014

Jun. 30, 2014

Dec. 31, 2015

Sep. 30, 2015

Dec. 31, 2014

Dec. 31, 2016

Sep. 30, 2015

Dec. 31, 2015

Dec. 31, 2014

Dec. 31, 2016

Subsidiary preferred shares include $143 million at December 31, 2016 (December 31, 2015 – $nil) of preferred equity 
interests held by a third-party investor in Rouse Properties, L.P., which have been classified as a liability, rather than as 
non-controlling interests, due to the fact that the interests have no voting rights and are mandatorily redeemable on/or after 
November 12, 2025 for a set price per unit plus any accrued but unpaid distributions; distributions are capped and accrue 
regardless of available cash generated.

Subsidiary preferred shares also include $40 million at December 31, 2016 (December 31, 2015 – $nil) of preferred equity 
interests held by a co-investor in Vintage Estates, which have been classified as a liability, rather than as non-controlling 
interests, due to the fact that the preferred equity interests are mandatorily redeemable on April 26, 2023 for cash at an 
amount equal to the outstanding principal balance of the preferred equity plus any accrued but unpaid dividend.

      2016 ANNUAL REPORT     151

20.  SUBSIDIARY PUBLIC ISSUERS AND FINANCE SUBSIDIARY

Brookfield Finance Inc. (“BFI”) is an indirect 100% owned subsidiary of the Corporation that may offer and sell debt securities. 
Any debt securities issued by BFI will be fully and unconditionally guaranteed by the company. On May 25, 2016, BFI issued 
$500 million of 4.25% notes due in 2026.

The company provided a full and unconditional guarantee of the Class 1 Senior Preferred shares, Series A issued by its wholly 
owned subsidiary, Brookfield Investments Corporation (“BIC”), other than those held by the Corporation or its affiliates. As at 
December 31, 2016, C$42 million of these senior preferred shares were held by third-party shareholders, and are retractable at the 
option of the holder.

On February 6, 2017, the company formed Brookfield Finance LLC (“BFL”), a Delaware limited liability company and an indirect 
100% owned subsidiary of the Corporation. BFL is a “finance subsidiary”, as defined in Rule 3-10 of Regulation S-X, that will 
be  used  as  the  issuer  in  potential  debt  financings  for  the  company. Any  debt  securities  issued  by  BFL  will  be  fully  and 
unconditionally guaranteed by the company. BFL has no independent activities, assets or operations other than in connection with 
any debt securities it may issue. On March 10, 2017, BFL issued $750 million of 4.00% notes due 2024, which were fully and 
unconditionally guaranteed by the Corporation.

The following tables contain summarized financial information of the Corporation, BFI, BIC and non-guarantor subsidiaries:

AS AT AND FOR THE YEAR ENDED DEC. 31, 2016
(MILLIONS)
Revenues.................................................. $
Net income attributable to shareholders ..

Total assets...............................................

Total liabilities .........................................

The  
Corporation1 

148

$

1,651

47,505

21,052

$

BFI 

13

—

507

497

BIC

3

66

2,974

1,411

Subsidiaries of 
the Corporation 
other than 
BFI and BIC2 

Consolidating 
Adjustments3  

The Company 
Consolidated 

$

24,326

$

(79) $

24,411

1,857

163,437

103,411

(1,923)

(54,597)

(36,233)

1,651

159,826

90,138

AS AT AND FOR THE YEAR ENDED DEC. 31, 2015
(MILLIONS)
Revenues.................................................. $
Net income attributable to shareholders ..

Total assets...............................................

Total liabilities .........................................

The  
Corporation1 

312

$

2,341

33,325

8,017

BFI 

— $

—

—

—

Subsidiaries of 
the Corporation 
other than 
BFI and BIC2 

BIC

Consolidating 
Adjustments3  

The Company 
Consolidated 

30

$

19,876

$

(305) $

19,913

220

2,625

1,095

2,398

143,552

80,236

(2,618)

(39,988)

(7,061)

2,341

139,514

82,287

1.  This column accounts for investments in all subsidiaries of the corporation under the equity method
2.  This column accounts for investments in all subsidiaries of the corporation other than BFI and BIC on a combined basis
3.  This column includes the necessary amounts to present the company on a consolidated basis

21.  EQUITY

Equity consists of the following:

AS AT DEC. 31
(MILLIONS)
Preferred equity....................................................................................................................................... $

Non-controlling interests ........................................................................................................................

Common equity.......................................................................................................................................

2016

3,954

$

43,235

22,499

$

69,688

$

2015

3,739

31,920

21,568

57,227

152     BROOKFIELD ASSET MANAGEMENT

a)  Preferred Equity

Preferred equity includes perpetual preferred shares and rate-reset preferred shares and consists of the following:

AS AT DEC. 31
(MILLIONS)
Perpetual preferred shares

Floating rate ...................................................................................

Fixed rate .......................................................................................

Fixed rate-reset preferred shares.......................................................

Further details on each series of preferred shares are as follows:

Average Rate

2016

2015

2016

2015

1.97%

4.82%

3.65%

4.42%

4.17%

1.92% $

4.82%

3.69%

4.63%

$

532

753

1,285

2,669

4.32% $

3,954

$

480

753

1,233

2,506

3,739

AS AT DEC. 31
(MILLIONS, EXCEPT PER SHARE INFORMATION)
Class A preferred shares

Perpetual preferred shares

Issued and Outstanding

Rate

2016

2015

2016

2015

Series 2 ............................................

70% P

10,465,100

10,465,100

$

169

$

Series 4 ............................................
Series 81...........................................
Series 13 ..........................................

Series 15 ..........................................

Series 17 ..........................................

70% P/8.5%

Variable up to P

70% P
B.A. + 40 b.p.2
4.75%

Series 18 ..........................................
4.75%
Series 253......................................... T-Bill + 230 b.p.2
Series 36 ..........................................
4.85%

Series 37 ..........................................

4.90%

Rate-reset preferred shares4

Series 91...........................................
Series 243.........................................
Series 26 ..........................................

Series 28 ..........................................

Series 30 ..........................................

Series 32 ..........................................

Series 34 ..........................................

Series 38 ..........................................

Series 40 ..........................................

Series 42 ..........................................
Series 445.........................................
Series 466.........................................

3.80%

3.01%

4.50%

4.60%

4.80%

4.50%

4.20%

4.40%

4.50%

4.50%

5.00%

4.80%

2,800,000

2,479,585

9,297,700

2,000,000

8,000,000

8,000,000

1,533,133

8,000,000

8,000,000

1,519,115

9,394,250

9,903,348

9,394,373

9,950,452

11,982,568

9,977,889

8,000,000

12,000,000

12,000,000

10,000,000

12,000,000

2,800,000

1,652,394

9,297,700

2,000,000

8,000,000

8,000,000

—

8,000,000

8,000,000

2,346,606

10,997,000

10,000,000

9,397,200

10,000,000

12,000,000

10,000,000

8,000,000

12,000,000

12,000,000

10,000,000

—

1,285

1,233

45

43

195

42

174

181

38

201

197

21

230

243

235

245

303

255

181

275

269

190

222

2,669

169

45

29

195

42

174

181

—

201

197

35

269

245

235

247

304

256

181

275

269

190

—

2,506

3,739

Total...................................................................................................................................................

$

3,954

$

1.  827,191 shares were converted from Series 9 to Series 8 on November 1, 2016
2.  Rate determined quarterly
3.  1,533,133 shares were converted from Series 24 to Series 25 on July 1, 2016
4.  Dividend rates are fixed for five to six years from the quarter end dates after issuance, June 30, 2011, March 31, 2012, June 30, 2012, December 31, 2012, 

September 30, 2013, March 31, 2014, June 30, 2014, December 31, 2014, December 31, 2015, and December 31, 2016, respectively and reset after five to six years to 
the 5-year Government of Canada bond rate plus between 180 and 417 basis points 

5.  Issued on October 2, 2015
6.  Issued on November 18, 2016
P - Prime Rate, B.A. - Bankers’ Acceptance Rate, b.p. - Basis Points

      2016 ANNUAL REPORT     153

The company is authorized to issue an unlimited number of Class A preferred shares and an unlimited number of Class AA preferred 
shares, issuable in series. No Class AA preferred shares have been issued.

The Class A preferred shares are entitled to preference over the Class A and Class B Limited Voting Shares (“Class A and B shares”) 
on the declaration of dividends and other distributions to shareholders. All series of the outstanding preferred shares have a par 
value of C$25 per share.

b)  Non-controlling Interests

Non-controlling interests represent the common and preferred equity in consolidated entities that are owned by other shareholders.

AS AT DEC. 31
(MILLIONS)
Common equity....................................................................................................................................... $

Preferred equity.......................................................................................................................................

