Brookfield Asset Management Inc.
F I V E - Y E A R
F I N A N C I A L R E C O R D
AS AT AND FOR THE YEARS ENDED DEC. 31
202 1
2020
2019
2018
20 17
PER SHARE1
Net income (loss)
Funds from operations2
Distributable earnings2
Dividends3
Cash
Special
$ 2.39
$ (0.12)
$ 1.73
$ 2.27
$ 0.89
4.67
3.96
0.52
0.36
3.27
2.74
0.48
—
2.71
1.79
2.90
1.63
0.43
0.40
—
—
2.49
1.42
0.37
0.07
Market trading price – NYSE1
60.38
41.27
38.53
25.57
29.03
1. Adjusted to reflect the three-for-two stock split effective April 1, 2020.
2. See definition in the MD&A Glossary of Terms beginning on page 136.
3. See Corporate Dividends on page 58.
2 0 2 1 A N N U A L R E P O R T
1
C O N T E N T S
Brookfield at a Glance
Letter to Shareholders
Management’s Discussion & Analysis
PART 1 – Our Business and Strategy
PART 2 – Review of Consolidated Financial Results
PART 3 – Operating Segment Results
PART 4 – Capitalization and Liquidity
PART 5 – Accounting Policies and Internal Controls
PART 6 – Business Environment and Risks
Glossary of Terms
Internal Control Over Financial Reporting
Consolidated Financial Statements
Shareholder Information
Board of Directors and Officers
3
8
22
25
41
62
91
102
111
136
143
149
239
240
2
B R O O K F I E L D A S S E T M A N A G E M E N T
B R O O K F I E L D
A T A G L A N C E
We are a premier global alternative asset manager with approximately $690
billion of assets under management. With a 100+ year heritage as an owner
and operator, we focus on investing in assets and businesses that help form
the backbone of the global economy. Throughout our operations in more
than 30 countries on five continents, we are committed to supporting and
enhancing the communities in which we operate.
Our goal is to deliver strong long-term returns and
for our investors and other stakeholders. As a
provide downside protection for our investors—
result, we embed these principles into all our
including pension plans, endowments, foundations,
activities—including our investment process—and
sovereign wealth funds, financial institutions,
conduct our business in a sustainable and ethical
insurance companies and individual investors. We
manner. An emphasis on diversity and inclusion
invest our own capital alongside our investors in
reinforces our culture of collaboration. It strength-
virtually every transaction, aligning interests and
leveraging our deep operational expertise, global
reach and access to large-scale capital.
ens our ability to develop our people and maintain
an engaged workforce focused on serving as a
trusted partner and first-choice provider of
investment solutions.
Our approach is focused on investing on a value
basis. We recognize that generating attractive
returns often requires seeking out assets, business-
es, markets and sectors that are out of favor or
experiencing periods of distress. We are disciplined
in acquiring high-quality assets and businesses that
we believe can deliver strong performance across
market cycles. And we take a long-term view in
deploying capital—but are ready to act decisively
when the right opportunities emerge.
We believe that sound environmental, social and
governance (ESG) practices are integral to building
resilient businesses and creating long-term value
With a 100+ year heritage
as an owner and
operator, we focus on
investing in assets and
businesses that help
form the backbone of the
global economy.
2 0 2 1 A N N U A L R E P O R T
3
HOW WE IN VES T
The Brookfield Advantage
We invest where we can bring our competi-
tive advantages to bear, leveraging our
deep operational expertise, global reach
and access to large-scale, flexible capital.
Long-Life, High-Quality Assets
Leveraging our operating experience, we
invest in key sectors across renewable
power & transition, infrastructure, private
equity, real estate, and credit & insurance.
Diverse Product Offering
We offer core, core-plus, value-add, oppor-
tunistic/growth equity and credit strategies
through closed-end and perpetual vehicles
in both the public and private markets.
Disciplined Financing Approach
We take a conservative approach to the use
of leverage, ensuring that we can preserve
capital across all business cycles.
Sustainability
We are committed to ensuring that the
assets and businesses we invest in are set
up for long-term success, and we seek to
have a positive impact on the environment
and the communities in which we operate.
“Brookfield,” the “company,” “we,” “us” or “our” refers to Brookfield
Asset Management Inc. and its consolidated subsidiaries. The “Cor-
poration” refers to our asset management business which is com-
prised of our asset management and corporate business segments.
Our “invested capital” includes our “perpetual affiliates” Brookfield
Renewable Partners L.P., Brookfield Infrastructure Partners L.P. and
Brookfield Business Partners L.P., which are separate issuers includ-
ed within our Renewable Power and Transition, Infrastructure and
Private Equity segments, respectively, and also includes issuers in
the Brookfield Property Group, which are included in our Real Estate
segment. Additional discussion of their businesses and results can
be found in their public filings. We use “private funds” to refer to our
real estate funds, transition funds, infrastructure funds and private
equity funds. Our other businesses include Residential Development
and Corporate. Please refer to the Glossary of Terms beginning on
page 136 which defines our key performance measures that we use
to measure our business.
4
4
B R O O K F I E L D A S S E T M A N A G E M E N T
B R O O K F I E L D A S S E T M A N A G E M E N T
NORTH AMERICA
$430B AUM
~69,500
Operating Employees
SOUTH AMERICA
$44B AUM
~28,200
Operating Employees
GLOBAL REACH ~$690 B
A SSE T S UNDER
M A N AGEMENT
NYSE: BAM
TSX : BAM.A
EUROPE &
MIDDLE EAST
$129B AUM
~36,500
Operating Employees
ASIA PACIFIC
$85B AUM
~43,100
Operating Employees
1,000+
30+
~180,000
IN V ES TMENT
COUNTRIES
OPER ATING
EMPLOY EES
2 0 2 1 A N N U A L R E P O R T
5
$364 B
FEE- BE A RING
C A PITA L
PROFESSION A L S
I N V E S T M E N T
O V E R V I E W
Our disciplined, well-established approach to investing reflects our over
100-year history as an owner and operator. We focus on value creation and
capital preservation, investing in high-quality assets and businesses within
our areas of expertise. We then manage these assets and businesses proactively
and finance them conservatively—with the goal of generating stable, predictable
and growing cash flows for our investors.
Brookfield’s investment activities are anchored by a set of core tenets that
guide our decision-making and determine how we measure success:
OUR BUSINESS PRINCIPLES
OUR INVESTMENT APPROACH
1
2
3
4
5
Operate our business and conduct
our relationships with integrity
Attract and retain high-caliber
individuals who will grow with us
over the long term
Ensure that our people think and
act like owners in all their decisions
• Acquire high-quality assets and businesses
•
Invest on a value basis, with the goal of
maximizing return on capital
• Enhance the value of investments through our
operating expertise
• Build sustainable cash flows to provide certainty,
reduce risk and lower our cost of capital
OUR PATHS TO SUCCESS
Treat our investor and shareholder
• Evaluate total return on capital over the long term
capital like it’s our own
Embed strong ESG practices through-
out our operations to help ensure that
our business model is sustainable
• Encourage calculated risks, measuring them
against potential returns
• Sacrifice short-term profit, if necessary, to
achieve long-term capital appreciation
• Seek profitability rather than growth—size
does not necessarily add value
6
B R O O K F I E L D A S S E T M A N A G E M E N T
Smoky Mountain Santeetlah
L E T T E R
T O S H A R E H O L D E R S
OVERVIEW (As of February 10, 2022)
What a difference a year can make. In 2021,
Irrespective of global macro issues, which always
we generated a record $12.4 billion of total net
arise, we own an incredible portfolio of real assets
income—compared with $707 million in 2020.
and businesses which provide both strong cash
Performance in our asset management business
flow and inflation protection. Our asset manage-
was very strong, resulting in total Distributable
Earnings of $6.3 billion for the year. On a go-for-
ward basis, annualized asset management
revenues, including carry, are now running at
$7.8 billion, and we are launching new funds
across all our strategies—which means that 2022
is off to a good start.
We raised $71 billion of capital during the year. This
latest round of funds was not only larger, but was
raised more quickly than expected. We will soon
close our $15 billion Global Transition Fund, which
we launched a little more than a year ago. This
shows both the power of the franchise and the
interest from investors in achieving net zero globally.
The launch of Brookfield Reinsurance has been
successful on many fronts. With the closing of the
American National deal expected before the end
of the second quarter, our insurance operations
will now be heading towards $50 billion of assets.
This gives us critical mass and the regulatory
ment business continues to establish itself as one
of the pre-eminent brands globally. In an inflation-
ary environment, backbone real assets, private
credit and transition-focused investments are
where you want to be invested.
We generated a record
$12.4 billion of total net
income—compared with
$707 million in 2020.
2021 HIGHLIGHTS
$12.4 B
TOTA L NE T INCOME GENER ATED
$6.3 B
licenses to continue assisting our insurance
DIS TRIBU TA BLE E A RNINGS
clients in many ways. It is still early, but with
interest rates looking to continue in a low-ish
range for longer, this business could become
$71 B
significant to us.
C A PITA L R A ISED IN 2021
8
B R O O K F I E L D A S S E T M A N A G E M E N T
BAM STOCK MARKET PERFORMANCE WAS STRONG
Performance in the stock market was exceptional;
More importantly, our franchise is stronger and
a 48% market return (the gain on our stock in 2021)
more durable today than it has ever been. This
does not happen very often. But, as an indication
should help us achieve strong returns in the future.
of the returns that can be generated over the
One advantage in that regard is that, despite the
longer term, below is our latest tabulation of
good returns over the past 30 years, we still trade
annualized compound investment returns over the
at a discount to what we believe our businesses
past 30 years. For reference, $1 million invested 30
would be valued at if sold. If we can close the gap
years ago in Brookfield Asset Management is worth
between share price and intrinsic value, a current
$111 million today. Please always remember that
stock owner will out-earn the underlying perfor-
compounding reasonable returns over long
mance of the business.
periods of time is an incredible miracle of finance.
Compound Investment Performance
YEARS
$1 Million Invested
in Brookfield ($M)
Brookfield
NYSE
1
5
10
20
30
1.5
2.9
6.2
38.3
111.1
48%
24%
20%
20%
17%
S&P
500
29%
18%
16%
10%
11%
10-Year U.S.
Treasuries
(3)%
4%
3%
5%
4%
THE MARKET ENVIRONMENT WAS BETTER IN 2021
All in all, 2021 was a pretty good year. It didn’t always
Economies are normalizing as central bank interven-
feel that way, but according to the data, it was. GDP
tion is withdrawn. And despite some setbacks with a
in every country recovered and the markets quit
new variant appearing in December, these are
worrying about deflation or negative interest rates. In
passing as we write. We expect that the global
fact, by midyear the markets were worried about
recovery will be back on track soon, and the level-set
exactly the opposite! The bottom line is that markets
of valuations in areas such as China and in technology
always need something to worry about—and while
businesses presents great opportunities.
rates are likely going higher (a bit) and inflation is going
higher (a bit), we expect rate increases will be relatively
Our operations are highly geared to the economic
muted this cycle. (Put into perspective, even eight rate
recovery. As a result, we should be able to grow the
hikes will bring the U.S. short rate only to around 2%.)
value of our businesses coming out of this reces-
sion, while working towards narrowing the gap
As we move into 2022, markets are strong, but
between the intrinsic value and the trading price of
recent volatility has brought some sanity back to
a Brookfield share. We are conservatively posi-
areas of the markets that were overvalued. With
tioned, with very substantial liquidity, to continue
money available and interest rates low, this is a very
to capitalize on the vast number of opportunities
constructive environment for good businesses.
we see every day.
2 0 2 1 A N N U A L R E P O R T
9
BUSINESS FUNDAMENTALS WERE VERY GOOD
Distributable earnings for the full year were a record $6.3 billion. This was an almost 50% increase
compared with 2020, and all parts of our business contributed to the strong results.
AS AT AND FOR THE 12 MONTHS ENDED DEC. 31
($US MILLIONS, EXCEPT PER SHARE AMOUNTS)
2017
2018
2019
2020
2021
CAGR
Distributable Earnings (DE)
- Per Share
- Total
$ 1.42
$ 1.63
$ 1.79
$ 2.74
$ 3.96
2,092
2,389
2,657
4,220
6,282
29%
32%
Fee-related earnings
(before performance fees)
Gross annual run rate of
fees plus target carry
Total assets under
management
754
851
1,201
1,428
1,742
23%
2,475
2,975
5,781
6,472
7,830
33%
283,141
354,736
544,896
601,983
688,138
25%
Asset Management Performance Was Strong
Our non-traded REIT is now being distributed on
Our asset management operations had an
excellent year. We raised $71 billion of capital
across our flagship and complementary strategies,
which increased total fee-bearing capital to $364
billion at year-end. This included a final $16 billion
close for our flagship opportunistic credit fund
and $24 billion in aggregate to date for our global
transition fund and our latest opportunistic real
estate fund.
In addition to our flagship products, we have 35+
other strategies in the market raising capital. We
recently had the final close for our sixth real
four wealth platforms globally, with additional
major platforms expected in the coming months.
Our real estate secondaries strategy has raised $2
billion of capital, and we are now in the midst of
raising our first commingled fund.
All combined, we have seen significant growth in
our asset management earnings, with fee-related
earnings growing by 33% in 2021, and we expect
to see another step change in 2022. On top of
that, we crystalized a record $1.7 billion of carried
interest in 2021. With several of our earlier vintage
funds having passed their preferred hurdles, we
are now realizing carried interest across a variety
estate debt fund, raising $4 billion—and in just
of strategies, and we expect to continue this
the fourth quarter we raised over $1 billion for
momentum into 2022.
our open-end perpetual private infrastructure
fund. We held a final close for our growth equity
Operations Keep Getting Better
fund for over $500 million and expect to launch
Overall performance across our operating
the next vintage in the first half of 2022.
businesses continues to strengthen, as we
10
B R O O K F I E L D A S S E T M A N A G E M E N T
remain well positioned around the economic
recovery and own many inflation-linked assets
that benefit from economic growth. Our renew-
able power and infrastructure businesses have
been resilient over the last two years, delivering
consistent, steady growth. Performance in our
private equity business has been excellent, and
the release of pent-up demand and debottle-
necking of supply chains should contribute to
even stronger results.
Our diversified real estate portfolio allowed us to
reap the benefits of the continued reopening
across most of our businesses. We saw increased
activity within our hospitality assets as travel
begins to return, a rebound in our retail assets
due to higher foot traffic and spend per person,
and a rebound in demand for our office proper-
ties and multifamily assets.
All of this drove very strong financial perfor-
mance across our operations, underpinning the
stable and growing distributions we receive. In
total, we received $2.2 billion during the year and
we expect this to continue increasing in line with
the growth in the underlying businesses.
Our non-traded REIT is
now being distributed on
four wealth platforms
globally, with additional
major platforms expected
in the coming months.