Total ........................................................................................................................................................ $

2016

39,974

3,261

43,235

$

$

2015

29,158

2,762

31,920

Further information on non-controlling interests is provided in Note 4, Subsidiaries.

c)  Common Equity

The company’s common equity is comprised of the following:

AS AT DEC. 31
(MILLIONS)
Common shares.................................................................................................................................... $
Contributed surplus ..............................................................................................................................

Retained earnings .................................................................................................................................

Ownership changes ..............................................................................................................................

Accumulated other comprehensive income .........................................................................................
Common equity.................................................................................................................................... $

2016

4,390

$

234

11,490

1,199

5,186

2015

4,378

192

11,045

1,500

4,453

22,499

$

21,568

The company is authorized to issue an unlimited number of Class A shares and 85,120 Class B shares, together referred to as 
common shares. The company’s common shares have no stated par value. The holders of Class A shares and Class B shares rank 
on parity with each other with respect to the payment of dividends and the return of capital on the liquidation, dissolution or 
winding up of the company or any other distribution of the assets of the company among its shareholders for the purpose of winding 
up its affairs. Holders of the Class A shares are entitled to elect one-half of the Board of Directors of the company and holders of 
the Class B shares are entitled to elect the other one-half of the Board of Directors. With respect to the Class A and Class B shares, 
there are no dilutive factors, material or otherwise, that would result in different diluted earnings per share between the classes. 
This relationship holds true irrespective of the number of dilutive instruments issued in either one of the respective classes of 
common stock, as both classes of shares participate equally, on a pro rata basis, in the dividends, earnings and net assets of the 
company, whether taken before or after dilutive instruments, regardless of which class of shares are diluted.

Total dividends paid to Class A shares during 2016 amounted to $500 million (2015 – $450 million) or $0.52 per share (2015 – 
$0.47 per share).

On June 20, 2016, the company paid a special dividend of approximately 19 million limited partnership units of a newly created 
subsidiary, Brookfield Business Partners L.P. (“BBU”), to the holders of the company’s Class A and B shares. This was a common 
control transaction and as such the special dividend of $441 million reflected in equity was based on the IFRS carrying value of 
the 21% interest in BBU distributed to shareholders on June 20, 2016.

154     BROOKFIELD ASSET MANAGEMENT

The number of issued and outstanding common shares and unexercised options are as follows:

AS AT DEC. 31

2016

2015

Class A shares1 ............................................................................................................................................................................

958,083,297

961,205,719

Class B shares ......................................................................................................................................

85,120

85,120

Shares outstanding1...................................................................................................................................................................

958,168,417

961,290,839

Unexercised options and other share-based plans2 .....................................................................................................

43,798,733

41,978,628

Total diluted shares .............................................................................................................................. 1,001,967,150

1,003,269,467

1.  Net of 27,846,452 (2015 – 26,260,617) Class A shares held by the company in respect of long-term compensation agreements
2. 

Includes management share option plan and escrowed stock plan

The authorized common share capital consists of an unlimited number of shares. Shares issued and outstanding changed as follows:

FOR THE YEARS ENDED DEC. 31

Outstanding, beginning of year1..........................................................................................................................................
Issued (repurchased)

2016

2015

961,290,839

928,227,520

Issuances............................................................................................................................................

—

32,901,133

Repurchases.......................................................................................................................................

(4,707,132)

(11,504,163)

Long-term share ownership plans2 .................................................................................................................................
Dividend reinvestment plan and others .............................................................................................

1,312,463

11,409,312

272,247

257,037

Outstanding, end of year1.......................................................................................................................................................

958,168,417

961,290,839

1.  Net of 27,846,452 (2015 – 26,260,617) Class A shares held by the company in respect of long-term compensation agreements
2. 

Includes management share option plan and restricted stock plan

i.  Earnings Per Share

The components of basic and diluted earnings per share are summarized in the following table:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Net income attributable to shareholders............................................................................................... $
Preferred share dividends.....................................................................................................................

Net income available to shareholders .................................................................................................. $

Weighted average – common shares....................................................................................................

Dilutive effect of the conversion of options and escrowed shares using treasury stock method.........

Common shares and common share equivalents .................................................................................

ii.  Share Based Compensation 

The expense recognized for stock-based compensation is summarized in the following table:

2016

1,651

(133)

1,518

$

$

959.0

17.6

976.6

2015

2,341

(134)

2,207

949.7

26.0

975.7

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Expense arising from equity-settled share-based payment transactions .............................................. $
Expense arising from cash-settled share-based payment transactions.................................................

Total expense arising from share-based payment transactions ............................................................

Effect of hedging program ...................................................................................................................

Total expense included in consolidated income................................................................................... $

2016

2015

$

64

32

96

(27)

69

$

67

73

140

(70)

70

The share-based payment plans are described below. There have been no cancellations or modifications to any of the plans during 
2016 and 2015.

      2016 ANNUAL REPORT     155

24.98

30.59

22.00

31.25

25.77

20.82

35.76

16.73

27.63

—

24.98

1)  Equity-settled Share-based Awards

a)  Management Share Option Plan

Options issued under the company’s Management Share Option Plan (“MSOP”) vest over a period of up to five years, expire 
10 years after the grant date, and are settled through issuance of Class A shares. The exercise price is equal to the market price at 
the grant date. 

The changes in the number of options during 2016 and 2015 were as follows:

Number of 
Options 
(000’s)1
9,427

Weighted-
Average
Exercise Price

C$

17.07

$

Number of 
Options 
(000’s)2
28,488 US$

Weighted-
Average
Exercise Price

Outstanding at January 1, 2016 ...............................................

Granted ....................................................................................

Exercised .................................................................................

Cancelled.................................................................................

—

(1,743)

—

—

23.44

—

4,363

(970)

(398)

Outstanding at December 31, 2016 .........................................

7,684

C$

15.63

31,483 US$

1.  Options to acquire TSX listed Class A shares 
2.  Options to acquire NYSE listed Class A shares

Outstanding at January 1, 2015 ...............................................

Granted ....................................................................................

Exercised .................................................................................

Cancelled.................................................................................
Converted3...............................................................................
Outstanding at December 31, 2015 .........................................

1.  Options to acquire TSX listed Class A shares 
2.  Options to acquire NYSE listed Class A shares
3.  Options converted to restricted shares at maturity 

Number of 
Options 
(000’s)1
21,283

Weighted-
Average
Exercise Price

C$

16.50

$

—

(10,660)

—

(1,196)

9,427

C$

—

16.32

—

13.61

17.07

Number of 
Options 
(000’s)2
29,012 US$

Weighted-
Average
Exercise Price

6,293

(6,512)

(305)

—

28,488 US$

The cost of the options granted during the year was determined using the Black-Scholes valuation model, with inputs to the model 
as follows:

YEARS ENDED DEC. 31

Weighted-average share price.....................................................................
Weighted-average fair value per option .....................................................

Average term to exercise............................................................................
Share price volatility2 .................................................................................

Liquidity discount.......................................................................................
Weighted-average annual dividend yield ...................................................

Risk-free rate ..............................................................................................

Unit

US$

US$

Years

%

%

%

%

2016

30.59

5.29

7.5

28.0

25.0

1.6

1.6

20151
35.76

7.18

7.3

28.1

25.0

1.3

1.8

1.  Adjusted to reflect the three-for-two stock split effective May 12, 2015 
2.  Share price volatility was determined based on historical share prices over a similar period to the average term to exercise

156     BROOKFIELD ASSET MANAGEMENT

At December 31, 2016, the following options to purchase Class A shares were outstanding:

Exercise Price

C$11.77 ..............................................................
C$18.20 – C$23.63 .............................................

C$26.02 ..............................................................

US$15.45 ............................................................

US$16.83 – US$23.37 ........................................
US$25.21 – US$30.59 ........................................

US$33.75 – US$36.32 ........................................

Weighted-Average
Remaining Life

Options Outstanding (000's)

Vested

Unvested

2.2 years 

1.1 years 

0.1 years 

3.2 years 

4.8 years 

7.5 years 

8.1 years 

4,885

2,159

640

5,153

5,626

4,692

949

24,104

—

—

—

—

890

9,143

5,030

15,063

At December 31, 2015, the following options to purchase Class A shares were outstanding:

Exercise Price1

C$11.77 ..............................................................
C$18.20 – C$23.63 .............................................

C$26.02 ..............................................................

US$15.45 ............................................................

US$16.83 – US$23.37 ........................................
US$25.21 – US$36.32 ........................................

Weighted-Average
Remaining Life

Options Outstanding (000's)1

Vested

Unvested

3.2 years 

1.8 years 

1.1 years 

4.2 years 

5.8 years 

8.2 years 

4,897

2,771

1,759

5,290

4,484

2,876

22,077

—

—

—

—

2,541

13,297

15,838

1.  Adjusted to reflect the three-for-two stock split effective May 12, 2015

b)  Escrowed Stock Plan

Total

4,885

2,159

640

5,153

6,516

13,835

5,979

39,167

Total

4,897

2,771

1,759

5,290

7,025

16,173

37,915

The Escrowed Stock Plan (the “ES Plan”) provides executives with indirect ownership of Class A shares. Under the ES Plan, 
executives are granted common shares (the “ES Shares”) in one or more private companies that own Class A shares. The Class A  
shares  are  purchased  on  the  open  market  with  the  purchase  cost  funded  with  the  proceeds  from  preferred  shares  issued  to 
the company. The ES shares vest over one to five years and must be held until the fifth anniversary of the grant date. At a date 
no less than five years, and no more than 10 years, from the grant date, all outstanding ES shares will be exchanged for Class A shares 
issued by the company, based on the market value of Class A shares at the time of the exchange. The number of Class A shares 
issued on exchange will be less than the Class A shares purchased under the ES Plan resulting in a net reduction in the number of 
Class A shares issued by the company.

During 2016, 3.3 million Class A shares were purchased in respect of ES shares granted to executives under the ES Plan (2015 –
6.3 million Class A shares) during the year. For the year ended December 31, 2016, the total expense incurred with respect to the 
ES Plan totalled $25.8 million (2015 – $27.6 million).

      2016 ANNUAL REPORT     157

The cost of the escrowed shares granted during the year was determined using the Black-Scholes model of valuation with inputs 
to the model as follows:

YEARS ENDED DEC. 31

Weighted-average share price.....................................................................
Weighted-average fair value per share.......................................................

Average term to exercise............................................................................
Share price volatility2 .................................................................................

Liquidity discount.......................................................................................
Weighted-average annual dividend yield ...................................................

Risk-free rate ..............................................................................................

Unit

US$

US$

Years

%

%

%

%

2016

30.59

5.29

7.5

28.0

25.0

1.6

1.6

20151
35.52

6.51

6.3

27.2

25.0

1.3

1.6

1.  Adjusted to reflect the three-for-two stock split effective May 12, 2015 
2.  Share price volatility was determined based on historical share prices over a similar period to the average term to exercise

The change in the number of ES shares during 2016 and 2015 was as follows:

Outstanding at January 1, 2016.....................................................................................................

20,938

$

Granted..........................................................................................................................................

Exercised.......................................................................................................................................

3,250

(21)

Outstanding at December 31, 2016...............................................................................................

24,167

$

27.33

30.59

21.74

27.77

Number of 
Units (000’s)

Weighted-
Average
Exercise Price

Outstanding at January 1, 20151 ...................................................................................................
Granted1 ........................................................................................................................................
Outstanding at December 31, 20151 .............................................................................................

1.  Adjusted to reflect the three-for-two stock split effective May 12, 2015

c)  Restricted Stock Plan

Number of 
Units (000’s)

Weighted-
Average
Exercise Price

14,625

6,313

20,938

$

$

23.80

35.52

27.33

The Restricted Stock Plan awards executives with Class A shares purchased on the open market (“Restricted Shares”). Under the 
Restricted Stock Plan, Restricted Shares awarded vest over a period of up to five years, except for Restricted Shares awarded in 
lieu of a cash bonus, which may vest immediately. Vested and unvested Restricted Shares must be held until the fifth anniversary 
of the award date. Holders of vested Restricted Shares are entitled to vote Restricted Shares and to receive associated dividends. 
Employee compensation expense for the Restricted Stock Plan is charged against income over the vesting period.

During 2016, Brookfield granted 449,110 Class A shares (2015 – 347,403) pursuant to the terms and conditions of the Restricted 
Stock Plan, resulting in the recognition of $11 million (2015 – $9 million) of compensation expense. 

2)  Cash-settled Share-based Awards

a)  Restricted Share Unit Plan

The Restricted Share Unit Plan provides for the issuance of the Deferred Share Units (“DSUs”), as well as Restricted Share Units 
(“RSUs”). Under this plan, qualifying employees and directors receive varying percentages of their annual incentive bonus or 
directors’ fees in the form of DSUs. The DSUs and RSUs vest over periods of up to five years, and DSUs accumulate additional 
DSUs at the same rate as dividends on common shares based on the market value of the common shares at the time of the dividend. 
Participants are not allowed to convert DSUs and RSUs into cash until retirement or cessation of employment. The value of the 
DSUs, when converted to cash, will be equivalent to the market value of the common shares at the time the conversion takes place. 

158     BROOKFIELD ASSET MANAGEMENT

The value of the RSUs, when converted into cash, will be equivalent to the difference between the market price of equivalent 
number of common shares at the time the conversion takes place and the market price on the date the RSUs are granted. The 
company uses equity derivative contracts to offset its exposure to the change in share prices in respect of vested and unvested 
DSUs and RSUs. The fair value of the vested DSUs and RSUs as at December 31, 2016 was $777 million (2015 – $706 million).

Employee compensation expense for these plans is charged against income over the vesting period of the DSUs and RSUs. The 
amount payable by the company in respect of vested DSUs and RSUs changes as a result of dividends and share price movements. 
All of the amounts attributable to changes in the amounts payable by the company are recorded as employee compensation expense 
in the period of the change, and for the year ended December 31, 2016, including those of operating subsidiaries, totalled $5 million 
(2015 – $3 million), net of the impact of hedging arrangements.

The change in the number of DSUs and RSUs during 2016 and 2015 was as follows:

Outstanding at January 1, 2016..................................................................
Granted and reinvested ..............................................................................

Exercised and canceled ..............................................................................

Outstanding at December 31, 2016............................................................

Outstanding at January 1, 20151 .................................................................
Granted and reinvested1 ..............................................................................
Exercised and canceled1..............................................................................
Outstanding at December 31, 20151 ...........................................................

1.  Adjusted to reflect the three-for-two stock split effective May 12, 2015 

DSUs

RSUs

Number 
of Units 
(000’s)

13,793

1,264

(71)

14,986

Number 
of Units 
(000’s)

10,920 C$

—

—

10,920 C$

DSUs

RSUs

Number 
of Units 
(000’s)

13,712

491

(410)

13,793

Number 
of Units 
(000’s)

10,920 C$

—

—

10,920 C$

Weighted-
Average
Exercise
Price

9.09

—

—

9.09

Weighted-
Average
Exercise
Price

9.09

—

—

9.09

The fair value of DSUs is equal to the traded price of the company’s common shares.

Share price on date of measurement...........................................................

Share price on date of measurement...........................................................

The fair value of RSUs was determined primarily using the following inputs:

Share price on date of measurement...........................................................

Weighted-average fair value of a unit ........................................................

22.  REVENUES

Unit

C$

U$

Unit

C$

C$

Dec. 31, 2016

Dec. 31, 2015

44.30

33.01

43.65

31.53

Dec. 31, 2016

Dec. 31, 2015

44.30

35.21

43.65

34.56

Revenues include $14.7 billion (2015 – $12.0 billion) from the sale of goods, $8.4 billion (2015 – $7.2 billion) from the rendering 
of services and $1.3 billion (2015 – $774 million) from other activities. 

      2016 ANNUAL REPORT     159

23.  DIRECT COSTS

Direct costs include all attributable expenses except interest, depreciation and amortization, taxes and fair value changes and 
primarily relate to cost of sales and compensation. The following table lists direct costs for 2016 and 2015 by nature:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Cost of sales ................................................................................................................................ $

2016

12,487

$

Compensation..............................................................................................................................

Selling, general and administrative expenses..............................................................................

Property taxes, sales taxes and other...........................................................................................

2,039

1,544

1,648

2015

9,988

1,686

1,264

1,495

$

17,718

$

14,433

24.  FAIR VALUE CHANGES

Fair value changes recorded in net income represent gains or losses arising from changes in the fair value of assets and liabilities, 
including derivative financial instruments, accounted for using the fair value method and comprise the following:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Investment properties ........................................................................................................................... $
General Growth Properties warrants....................................................................................................

Investment in Canary Wharf ................................................................................................................
Private equity investments1 ..................................................................................................................
Redeemable units .................................................................................................................................

Transaction related gains......................................................................................................................

Impairments and other..........................................................................................................................

2016

960

$

(110)

—

(665)

(40)

—

(275)

2015

2,275

(30)

150

(120)

(2)

232

(339)

$

(130) $

2,166

1. 

Includes a loss of $447 million reclassified from accumulated other comprehensive income to net income

25.  DERIVATIVE FINANCIAL INSTRUMENTS

The company’s activities expose it to a variety of financial risks, including market risk (i.e. currency risk, interest rate risk, and 
other price risk), credit risk and liquidity risk. The company selectively uses derivative financial instruments principally to manage 
these risks.

The aggregate notional amount of the company’s derivative positions at December 31, 2016 and 2015 is as follows:

AS AT DEC. 31
($ MILLIONS)
Foreign exchange.................................................................................................................

Interest rates.........................................................................................................................

Credit default swaps ............................................................................................................

Equity derivatives ................................................................................................................

Note

(a)

(b)

(c)

(d)

Commodity instruments ......................................................................................................