2 0 2 1 A N N U A L R E P O R T
1 1
WE ARE INVESTING IN 50 SHADES OF GREEN
We are in the final stages of closing our $15 billion
The third type is working with electricity genera-
Brookfield Global Transition Fund I. This fund was
tors, where we will help provide the capital to
raised faster— and is larger—than expected, and
enable them to shift from coal to gas, and from gas
we have already started putting the capital to
to renewables. We are focused on funding the
work to help companies decarbonize their
“transition”—across all 50 shades of green; those
operations. We expect these opportunities to fit
that are currently black, brown, dark green, olive,
into three categories.
The first is our traditional new-build renewables
business. For 30 years we have been developing
renewable assets as a component of our infrastruc-
ture strategy, but given the sheer quantity of
renewables required as the grid shifts generation to
renewables, the capital required is now much larger
than in the past. These new-build opportunities will
provide a steady flow of investment for this Fund,
and they have already begun for us with partners
including Amazon, Enbridge and Scotiabank.
light green and all other shades of green—from
coal generation all the way to solar generation. The
main goal of our investments is to assist and
accelerate the transition to net zero. However, a
critical point in this is that everything does not have
to become green today—in fact, not everything can
be green today. But every business does need to
transition to a cleaner future. It is therefore equally
important to go where the emissions are and
provide capital to convert a coal-based utility or a
carbon-intensive industrial business. We intend to
invest significant capital in these opportunities and
The second type of opportunity focuses on provid-
bring our operating capabilities to bear, but always
ing capital to industrial companies to enable them
where we can be part of the solution, not part of
to decarbonize their operations. Industries such as
the problem. That is the Transition.
steel, cement, chemicals and others require both
renewable generation to lower their carbon
We are at the start of a new era with a market
footprint and capital to decarbonize their produc-
leading fund and strategy that we believe will be
tion processes. This investment cycle is just getting
very attractive for investment over a long period
started, and we see a meaningful opportunity for
of time. As a result, this should become a very
investment in the years to come.
large business for us.
AREAS OF OPPORTUNITIES TO HELP COMPANIES DECARBONIZE
Traditional
new-build renewables
Providing capital to
industrial companies
Working with
electricity generators
12
B R O O K F I E L D A S S E T M A N A G E M E N T
We have already started
putting the capital to work to
help companies decarbonize
their operations.
OUR ASIA PACIFIC BUSINESS IS GROWING FAST
We continue to grow our Asia Pacific business at a
and industrial properties, and numerous industrial
faster pace than any other region. Of course, this is
businesses. Most recently we committed to close
in part because it is coming off a smaller base, but
our largest transaction to date: the purchase of a
also because our operations there continue to
public company with an enterprise value of US$13
build on their successes. We are heading towards
billion, which owns four utilities in Victoria. This
$100 billion in total assets across the region and
transaction has further increased our presence in
continue to grow in all of Australia, China, Korea,
the country and opened up new adjacent opportu-
Japan and India.
nities. Today in Australia we have access to global
Our initial business in Asia Pacific was in Australia,
capital, but truly are a local player.
where today we have $30 billion of assets across
We have begun to see great progress in China
our businesses. We own utilities, rail, ports, offices,
following the build out of our business over the
hospitals, nursing homes, data centers, residential
years, the current lack of capital for entrepreneurs
2 0 2 1 A N N U A L R E P O R T
1 3
ASIA PACIFIC HIGHLIGHTS
We started in South Korea 10 years ago and have one
$30B
OF A SSE T S ACROSS BUSINESSES
IN AUS TR A LI A
$13B
OF A SSORTED A SSE T S IN CHIN A
SUCH A S WIND & SOL A R PROJEC T S
5.5M SF
of the strongest client rosters of any foreign manager
in the country. We have completed numerous real
estate transactions, including our extremely success-
ful acquisition and turnaround of IFC Seoul, a 5.5
million square foot signature mixed-use complex.
More recently, we acquired a number of new-build
industrial logistics warehouse projects and land for
data centers. We also hired both an infrastructure
and a private equity team and are excited about the
opportunities we see in South Korea.
Japan is becoming more interesting all the time
OF SIGN AT URE MI XED - USE SPACE
and we continue to increase our presence there.
IF C SEOUL , SOU TH KORE A
We started with an experienced fundraising team,
150,000
TELECOM TOWER S
THROUGHOU T INDI A
and are now building solar projects and industrial
logistics real estate. We also have a number of
industrial businesses. We have only scratched the
surface and believe that Japan will become a very
meaningful investment market for us.
in China, and a strategic decision to have a
regional office on the ground in Shanghai. In total,
our business now accounts for $13 billion of
assets across wind and solar projects, distributed
In India, our 14 years have taught us that if you’re
careful and patient, you can do extremely well.
Our business today is vast, and we have earned
strong returns on every investment. Today, with
electricity generation, office, industrial warehouse,
40 million square feet of IT office park real estate,
retail and mixed-use projects, multi-family
150,000 telecom towers, toll roads, pipelines, solar
residential, and industrial businesses. We have
and wind facilities, and an IT outsourcing business,
some great partners in the country and are
we are a brand name in alternative investments.
looking to raise RMB-denominated capital. While
While always careful, we believe that our early
the fund distribution market in China is small
success can lead to much more.
today on a relative basis, we believe that in the
long run, it could become meaningful to us. We
It is quite possible that one-third of our business
recently created a partnership with Sequoia Capital
could be in these markets one day. This will be led
China to invest in “new economy” infrastructure.
by China and India due to their vast populations and
We believe that the local presence and technology
need for backbone infrastructure—and while this
prowess of Sequoia, and our experience in
won’t be easy because there are many very strong
property and infrastructure, will create a powerful
local players, we believe that our access to capital
combination for Chinese entrepreneurs as they
enables us to complete our share of deals—some-
build out their operations.
times as a great partner to the best-of-the-best locals.
14
B R O O K F I E L D A S S E T M A N A G E M E N T
REAL ESTATE MARKETS AND THEIR LIQUIDITY ARE STRENGTHENING
The tone of the real estate markets has improved
the past two years, as there have been very few
dramatically since mid-2020. While most property
competitive buyers. We bought numerous assets at
fundamentals were largely unaffected as leases were
a fraction of their replacement cost, including a
in place and there were few bankruptcies this
grocery anchored retail portfolio in the U.K. that
down-cycle, leasing and capital markets activities
now generates a running cash yield of 18% on our
for virtually all assets ground to a halt for a period
of time. Since then, the markets have come back
as investors witnessed the resilience of prime real
cost basis. Today, this portfolio could likely be sold
for double our purchase price.
estate—and continue to be attracted to the cash yield
As you also know, we privatized our real estate
it generates in a low interest rate world. Single-family
business at around 70% of IFRS values in early 2021
residential responded first, driven by people being at
home, with industrial and life sciences next, followed
more recently by urban high-rise multifamily—and
now office, with the balance of sectors to follow.
The growth sectors of property have been industrial
and life sciences real estate, given e-commerce
tailwinds and the biotech revolution taking hold. We
have been both selling more mature industrial and
life sciences properties, where excellent returns have
been locked in, and are buying others. We just
committed to buying two life science developers—one
in the U.S. and one in the U.K., and are building out
industrial logistics across the U.S., France, Germany,
Italy, Poland, China, Korea, Japan, Brazil and Australia.
and as planned, have now started to monetize some
of the assets at premiums to these same IFRS
values. As an example of the transaction markets
today and where values have moved in a year, we
note the following, which admittedly is a select
group, but does represent $10 billion of assets, with
a profit of $2 billion generated in the last year.
The below represents a total dollar gain of $2.0 billion
for all of our constituents, or a 47% annualized gain
on a gross asset basis over the year (equity returns
are far higher). More importantly, however, the real
estate investment markets are only now starting to
regain a sense of normalcy, driven in large part by the
attractiveness of the combined attributes of real
The areas of the property markets that have
estate—being income generation, and inflation
exhibited “value investment characteristics”
protection. We acquired a lot of real estate early in
(primarily office and retail) have been incredible
2021 and are now successfully unlocking value
places to acquire assets at a steep discount over
through the monetization of select assets.
($US MILLIONS)
1/1/21 Allocated
Purchase Price
at Privatization
6/30/21
IFRS Value
Cash Price
Received on Sale
Gain Over
Purchase Price
One Manhattan West
$ 2,426
$ 2,716
$ 2,850
$ 424
U.S. Multifamily
U.S. Hotels
U.S. Net Leases
Brazil and India Office
1,136
882
3,308
773
1,273
988
3,704
865
1,550
1,424
3,775
926
414
542
467
153
$ 8,525
$ 9,546
$ 10,525
$ 2,000
2 0 2 1 A N N U A L R E P O R T
1 5
TO BE ASSET-LIGHT, OR NOT—THAT IS THE QUESTION
We are often asked if we would prefer to be “asset-
investment businesses globally. This, together with
light” or stay “asset-heavy.” For those not familiar
the added benefit of having the longest duration of
with the nomenclature, in addition to our asset
annuity-like cash flows of any asset manager, means
management business we have $50 billion (net of
that it could now simply be separated from our
debt) of our own parent company investment
capital. Its growth path on its own is very compelling,
capital. This capital is the result of both the retention
as many of our strategies are still getting larger with
of profits and growth in asset values over the
decades. This makes us “asset-heavy” compared
with most managers today, which are “asset-light”—
as they were either founded more recently or have
distributed their profits annually to their owners.
If we distributed most of our $50 billion of invest-
ment capital to shareholders, we could quickly and
easily become asset-light. While to date that capital
has been one of our great operating strengths, we
sometimes hear that it makes it harder for an
investor to value Brookfield, as he or she needs to
both put a value on our asset-light business and
understand our investments. Many of our long-
standing shareholders appreciate the true value of
our capital base and the benefits it brings to the
broader franchise. In addition, these investors
understand how and what we invest in, and have
been comfortable with us making investment
decisions with the capital. But for new investors
who do not know us as well, this can be more
time-consuming to understand.
Pure-play managers have been more in vogue
across global markets because they are easier to
value and have attracted higher multiples. For many
decades our sole focus has been on compounding
shareholder capital. In addition, our asset manage-
ment business, started only 25 years ago, would not
have been mature enough to consider separating it
from our capital. In fact, our business has grown
faster and become more profitable because of the
capital we have to support it.
each vintage and are compounding on each other.
Our asset management
business is now one of the
largest and fastest-growing
scale alternative investment
businesses globally.
Based on the comparable multiples of pure-play,
asset-light alternative investment managers, the
equity value of our separated asset management
business (i.e., “our Manager”) would likely be in the
range of $70 billion to $100 billion (circa $45-$60
per share). To be very clear, that excludes the
equity capital that we have invested in our busi-
nesses, which today is around another $50 billion
net (circa $30 per share).
Separating a part of our Manager in the public or
private market, while ensuring it still benefits from
the capital we have at overall Brookfield, could
open up growth options to us that do not exist
today, as we dislike ever issuing shares at less than
what we believe to be at least their full fair value. In
addition, as our reinsurance and investment
operations grow, separating a part of the Manager
might make sense in order to allow investors who
only want exposure to the Manager, to own a
separate security. As we consider these options
(including possibly doing nothing), we will report in
But our asset management business is now one of
the quarters/years ahead—and will be pleased to
the largest and fastest-growing scale alternative
hear any views that you have.
16
B R O O K F I E L D A S S E T M A N A G E M E N T
CLOSING
We remain committed to being a world-class asset manager, and to investing capital for you and the rest
of our investment partners in high-quality assets that earn solid cash returns on equity, while emphasiz-
ing downside protection for the capital employed. The primary objective of the company continues to be
to generate increasing cash flows on a per-share basis, and as a result, higher intrinsic value per share
over the longer term.
And do not hesitate to contact any of us should you have suggestions, questions, comments or ideas you
wish to share.
Sincerely,
Bruce Flatt
Chief Executive Officer
February 10, 2022
Note: In addition to the disclosures set forth in the cautionary statements included elsewhere in this Report, there are other
important disclosures that must be read in conjunction with, and that have been incorporated in, this letter as posted on our
website at https://bam.brookfield.com/en/reports-and-filings.
2 0 2 1 A N N U A L R E P O R T
1 7
VAL UE
CREAT ION
We create value for our shareholders by increasing both the value of our Asset
Management franchise and our invested capital.
Fee-Related
Earnings Value
Carried
Interest Value
Invested
Capital Value
Brookfield Asset
Management Value
ASSET MANAG EMENT
FOR THE YEAR ENDED DEC. 31, 2021
(MILLIONS)
We create value by:
Fee revenues
•
Increasing fee-bearing capital, which
Direct costs
increases our fee-related earnings.
Fee-related earnings value is typically
measured by applying a multiple to
our current fee-related earnings.
• Achieving attractive investment
Earnings not attributable to BAM
Fee-related earnings
Carried interest
ACTUAL CURRENT1
$ 3,523
$ 3,777
(1,468)
(1,844)
2,055
(156)
1,899
1,713
1,933
(130)
1,803
4,053
returns, which enables us to earn
Direct costs
(786)
(1,503)
performance income (carried
interest). Carried interest value is
typically measured by applying a
multiple to our target carried inter-
Carried interest not attributable to BAM
(212)
Carried interest, net2
715
927
2,550
(312)
2,238
est, net of costs.1
Total
$ 2,614
$ 4,041
Our asset management activities generated annualized fee-related earnings of $1.8 billion and target
carried interest, net of $2.2 billion, representing growth of 15% and 30%, over the last year, respectively.
These increases were primarily due to growth in fee-bearing capital of 17% and carry eligible capital of
25%, respectively, over the year.
1. See definition in the Notice to Readers on page 21.
2. For the purposes of value creation, “current” carried interest, net represents target carried interest, net. Target carried
interest, net, is defined in the Notice to Readers on page 21.
18
B R O O K F I E L D A S S E T M A N A G E M E N T
IN VE S TED C AP ITAL
We create value by increasing the cash income generated by our investments as well as capital apprecia-
tion, through operational improvements and disciplined recycling of the underlying assets. We measure the
value thereby created using a combination of market values and fair values as determined under IFRS.
AS AT DEC. 31, 2021
(MILLIONS)
BEP
BIP
BBU
Corporate cash and financial assets
BPG
Other Investments4
Total Investments
Working Capital, net
Invested Capital
Leverage
Invested Capital, net
QUOTED1
IFRS2
BLENDED3
CASH FLOW4
$ 11,214
$ 4,641
$ 11,214
$ 399
8,552
4,351
3,522
$ 27,639
N/A
Various
2,696
2,803
3,522
13,662
32,004
6,190
51,856
699
8,552
4,351
3,552
27,639
32,004
7,685
67,328
699
301
24
282
1,006
1,523
284
2,813
N/A
52,555
68,027
$ 2,813
(15,250)
(15,250)
$ 37,305
$ 52,777
Our invested capital generates $2.8 billion of annualized distributions from our investments.
1. Quoted based on December 31, 2021 public pricing.
2. Total IFRS invested capital excludes $4.9 billion of common equity in our Asset Management segment.
3. For performance measurement purposes, we consider the value of invested capital to be the quoted value of listed invest-
ments, public pricing using industry comparables for Brookfield Residential values and IFRS values for unlisted investments.