(e)

Energy (GWh)...................................................................................................................

Natural gas (MMBtu – 000’s)...........................................................................................

2016

$

21,782

$

17,092

182

2,583

2016

15,904

9,150

2015

18,192

15,699

870

2,170

2015

36,679

10,295

160     BROOKFIELD ASSET MANAGEMENT

a)  Foreign Exchange

The company held the following foreign exchange contracts with notional amounts at December 31, 2016 and December 31, 2015:

(MILLIONS)

Foreign exchange contracts

Notional Amount 
(U.S. Dollars)

Average Exchange Rate

2016

2015

2016

2015

British pounds ................................................................................ $

6,231

$

4,596

$

Australian dollars ...........................................................................

European Union euros....................................................................

Canadian dollars.............................................................................

Brazilian reais ................................................................................

Korean won....................................................................................

Chinese yuan..................................................................................

Japanese yen...................................................................................

Indian rupees..................................................................................

Cross currency interest rate swaps

Canadian dollars.............................................................................

Australian dollars ...........................................................................

European Union euros....................................................................

British pounds ................................................................................

Colombian pesos............................................................................

Foreign exchange options

Australian dollars ...........................................................................

British pounds ................................................................................

Chinese yuan..................................................................................

Brazilian reais ................................................................................

Japanese yen...................................................................................

5,022

1,855

1,405

511

485

252

203

186

2,269

1,484

530

249

125

—

—

—

—

975

3,017

1,641

493

379

0

308

12

—

2,679

1,503

—

296

—

1,443

1,312

500

14

—

$

1.26

0.74

1.11

0.75

3.15

1,152.60

7.06

116.35

69.83

0.82

0.99

1.06

1.49

3,056

—

—

—

—

118

1.49

0.73

1.11

0.77

4.00

—

6.70

110.00

—

0.82

0.99

—

1.48

—

0.81

1.41

6.75

3.77

—

Included  in  net  income  are  unrealized  net  losses  on  foreign  currency  derivative  contracts  amounting  to  $62 million  (2015 –
 $98 million) and included in the cumulative translation adjustment account in other comprehensive income are gains in respect 
of foreign currency contracts entered into for hedging purposes amounting to $893 million (2015 – $1,155 million).

b)  Interest Rates

At December 31, 2016, the company held interest rate swap contracts having an aggregate notional amount of $6.6 billion (2015
– $7.8 billion), interest rate swaptions with an aggregate notional amount of $4.1 billion (2015 – $2.6 billion), and interest rate 
cap contracts with an aggregate notional amount of $6.4 billion (2015 – $5.3 billion).

c)  Credit Default Swaps

As at December 31, 2016, the company held credit default swap contracts with an aggregate notional amount of $182 million 
(2015 – $870 million). Credit default swaps are contracts which are designed to compensate the purchaser for any change in the 
value of an underlying reference asset, based on measurement in credit spreads, upon the occurrence of predetermined credit 
events. The company is entitled to receive payments in the event of a predetermined credit event for up to $100 million (2015 –
$800 million) of the notional amount and could be required to make payments in respect of $82 million (2015 – $70 million) of 
the notional amount.

d)  Equity Derivatives

At December 31, 2016, the company held equity derivatives with a notional amount of $2,583 million (2015 – $2,170 million) 
which  includes  $988 million  (2015 – $799 million)  notional  amount  that  hedges  long-term  compensation  arrangements.  The 
balance represents common equity positions established in connection with the company’s investment activities. The fair value 
of these instruments was reflected in the company’s consolidated financial statements at year end.

      2016 ANNUAL REPORT     161

e)  Commodity Instruments

The company has entered into energy derivative contracts primarily to hedge the sale of generated power. The company endeavours 
to link forward electricity sale derivatives to specific periods in which it expects to generate electricity for sale. All energy derivative 
contracts are recorded at an amount equal to fair value and are reflected in the company’s consolidated financial statements. The 
company has purchased 10,820,000 MMBtu’s of natural gas financial contracts and sold 10,040,000 MMBtu’s of natural gas 
financial contracts as part of its electricity sale price risk mitigation strategy.

Other Information Regarding Derivative Financial Instruments

The following table classifies derivatives elected for hedge accounting during the years ended December 31, 2016 and 2015 as 
either cash flow hedges or net investment hedges. Changes in the fair value of the effective portion of the hedge are recorded in 
either other comprehensive income or net income, depending on the hedge classification, whereas changes in the fair value of the 
ineffective portion of the hedge are recorded in net income:

2016

2015

FOR THE YEARS ENDED DECEMBER 31
(MILLIONS)
Cash flow hedges1 ........................................ $
Net investment hedges..................................

$

Notional

Effective
Portion

Ineffective
Portion

Notional

Effective
Portion

Ineffective
Portion

11,998

13,973

25,971

$

$

149

129

278

$

$

(13) $

13,210

—

8,447

(13) $

21,657

$

$

197

75

272

$

$

(1)

—

(1)

1.  Notional amount does not include 8,561 GWh and 9,119 GWh of commodity derivatives at December 31, 2016 and December 31, 2015, respectively

The following table presents the change in fair values of the company’s derivative positions during the years ended December 31, 
2016 and 2015, for derivatives that are fair valued through profit or loss, and derivatives that qualify for hedge accounting:

(MILLIONS)

Unrealized
Gains During
2016

Unrealized
Losses
During 2016

Net Change
During 2016

Net Change
During 2015

Foreign exchange derivatives........................................................ $

55

$

(117) $

Interest rate derivatives .................................................................

Credit default swaps......................................................................

Equity derivatives .........................................................................

Commodity derivatives .................................................................

120

—

110

41

(10)

(5)

(119)

(32)

$

326

$

(283) $

(62) $

110

(5)

(9)

9

43

$

199

(61)

2

61

54

255

162     BROOKFIELD ASSET MANAGEMENT

The following table presents the notional amounts underlying the company’s derivative instruments by term to maturity as at 
December 31, 2016 and the comparative notional amounts at December 31, 2015, for derivatives that are classified as fair value 
through profit or loss, and derivatives that qualify for hedge accounting:

AS AT DEC. 31
($ MILLIONS)

Fair value through profit or loss

2016

<1 Year

1 to 5 Years

>5 Years

Total Notional
Amount

2015
Total Notional
Amount

Foreign exchange derivatives..................... $

2,610

$

2,009

$

446

$

5,065

$

Interest rate derivatives ..............................

Credit default swaps ...................................

Equity derivatives.......................................

Commodity instruments .............................

Energy (GWh) .........................................

Natural gas (MMBtu – 000’s)..................

Elected for hedge accounting

5,521

100

1,854

2,207

4,965

2,262

82

706

5,136

4,185

55

—

—

—

—

7,838

182

2,560

7,343

9,150

Foreign exchange derivatives..................... $

13,452

$

1,576

$

1,689

$

16,717

$

Interest rate derivatives ..............................

Equity derivatives.......................................

Commodity instruments .............................

Energy (GWh) .........................................

4,127

—

5,302

4,294

24

3,259

833

—

—

9,254

24

8,561

6,911

5,342

870

2,151

27,560

10,295

11,281

10,357

19

9,119

26.  MANAGEMENT OF RISKS ARISING FROM HOLDING FINANCIAL INSTRUMENTS

The company is exposed to the following risks as a result of holding financial instruments: market risk (i.e. interest rate risk, 
currency risk and other price risk that impact the fair value of financial instruments); credit risk; and liquidity risk. The following 
is a description of these risks and how they are managed: 

a)  Market Risk 

Market risk is defined for these purposes as the risk that the fair value or future cash flows of a financial instrument held by the 
company will fluctuate because of changes in market prices. Market risk includes the risk of changes in interest rates, currency 
exchange rates and changes in market prices due to factors other than interest rates or currency exchange rates, such as changes 
in equity prices, commodity prices or credit spreads. 

The company manages market risk from foreign currency assets and liabilities and the impact of changes in currency exchange 
rates and interest rates, by funding assets with financial liabilities in the same currency and with similar interest rate characteristics, 
and holding financial contracts such as interest rate and foreign exchange derivatives to minimize residual exposures. 

Financial instruments held by the company that are subject to market risk include other financial assets, borrowings, and derivative 
instruments such as interest rate, currency, equity and commodity contracts. 

i. 

Interest Rate Risk 

The observable impacts on the fair values and future cash flows of financial instruments that can be directly attributable to interest 
rate risk include changes in the net income from financial instruments whose cash flows are determined with reference to floating 
interest rates and changes in the value of financial instruments whose cash flows are fixed in nature. 

The company’s assets largely consist of long-duration interest-sensitive physical assets. Accordingly, the company’s financial 
liabilities consist primarily of long-term fixed-rate debt or floating-rate debt that has been swapped with interest rate derivatives. 
These financial liabilities are, with few exceptions, recorded at their amortized cost. The company also holds interest rate caps to 
limit its exposure to increases in interest rates on floating rate debt that has not been swapped, and holds interest rate contracts 
to lock in fixed rates on anticipated future debt issuances and as an economic hedge against the values of long duration interest 
sensitive physical assets that have not been otherwise matched with fixed rate debt. 

The result of a 50 basis-point increase in interest rates on the company’s net floating rate financial assets and liabilities would 
have resulted in a corresponding decrease in net income before tax of $45 million (2015 – $46 million) on an annualized basis.

      2016 ANNUAL REPORT     163

Changes in the value of fair value through profit or loss interest rate contracts are recorded in net income and changes in the value 
of contracts that are elected for hedge accounting are recorded in other comprehensive income. The impact of a 50 basis-point 
parallel increase in the yield curve on the aforementioned financial instruments is estimated to result in a corresponding increase 
in  net  income  of  $26 million  (2015 –  $23 million)  and  an  increase  in  other  comprehensive  income  of  $72  million  (2015 –
$124 million), before tax for the year ended December 31, 2016 and December 31, 2015.

ii.  Currency Exchange Rate Risk

Changes  in  currency  rates  will  impact  the  carrying  value  of  financial  instruments  denominated  in  currencies  other  than  the 
U.S. dollar.

The company holds financial instruments with net unmatched exposures in several currencies, changes in the translated value of 
which are recorded in net income. The impact of a 1% increase in the U.S. dollar against these currencies would have resulted in 
an $38 million (2015 – $24 million) increase in the value of these positions on a combined basis. The impact on cash flows from 
financial instruments would be insignificant. The company holds financial instruments to limit its exposure to the impact of foreign 
currencies on its net investments in foreign operations whose functional and reporting currencies are other than the U.S. dollar. 
A 1% increase in the U.S. dollar would increase the value of these hedging instruments by $133 million (2015 – $66 million) as 
at December 31, 2016, which would be recorded in other comprehensive income and offset by changes in the U.S. dollar carrying 
value of the net investment being hedged.

iii.  Other Price Risk

Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as commodity 
prices and credit spreads. 

Financial instruments held by the company that are exposed to equity price risk include equity securities and equity derivatives. 
A 5% decrease in the market price of equity securities and equity derivatives held by the company, excluding equity derivatives that 
hedge compensation arrangements, would have decreased net income by $161 million (2015 – $79 million) and decreased other 
comprehensive  income  by  $48 million  (2015  –  $70 million),  prior  to  taxes.  The  company’s  liability  in  respect  of  equity 
compensation arrangements is subject to variability based on changes in the company’s underlying common share price. The 
company holds equity derivatives to hedge almost all of the variability. A 5% change in the common equity price of the company 
in respect of compensation agreements would increase the compensation liability and compensation expense by $52 million (2015
– $46 million). This increase would be offset by a $52 million (2015 – $45 million) change in value of the associated equity 
derivatives of which $51 million (2015 – $45 million) would offset the above mentioned increase in compensation expense and 
the remaining $1 million (2015 – $1 million) would be recorded in other comprehensive income.

The company sells power and generation capacity under long-term agreements and financial contracts to stabilize future revenues. 
Certain of the contracts are considered financial instruments and are recorded at fair value in the consolidated financial statements, 
with changes in value being recorded in either net income or other comprehensive income as applicable. A 5% increase in energy 
prices would have decreased net income for the year ended December 31, 2016 by approximately $15 million (2015 – $16 million) 
and decreased other comprehensive income by $16 million (2015 – $17 million), prior to taxes. The corresponding increase in 
the value of the revenue or capacity being contracted, however, is not recorded in net income until subsequent periods.

The company held credit default swap contracts with a total notional amount of $182 million (2015 – $870 million) at December 31, 
2016. The company is exposed to changes in the credit spread of the contracts’ underlying reference asset. A 50 basis-point increase 
in the credit spread of the underlying reference assets would have decreased net income by $2.4 million (2015 – $1.8 million 
increase) for the year ended December 31, 2016, prior to taxes.

b)  Credit Risk

Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfill its contractual obligations. The company’s 
exposure to credit risk in respect of financial instruments relates primarily to counterparty obligations regarding derivative contracts, 
loans receivable and credit investments such as bonds and preferred shares.

The company assesses the credit worthiness of each counterparty before entering into contracts and ensures that counterparties 
meet minimum credit quality requirements. Management evaluates and monitors counterparty credit risk for derivative financial 
instruments and endeavours to minimize counterparty credit risk through diversification, collateral arrangements, and other credit 
risk mitigation techniques. The credit risk of derivative financial instruments is generally limited to the positive fair value of the 
instruments, which, in general, tends to be a relatively small proportion of the notional value. Substantially all of the company’s 
derivative financial instruments involve either counterparties that are banks or other financial institutions in North America, the 
United Kingdom and Australia, or arrangements that have embedded credit risk mitigation features. The company does not expect 
to incur credit losses in respect of any of these counterparties. The maximum exposure in respect of loans receivable and credit 
investments is equal to the carrying value.

164     BROOKFIELD ASSET MANAGEMENT

c)  Liquidity Risk

Liquidity risk is the risk that the company cannot meet a demand for cash or fund an obligation as it comes due. Liquidity risk 
also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price. 

To ensure the company is able to react to contingencies and investment opportunities quickly, the company maintains sources of 
liquidity at the corporate and subsidiary level. The primary source of liquidity consists of cash and other financial assets, net 
of deposits and other associated liabilities, and undrawn committed credit facilities. 

The company is subject to the risks associated with debt financing, including the ability to refinance indebtedness at maturity. The 
company believes these risks are mitigated through the use of long-term debt secured by high quality assets, maintaining debt 
levels that are in management’s opinion relatively conservative, and by diversifying maturities over an extended period of time. 
The company also seeks to include in its agreements terms that protect the company from liquidity issues of counterparties that 
might otherwise impact the company’s liquidity.

The following tables present the contractual maturities of the company’s financial liabilities at December 31, 2016 and 2015:

AS AT DECEMBER 31, 2016
(MILLIONS)

Principal repayments

Payments Due by Period

<1 Year

1 to 3 Years

4 to 5 Years

After 5 Years

Total

Corporate borrowings .............................. $

425

$

447

$

260

$

3,368

$

Property-specific mortgages ....................

Other debt of subsidiaries ........................

Subsidiary equity obligations ..................

Interest expense1

Corporate borrowings ..............................

Non-recourse borrowings ........................

Subsidiary equity obligations ..................

7,655

866

421

201

2,776

198

13,965

2,699

143

375

4,549

376

13,467

1,955

1,217

342

3,219

318

17,355

2,429

1,784

878

4,378

378

4,500

52,442

7,949

3,565

1,796

14,922

1,270

1.  Represents the aggregated interest expense expected to be paid over the term of the obligations. Variable interest rate payments have been calculated based on current 

rates

AS AT DECEMBER 31, 2015
(MILLIONS)

Principal repayments

Payments Due by Period

<1 Year

1 to 3 Years

4 to 5 Years

After 5 Years

Total

Corporate borrowings .............................. $

217

$

419

$

591

$

2,709

$

Property-specific mortgages ....................

Other debt of subsidiaries ........................

Subsidiary equity obligations ..................

Interest expense1

Corporate borrowings ..............................

Non-recourse borrowings ........................

Subsidiary equity obligations ..................

9,426

1,839

501

188

2,128

123

11,991

2,010

—

322

3,426

234

8,622

2,253

—

284

2,438

234

16,005

2,201

2,830

826

3,684

437

3,936

46,044

8,303

3,331

1,620

11,676

1,028

1.  Represents the aggregated interest expense expected to be paid over the term of the obligations. Variable interest rate payments have been calculated based on current 

rates

      2016 ANNUAL REPORT     165

27.  CAPITAL MANAGEMENT

The capital of the company consists of the components of equity in the company’s consolidated balance sheet (i.e. common and 
preferred equity). As at December 31, 2016, the recorded values of these items in the company’s consolidated financial statements 
totalled $26.5 billion (2015 – $25.3 billion).

The company’s objectives when managing this capital are to maintain an appropriate balance between holding a sufficient amount 
of capital to support its operations, which includes maintaining investment-grade ratings at the corporate level, and providing 
shareholders with a prudent amount of leverage to enhance returns. Corporate leverage, which consists of corporate debt as well 
as subsidiary obligations that are guaranteed by the company or are otherwise considered corporate in nature, totalled $4.5 billion 
based on carrying values at December 31, 2016 (2015 – $3.9 billion). The company monitors its capital base and leverage primarily 
in the context of its deconsolidated debt-to-total capitalization ratios. The ratio as at December 31, 2016 was 14% (2015 – 13%).