4. Distributed cash flow (current) from our listed investments is calculated by multiplying units held as at December 31, 2021 by
the current distribution rates per unit. Corporate cash and financial asset distribution is calculated by applying an 8% total
return on the current quarter’s ending balance. Distributions on our unlisted investments is equal to the total distributions
received over the last twelve month period.
2 0 2 1 A N N U A L R E P O R T
1 9
PERFORM ANCE
HIGHL IGHT S
Fee-Bearing Capital
As at Dec. 31 (BILLIONS)
Real Estate
Infrastructure
Private Equity
Renewable Power & Transition
Credit & Other
$290
$312
$364
Fee-Related Earnings
Excluding Performance Fees
For the Years Ended Dec. 31 (MILLIONS)
$1,742
$1,428
$1,201
$126
$138
$851
$754
20172017
20182018
20192019
20202020
20212021
2017
2017
2018
2018
2019
2019
2020
2020
20212021
Carry Eligible Capital
As at Dec. 31 (BILLIONS)
$140
$120
$174
Accumulated Unrealized Carried Interest
As at Dec. 31 (MILLIONS)
Accumulated Unrealized Carried Interest, Net
Accumulated Unrealized Carried Interest, Gross
$6,785
$58
$42
$3,647
$4,024
$2,079
$2,486
20172017
20182018
20192019
20202020
20212021
2017
2017
2018
2018
2019
2019
2020
2020
20212021
Distributable Earnings
For the Years Ended Dec. 31 (MILLIONS)
Distributable earnings before realizations
Realized carried interest and disposition gains
from principal investments
$6,282
$4,220
Distributions to Common Shareholders1
For the Years Ended Dec. 31 (MILLIONS)
$800
$726
$620
$2,092
$2,389
$2,657
$575
$540
20172017
20182018
20192019
20202020
20212021
2017
2017
2018
2018
2019
2019
2020
2020
20212021
1. Excludes special dividends.
20
B R O O K F I E L D A S S E T M A N A G E M E N T
NOTICE TO READERS
Pages 1 through 20 of the 2021 Annual Report must be read in conjunction with the cautionary statements included
elsewhere in the 2021 Annual Report. Except where otherwise indicated, the information provided herein is based
on matters as they exist as of December 31, 2021 and not as of any future date.
In addition, for pages 1 through 20 of the 2021 Annual Report, the following terms have the definitions provided
below:
Current fee-related earnings are annualized fee revenues net of associated direct costs. Annualized fee revenues
are the sum of (i) base management fees on current fee-bearing capital based on the associated contractual fee
rates; (ii) incentive distributions based on BEP and BIP current annual distribution policies; (iii) performance fees
from BBU assuming a 10% annualized unit price appreciation; and (iv) transaction and public securities performance
fees equal to a simple average of the last two years’ revenues. We assume that direct costs represent 40% of current
fee revenues from Brookfield funds and 70% on Oaktree funds.
Target carried interest, net is target carried interest net of associated direct costs. Target carried interest
represents the carried interest we will earn, straight-lined over the life of the fund, assuming that we achieve the
target fund returns. This is calculated by multiplying carry eligible fund capital by the net target return of a fund and
the fund’s carried interest percentage. Target gross returns are typically 20%+ for opportunistic funds; 10% to 15%
for value add funds; 10% to 15% for credit and core funds. Fee terms vary by investment strategy (carried interest is
approximately 15% to 20% subject to a preferred return and catch-up) and may change over time. Target carried
interest on uncalled fund commitments is discounted for two years at 10%. We assume that direct costs represent
30% of target carried interest on Brookfield funds and 50% on Oaktree funds. There can be no assurance that
targeted returns will be met.
2021 ANNUAL REPORT
21
MANAGEMENT’S
DISCUSSION AND ANALYSIS
ORGANIZATION OF MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”)
PART 1 – OUR BUSINESS AND STRATEGY
Overview ........................................................................ 25
PART 2 – REVIEW OF CONSOLIDATED
FINANCIAL RESULTS
Real Estate .......................................................................
Residential Development .............................................
Corporate Activities .......................................................
84
87
89
PART 4 – CAPITALIZATION AND LIQUIDITY
Overview ........................................................................ 41
Income Statement Analysis ....................................... 42
Balance Sheet Analysis ............................................... 49
Consolidation and Fair Value Accounting .............. 55
Foreign Currency Translation ................................... 56
Corporate Dividends ................................................... 58
Summary of Quarterly Results ................................. 59
Capitalization ...................................................................
Liquidity ............................................................................
Review of Consolidated Statement of Cash Flows ..
99
Contractual Obligations ................................................ 100
Exposures to Selected Financial Information .......... 101
91
95
PART 5 – ACCOUNTING POLICIES AND INTERNAL
CONTROLS
PART 3 – OPERATING SEGMENT RESULTS
Accounting Policies, Estimates and Judgments ....... 102
Basis of Presentation .................................................. 62
Summary of Results by Operating Segment ......... 63
Asset Management ..................................................... 64
Renewable Power and Transition ............................ 71
Infrastructure ............................................................... 75
Private Equity ................................................................ 79
Management Representations and Internal
Controls ....................................................................... 110
Related Party Transactions .......................................... 110
PART 6 – BUSINESS ENVIRONMENT AND RISKS ........ 111
GLOSSARY OF TERMS ....................................................... 136
“Brookfield,” the “company,” “we,” “us” or “our” refers to Brookfield Asset Management Inc. and its consolidated
subsidiaries. The “Corporation” refers to our asset management business which is comprised of our asset management
and corporate business segments. Our “invested capital” includes our “perpetual affiliates” Brookfield Renewable Partners
L.P., Brookfield Infrastructure Partners L.P. and Brookfield Business Partners L.P., which are separate issuers included
within our Renewable Power and Transition, Infrastructure and Private Equity segments, respectively, and also includes
issuers in the Brookfield Property Group, which are included in our Real Estate segment. Additional discussion of their
businesses and results can be found in their public filings. We use “private funds” to refer to our real estate funds,
transition funds, infrastructure funds and private equity funds. Our other businesses include Residential Development and
Corporate.
Please refer to the Glossary of Terms beginning on page 136 which defines our key performance measures that we use to
measure our business.
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.
Information contained in or otherwise accessible through the websites mentioned throughout this report does not form
part of this report. All references in this report to websites are inactive textual references and are not incorporated by
reference. Any other reports of the company referred to herein are not incorporated by reference unless explicitly stated
otherwise.
22
BROOKFIELD ASSET MANAGEMENT
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This 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. Forward-looking statements include statements that are predictive in nature,
depend upon or refer to future events or conditions, include statements which reflects management’s expectations
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 contained in this Report. The statements and
information 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 company 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: (i) investment returns that are lower than target; (ii) the impact or unanticipated
impact of general economic, political and market factors in the countries in which we do business, including as a result of
COVID-19 and the related global economic disruptions; (iii) the behavior of financial markets, including fluctuations in
interest and foreign exchange rates; (iv) global equity and capital markets and the availability of equity and debt financing
and refinancing within these markets; (v) strategic actions including dispositions; the ability to complete and effectively
integrate acquisitions into existing operations and the ability to attain expected benefits; (vi) changes in accounting policies
and methods used to report financial condition (including uncertainties associated with critical accounting assumptions
and estimates); (vii) the ability to appropriately manage human capital; (viii) the effect of applying future accounting
changes; (ix) business competition; (x) operational and reputational risks; (xi) technological change; (xii) changes in
government regulation and legislation within the countries in which we operate; (xiii) governmental investigations;
(xiv) litigation; (xv) changes in tax laws; (xvi) ability to collect amounts owed; (xvii) catastrophic events, such as earthquakes,
hurricanes, or pandemics/epidemics; (xviii) the possible impact of international conflicts and other developments including
terrorist acts and cyberterrorism; (xix) the introduction, withdrawal, success and timing of business initiatives and
strategies; (xx) the failure of effective disclosure controls and procedures and internal controls over financial
reporting and other risks; (xxi) health, safety and environmental risks; (xxii) the maintenance of adequate insurance
coverage; (xxiii) the existence of information barriers between certain businesses within our asset management
operations; (xxiv) risks specific to our business segments including our real estate, renewable power and transition,
infrastructure, private equity, and other alternatives, including credit; and (xxv) factors detailed from time to time in our
documents filed with the securities regulators in Canada and the United States, including in “Part 6 – Business Environment
and Risks” of our Annual Report available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. Readers are urged
to consider the foregoing risks, as well as other uncertainties, factors and assumptions carefully in evaluating the forward-
looking information and are cautioned not to place undue reliance on such forward-looking information. 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.
Past performance is not indicative nor a guarantee of future results. There can be no assurance that comparable results
will be achieved in the future, that future investments will be similar to the historic investments discussed herein (because
of economic conditions, the availability of investment opportunities or otherwise), that targeted returns, diversification or
asset allocations will be met or that an investment strategy or investment objectives will be achieved.
2021 ANNUAL REPORT
23
STATEMENT REGARDING 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 International Financial Reporting Standards (“IFRS”), as issued by the International
Accounting Standards Board (“IASB”). We utilize these measures in managing the business, including for
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 the sole measure of our performance and
should not be considered in isolation from, or as a substitute for, similar financial measures calculated in
accordance with IFRS. We caution readers that these non-IFRS financial measures or other financial metrics may
differ from the calculations disclosed by other businesses and, as a result, may not be comparable to similar
measures presented by other issuers and entities. 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 Report. Please refer to our Glossary of Terms beginning on page 136 for all non-IFRS measures.
24
BROOKFIELD ASSET MANAGEMENT
PART 1
OUR BUSINESS AND STRATEGY
OVERVIEW
We are a premier global alternative asset manager1 with a history spanning over 100 years. We have approximately
$690 billion of assets under management (“AUM”)1 across a broad portfolio of renewable power and transition,
infrastructure, private equity, real estate and credit. Our $364 billion in fee-bearing capital1 is invested on behalf of
some of the world’s largest institutional investors, sovereign wealth funds and pension plans, along with thousands
of individuals.
We provide a diverse product mix of private funds1 and dedicated public vehicles, which allow investors to invest in
our five key asset classes and participate in the strong performance of the underlying portfolio. We invest in a
disciplined manner, targeting returns of 12-15% over the long-term with strong downside protection, allowing our
investors and their stakeholders to meet their goals and protect their financial futures.
ü Investment Focus
We predominantly invest in real assets across renewable power and transition, infrastructure, private equity,
real estate and credit.
ü Diverse Products Offering
We offer public and private vehicles to invest across a number of product lines, including core, value-add, and
opportunistic equity and credit strategies in both closed-end and perpetual vehicles.
ü Focused Investment Strategies
We invest where we can bring our competitive advantages to bear, such as our strong capabilities as an owner-
operator, our large-scale capital and our global reach.
ü Disciplined Financing Approach
We employ leverage1 in a prudent manner to enhance returns while preserving capital throughout business
cycles. Underlying investments are typically funded at investment-grade levels on a standalone and non-
recourse basis, providing us with a stable capitalization. Only 6% of the total leverage reported in our
consolidated financial statements has recourse to the Corporation.
ü Sustainability
We are committed to ensuring that the assets and businesses in which we invest are set up for long-term
success, and we seek to have a positive impact on the environment and the communities in which we operate.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
25
In addition, we maintain significant invested capital1 on the Corporation’s balance sheet where we invest alongside
our investors. This capital generates annual cash flows that enhance the returns we earn as an asset manager,
creates a strong alignment of interest, and allows us to bring the following strengths to bear on all our investments:
1. Large-scale capital
We have approximately $690 billion in assets under management and $364 billion in fee-bearing capital.
2. Operating expertise
We have approximately 180,000 operating employees worldwide who maximize value and cash flows from our
operations.
3. Global reach
We operate in more than 30 countries on five continents around the world.
The value of the business is comprised of two key components: Our asset management activities that we refer to as
Asset Management, and our balance sheet investments that we refer to as Invested Capital. Our financial returns
are represented by the combination of the earnings of our Asset Management business, as well as capital
appreciation and distributions from our Invested Capital. The primary performance measure we use is funds from
operations (“FFO”)1 which we use to evaluate the performance of our segments.
ASSET MANAGEMENT
Our Asset Management business oversees $364 billion of fee-bearing capital across a broad portfolio of renewable
power and transition, infrastructure, private equity, real estate and credit. Today, we have approximately
2,100 unique institutional investors and have approximately $40 billion of additional committed capital that will be
fee-bearing when invested. Within each of our investment verticals, we manage capital in a variety of products that
broadly fall into one of three categories: i) long-term private funds, ii) perpetual strategies and iii) liquid strategies1.
Products within these three strategies have similar base management fee1 and carried interest1 or performance fee1
drivers.
Fee-Bearing Capital Diversification
AS AT DEC. 31, 2021 (BILLIONS)
1.
See definition in Glossary of Terms beginning on page 136.
26
BROOKFIELD ASSET MANAGEMENT
Long-term Private Funds – $169 billion fee-bearing capital
We manage and earn fees on a diverse range of renewable power and transition, infrastructure, private equity, real
estate and credit funds. These funds have a long duration, are closed-end and include opportunistic, value-add, core
and core plus investment strategies.
On long-term private fund capital, we earn:
1. Diversified and long-term base management fees on capital that is typically committed for 10 years with two
one-year extension options.
2. Carried interest, which enables us to receive a portion of overall fund profits provided that investors receive a
minimum prescribed preferred return. Carried interest is recognized when a fund’s cumulative returns are in
excess of preferred returns and when it is highly probable that a significant reversal will not occur.
3.
Transaction and advisory fees are one-time fees earned on co-investment capital related to the close of
transactions, and vary based on transaction agreements.
Perpetual Strategies – $115 billion fee-bearing capital
We manage perpetual capital in our perpetual affiliates1, as well as in our core and core plus private funds, which
can continually raise new capital. From our perpetual strategies, we earn:
1.
Long-term perpetual base management fees, which are based on total capitalization or net asset value (“NAV”)
of our perpetual affiliates and the NAV of our perpetual private funds.
2.
Stable incentive distribution1 fees which are linked to cash distributions from perpetual affiliates (BEP/BEPC
and BIP/BIPC) that exceed pre-determined thresholds. These cash distributions have a historical track record of
growing annually and each of these perpetual affiliates target annual distribution growth rates within a range
of 5-9%.
3. Performance fees based on unit price performance (BBU) and carried interest on our perpetual private
funds.
Liquid Strategies – $80 billion fee-bearing capital
We manage publicly listed funds and separately managed accounts, focused on fixed income and equity securities
across real estate, infrastructure and natural resources. We earn base management fees, which are based on
committed capital and fund NAV, and performance income based on investment returns.
INVESTED CAPITAL
We have approximately $68 billion of invested capital on our balance sheet as a result of our history as an
owner and operator of real assets. This capital provides attractive financial returns and important stability and
flexibility to our asset management business.
Key attributes of our invested capital:
•
•
•
Transparent – a significant portion of our invested capital is in our publicly traded investments. The remainder
is primarily held in our recently privatized real estate perpetual affiliate, a residential homebuilding business,
and a few other directly held investments.