The consolidated capitalization of the company includes the capital and financial obligations of consolidated entities, including 
long-term property-specific financings, subsidiary borrowings, capital securities as well as common and preferred equity held by 
other investors in these entities. The capital in these entities is managed at the entity level with oversight by management of the 
company. The capital is managed with the objective of maintaining investment-grade levels in most circumstances and is, except 
in limited and carefully managed circumstances, without any recourse to the company. Management of the company also takes 
into consideration capital requirements of consolidated and non-consolidated entities that it has interests in when considering the 
appropriate level of capital and liquidity on a deconsolidated basis.

The company is subject to limited covenants in respect of its corporate debt and is in full compliance with all such covenants as 
at December 31, 2016 and 2015. The company is also in compliance with all covenants and other capital requirements related to 
regulatory or contractual obligations of material consequence to the company.

28.  RELATED PARTY TRANSACTIONS

a)  Related Parties

Related  parties  include  subsidiaries,  associates,  joint  arrangements,  key  management  personnel,  the  Board  of  Directors 
(“Directors”), immediate family members of key management personnel and Directors, and entities which are, directly or indirectly, 
controlled by, jointly controlled by or significantly influenced by key management personnel, Directors or their close family 
members. 

b)  Key Management Personnel and Directors

Key management personnel are those individuals who have the authority and responsibility for planning, directing and controlling 
the company’s activities, directly or indirectly, and consist of the company’s Senior Managing Partners. The company’s Directors 
do not plan, direct or control the activities of the company directly; they provide oversight over the business.

The remuneration of Directors and other key management personnel of the company during the years ended December 31, 2016 
and 2015 was as follows:

FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Salaries, incentives and short-term benefits ........................................................................................... $

Share-based payments.............................................................................................................................

$

2016

2015

19

50

69

$

$

19

55

74

The remuneration of Directors and key executives is determined by the Compensation Committee of the Board of Directors having 
regard to the performance of individuals and market funds.

c)  Related Party Transactions

In the normal course of operations, the company executes transactions on market terms with related parties, which have been 
measured  at  exchange  value  and  are  recognized  in  the  consolidated  financial  statements,  including,  but  not  limited  to:  base 
management fees, performance fees and incentive distributions; loans, interest and non-interest bearing deposits; power purchase 
and sale agreements; capital commitments to private funds; the acquisition and disposition of assets and businesses; derivative 
contracts; and the construction and development of assets. 

166     BROOKFIELD ASSET MANAGEMENT

The following table lists the related party balances included within the consolidated financial statements as at and for the years 
ended December 31, 2016 and 2015:

AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Financial assets ....................................................................................................................................... $

Investment and other losses ....................................................................................................................

Management fees received......................................................................................................................

2016

1,254

$

(110)

56

2015

1,364

(30)

28

As at December 31, 2016, financial assets of $1.3 billion (2015 – $1.4 billion) represents warrants that BPY holds which are 
convertible into common shares of GGP.

In connection with our newly launched open-ended real estate fund, BPY contributed certain operating buildings and development 
projects for net proceeds of approximately $500 million, which was received in the form of cash and limited partner interest in 
the fund. The company is the general partner of the fund and will earn fees for the management of this fund. This fund is equity 
accounted for in the consolidated financial statements of the company. 

In April 2015, the Corporation issued 32.9 million Class A shares. Current officers, directors and shareholders of Brookfield, and 
entities controlled by them, purchased an aggregate of 2.1 million Class A shares as part of this issuance. The aggregate gross 
proceeds of the issuance was $1.2 billion.

29.  OTHER INFORMATION

a)  Commitments, Guarantees and Contingencies

In the normal course of business, the company enters into contractual obligations which include commitments to provide bridge 
financing, letters of credit, guarantees and reinsurance obligations. At the end of 2016, the company has $2.6 billion (2015 –
 $906 million)  of  such  commitments  outstanding. The  company  also  had  $5.2  billion  of  future  operating  lease  obligations  at 
December 31, 2016, of which $4.4 billion relates to land leases with agreements largely expiring after the year 2065.  

In addition, the company executes agreements that provide for indemnifications and guarantees to third parties in transactions or 
dealings such as business dispositions, business acquisitions, sales of assets, provision of services, securitization agreements, and 
underwriting  and  agency  agreements.  The  company  has  also  agreed  to  indemnify  its  directors  and  certain  of  its  officers 
and employees. The nature of substantially all of the indemnification undertakings prevents the company from making a reasonable 
estimate of the maximum potential amount the company could be required to pay third parties, as in most cases, the agreements 
do not specify a maximum amount, and the amounts are dependent upon the outcome of future contingent events, the nature and 
likelihood of which cannot be determined at this time. Neither the company nor its consolidated subsidiaries have made significant 
payments in the past nor do they expect at this time to make any significant payments under such indemnification agreements in 
the future.

The company periodically enters into joint ventures, consortium or other arrangements that have contingent liquidity rights in 
favour  of  the  company  or  its  counterparties.  These  include  buy  sell  arrangements,  registration  rights  and  other  customary 
arrangements. These agreements generally have embedded protective terms that mitigate the risk to us. The amount, timing and 
likelihood of any payments by the company under these arrangements is, in most cases, dependent on either further contingent 
events or circumstances applicable to the counterparty and therefore cannot be determined at this time.

The company is contingently liable with respect to litigation and claims that arise in the normal course of business. It is not 
reasonably possible that any of the ongoing litigation as at December 31, 2016 could result in a material settlement liability.

The company has up to $4 billion of insurance for damage and business interruption costs sustained as a result of an act of terrorism. 
However, a terrorist act could have a material effect on the company’s assets to the extent damages exceed the coverage.

The company, through its subsidiaries within the residential properties operations, is contingently liable for obligations of its 
associates in its land development joint ventures. In each case, all of the assets of the joint venture are available first for the purpose 
of satisfying these obligations, with the balance shared among the participants in accordance with predetermined joint venture 
arrangements.

The Corporation has entered into arrangements with respect to the $1.8 billion of exchangeable preferred equity units issued by 
BPY discussed in Note 19, which are redeemable in equal tranches of $600 million in 2021, 2024 and 2026, respectively. 

      2016 ANNUAL REPORT     167

The preferred equity units are exchangeable into equity units of BPY at $25.70 per unit, at the option of the holder, at any time 
up to and including the maturity date. BPY may redeem the preferred equity units after specified periods if the BPY equity unit 
price exceeds predetermined amounts. At maturity, the preferred equity units will be converted into BPY equity units at the lower 
of $25.70 or the then market price of a BPY equity unit. In order to provide the purchaser with enhanced liquidity, the Corporation 
has agreed to purchase the preferred equity units for cash at the option of the holder, for the initial purchase price plus accrued 
and unpaid dividends. In order to decrease dilution risk to BPY, the Corporation has agreed with the holder and BPY that if the 
price of a BPY equity unit is less than 80% of the exchange price of $25.70 at the redemption date of the 2021 and 2024 tranches, 
the Corporation will acquire the preferred equity units subject to redemption, at the redemption price, and to exchange these 
preferred equity units for preferred equity units with similar terms and conditions, including redemption date, as the 2026 tranche.

b)  Insurance

The company conducts insurance operations as part of its corporate activities. As at December 31, 2016, the company held insurance 
assets of $77 million (2015 – $88 million) in respect of insurance contracts that are accounted for using the deposit method which 
were offset in each year by an equal amount of reserves and other liabilities. During 2016, net underwriting losses on reinsurance 
operations were $9 million (2015 – gains of $9 million) representing $nil (2015 – $1 million) of premium and other revenues and 
$8 million (2015 – recoveries of $8 million) of reserves and other expenses.

c)  Supplemental Cash Flow Information

Sustaining capital expenditures in the company’s renewable power operations were $67 million (2015 – $60 million), in its property 
operations were $300 million (2015 – $294 million) and in its infrastructure operations were $390 million (2015 – $156 million). 

During the year, the company has capitalized $229 million (2015 – $331 million) of interest primarily to investment properties 
and residential inventory under development.

168     BROOKFIELD ASSET MANAGEMENT

CAUTIONARY  STATEMENT  REGARDING  FORWARD-LOOKING  STATEMENTS AND 
INFORMATION

This Annual  Report  contains  “forward-looking  information”  within  the  meaning  of  Canadian  provincial  securities  laws  and 
“forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of 
the U.S. Securities Exchange Act of 1934, as amended, “safe harbour” provisions of the United States Private Securities Litigation 
Reform Act of 1995 and in any applicable Canadian securities regulations. Forward-looking statements include statements that 
are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the operations, business, 
financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, 
strategies and outlook of the Corporation and its subsidiaries, as well as the outlook for North American and international economies 
for  the  current  fiscal  year  and  subsequent  periods,  and  include  words  such  as  “expects,”  “anticipates,”  “plans,”  “believes,” 
“estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions, or 
future or conditional verbs such as “may,” “will,” “should,” “would” and “could.”

Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking 
statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance 
on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, 
many of which are beyond our control, which may cause the actual results, performance or achievements of the Corporation to 
differ  materially  from  anticipated  future  results,  performance  or  achievement  expressed  or  implied  by  such  forward-looking 
statements and information. 