Diversified, long-term, stable cash flows – received from our underlying perpetual affiliates. These cash flows
are underpinned by investments in real assets which should provide inflation protection and less volatility
compared to traditional equities, and higher yields compared to fixed income.
Strong alignment of interests – we are the largest investor in each of our perpetual affiliates, and in turn, the
perpetual affiliates are typically the largest investor in each of our private funds.
Refer to Parts 2 and 3 of this MD&A for more information on our operations and performance.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
27
COMPETITIVE ADVANTAGES
We have three distinct competitive advantages that enable us to consistently identify and acquire high-quality assets
and create significant value in the assets that we own and operate.
LARGE-SCALE CAPITAL
We have approximately $690 billion in assets under management.
We offer our investors a large portfolio of private funds that have global mandates and diversified strategies. Our
access to large-scale, flexible capital enables us to pursue transactions of a size that lessens competition. In
addition, investing significant amounts of our own capital either through our perpetual affiliates or through our own
balance sheet ensures strong alignment of interest with our investors.
OPERATING EXPERTISE
We have approximately 180,000 operating employees
worldwide who are instrumental in maximizing the value and
cash flows from our operations.
We believe that strong operating experience is essential in
maximizing efficiency and productivity – and ultimately,
returns. We do this by maintaining a culture of long-term
focus, alignment of interest and collaboration through the
people we hire and our operating philosophy. This in-house
operating expertise developed through our heritage as an
owner-operator is invaluable in underwriting acquisitions and
executing value-creating development and capital projects.
GLOBAL REACH
We operate in more than 30 countries on five continents around the world.
Our global reach allows us to diversify and identify a broad range of opportunities. We are able to invest where
capital is scarce, and our scale enables us to move quickly and pursue multiple opportunities across different
markets. Our global reach also allows us to operate our assets more effectively: we believe that a strong on-the-
ground presence is critical to operating successfully in many of our markets, and many of our businesses are truly
local. Furthermore, the combination of our strong local presence and global reach allows us to bring global
relationships and operating practices to bear across markets to enhance returns.
28
BROOKFIELD ASSET MANAGEMENT
INVESTMENT CYCLE
Raise Capital
As an asset manager, the starting point is establishing new funds and other investment products for investors. This
in turn provides the capital to invest, from which we earn base management fees, incentive distributions and
performance-based returns such as carried interest. Accordingly, we create value by increasing our amount of fee-
bearing capital and by achieving strong investment performance that leads to increased cash flows and
asset values.
Identify and Acquire High-Quality Assets
We follow a value-based approach to investing and allocating capital. We believe that our disciplined approach,
global reach and our operating expertise enable us to identify a wide range of potential opportunities, and allow
us to invest at attractive valuations and generate superior risk-adjusted returns. We also leverage our
considerable expertise in executing recapitalizations, operational turnarounds and large development and capital
projects, providing additional opportunities to deploy capital.
Secure Long-Term Financing
We finance our operations predominantly on a long-term investment-grade basis, and most of our capital consists
of equity and standalone 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. 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.
Enhance Value and Cash Flows Through Operating Expertise
Our strong, time-tested operating capabilities enable us to increase the value of the assets within our businesses
and the cash flows they produce, and they help to protect capital in adverse conditions. Our operating expertise,
development capabilities and effective financing can help ensure that an investment’s full value creation potential
is realized, which we believe is one of our most important competitive advantages.
Realize Capital from Asset Sales or Refinancings
We actively monitor opportunities to sell or refinance assets to generate proceeds; in our limited life funds that
capital is returned to investors, and in the case of our perpetual funds, we then redeploy the capital to enhance
returns. In many cases, returning capital from private funds completes the investment process, locks in investor
returns and gives rise to performance income.
Our Operating Cycle Leads to Value Creation
We create value from earning robust returns on our investments that compound over time and grow our fee-
bearing capital. By generating value for our investors and shareholders, we increase fees and carried interest
received in our asset management business, and grow cash flows that compound value in our invested capital.
2021 ANNUAL REPORT
29
LIQUIDITY AND CAPITAL RESOURCES
The Corporation has $5.1 billion of core liquidity1 and $92.1 billion of total liquidity1 on a group basis as at
December 31, 2021. We manage our liquidity and capitalization on a group-wide basis, which we organize into three
principal tiers:
i)
The Corporation:
•
•
•
•
Strong levels of liquidity are maintained to support growth and ongoing operations.
Capitalization consists of a large common equity base, supplemented with perpetual preferred shares,
long-dated corporate bonds and, from time to time, draws on our corporate credit facilities.
Negligible guarantees are provided on the financial obligations of perpetual affiliates and managed funds.
High levels of cash flows are available after payment of common share dividends.
ii) Our perpetual affiliates (BEP/BEPC, BIP/BIPC, BBU and BPG):
•
•
•
Strong levels of liquidity are maintained at each of the perpetual affiliates to support their growth and
ongoing operations.
Perpetual affiliates are intended to be self-funding with stable capitalization through market cycles.
Financial obligations have no recourse to the Corporation.
iii) Managed funds, or investments, either held directly or within perpetual affiliates:
•
•
•
Each underlying investment is typically funded on a standalone basis.
Fund level borrowings are generally limited to subscription facilities backed by the capital commitments to
the fund.
Financial obligations have no recourse to the Corporation.
APPROACH TO CAPITALIZATION
We maintain a prudent level of long-dated capitalization in the form of common equity, perpetual preferred shares
and corporate bonds, which provides a very stable capital structure. In addition, we maintain appropriate levels of
liquidity throughout the organization to fund operating, development and investment activities as well as
unforeseen requirements.
A key element of our capital strategy is to maintain significant liquidity at the corporate level, primarily in the form
of cash, financial assets and undrawn credit lines.
Within our perpetual affiliates and private funds, we strive to:
•
•
•
Ensure our perpetual affiliates can finance their operations on a standalone basis without recourse to or
reliance on the Corporation.
Structure borrowings and other financial obligations associated with assets or portfolio companies in our
private funds to provide a stable capitalization at levels that are attractive to investors, are sustainable on a
long-term basis and can withstand business cycles.
Ensure the vast majority of this debt is at investment-grade levels; however, periodically, we may borrow at sub-
investment grade levels in certain parts of our business where the borrowings are carefully structured and
monitored.
1.
See definition in Glossary of Terms beginning on page 136.
30
BROOKFIELD ASSET MANAGEMENT
•
Provide recourse only to the specific businesses or assets being financed, without cross-collateralization or
parental guarantees.
• Match the duration of our debt to the underlying leases or contracts and match the currency of our debt to that
of the assets such that our remaining exposure is on the net equity of the investment.
As at December 31, 2021, only $10.9 billion of long-term debt has recourse to the Corporation. The remaining debt
on our consolidated balance sheet is held within managed entities and has no recourse to the Corporation but is
consolidated under IFRS.
LIQUIDITY
•
The Corporation has very few capital requirements. Nevertheless, we maintain significant liquidity ($5.1 billion
in the form of cash and financial assets and undrawn credit facilities as at December 31, 2021) at the corporate
level to bridge larger fund transactions, seed new fund products, invest in businesses alongside our fund
investors or participate in equity issuances by our perpetual affiliates.
•
On a group basis, we have approximately $92.1 billion of liquidity, which includes corporate liquidity, perpetual
affiliate liquidity and uncalled private fund commitments. Uncalled private fund commitments are third-party
commitments available for drawdown in our private funds.
AS AT DEC. 31, 2021
(MILLIONS)
Cash and financial assets, net .............................................................................................................. $
Undrawn committed credit facilities ...................................................................................................
Core liquidity .............................................................................................................................................
Third-party uncalled private fund commitments .............................................................................
Total liquidity ......................................................................................................................................... $
Group
Liquidity
6,233
8,778
15,011
77,079
5,140 $ 92,090
3,522 $
1,618
5,140
—
Corporate
Liquidity
CAPITAL MANAGEMENT
We utilize a metric we call the Corporation’s Capital to manage the business in a number of ways, including
operating performance, value creation, credit metrics and capital efficiency. The performance of the Corporation’s
Capital is closely tracked and monitored by the company’s key management personnel and evaluated against
management’s objectives. The primary goal of the company is to earn a 12-15% return compounded over the long-
term while always maintaining excess capital to support ongoing operations.
The Corporation’s Capital consists of the capital invested in its asset management activities, including investments in
entities that it manages, its corporate investments that are held outside of managed entities and its net working
capital, and is computed as follows:
AS AT DEC. 31
(MILLIONS)
Cash and cash equivalents .................................................................................................................. $
Other financial assets ...........................................................................................................................
Common equity in managed investments .......................................................................................
Other assets and liabilities of the Corporation ...............................................................................
Corporation’s Capital ......................................................................................................................... $
57,460 $
1,197 $
46,248
6,585
3,430
2021
2020
1,283
3,809
33,732
6,321
45,145
2021 ANNUAL REPORT
31
The Corporation’s Capital is funded with common equity, preferred equity and corporate borrowings issued by the
Corporation.
AS AT DEC. 31
(MILLIONS)
Common equity ...................................................................................................................................... $
Preferred shares ....................................................................................................................................
Non-controlling interest .......................................................................................................................
Corporate borrowings ..........................................................................................................................
Corporation’s Capital ......................................................................................................................... $
42,210 $
57,460 $
10,875
4,145
2021
230
2020
31,693
4,145
230
9,077
45,145
We maintain a prudent level of capitalization at the Corporation with 81% of our book capitalization in the form of
common and preferred equity. Consistent with our conservative approach, our corporate borrowings represent
only 17% of our corporate book capitalization and equate to just 6% of our consolidated debt.
The remaining 94% of our consolidated debt is non-recourse and is held within managed entities and has virtually
no cross-collateralization or parental guarantees by the Corporation.
The following table presents our total capitalization on a corporate and consolidated basis. Total capitalization also
includes amounts payable under long-term incentive plans, fixed annuity liabilities fully backed by financial asset
portfolios, deferred tax liabilities and other working capital balances:
AS AT DEC. 31
(MILLIONS)
Corporate borrowings ....................................................................... $
Non-recourse borrowings
Corporate
2021
10,875 $
2020
9,077 $
Consolidated
2021
10,875 $
2020
9,077
Subsidiary borrowings ....................................................................
Property-specific borrowings ........................................................
Corporation’s Capital, excluding corporate borrowings ............
Accounts payable, deferred taxes and other ...............................
—
—
10,875
46,585
5,403
—
—
9,077
36,068
5,395
13,049
152,008
175,932
46,585
168,486
10,768
128,556
148,401
36,068
159,227
Total capitalization ............................................................................. $
62,863 $
50,540 $ 391,003 $ 343,696
Debt to capitalization .........................................................................
17%
18%
45%
43%
CASH FLOW GENERATION FROM OUR CAPITAL
Our Corporation’s Capital generates significant, recurring cash flows at the corporate level, which may be used for
(i) reinvestment into the business; or (ii) returning cash to shareholders. These cash flows are underpinned by:
•
•
Fee-related earnings1 that are supported by long-term and perpetual contractual agreements.
Distributions from investments which are stable and backed by high-quality operating assets.
These cash flows are supplemented with carried interest as we monetize mature investments and return capital to
our investors.
32
BROOKFIELD ASSET MANAGEMENT
2020
1,428
1,846
(539)
(142)
(681)
94
2,687
348
1,185
Distributable Earnings (“DE”)1 was $6.3 billion for 2021, and over the past five years has grown at a 32% compound
annual growth rate.
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Fee-related earnings1
Distributions from investments ..............................................................................................................
................................................................................................................................ $
1,899 $
2,198
2021
Corporate activities .................................................................................................................................
Preferred share dividends2
...................................................................................................................
Add back: equity-based compensation costs ....................................................................................
Distributable earnings before realizations .....................................................................................
Realized carried interest, net3, 4
..............................................................................................................
Disposition gains from principal investments .....................................................................................
Distributable earnings ........................................................................................................................... $
(592)
(157)
(749)
119
3,467
715
2,100
6,282 $
4,220
1.
2.
3.
4.
Includes $250 million (2020 – $186 million) of fee-related earnings from Oaktree at our share.
Includes $9 million (2020 – $1 million) of dividends paid on perpetual subordinated notes for the year ended December 31, 2021.
Includes our share of Oaktree’s distributable earnings attributable to realized carried interest.
See definition in Glossary of Terms beginning on page 136.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
33
RISK MANAGEMENT
OUR APPROACH
Managing risk is an integral and critical part of our
business. We have a well-established, proactive and
disciplined risk management approach that is based on
clear operating methods and a strong risk management
culture. We ensure that we have the necessary capacity
and resilience to respond to changing environments by
evaluating both current and emerging risks. We adhere
to a robust risk management framework and
methodology that is designed to enable comprehensive
and consistent management of risk across the
organization. We use a thorough and integrated risk
assessment process to identify and evaluate risk areas
across the business such as human capital, climate
change, liquidity, disruption, regulatory compliance and
other strategic, financial, and operational risks.
Management and mitigation approaches and practices
are tailored to the specific risk areas and executed by
business and functional groups for their businesses
and areas of responsibility, with appropriate
coordination and oversight through monitoring and
reporting processes.
FOCUS ON RISK CULTURE
A strong risk culture is the cornerstone of our risk management program: one that promotes measured and
appropriate risk-taking, addresses current and emerging risks and ensures employees conduct business with a long-
term perspective and in a sustainable and ethical manner. This culture is reinforced by strong commitment and
leadership from our senior executives, as well as the policies and practices we have implemented, including our
compensation approach.
SHARED EXECUTION
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 specific
34
BROOKFIELD ASSET MANAGEMENT
business or risk area. As such, business specific risks—such as safety, environmental and other operational risks—
are generally managed at the operating business level, as the risks vary based on the nature of each business.
At the same time, we monitor key risks organization-wide to ensure adequacy of risk management, adherence to
applicable Brookfield policies, and sharing of best practices.
For risks that are more pervasive and correlated in their impact across the organization—such as liquidity, foreign
exchange and interest rates or where we can bring specialized knowledge—we utilize a coordinated approach that
is centralized amongst our corporate and business groups. Management of strategic, reputational and regulatory
compliance risks are similarly coordinated to ensure consistent focus and implementation across the organization.
Oversight & Coordination
We have implemented strong governance practices to monitor and oversee our risk management program.