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements 
include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in the countries 
in which we do business; the behaviour of financial markets, including fluctuations in interest and foreign exchange rates; global 
equity and capital markets and the availability of equity and debt financing and refinancing within these markets; strategic actions 
including dispositions; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain 
expected benefits; changes in accounting policies and methods used to report financial condition (including uncertainties associated 
with critical accounting assumptions and estimates); the ability to appropriately manage human capital; the effect of applying 
future accounting changes; business competition; operational and reputational risks; technological change; changes in government 
regulation and legislation within the countries in which we operate; governmental investigations; litigation; changes in tax laws; 
ability to collect amounts owed; catastrophic events, such as earthquakes and hurricanes; the possible impact of international 
conflicts and other developments including terrorist acts and cyber terrorism; and other risks and factors detailed from time to 
time in our documents filed with the securities regulators in Canada and the United States.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-
looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential 
events. Except as required by law, the Corporation undertakes no obligation to publicly update or revise any forward-looking 
statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

      2016 ANNUAL REPORT     169

BROOKFIELD’S COMMITMENT TO CORPORATE SOCIAL RESPONSIBILITY

Across Brookfield, we recognize that our success depends on the long-term health of the communities in which we conduct 
business and the environment in which we operate. Around the world, we invest in real assets that are essential to the global 
economy, and we operate these assets with the view that we will own them forever. That long-term approach dictates both our 
investment strategy and our commitment to corporate social responsibility. We believe that the pursuit of shareholder value and 
sustainable development are complementary goals.

Brookfield’s Board of Directors, management and operating employees strive for excellence in all our operations. We seek to 
ensure the well-being and safety of our employees and the public by meeting or exceeding all applicable labour laws and standards 
of the jurisdictions in which we operate by offering competitive wages to employees, providing safe work environments, and 
implementing  non-discriminatory  hiring  practices.  Furthermore,  we  aim  to  mitigate  the  impact  of  our  operations  on  the 
environment, to be actively engaged in the communities in which we operate and always work to be good corporate citizens. 
Finally, we conduct our business according to the highest ethical and regulatory standards. Below are some examples of the 
different initiatives across our organization. 

Employee Well-being 

Because our employees are integral to our success, our management teams maintain high standards with respect to employee 
welfare. Safety training and protocols are constantly refined, and health and safety metrics are reviewed regularly. Our goal is to 
have zero serious safety incidents by following a robust set of health and safety principles that are applied across our organization. 

For example, in our office property portfolio, we foster a safe environment by offering our security and fire and life safety teams 
as a resource to tenants as they develop their individual security and preparedness plans, organizing and managing not only the 
required fire and shelter-in-place drills, but being able to create and facilitate other safety drills at tenant requests. 

Within our infrastructure business, we have worked with our operating businesses on a number of initiatives to improve the health 
and safety of our operating professionals. In an attempt to decrease roadside incidents of our roadside workers and tollbooth 
operators, our Brazilian toll roads business has installed concrete barriers, constructed pedestrian overpasses, and installed speed 
radars at job sites. This business also introduced electro-mechanical ‘flagmen robots’ to stand in place of road workers, an industry 
first.

Environmental Stewardship

Across  our  portfolio  of  long-life,  high  quality  assets,  we  are  committed  to  improving  energy  efficiency  and  minimizing  any 
environmental impact of our operations. 

For example, in our office property portfolio, we judge our performance against standards that include the Global Real Estate 
Sustainability Benchmark (GRESB), an independently run assessment of the environmental performance of commercial properties. 
In 2016, we have been identified as a GRESB Survey Green Star for the fourth straight year, ranking in the 87th percentile of all 
GRESB respondents. This survey rates our operations on seven sustainability standards, and we have ranked well above both our 
peer group and the global GRESB average.

Within our renewable power business, 53 of Brookfield Renewable’s North American hydro facilities are now certified by the 
Low Impact Hydropower Institute (LIHI). LIHI is a non-profit organization dedicated to reducing the impact of hydropower 
generation through the certification of hydropower projects that have avoided or reduced their environmental impacts, such as 
water quality protection, upstream and downstream fish passages, and threatened and endangered species protection.

Our Canadian District Energy operator, which is part of our infrastructure business, offers the world’s largest lake-source cooling 
system, a $250 million project that resulted in a 90% reduction in energy usage for the Toronto heat exchange system. 

Lastly, our private equity group operates a global construction business that received the 2016 Most Sustainable Construction and 
Demolition Project award for adopting innovative environmental practices throughout the demolition and construction phases of 
a commercial office project in the U.K. A key initiative ensured that more than 340 tonnes of glass façade was processed and 
recycled into new glass products, preventing 227,000 kg of CO2 being released into the atmosphere – the equivalent of energy 
needed to power 133 homes for a year.

Community Engagement 

We believe that building strong partnerships with local and national stakeholders is good business. To ensure our interests are 
aligned, we continually look to involve our local communities and other stakeholders in both our existing businesses and our new 
investments. 

170     BROOKFIELD ASSET MANAGEMENT

In 2016, our arts and events program, Arts Brookfield, staged more than 500 free cultural events, attracting thousands of visitors. 
One such event, I Never Saw Another Butterfly, was presented in partnership with the Holocaust Museum of Houston. For over 
20 years, the Museum has collected 1.5 million handmade butterfly artworks as part of its Butterfly Project, each representing the 
1.5 million children who perished in the Holocaust. The Arts Brookfield-sponsored exhibit at the Allen Center gathered more than 
200 additional butterflies from the community to expand upon the display. 

In addition, we regularly engage with the communities in which we operate to ensure their interests are appropriately integrated 
into our business decisions. For example, sourcing both labour and materials locally is important to us. In the case of our Australian 
regulated terminal operator, one of the largest employers in the region, policies are in place to help award significant contracts to 
local businesses where appropriate. Furthermore, our Colombian Regulated Electricity Distribution business regularly engages 
in community outreach programs and advertising campaigns to educate the community on the public safety risks associated with 
electricity infrastructure.

Corporate Citizenship

We encourage and support a culture of philanthropy and volunteerism among our employees around the world. Through our people, 
we are a leader in communities, and our commitment shows in everyday activities – that are both in support of charities and in 
exceptional contributions we make during times of need.

All of our employees are encouraged to participate in community activities and fundraising, and our executives hold leadership 
positions on the boards and capital campaigns at major charities and public institutions, such as hospitals and universities. Many 
of our philanthropic and volunteer initiatives are global in scope, but local in focus. For example, we are long-time sponsors of a 
program that provides education assistance to gifted students from low income neighbourhoods in Rio de Janeiro. And we stage 
charity stair climbing challenges at our office buildings in major financial centres, for causes such as the United Way. 

Brookfield’s Commitment to Corporate Governance 

On behalf of all shareholders, the Board of Directors and management of Brookfield are committed to excellence in corporate 
governance at all levels of the organization. We believe Brookfield’s directors are well equipped to represent the interests of the 
Corporation and its shareholders, with an independent chair leading a Board that features global business experience, diversity 
and  proven  governance  skills. We  continually  strive  to  ensure  that  we  have  sound  governance  practices  to  maintain  investor 
confidence. We constantly review our approach to governance in relation to evolving legislation, guidelines and best practices. 
Our Board of Directors is of the view that our corporate governance policies and practices, and our disclosure in this regard are 
appropriate, effective and consistent with the guidelines established by Canadian and U.S. securities regulators.

Our Board of Directors believes that communication with shareholders is a critical element of good governance and the Board 
encourages  all  shareholders  to  express  their  views,  including  by  way  of  an  advisory  shareholder  resolution  on  executive 
compensation which is voted on annually by holders of Class A shares.

Brookfield outlines its commitment to good governance in the Statement of Corporate Governance Practices (the Statement), 
published  each  year  in  the  Corporation’s  Management  Information  Circular  and  mailed  to  shareholders  who  request  it. The 
Statement is also available on our website, www.brookfield.com, at “Shareholders / Brookfield Asset Management / Corporate 
Governance / Governance Documents.”

Shareholders can also access the following documents that outline our approach to governance on our website: the Board of 
Directors  Charter,  the  Charter  of  Expectations  for  Directors,  the  Charters  of  the  Board’s  four  Standing  Committees  (Audit, 
Governance and Nominating, Management Resources and Compensation and Risk Management), Board Position Descriptions, 
our Code of Business Conduct and Ethics and our Corporate Disclosure Policy.

An Ongoing Commitment

We are proud of our track record of leadership in corporate social responsibility, but we recognize that we can always do more, 
and are committed to continuous improvement in this regard.