Management committees bring together required expertise to manage key risk areas, ensuring appropriate
application and coordination of approaches and practices across our business and functional groups, and include
the following:
•
•
•
•
•
•
Risk Management Steering Committee – supports the overall corporate risk management program, and
coordinates risk assessment and mitigation on an enterprise-wide basis
Investment Committees – oversees the investment process and reviews and approves investment
transactions
Conflicts Committee – resolves potential conflict situations in the investment process and other corporate
transactions
Financial Risk Oversight Committee – reviews and monitors financial exposures
Environmental, Social and Governance (ESG) Steering Committee – oversees ESG initiatives, with a focus on
health, safety, security and environmental matters
Disclosure Committee – oversees the public disclosure of material information
Brookfield’s Board of Directors (the “Board”) oversees risk management with a focus on more significant risks, and
leverages management’s monitoring processes. The Board has delegated responsibility for oversight of specific risks
to the following board committees:
•
•
Risk Management Committee – oversees the management of Brookfield’s significant financial and non-
financial risk exposures, including review of risk assessment and risk management practices, and confirms 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 internal and external audit processes
• Management Resources and Compensation Committee – oversees risks related to Brookfield’s management
resource planning, including succession planning, executive compensation and senior executives’ performance
•
Governance and Nominating Committee – oversees risks related to Brookfield’s governance structure,
including the effectiveness of board and committee activities and potential conflicts of interest
2021 ANNUAL REPORT
35
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
MANAGEMENT
ESG AT BROOKFIELD
Our business philosophy is based on our conviction that acting responsibly toward our stakeholders is foundational
to operating a productive, profitable and sustainable business, and that value creation and sustainable
development are complementary goals. This view has been underpinned by what we have learned throughout our
100+ year heritage as an owner and operator of long-term assets, many of which form the backbone of the global
economy. Our long-term focus lends itself to implementing robust ESG programs throughout our asset
management business and underlying operations, which has always been a key priority for us.
Our approach to ESG is based on the following
ESG Governance
guiding principles:
Brookfield’s Board of Directors, through its Governance and
Mitigate the impact of our operations on the
Nominating Committee, has ultimate oversight of
environment:
Brookfield’s ESG strategy and receives regular updates on
–
Strive to minimize the environmental impact of
the company’s ESG initiatives throughout the year. Each
our operations and improve our efficient use of
aspect of ESG is overseen by select senior executives from
resources over time
–
Support the goal of net zero greenhouse gas
(GHG) emissions by 2050 or sooner
Ensure the well-being and safety of employees:
–
Foster a positive work environment based on
BAM and each of our business groups, who are charged
with driving ESG
initiatives based on our business
imperatives, industry developments and best practices, in
each case supported by asset management professionals
from each of these constituencies.
respect for human rights, valuing diversity, and
ESG Integration into the Investment Process
zero tolerance for workplace discrimination,
violence or harassment
– Operate with leading health and safety
practices to support the goal of zero serious
safety incidents
During the initial due diligence phase of an investment, we
proactively identify material ESG risks and opportunities
relevant to the particular asset. We leverage our investment
and operating expertise and utilize
industry-specific
guidelines
that
incorporate Sustainability Accounting
Uphold strong governance practices:
Standards Board guidance. In addition, we have developed
– Operate to the highest ethical standards by
a comprehensive climate change risk assessment, driven by
conducting business activities in accordance
our alignment with the Task Force on Climate-related
with our Code of Business Conduct and Ethics
Financial Disclosures (“TCFD”) and our commitment to net
– Maintain strong stakeholder relationships
through transparency and active engagement
Be good corporate citizens:
–
Ensure the interests, safety and well-being of
the communities in which we operate are
integrated into our business decisions
–
Support philanthropy and volunteerism by our
employees
zero. This risk assessment provides a framework for
evaluating climate change risks and opportunities—both
for physical as well as transition risks. We also have added
a separate human rights and modern slavery risk
assessment to our due diligence process with the objective
of mitigating the risks of modern slavery and human rights
violations for potential
investments,
including supply
chains. Where required, we perform deeper due diligence,
working with internal experts and third-party consultants as
needed.
All investments made by Brookfield must be approved by the applicable Investment Committee, which makes its
decision based on a set of predetermined criteria. To facilitate this, investment teams outline for the Committee the
36
BROOKFIELD ASSET MANAGEMENT
merits of the transaction and material risks, mitigants and significant opportunities for improvement, including
those related to ESG, such as bribery and corruption risks, health and safety risks, and environmental and social
risks.
As part of each acquisition, investment teams create a tailored integration plan that includes, among other things,
material ESG-related matters for review or execution. Brookfield looks to advance ESG initiatives and improve ESG
performance to drive long-term value creation, as well as to manage any associated risks. This is because we have
witnessed and continue to see a strong correlation between managing these considerations and enhancing
investment returns. It is the responsibility of the management teams within each portfolio company to manage ESG
risks and opportunities through the investment’s life cycle, supported by the applicable investment team. The
combination of having local accountability and expertise in tandem with Brookfield’s investment and operating
capabilities is important when managing a wide range of asset types across jurisdictions.
When preparing an asset for divestiture, we create robust business plans outlining potential value creation deriving
from several different factors, including ESG considerations. We also prepare both qualitative and quantitative data
that summarize the ESG performance of the investment and provide a holistic understanding of how Brookfield has
managed the investment during the holding period.
Below is a summary of some of the ESG initiatives that we undertook in 2021. For additional information, please
refer to Brookfield’s latest ESG report, which is available on the Responsibility page at brookfield.com.
ENVIRONMENTAL
Commitment to Net Zero
We support the goal of net zero greenhouse gas (“GHG”) emissions by 2050 or sooner. We believe that the transition
to net zero represents an enormous investment opportunity estimated at $3.5–$5.0 trillion annually and will require
large economic adjustments and potential rewiring of virtually every industry. We are committed to doing our part
to support the global decarbonization effort.
To formalize our support, in March 2021, Brookfield became a signatory to the Net Zero Asset Managers (“NZAM”)
initiative. As part of joining this initiative, we will (i) work on decarbonization goals, consistent with an ambition to
reach net-zero emissions by 2050 or sooner across all assets under management; (ii) set an interim target of a
specific proportion of our assets to be managed in line with net zero, with targeted emissions reduction by 2030;
and (iii) review this interim target at least every five years, with a view to increasing the proportion of AUM covered
until 100% of assets are included. As an initial step, we are working on creating a consistent GHG emissions
inventory across our portfolio companies and are in the process of setting an interim target that outlines the
proportion of assets to be managed in line with net zero by 2030.
We believe many of our operating businesses are well-positioned to play a critical role in the transition to net zero.
We are one of the largest pure-play global owners and operators of hydroelectric, wind and solar power generation
facilities, and we have a significant development portfolio. In addition, we are one of the world’s largest owners of
real estate, and the majority of our office and retail assets have earned green building certificates, thereby meeting
stringent environmental sustainability standards. Finally, our infrastructure and private equity businesses
encompass a diverse range of assets, many of which not only help form the backbone of the global economy but
are well positioned to generate positive environmental outcomes.
In 2021, we launched the Brookfield Global Transition Fund, Brookfield’s first dedicated impact fund, which will
invest in the global transition to net zero. Specifically, the fund will focus on investments that contribute to the
decarbonization of the global economy across three main themes: (i) new-build renewable power generation and
related technologies that provide additional capacity to the energy mix; (ii) business transformation of companies in
industries, such as steel, cement and chemicals, which require both renewable power generation to lower their
carbon footprint and capital to decarbonize their production processes; and (iii) the provision of capital to electricity
generators to enable them to shift from coal to gas and from gas to renewables. We are in the final stages of closing
this $15 billion fund and have already started putting capital to work.
2021 ANNUAL REPORT
37
Sustainable Finance
We have continued to be active in the sustainable finance market, with issuances in 2021 reaching $8 billion across
green bonds and hybrid securities, sustainability-linked debt and sustainability-linked loans, up from $3.6 billion in
2020. We also published the Brookfield Asset Management Green Bond and Preferred Securities Framework, which
lays out the process for evaluating and selecting the eligible investments, the use and management of the proceeds,
and the reporting frequency and format.
TCFD Alignment
In 2021, we became supporters of the TCFD, and many of the above-mentioned initiatives also relate to our
continued effort to align with the TCFD recommendations. This applies to embedding climate change considerations
into our strategy through our net-zero commitment, our sustainable financing efforts and the launch of our
inaugural transition fund. In addition, in 2021 we also undertook a climate risk assessment to better understand the
potential physical and transition risks, as well as opportunities, across all our businesses. We are leveraging those
results to identify ways to improve our approach to climate change mitigation and adaptation and continue to
integrate these considerations into our business and investment strategies.
Finally, we continue to align our business with the TCFD recommendations and are targeting to publish TCFD
disclosures for the 2022 fiscal year in 2023.
SOCIAL
Diversity, Equity and Inclusion
We recognize that our people drive our success. Developing our 2,300 asset management employees and ensuring
their continued engagement is one of our top priorities. We aim to create an environment that is built on strong
relationships and conducive to developing our workforce, and where individuals from diverse backgrounds can
thrive. In 2021, we continued to work on ensuring that our talent attraction and retention efforts and our diversity,
equity and inclusion efforts are in line with best practices.
Our approach to diversity, equity and inclusion has been deliberate and is integrated into our human capital
development processes and initiatives. Specifically, over the last five years, we have more than doubled our
employee population and during this period we have increased our female representation at the most senior levels
of the organization by 140%; female representation among managing partners/managing directors increased from
7% to 19%, and among senior vice presidents from 15% to 33%.
Further, in 2021, we launched a global process for employees to self-identify their ethnicity. This information will
assist us in identifying specific areas of focus related to increasing ethnic diversity. Our response rate in countries
with more than 100 employees (U.S., Canada, Australia, the U.K. and Brazil) was 92%. These results demonstrate our
current state of diversity:
Global Ethnic Diversity Metrics
White
Asian
Black
Hispanic
Two or More Races
Did Not Respond or Declined to Self-Identify
55 %
21 %
4 %
3 %
7 %
10 %
Having a diverse workforce reinforces our culture of collaboration and strengthens our ability to develop team
members and maintain an engaged workforce. We seek to foster a diverse and inclusive workplace by ensuring our
leaders understand their role in creating an inclusive environment and by maintaining a focus on disciplined talent
management processes that seek to mitigate the impact of unconscious bias. We believe that these priorities are
foundational to our success in enhancing diversity and inclusion within our workplace, where career advancement is
38
BROOKFIELD ASSET MANAGEMENT
directly tied to performance and to alignment with our values of making decisions with intense collaboration and a
long-term focus.
Occupational Health and Safety
Occupational health and safety continues to be integral to how we manage our businesses. As health and safety risk
varies across industries, sectors, and the nature of operations, we emphasize the importance of our operating
businesses having direct accountability and responsibility for managing and reporting risks within their operations,
with Brookfield providing support and strategic oversight at the business’ board (or similarly situated governance
body.) For details on our health and safety framework, as it relates to our operating businesses, please refer to
Brookfield’s latest ESG report.
Human Rights and Modern Slavery
Our approach to addressing modern slavery is designed to be commensurate with the risks we face, which vary
based on jurisdiction, industry and sector. In 2021, we expanded our U.K. modern slavery and human trafficking
policy to a global modern slavery policy that covers all Brookfield entities and provides guidance on measures to
prevent and detect modern slavery. In addition, we have several other policies and procedures that provide
guidance on the identification of modern slavery risks and the steps to be taken to mitigate these risks. These
include our Code of Conduct, Vendor Management Guidelines, ESG Due Diligence Guidelines, ABC Program, Anti-
Money Laundering Program and Whistleblowing Program. Our portfolio companies’ senior management teams are
each responsible for identifying and managing the modern slavery and human rights risks for their individual
businesses.
Employees in certain jurisdictions and functions receive modern slavery training as part of the onboarding process
and access ongoing training, as necessary. In particular, we regularly train employees involved in higher-risk
functions, such as procurement. We also encourage employees, suppliers and business partners to report concerns
in accordance with our Whistleblowing Policy.
We are cognizant of the fact that the risks of modern slavery and human trafficking are complex and evolving, and
we will continue to work on addressing these risks in our business.
COVID-19 Update
The pandemic placed high demands on all of our people, requiring close coordination across the organization,
increased communication with investors and employees, and deep engagement with communities and other
stakeholders around the world. Over this period, our experience reinforced for us what we consider to be the core
strengths of Brookfield: adhering to a business model that supports resilience, keeping a long-term perspective—
especially during periods of uncertainty and volatility—maintaining a collaborative corporate culture, and putting
our assets and resources to good use for the community. It will likely take years to understand the full extent of the
pandemic’s global impact; however, we believe that we have emerged more resilient, more flexible and, in some
ways, more connected than ever.
GOVERNANCE
We recognize that strong governance is essential to sustainable business operations, and we aim to conduct our
business according to the highest ethical and legal standards.
Proxy Voting Guidelines
In 2021, Brookfield formally established Proxy Voting Guidelines, which apply when Brookfield votes proxies for its
own accounts and those of its clients. These guidelines ensure that we vote in our investors’ best interests, in
accordance with any applicable proxy voting agreements and consistent with the investment mandate. While our
public securities holdings are modest relative to our assets under management, we considered it important to
formally record the variety of ESG factors that we assess in determining whether voting a proxy is in the client’s best
interests, including gender equality, board diversity, ecology and sustainability, climate change, ethics, human rights,
2021 ANNUAL REPORT
39
and data security and privacy. As part of our Proxy Voting Guidelines, Brookfield has created a Proxy Voting
Committee that comprises senior executives across Brookfield and oversees proxy voting across our holdings.
ESG Regulation
We aim to uphold strong governance practices, and we actively monitor proposed and evolving ESG legislation,
regulation and market practices in all jurisdictions in which we operate. This includes, for example, the EU
Sustainable Finance Disclosure Regulation and EU Taxonomy Regulation as well as the newly announced
International Sustainability Standards Board. We seek to continuously improve and refine our processes by actively
participating in the development and implementation of new industry standards and best practices.
Data Privacy and Cybersecurity
Data privacy and cybersecurity remain key ESG focus areas for us. In 2022, we undertook initiatives to further
enhance our data protection and threat-intelligence capabilities, and we worked on improving our processes for
third-party risk management. We review and update our cybersecurity program annually and conduct regular
external-party assessments of our program maturity based on the NIST Cybersecurity Framework. The results of the
NIST Cybersecurity Maturity Assessment conducted in 2021 validated the strength of our program. Finally, in
addition to continued mandatory cybersecurity education for all employees, we enhanced our phishing simulations
to include social engineering.
ESG Affiliations and Partnerships
Finally, we continue to align our business practices with leading frameworks for responsible investing and are an
active participant in industry forums and other organizations. We are a signatory to the United Nations-supported
Principles for Responsible Investment (“PRI”), which demonstrates our ongoing commitment to responsible
investment and ESG best practices. As a participant in organizations like the PRI, the TCFD and NZAM, we are
committed to ongoing engagement and stewardship and the promotion of leading ESG practices—both with our
portfolio companies and with the broader asset management industry—that are designed to enhance the value of
our assets and businesses. In addition, through our membership in these organizations and other industry forums,
we remain actively involved in discussions aimed at advancing ESG awareness across private and public markets
and enhance our reporting and protocols in line with evolving best practices.
40
BROOKFIELD ASSET MANAGEMENT
PART 2
REVIEW OF CONSOLIDATED FINANCIAL RESULTS
The following section contains a discussion and analysis of line items presented within our consolidated financial
statements. The financial data in this section has been prepared in accordance with IFRS. Starting on page 55 we
provide an overview of our fair value accounting process and why we believe it provides useful information for
investors about our performance. We also provide an overview of our application of the control-based model under
IFRS used to determine whether or not an investment should be consolidated.
OVERVIEW
During 2021, our operating performance was strong, with most of our businesses generating solid financial results.
The market environment was strong and continues to get stronger in most, if not all, of the key markets that we
operate in.
Net income was $12.4 billion in the current year, with $4.0 billion attributable to common shareholders
($2.39 per share) and the remaining income attributable to non-controlling interests.
The $11.7 billion increase in consolidated net income and the $4.1 billion increase in net income attributable to
common shareholders were primarily attributable to:
•
•
•
•
•
fair value gains of $5.2 billion compared to a loss of $1.4 billion in the prior year, primarily driven by valuation
gains on our investment properties;
an increase in equity accounted income of $2.5 billion from valuation gains on investment properties held in
our equity accounted investments; and
contributions from acquisitions during the year and same-store1 growth across our operations; partially offset
by
income tax expense of $2.3 billion compared to $837 million in 2020, predominantly attributable to an increase
in tax rates in the U.K. and Colombia, higher taxable income relative to the prior year and the tax impact of the
aforementioned fair value uplifts; and
higher depreciation expense primarily as a result of recent acquisitions.
Our consolidated balance sheet primarily increased as a result of assets acquired, net of liabilities. Further increases
relate to net valuation gains and revaluations of our investment properties and property, plant and equipment
(“PP&E”) primarily within our Real Estate and Renewable Power and Transition segments. Equity accounted
investments also increased due to additions and our share of comprehensive income generated in those
businesses. These increases were partially offset by dispositions during the year of our West Fraser Timber Co.
(“West Fraser”)1 shares, other financial assets and a portfolio of investment properties.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
41
INCOME STATEMENT ANALYSIS
The following table summarizes the financial results of the company for 2021, 2020 and 2019:
FOR THE YEARS ENDED DEC. 31
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
Revenues ............................................................................... $ 75,731 $ 62,752 $ 67,826 $
Direct costs1
..........................................................................
Other income and gains .....................................................
Equity accounted income (loss) ........................................
Expenses
(53,177)
785
(79)
(57,604)
1,285
2,498
(64,000)
3,099
2,451
2019
2020
2021
Change
2021 vs.
2020
12,979 $
(10,823)
2,314
2,530
2020 vs.
2019
(5,074)
4,427
(500)
(2,577)
Interest ................................................................................
Corporate costs .................................................................
Fair value changes ...............................................................
Income tax expense ............................................................
Net income ..........................................................................
Non-controlling interests ...................................................
Net income (loss) attributable to shareholders ..... $ 3,966 $
Net income (loss) per share2
2.39 $
(7,604)
(116)
5,151
(2,324)
12,388
(8,422)
.......................................... $
(7,227)
(98)
(831)
(495)
5,354
(2,547)
(7,213)
(101)
(1,423)
(837)
707
(841)
(134) $ 2,807 $
1.73 $
(0.12) $
(391)
(15)
6,574
(1,487)
11,681
(7,581)
4,100 $
2.51 $
14
(3)
(592)
(342)
(4,647)
1,706
(2,941)
(1.85)
1. During the fourth quarter of 2021, the company reclassified $6.4 billion of depreciation and amortization, which were previously presented as a
separate line item, to direct costs. Prior period amounts were also adjusted to reflect this change, which resulted in an increase to direct costs by
$5.8 billion and $4.9 billion for the years ended December 31, 2020 and 2019, respectively, with equal and offsetting decreases to depreciation
and amortization. This reclassification had no impact on revenues, net income, or basic and diluted earnings per share.
2. Adjusted to reflect the three-for-two stock split effective April 1, 2020.
2021 vs. 2020
Revenues for the year were $75.7 billion, an increase of $13.0 billion or 21% compared to 2020, primarily due to the
recovery from the pandemic related economic shutdowns in 2020, including:
•
•
•
•
•
higher volumes and prices at our road fuels and our advanced energy storage operations within our Private
Equity segment. Included within revenues and direct costs of our road fuels operation are import duties that
are passed through to their customers;
higher occupancy at our hospitality and core portfolios within our Real Estate segment;
additional contributions from our wind assets and our gas storage business in our Renewable Power and
Transition and
Infrastructure segments, respectively, as a result of higher realized market prices
and operational strength through the extreme weather conditions experienced in the U.S. during the first
quarter of 2021; and
revenues from acquisitions during the year, net of the absence of contributions from businesses fully or
partially sold; partially offset by
lower generation at our hydroelectric facilities in North America in our Renewable Power and Transition
segment, as well as lower revenues at our offshore oil services operations in our Private Equity segment.
A discussion of the impact on revenues and net income from recent acquisitions and dispositions can be found on
page 45.
Direct costs increased by 20% or $10.8 billion primarily due to:
•
•
the aforementioned higher volumes and prices at our road fuels operation in our Private Equity segment, as
well as incremental costs associated with organic growth initiatives at our Infrastructure segment;
an increase in depreciation and amortization expense due to an increase in the carrying value of our PP&E from
the impact of revaluation gains as part of our year-end revaluation process; and
42
BROOKFIELD ASSET MANAGEMENT
•
•
higher direct costs related to recent acquisitions, net of dispositions; partially offset by
cost saving initiatives across our businesses.
Other income and gains of $3.1 billion primarily relate to the sale of our Canadian and U.S. district energy
operations in our Infrastructure segment.
Equity accounted income increased by $2.5 billion primarily due to:
•
•
•
valuation gains in our retail and office portfolios held in our equity accounted investments; and
strong operating performance at Oaktree Capital Management (“Oaktree”)1; partially offset by
the absence of contributions from Norbord Inc. (“Norbord”)1 after our investment was converted into West
Fraser’s shares as part of the West Fraser — Norbord strategic business combination. Since the first quarter of
2021, our interest in West Fraser has been accounted for as a financial asset.
Interest expense of $7.6 billion increased by $391 million due to additional borrowings associated with acquisitions,
partially offset by the impact of dispositions and the refinancing of debt across our operations.
We recorded fair value gains of $5.2 billion, compared to losses of $1.4 billion in the prior year, primarily as a
result of valuation gains on our LP investments, partially offset by valuation losses of certain retail portfolios across
our real estate business. Refer to pages 46 and 47 for a discussion on fair value changes.
We recorded an income tax expense of $2.3 billion for the year compared to $837 million in the prior year mainly
due to an increase in tax rates in the U.K. and Colombia, higher taxable income and the tax impact of the
aforementioned fair value uplifts.
2020 vs. 2019
Revenues decreased by $5.1 billion in 2020 primarily due to the impact of the economic shutdowns, including lower
volumes and lower contributions at our road fuels operations and our construction operations within our Private
Equity segment, respectively. These decreases also related to lower revenues at our hospitality assets within our
Real Estate segment as a result of reduced occupancy levels, partially offset by a full year of contributions from
acquisitions completed in 2019, including businesses acquired within our Private Equity segment, and acquisitions
completed in 2020. Furthermore, the benefits of organic growth within our Infrastructure segment, net of the
foreign exchange impact, contributed to our revenues in 2020.
Direct costs decreased by $4.4 billion in 2020 due to the aforementioned lower volumes at our road fuels
operations and cost saving initiatives across a number of our businesses. These decreases were partially offset by
higher direct costs related to recent acquisitions, net of dispositions, incremental costs associated with organic
growth initiatives at our operations and an increase in depreciation and amortization expense, due to an increase in
the carrying value of our PP&E from the impact of revaluation gains as part of our year-end revaluation process.
Other income and gains of $785 million in 2020 primarily relate to the sales of our cold storage logistics business
and the pathology business within our healthcare service operations in our Private Equity segment, as well as the
sale of our self-storage business in our Real Estate segment.
Equity accounted income decreased from $2.5 billion to a loss of $79 million. This decrease primarily related to
valuation losses in our real estate retail portfolio as a result of adjusted discounted cash flows in light of the
economic shutdown, partially offset by a deferred tax recovery at our Brazilian data center operations in our
Infrastructure segment and strong operating performance at Norbord.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
43
Interest expense of $7.2 billion remained consistent in 2020 versus 2019 as the benefits from lower interest rates
on issued borrowings and our variable rate debt held at our real estate operations were partially offset by
additional interest expense paid on new debt offerings.
We recorded fair value losses of $1.4 billion in 2020, compared to $831 million in 2019, primarily as a result of:
•
•
valuation losses due to revised valuation assumptions, including rental growth and leasing assumptions, in our
retail and office portfolios; partially offset by
valuation gains in our LP investments portfolio, including our life sciences portfolio held within our Real Estate
segment.
Income tax expense increased by $342 million to $837 million in 2020, primarily due to the absence of the 2019
deferred income tax recovery of $475 million, related to the recognition of deferred tax assets due to the projected
utilization of net operating loss carryforwards.
44
BROOKFIELD ASSET MANAGEMENT
SIGNIFICANT ACQUISITIONS AND DISPOSITIONS
We have summarized below the impact of recent significant acquisitions and dispositions on our results for 2021:
Acquisitions
Dispositions
FOR THE YEAR ENDED DEC. 31, 2021
(MILLIONS)
Renewable Power and Transition .......................................... $
Infrastructure .............................................................................
Private Equity ..............................................................................
Real Estate ...................................................................................
Revenue
Revenue
205 $
(1,183)
(89) $
24 $
1,678
1,929
(12)
(511)
(478)
171
468
682
Net
Income
(Loss)
Net
Income
(Loss)
48
(39)
(413)
(907)
ACQUISITIONS
Acquisitions in 2021 and 2020 contributed incremental revenues and net income of $4.5 billion and $651 million,
$
4,494 $
651 $
(2,261) $
(1,311)
respectively, in the current year.
Renewable Power and Transition
Within our Renewable Power and Transition segment, recent acquisitions contributed to incremental revenues and
net income of $205 million and $24 million, respectively. These contributions were primarily due to the acquisitions
of a distributed generation platform and a wind portfolio in the U.S. in the first quarter of 2021.
Infrastructure
Recent acquisitions contributed incremental revenues of $1.9 billion and net income of $171 million. These
contributions were primarily from Inter Pipeline Ltd. (“IPL”)1 which was acquired in 2021, as well as our Indian
telecom towers operation and our U.S. LNG export terminal, which were both acquired in the third quarter of 2020.
Private Equity
Within our Private Equity segment, recent acquisitions contributed to incremental revenues of $1.7 billion and net
loss of $12 million. These contributions and net loss were primarily from acquisitions of a technology services
operation, a solar power solutions operation and an engineered components manufacturer in the first, third and
fourth quarter of 2021, respectively.
Real Estate
Recent acquisitions contributed incremental revenues of $682 million and net income of $468 million. These
contributions were primarily from the acquisition of hospitality assets made through our Brookfield Strategic Real
Estate Partners III fund (“BSREP III”)1.
DISPOSITIONS
Recent asset sales reduced revenues and net income by $2.3 billion and $1.3 billion, respectively, in the current
year. The assets that most significantly impacted our results were the dispositions of our life science portfolio in our
Real Estate segment and our North American district energy operations in our Infrastructure segment, as well as the
partial dispositions of our graphite electrode operations in our Private Equity segment and our Australian export
terminal in our Infrastructure segment.
1. See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
45
FAIR VALUE CHANGES
The following table disaggregates fair value changes into major components to facilitate analysis:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Investment properties ............................................................................................................ $ 5,073 $
Transaction related gains, net of expenses .......................................................................
Financial contracts ...................................................................................................................
Impairment and provisions ...................................................................................................
Other fair value changes ........................................................................................................
Total fair value changes .......................................................................................................... $ 5,151 $
(1,423) $ 6,574
(269) $ 5,342
Change
(1,052)
(654)
(966)
(808)
2020
2021
298
154
694
686
984
714
86
20
INVESTMENT PROPERTIES
Investment properties are recorded at fair value with changes recorded in net income. We present the investment
properties of our Real Estate segment within three sub-segments. The sub-segments are based on our strategy to
maintain an irreplaceable portfolio of trophy mixed-use precincts in global gateway cities (“Core”), maximize returns
through a development or buy-fix-sell strategy (“Transitional and Development”), or recycle capital from our private
funds (“LP Investments”).
The following table disaggregates investment property fair value changes by asset type:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Core ............................................................................................................................................. $
Transitional and Development ..............................................................................................
LP Investments and Other .....................................................................................................
(174) $
5,506
(259)
2021
2020
Change
(345) $
171
(1,433)
1,509
1,174
3,997
$ 5,073 $
(269) $ 5,342
We discuss the key valuation inputs of our investment properties on pages 102 and 103.
Core
Valuation losses of $174 million are mainly due to lower cash flow and leasing assumptions on certain retail assets,
as well as changes in market leasing assumptions on our downtown New York office portfolio. These losses were
partially offset by valuation gains at our office portfolio in Canada.
Valuation losses of $345 million in the prior year were primarily due to changes to leasing assumptions as a result of
the impacts from the pandemic related economic shutdowns in our downtown New York office portfolio, partially
offset by gains as certain assets neared completion and met development milestones at our London and Toronto
office portfolios, respectively.
Transitional and Development
Valuation losses of $259 million primarily relate to:
•
•
valuation losses on retail assets due to updated leasing and cash flow assumptions; partially offset by
an increase in values on certain office assets in Australia as a result of higher external appraisal values.
Valuation losses of $1.4 billion in the prior year were primarily related to changes in assumptions on a space-by-
space basis to reflect the impacts of the pandemic related economic shutdowns.
LP Investments and Other
Valuation gains of $5.5 billion primarily relate to:
•
an increase in values of our U.S. manufactured housing business as a result of higher external appraisals;
46
BROOKFIELD ASSET MANAGEMENT
•
•
•
•
•
capitalization rate compression in our multi-family assets mainly within our Forest City Realty Trust Inc. (“Forest
City”)1 portfolio and our U.S. multi-family REIT;
fair value uplifts at our mixed-use property in Seoul to reflect higher comparable market pricing;
a higher valuation at our Australian senior living business due to an increase in unit prices, as well as increased
market rent assumptions at our U.S. logistics portfolio; and
an increase in operating income at our U.K. student housing business due to improved cash flows; partially
offset by
valuation losses on certain retail assets in the U.S. as a result of changes to cash flow assumptions.
In the prior year, valuation gains of $1.5 billion were primarily due to gains on our life science assets in our Forest
City portfolio, our mixed-use property in China, our Brazil office portfolio, our U.K. student housing portfolio and our
U.S. manufactured housing portfolio. These gains were partially offset by updated cash flow assumptions on
our retail and office assets as a result of the impact of the pandemic related economic shutdown.
TRANSACTION RELATED GAINS, NET OF EXPENSES
Transaction related gains, net of expenses, totaled $714 million for the year. This was primarily due to a gain on the
deconsolidation of our investment in our graphite electrode operations, within our Private Equity segment. This gain
was partially offset by transaction costs related to recent acquisitions, as well as restructuring costs incurred in our
Private Equity segment.