      2016 ANNUAL REPORT     171

SHAREHOLDER INFORMATION

Shareholder Enquiries

Investor Relations and Communications

Shareholder enquiries should be directed to our Investor Relations 
group at:
Brookfield Asset Management Inc.
Suite 300, Brookfield Place, Box 762, 181 Bay Street
Toronto, Ontario M5J 2T3
T: 416-363-9491 or toll free in North America: 1-866-989-0311
F: 416-363-2856
bam.brookfield.com
enquiries@brookfield.com

Shareholder enquiries relating to dividends, address changes and share 
certificates should be directed to our Transfer Agent:
CST Trust Company
P.O. Box 700, Station B
Montreal, Quebec H3B 3K3
T: 416-682-3860 or toll free in North America: 1-800-387-0825
F: 1-888-249-6189
www.canstockta.com
enquiries@canstockta.com

We are committed to informing our shareholders of our progress through 
our comprehensive communications program which includes publication 
of materials such as our annual report, quarterly interim reports and news 
releases. We also maintain a website that provides ready access to these 
materials, as well as statutory filings, stock and dividend information and 
other presentations.

Meeting  with  shareholders  is  an  integral  part  of  our  communications 
program. Directors and management meet with Brookfield’s shareholders 
at  our  annual  meeting  and  are  available  to  respond  to  questions. 
Management is also available to investment analysts, financial advisors 
and media.

The text of our 2016 Annual Report is available in French on request from 
the  company  and  is  filed  with  and  available  through  SEDAR  at 
www.sedar.com.

Annual Meeting of Shareholders

Our 2017 Annual Meeting of Shareholders will be held at 10.30 a.m. on 
Friday, June 16, 2017 at the Design Exchange, 234 Bay Street, Toronto, 
Ontario, Canada.

Stock Exchange Listings

Dividends

Class A Limited Voting Shares

BAM

Symbol

Stock Exchange

BAM.A

BAMA

BAM.PR.B

BAM.PR.C

BAM.PR.E

BAM.PR.G

BAM.PR.K

New York

Toronto

Euronext – Amsterdam

Toronto

Toronto

Toronto

Toronto

Toronto

BAM.PR.M Toronto

BAM.PR.N

BAM.PR.R

BAM.PR.S

BAM.PR.T

BAM.PR.X

BAM.PR.Z

BAM.PF.A

BAM.PF.B

BAM.PF.C

BAM.PF.D

BAM.PF.E

BAM.PF.F

BAM.PF.G

BAM.PF.H

BAM.PF.I

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

Toronto

The  quarterly  dividend  payable  on  Class A  shares  is  declared  in  U.S. 
dollars.  Registered  shareholders  who  are  U.S.  residents  receive  their 
dividends  in  U.S.  dollars,  unless  they  request  the  Canadian  dollar 
equivalent. Registered shareholders who are Canadian residents receive 
their dividends in the Canadian dollar equivalent, unless they request to 
receive dividends in U.S. dollars. The Canadian dollar equivalent of the 
quarterly dividend is based on the Bank of Canada daily average exchange 
rate  exactly  two  weeks  (or  14 days)  prior  to  the  payment  date  for  the 
dividend.

Dividend Reinvestment Plan

The  Corporation  has  a  Dividend  Reinvestment  Plan  which  enables 
registered holders of Class A Shares who are resident in Canada and the 
United States to receive their dividends in the form of newly issued Class A 
shares.

Registered  shareholders  of  our  Class A  shares  who  are  resident  in  the 
United States may elect to receive their dividends in the form of newly 
issued Class A shares at a price equal to the volume-weighted average price 
(in  U.S.  dollars)  at  which  the  shares  traded  on  the  New  York  Stock 
Exchange based on the average closing price during each of the five trading 
days  immediately  preceding  the  relevant  dividend  payment  date  (the 
“NYSE VWAP”).

Registered shareholders of our Class A shares who are resident in Canada 
may also elect to receive their dividends in the form of newly issued Class A 
shares at a price equal to the NYSE VWAP multiplied by an exchange 
factor which is calculated as the average of the daily average exchange 
rates as reported by the Bank of Canada during each of the five trading 
days immediately preceding the relevant dividend payment date.

Our  Dividend  Reinvestment  Plan  allows  current  shareholders  of  the 
Corporation who are resident in Canada and the United States to increase 
their investment in the Corporation free of commissions. Further details 
on  the  Dividend  Reinvestment  Plan  and  a  Participation  Form  can  be 
obtained from our Toronto office, our transfer agent or from our website.

Class A Preference Shares

Series 2

Series 4

Series 8

Series 9

Series 13

Series 17

Series 18

Series 24

Series 25

Series 26

Series 28

Series 30

Series 32

Series 34

Series 36

Series 37

Series 38

Series 40

Series 42

Series 44

Series 46

Dividend Record and Payment Dates
Security1

Class A and Class B shares

Class A Preference shares

Series 2, 4, 13, 17, 18, 24, 25, 26, 28, 30

Record Date2

Payment Date3

Last day of February, May, August and November

Last day of March, June, September and December

  32, 34, 36, 37, 38, 40, 42, 44 and 46

15th day of March, June, September and December

Last day of March, June, September and December

Series 8

Series 9

Last day of each month

12th day of following month

15th day of January, April, July and October

First day of February, May, August and November

1.    All dividend payments are subject to declaration by the Board of Directors
2.    If the Record Date is not a business day, the Record Date will be the previous business day
3.    If the Payment Date is not a business day, the payment will be made on the next business day (other than where December 31st is not a business day, in which case the 

Payment Date will be the prior business day)

172     BROOKFIELD ASSET MANAGEMENT

 
BOARD OF DIRECTORS AND OFFICERS

BOARD OF DIRECTORS

M. Elyse Allan, C.M. 
President and Chief Executive Officer, 
GE Canada 

J. Bruce Flatt 
Chief Executive Officer, 
Brookfield Asset Management Inc. 

Jeffrey M. Blidner 
Senior Managing Partner, 
Brookfield Asset Management Inc. 

Robert J. Harding, C.M., F.C.A. 
Past Chairman, 
Brookfield Asset Management Inc. 

Angela Braly 
Former Chair of the Board, President and 
Chief Executive Officer, Wellpoint, Inc. 
(now Anthem, Inc.) 

Maureen Kempston Darkes, O.C., O.ONT. 
Former President, Latin America, Africa 
and Middle East, General Motors 
Corporation 

Jack L. Cockwell, C.M. 
Corporate Director 

David W. Kerr 
Chairman, Halmont Properties Corp. 

Marcel R. Coutu 
Former President and 
Chief Executive Officer, 
Canadian Oil Sands Limited

Philip B. Lind, C.M. 
Co-Founder, Vice Chairman and Director, 
Rogers Communications Inc. 

Hon. Frank J. McKenna, P.C., O.C., O.N.B. 
Chair, Brookfield Asset Management Inc. 
and Deputy Chair, TD Bank Group

Youssef A. Nasr 
Former Chairman and Chief Executive 
Officer of HSBC Middle East Ltd. and 
former President of HSBC Bank Brazil 

Lord O’Donnell 
Chairman, 
Frontier Economics 

Seek Ngee Huat 
Former Chairman of the Latin American 
Business Group, Government of Singapore 
Investment Corporation 

Diana L. Taylor 
Vice Chair, 
Solera Capital LLC 

George S. Taylor 
Corporate Director 

Details  on  Brookfield’s  directors  are  provided  in  the  Management  Information  Circular  and  on  Brookfield’s  website  at 
www.brookfield.com.

CORPORATE OFFICERS

J. Bruce Flatt, Chief Executive Officer 

Brian Lawson, Chief Financial Officer 

A.J. Silber, Corporate Secretary 

Brookfield incorporates sustainable development practices with our Corporation. 
This document was printed in Canada using vegetable-based inks on FSC stock.

      2016 ANNUAL REPORT     173

BROOKFIELD ASSET MANAGEMENT INC. 
brookfield.com

NYSE: BAM  
TSX: BAM.A
EURONEXT: BAMA

CORPORATE OFFICES

United States
Brookfield Place
250 Vesey Street 
15th Floor
New York, NY 
10281-1023
+1.212.417.7000

Canada
Brookfield Place 
181 Bay Street 
Suite 300
Bay Wellington Tower
Toronto, ON M5J 2T3
+1.416.363.9491

United Kingdom
99 Bishopsgate 
2nd Floor
London  EC2M 3XD
+44.20.7659.3500

Australia
Level 22
135 King Street
Sydney, NSW 2001
+61.2.9322.2000

Brazil
Avenida Antônio 
Gallotti s/n
Edifício Pacific Tower 
BL 2, 2º andar
Barra da Tijuca 
Rio de Janeiro - RJ
22775-029
+55.21.3725.7800

REGIONAL OFFICES

North America
Calgary 
Chicago 
Houston 
Los Angeles 
Mexico City 
Vancouver

South America 
Bogota 
Lima 
São Paulo

Europe & 
Middle East 
Dubai 
Madrid

Asia 
Mumbai 
New Delhi 
Hong Kong 
Seoul 
Shanghai 
Singapore 
Tokyo