The prior year transaction related gains, net of expenses, of $20 million primarily relate to restructuring gains at our
Infrastructure and Private Equity segments, partially offset by the early redemption of debt across a number of
our businesses and transaction costs related to acquisitions.
FINANCIAL CONTRACTS
Financial contracts include mark-to-market gains and losses related to foreign currency, interest rate and pricing
exposures that are not designated as hedges.
The gain of $984 million in 2021 is primarily attributable to gains on our toehold positions in our Infrastructure and
Real Estate businesses, as well as fair value gains on our venture investments. These gains were partially offset by
the mark-to-market movement on short-term financial contracts to hedge power prices in our Renewable Power
and Transition business.
Unrealized gains of $686 million in the prior year primarily related to gains on our financial contracts in our Private
Equity segment and mark-to-market movements on market and currency hedges, partially offset by losses on
interest rate and cross-currency swaps, which did not qualify for hedge accounting.
IMPAIRMENT PROVISIONS
Impairment and provisions expense for the year of $654 million is primarily attributable to the impairment of PP&E
and goodwill in our offshore oil services operations and provisions taken at our advanced energy storage
operations within our Private Equity segment. In addition, legal provisions at our Brazil residential development
business are included in this balance.
OTHER FAIR VALUE CHANGES
Other fair value losses of $1.0 billion were reported for the year. These losses primarily relate to accretion expenses
and amortization of deferred financing fees across most operations. The remainder of the losses are various one-
time charges across our segments.
1. See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
47
INCOME TAXES
We recorded an aggregate income tax expense of $2.3 billion in 2021 (2020 – $837 million), including current tax
expenses of $1.1 billion (2020 – $756 million) and deferred tax expense of $1.2 billion (2020 – $81 million).
Our income tax provision does not include a number of non-income taxes paid that are recorded elsewhere in our
consolidated 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 predominantly recorded in direct costs.
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 ..............................................................................................................
2021
2020
Change
26%
26%
—%
(Reduction) increase in rate resulting from:
Portion of gains subject to different tax rates .......................................................................
Change in tax rates and new legislation .................................................................................
Taxable income attributed to non-controlling interests .....................................................
International operations subject to different tax rates .......................................................
Recognition of deferred tax assets ..........................................................................................
Non-recognition of the benefit of current year’s tax losses ...............................................
Other ...............................................................................................................................................
Effective income tax rate ...............................................................................................................
(3)
3
(10)
(1)
(2)
2
1
(10)
12
(31)
52
(10)
8
7
7
(9)
21
(53)
8
(6)
(6)
16%
54%
(38%)
The increase in income tax expense is primarily attributed to higher net income generated in 2021. This year, we
recorded realized disposition gains1 that were subject to tax rates that were different compared to our statutory
income tax rate. This contributed to a 3% reduction in our effective tax rate. This reduction was offset by a non-
recurring deferred tax expense due to an increase in tax rates in jurisdictions we operate in, which increased our
effective tax rate by 3%.
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 earnings include income attributable to non-controlling ownership interests in these entities,
our consolidated tax provision includes only our proportionate share of the associated tax provision of these
entities. In other words, we are consolidating all the net income, but only our share of the associated tax provision.
This reduced our effective tax rate by 10% this year.
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 resulted in a 1% decrease in our effective tax rate this year. The difference will vary from period to period
depending on the relative proportion of income in each country.
1.
See definition in Glossary of Terms beginning on page 136.
48
BROOKFIELD ASSET MANAGEMENT
BALANCE SHEET ANALYSIS
The following table summarizes the statement of financial position of the company as at December 31, 2021, 2020
and 2019:
AS AT DEC. 31
2019
(MILLIONS)
2020
2021
Assets
Property, plant and equipment ..................................... $ 115,489 $ 100,009 $ 89,264 $
Investment properties .....................................................
Equity accounted investments .......................................
Cash and cash equivalents .............................................
Accounts receivable and other ......................................
Intangible assets ...............................................................
Goodwill ..............................................................................
Other assets .......................................................................
18,928
24,658
27,710
41,327
40,698
96,782
14,550
29,814
96,686
37,345
18,469
14,714
100,865
46,100
43,259
20,227
21,760
12,694
30,609
9,933
6,778
Change
2021 vs.
2020
2020 vs.
2019
15,480 $
10,745
4,083
4,773
2,761
2,832
5,951
5,513
5,914
96
629
3,155
459
(3,052)
164
7,531
Total assets .......................................................................... $ 391,003 $ 343,696 $ 323,969 $
47,307 $
19,727
Liabilities
Corporate borrowings ..................................................... $ 10,875 $ 9,077 $ 7,083 $
Non-recourse borrowings of managed entities .........
Other non-current financial liabilities ..........................
Other liabilities ..................................................................
136,292
139,324
28,524
44,129
39,751
23,997
165,057
27,718
52,612
1,798 $
25,733
(806)
8,483
Equity
Preferred equity ................................................................
Non-controlling interests ................................................
Common equity .................................................................
Total equity ..........................................................................
4,145
4,145
4,145
88,386
86,804
81,833
42,210
31,693
30,868
134,741
122,642
116,846
—
1,582
10,517
12,099
1,994
3,032
4,527
4,378
—
4,971
825
5,796
$ 391,003 $ 343,696 $ 323,969 $
47,307 $
19,727
2021 vs. 2020
Total assets increased by $47.3 billion since December 31, 2020 to $391.0 billion as at December 31, 2021. The
increase is driven by business combinations and asset acquisitions, which added total assets of $62.8 billion during
the year. Net valuation gains recognized on our PP&E during the year also contributed to the increase in total
assets. These increases were partially offset by amortization and depreciation as well as assets sold during the year.
2021 ANNUAL REPORT
49
We have summarized the impact of business combinations as well as equity accounted investment, investment
properties and PP&E additions for the year ended December 31, 2021 in the table below:
Total
586
1,485
721
5,969
14,545
24,547
8,336
6,591
15
62,795
(5,401)
(9,257)
(2,758)
(183)
Renewable
Power and
Transition
and Other
Private
Equity
826
217 $
288 $
Real Estate
Infrastructure
FOR THE YEAR ENDED DEC. 31, 2021
(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 ...................................................
11,504
22,088
14,408
18,448
15,649
78 $
3,734
1,360
3,960
3,984
1,505
4,212
3,104
4,535
4,847
2,400
6,610
3 $
690
100
455
118
104
106
113
23
31
67
—
—
—
—
—
6
9
6
2
Less:
Accounts payable and other ..................
Non-recourse borrowings ......................
Deferred income tax liabilities ...............
Non-controlling interests1
......................
(1,811)
(132)
(1,215)
(22)
(3,180)
(3,271)
(6,698)
(1,430)
(156)
(131)
(1,452)
(113)
(3)
(188)
(975)
—
(2)
(11,555)
(1,699)
(1,165)
(17,599)
Net assets acquired .................................... $
12,469 $
6,893 $
20,389 $
5,445 $
45,196
1.
Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the identifiable
assets and liabilities on the date of acquisition.
We have summarized below the major contributors to the year-over-year variances for the statement of financial
position.
PP&E increased by $15.5 billion primarily as a result of:
•
•
•
•
•
additions of $24.5 billion, primarily related to the acquisition of IPL in our Infrastructure segment; and
revaluation surplus of $6.1 billion with the majority of the increase attributable to our Renewable Power and
Transition segment, which benefited from higher power prices across most markets in which we operate
and the expected growth in demand for renewable power; partially offset by
dispositions and assets reclassified as held for sale of $7.1 billion, most notably from the sales of our North
American district energy operations within our Infrastructure segment, wind portfolios in the U.S. and Europe
within our Renewable Power and Transition segment, and mixed-use and hospitality assets within our Real
Estate segment;
depreciation of $5.0 billion in the year; and
the adverse impact of foreign currency translation of $2.2 billion.
We provide a continuity of PP&E in Note 12 of the consolidated financial statements.
50
BROOKFIELD ASSET MANAGEMENT
Investment properties consist primarily of the company’s real estate assets. The balance as at December 31, 2021
increased by $4.1 billion, primarily due to:
•
•
•
•
additions of $14.5 billion, mainly through the purchase of investment properties within our real estate funds;
and
net valuation gains of $5.1 billion, primarily driven by valuation gains on our LP investments; partially offset by
asset sales and reclassifications to assets held for sale of $15.0 billion, primarily in our real estate funds; and
the negative impact of foreign currency translation of $1.1 billion.
We provide a continuity of investment properties in Note 11 of the consolidated financial statements.
Equity accounted investments increased by $4.8 billion to $46.1 billion in the current year, mainly due to:
•
additions of $4.0 billion, net of dispositions, primarily due to the acquisition of an additional interest in our
German Office portfolio within our Real Estate segment, the spin-out of our reinsurance business, and the
change in accounting basis of our interest in our graphite electrode operations within our Private Equity
segment, as a result of the partial sale of our stake in the business in 2021; and
•
•
•
our proportionate share of comprehensive income of $3.4 billion; partially offset by
distributions and returns of capital received of $2.0 billion; and
foreign currency translation and other items of $668 million.
We provide a continuity of equity accounted investments in Note 10 of the consolidated financial statements.
Cash and cash equivalents increased by $2.8 billion as at December 31, 2021. For further information, refer to our
Consolidated Statements of Cash Flows and to the Review of Consolidated Statements of Cash Flows within Part 4 –
Capitalization and Liquidity.
Increases of $6.0 billion and $5.5 billion in our intangible assets and goodwill balances, respectively, are related to
additions from acquisitions, net of dispositions, primarily in our Infrastructure and Private Equity segments, partially
offset by the amortization of certain intangible assets.
Other assets are comprised of inventory, deferred income tax assets, assets classified as held for sale and other
financial assets. The increase of $5.9 billion is primarily a result of:
•
•
•
an increase in assets held for sale of $6.0 billion largely attributable to the reclassification of our office assets
and other properties within our Real Estate segment to held for sale, partially offset by the derecognition of our
investment in Norbord within our Private Equity segment in the first quarter of 2021; and
an increase in inventory of $1.1 billion mainly due to the acquisition of our engineered components
manufacturer and increased prices and inventory at our advanced energy storage operations within our Private
Equity segment; partially offset by
a decrease in other financial assets of $1.2 billion as a result of the sale of a portion of our securities portfolio
and toehold positions during the year.
Corporate borrowings increased by $1.8 billion from the $600 million green bond issuance and $250 million re-
opening of our 2051 notes during the year, in addition to net draws of $912 million of commercial paper issuances
and credit facility draws.
Non-recourse borrowings of managed entities increased by $25.7 billion, net of borrowings reclassified to held for
sale, largely attributable to recent acquisitions across our business segments.
2021 ANNUAL REPORT
51
Other non-current financial liabilities consist of our subsidiary equity obligations, non-current accounts payable and
other long-term financial liabilities that are due after one year. The decrease of $806 million was primarily due to a
decrease in insurance contract liabilities as a result of the deconsolidation of our annuities business as part of the
Brookfield Asset Management Reinsurance Partners Ltd. (“BAMR”)1 spin-out in the second quarter of 2021.
The increase of $8.5 billion in other liabilities, was primarily due to the increase in deferred income tax liabilities
mainly as a result of acquisitions completed in the year, the aforementioned fair value uplifts in our Real Estate
segment and revaluation of PP&E in our Renewable Power and Transition segment. Refer to Part 4 – Capitalization
and Liquidity for more information.
2020 vs. 2019
Consolidated assets as at December 31, 2020 were $343.7 billion, compared to $324.0 billion as at
December 31, 2019. Year-over-year increases were primarily due to business combinations and asset acquisitions
completed in 2020, as well as net valuation gains recognized on our PP&E. These increases were partially offset by
assets sold in 2020.
PP&E increased by $10.7 billion in 2020 primarily as a result of acquisitions completed across our segments and
revaluation gains largely in our Renewable Power and Transition segment. These increases were partially offset by
depreciation and the deconsolidation of our hospitality investments and other businesses in 2020.
Investment properties were $96 million higher at the end of 2020 compared to 2019 primarily due to capital
expenditures, the purchase of investment properties and the positive impact of foreign currency translation. These
increases were partially offset by asset sales, including a self-storage portfolio and an office asset in London within
our Real Estate segment, as well as reclassifications to assets held for sale.
Equity accounted investments were $41.3 billion as at December 31, 2020, an increase of $629 million compared to
2019. The increase was mainly due to the acquisition of an interest in the work access services operation and the
U.S. LNG export terminal within our Private Equity and Infrastructure segments, respectively. In addition,
the increase was due to our proportionate share of the comprehensive income in 2020. These increases were
partially offset by the reclassification of our interest in Norbord to held for sale, as well as distributions and returns
of capital received.
Cash and cash equivalents increased by $3.2 billion as at December 31, 2020 compared to 2019 primarily due to net
proceeds from corporate debt issuances, the secondary offerings of BEP units, BEPC and BIPC shares, as well as
cash received from asset sales. These items were partially offset by cash used in business combinations completed
in 2020.
Intangible assets decreased by $3.1 billion due to the impact of foreign currency translation and amortization,
partially offset by additions from acquisitions in our Infrastructure segment in 2020. Goodwill increased by
$164 million due to the acquisition of new businesses, partially offset by the sale of the pathology business in our
healthcare services operation in 2020.
Other assets increased by $7.5 billion primarily as a result of strategic investments acquired and opportunistic
financial asset positions entered into across most of our segments in 2020, as well as an increase in assets held for
sale mainly attributable to the reclassification of retail and office assets within our Real Estate segment and our
equity investment in Norbord within our Private Equity segment. These items were partially offset by the sale of the
Australian portion of our rail operation and a Colombian regulated distribution operation within our Infrastructure
segment in 2020.
1.
See definition in Glossary of Terms beginning on page 136.
52
BROOKFIELD ASSET MANAGEMENT
Corporate borrowings increased by $2.0 billion due to issuances of a $600 million 30-year note, a $750 million 10-
year note, a $500 million 31-year note and a $400 million 60-year note in 2020. These were partially offset by a
repayment of a $251 million (C$350 million) note in 2020.
Non-recourse borrowings increased by $3.0 billion in 2020 as a result of an increase in subsidiary borrowings across
the businesses to take advantage of the low interest rate environment to strengthen liquidity, as well as an increase
in property-specific borrowings mainly related to the aforementioned acquisitions in 2020.
Other non-current financial liabilities increased by $4.5 billion in 2020 primarily due to the aforementioned
acquisitions in 2020 as well as an increase in lease obligations in our Real Estate segment.
Other liabilities increased by $4.4 billion in 2020 primarily attributable to an increase in financial liabilities associated
with hedges in our Infrastructure segment as well as liabilities associated with assets held for sale in our Real Estate
segment.
2021 ANNUAL REPORT
53
EQUITY
The significant variances in common equity and non-controlling interests are discussed below. Preferred equity is
discussed in Part 4 – Capitalization and Liquidity.
COMMON EQUITY
The following table presents the major contributors to the year-over-year variances for common equity:
AS AT AND FOR THE YEARS ENDED DEC. 31
2020
(MILLIONS)
Common equity, beginning of year ......................................................................................................... $ 31,693 $ 30,868
Changes in year
2021
Net income (loss) attributable to shareholders ................................................................................
Common dividends ..................................................................................................................................
Common dividends - special distribution ...........................................................................................
Preferred dividends .................................................................................................................................
Other comprehensive income ...............................................................................................................
Share issuances, net of repurchases ...................................................................................................
Ownership changes and other ..............................................................................................................
3,966
(800)
(538)
(148)
1,844
2,813
3,380
(134)
(726)
—
(141)
818
(270)
1,278
825
Common equity, end of year .................................................................................................................... $ 42,210 $ 31,693
10,517
Common equity increased by $10.5 billion to $42.2 billion during the year. The change includes:
•
•
•
•
•
net income attributable to common shareholders of $4.0 billion;
ownership changes and other of $3.4 billion primarily related to gains recorded directly in equity associated
with the privatization of BPY, a secondary offering of BEPC shares, issuances of BIPC shares, and the partial sell-
down of our graphite electrode operations;
share issuances, net of repurchases, of $2.8 billion, primarily related to the issuance of 60.9 million
Class A Limited Voting Shares (“Class A shares”) as part of the BPY privatization, net of the repurchase of
9.7 million Class A shares for the year;
other comprehensive income of $1.8 billion, consisting of gains from revaluation surplus and other of
$2.2 billion, primarily attributable to valuation gains on our PP&E within our Renewable Power and Transition
and Infrastructure segments, partially offset by foreign currency translation of $318 million; and
the above items were somewhat offset by distributions of $1.5 billion to shareholders as common and
preferred share dividends, including the $538 million distribution as part of the spin-out of our reinsurance
business in the second quarter of 2021.
NON-CONTROLLING INTERESTS
Non-controlling interests in our consolidated results primarily consist of third-party interests in BEP, BIP, BBU, BPG
and their consolidated entities as well as co-investors and other participating interests in our consolidated
investments as follows:
AS AT DEC. 31
2020
(MILLIONS)
Brookfield Renewable .................................................................................................................................. $ 19,355 $ 17,194
Brookfield Infrastructure ............................................................................................................................
Brookfield Business Partners ......................................................................................................................
Brookfield Property Group ..........................................................................................................................
Other participating interests .......................................................................................................................
19,753
33,345
10,197
28,064
23,695
7,075
7,350
9,162
2021
54
BROOKFIELD ASSET MANAGEMENT
$ 88,386 $ 86,804
Non-controlling interests increased by $1.6 billion during the year, primarily due to:
•
•
•
•
comprehensive income attributable to non-controlling interests, which totaled $11.8 billion; and
an increase in non-controlling interests as a result of acquisitions, primarily attributable to IPL in the third
quarter of 2021; partially offset by
a decrease in non-controlling interests related to the privatization of BPY in the third quarter of 2021; and
distributions, net of equity issuances, of $5.7 billion.
CONSOLIDATION AND FAIR VALUE ACCOUNTING
As a Canadian domiciled public corporation, we report under IFRS, while many of our alternative asset manager
peers report under U.S. GAAP. There are many differences between U.S. GAAP and IFRS, but the two principal
differences affecting our consolidated financial statements compared to those of our peers are consolidation and
fair value accounting.
In particular, U.S. GAAP allows some of our alternative asset manager peers to report certain investments, which
qualify as variable interest entities, at fair value on one line in their balance sheet on a net basis as opposed to
consolidating the funds. This approach is not available under IFRS. This can create significant differences in the
presentation of our financial statements as compared to our alternative asset manager peers.
CONSOLIDATION
Our consolidation conclusions under IFRS may differ from our peers who report under U.S. GAAP for two primary
reasons:
•
•
U.S. GAAP uses a voting interest model or a variable interest model to determine consolidation requirements,
depending on the circumstances, whereas IFRS uses a control-based model. We generally have the contractual
ability to unilaterally direct the relevant activities of our funds; and
we generally invest significant amounts of capital alongside our investors and partners, which, in addition to our
customary management fees and incentive fees, means that we earn meaningful returns as a principal investor
in addition to our asset management returns compared to a manager who acts solely as an agent.
As a result, in many cases, we control entities in which we hold only a minority economic interest. For example, a
Brookfield-sponsored private fund to which we have committed 30% of the capital may acquire 60% of the voting
interest in an investee company. The contractual arrangements generally provide us with the irrevocable ability to
direct the funds’ activities. Based on these facts, we would control the investment because we exercise decision-
making power over a controlling interest of that business and our 18% economic interest provides us with exposure
to the variable returns of a principal.
All entities that we control are consolidated for financial reporting purposes. As a result, we include 100% of these
entities’ revenues and expenses in our Consolidated Statements of Operations, even though a substantial portion of
their net income is attributable to non-controlling interests. Furthermore, we include all of the assets, liabilities,
including non-recourse borrowings, of these entities in our Consolidated Balance Sheets, and include the portion of
equity held by others as non-controlling interests.
Intercompany revenues and expenses between Brookfield and its subsidiaries, such as asset management fees, are
eliminated in our Consolidated Statements of Operations; however, these items affect the attribution of net income
between shareholders and non-controlling interests. For example, asset management fees paid by our listed
affiliates to the Corporation are eliminated from consolidated revenues and expenses. However, as the common
shareholders are attributed all of the fee revenues1 while only attributed their proportionate share of the listed
affiliates’ expenses, the amount of net income attributable to common shareholders is increased with a
corresponding decrease in net income attributable to non-controlling interests.
1. See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
55
FAIR VALUE ACCOUNTING
Under U.S. GAAP, many of our alternative asset manager peers account for their funds as investment companies
and reflect their investments at fair value.
Under IFRS, as a parent company, we are required to look through our consolidated and equity accounted
investments and account for their assets and liabilities under the applicable IFRS guidance. We reflect a large
number of assets at fair value, namely our commercial properties, renewable power facilities and certain
infrastructure assets which are typically recorded at amortized cost under U.S. GAAP. However, there are other
assets that are not subject to fair value accounting under IFRS and are therefore carried at amortized cost, which
would be more consistent with U.S. GAAP.
Under both IFRS and U.S. GAAP, the value of asset management activities is generally not reflected on the balance
sheet despite being material components of the value of these businesses.
For additional details on the valuation approach for the relevant segments, critical assumptions and related
sensitivities, refer to Part 5 – Accounting Policies and Internal Controls.
FOREIGN CURRENCY TRANSLATION
Approximately half of our capital is invested in non-U.S. currencies and the cash flows generated from these
businesses, as well as our equity, are subject to changes in foreign currency exchange rates. From time to time, we
utilize financial contracts to adjust these exposures. The most significant currency exchange rates that impact our
business are shown in the following table:
Year End Spot Rate
Change
Average Rate
Change
AS AT DEC. 31
2021
2020
2019
0.7262
0.7694
0.7018
5.5804
5.1975
4.0306
1.3532
1.3670
1.3255
0.7913
0.7853
0.7699
Australian
dollar ...................
Brazilian real1
....
British pound ....
Canadian dollar
Colombian
peso1
...................
Euro .....................
2021
vs.
2020
(6) %
(7) %
(1) %
1 %
2020
vs.
2019
2021
2020
2019
10 % 0.7515
0.6908
0.6953
(22) % 5.3969
5.1546
3.9463
3 % 1.3759
1.2838
1.2767
2 % 0.7979
0.7464
0.7538
2021
vs.
2020
9 %
(4) %
7 %
7 %
(1) %
4 %
2020
vs.
2019
(1) %
(23) %
1 %
(1) %
(11) %
2 %
4,064.9
3,428.3
3,287.2
(16) %
(4) % 3,747.7
3,695.4
3,280.8
1.1370
1.2217
1.1214
(7) %
9 % 1.1831
1.1416
1.1194
1. Using Brazilian real and Colombian peso as the price currency.
Currency exchange rates relative to the U.S. dollar at the end of 2021 were lower than December 31, 2020 for all of
our significant non-U.S. dollar investments with the exception of the Canadian dollar. As at December 31, 2021, our
common equity of $42.2 billion was invested in the following currencies: U.S. dollars – 55% (2020 – 58%); Brazilian
reais – 6% (2020 – 8%); British pounds – 16% (2020 – 12%); Canadian dollars – 7% (2020 – 7%); Australian dollars – 6%
(2020 – 7%); Colombian pesos – 1% (2020 – 2%); and other currencies – 9% (2020 – 6%).
56
BROOKFIELD ASSET MANAGEMENT
The following table disaggregates the impact of foreign currency translation on our equity by the most significant
non-U.S. currencies:
2021
2020
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Australian dollar ................................................................................................................ $
Brazilian real .......................................................................................................................
British pound ......................................................................................................................
Canadian dollar ..................................................................................................................
Colombian peso .................................................................................................................
Euro ......................................................................................................................................
Other ....................................................................................................................................
Total cumulative translation adjustments ...................................................................
Currency hedges1
..............................................................................................................
Total cumulative translation adjustments net of currency hedges ....................... $
Attributable to:
(1,889) $
(1,331) $
(495) $
775 $
(2,330)
(3,215)
(1,103)
(341)
(391)
(127)
(430)
(815)
(228)
(103)
593
186
291
370
441
269
Shareholders ................................................................................................................... $
Non-controlling interests ..............................................................................................
(318) $
(332) $
(1,571)
(999)
$
(1,889) $
(1,331) $
1. Net of deferred income tax recovery of $21 million (2020 – income tax expense of $37 million).
Change
(1,270)
2,824
(497)
83
(712)
(1,023)
(632)
(1,227)
669
(558)
14
(572)
(558)
The foreign currency translation of our equity, net of currency hedges, for the year ended December 31, 2021
generated a loss of $1.9 billion. This was primarily attributable to lower year end rates for the Colombian peso,
Australian dollar and Euro, partially offset by gains on the higher year end and average rates for the Canadian
dollar.
We seek to hedge foreign currency exposure where the cost of doing so is reasonable. Due to the high historical
costs associated with hedging the Brazilian real, Colombian peso and other emerging market currencies, hedge
levels against those currencies were low at year end.
2021 ANNUAL REPORT
57
CORPORATE DIVIDENDS
The dividends paid by Brookfield on outstanding securities during 2021, 2020 and 2019, are summarized in the
following table. Dividends to the Class A and B Limited Voting Shares have been adjusted to reflect a three-for-two
stock split on April 1, 2020.
Class A and B1 Limited Voting Shares (“Class A and B shares”)2
Special distribution to Class A and B shares3
Class A Preferred Shares
.................................... $
....................................................................
Series 2 ..................................................................................................................................
Series 4 .................................................................................................................................
Series 8 ..................................................................................................................................
Series 9 ..................................................................................................................................
Series 13 ................................................................................................................................
Series 15 ................................................................................................................................
Series 17 ................................................................................................................................
Series 18 ................................................................................................................................
Series 24 ................................................................................................................................
Series 254
...............................................................................................................................
Series 26 ................................................................................................................................
Series 28 ................................................................................................................................
Series 30 ................................................................................................................................
Series 32 ................................................................................................................................
Series 345
...............................................................................................................................
Series 36 ................................................................................................................................
Series 37 ................................................................................................................................
Series 386
...............................................................................................................................
Series 407
Series 428
Series 44 ................................................................................................................................
Series 46 ................................................................................................................................
Series 48 ................................................................................................................................
...............................................................................................................................
...............................................................................................................................
Distribution per Security
2021
2020
2019
0.52 $
0.48 $
0.43
0.36
—
—
0.34
0.34
0.47
0.55
0.34
0.12
0.95
0.95
0.62
0.24
0.69
0.54
0.93
1.01
0.89
0.97
0.98
0.71
0.80
0.71
1.00
0.96
0.95
0.38
0.38
0.54
0.51
0.38
0.24
0.89
0.89
0.56
0.60
0.65
0.51
0.87
0.94
0.83
0.90
0.91
0.70
0.75
0.72
0.93
0.90
0.89
0.52
0.52
0.74
0.52
0.52
0.46
0.89
0.89
0.57
0.75
0.65
0.51
0.88
0.95
0.82
0.91
0.92
0.83
0.83
0.85
0.94
0.90
0.90
1. Class B Limited Voting Shares (“Class B shares”).
2. Adjusted to reflect the three-for-two stock split effective April 1, 2020.
3. Distribution of one class A exchangeable limited voting share of Brookfield Asset Management Reinsurance Partners Ltd. for every 145 Class A
shares and Class B shares held as of the close of business of June 18, 2021.
4. Dividend rate reset commenced the last day of each quarter. All Series 25 shares were converted into Series 24 on a one-for-one basis effective
June 30, 2021.
5. Dividend rate reset commenced March 31, 2019.
6. Dividend rate reset commenced March 31, 2020.
7. Dividend rate reset commenced September 30, 2019.
8. Dividend rate reset commenced June 30, 2020.
Dividends on the Class A and B shares are declared in U.S. dollars whereas Class A Preferred share dividends are
declared in Canadian dollars.
58
BROOKFIELD ASSET MANAGEMENT
SUMMARY OF QUARTERLY RESULTS
The quarterly variances in revenues over the past two years are due primarily to acquisitions and dispositions.
Variances in net income to shareholders relate primarily to the timing and amount of non-cash fair value changes
and deferred tax provisions, 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 Real Estate and Private Equity businesses. Other factors include the impact of foreign currency on non-U.S.
revenues, net income attributable to non-controlling interests, and the global economic shutdown.
Our Real Estate business typically generates 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.
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 real estate assets on a quarterly basis which results in variations in net income based on changes in the
value.
Renewable power hydroelectric 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 regulation or long-term sales contracts with
our investors, certain of which guarantee minimum volumes.
Revenues and direct costs in our private equity operations vary from quarter to quarter primarily due to
acquisitions and dispositions of businesses, fluctuations in foreign exchange rates, business and economic cycles,
and weather and seasonality in underlying operations. Broader economic factors and commodity market volatility
may have a significant impact on a number of our businesses, in particular within our industrials portfolio. For
example, seasonality affects our contract drilling and well-servicing operations as the ability to move heavy
equipment safely and efficiently in western Canadian oil and gas fields is dependent on weather conditions. Within
our infrastructure services, the core operating plants business of our service provider to the power generation
industry generates the majority of its revenue during the fall and spring, when power plants go offline to perform
maintenance and replenish their fuel. Some of our business services operations will typically have stronger
performance in the latter half of the year whereas others, such as our fuel marketing and road fuel distribution
businesses, will generate stronger performance in the second and third quarters. Net income is impacted by
periodic gains and losses on acquisitions, monetization and impairments.
Our residential development operations are seasonal in nature and a large portion is correlated with the ongoing
strength of the U.S. housing market 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 favorable in the latter half of the year which tends to increase construction activity levels.
2021 ANNUAL REPORT
59
Our condensed statements of operations for the eight most recent quarters are as follows:
2021
2020
FOR THE PERIODS ENDED
(MILLIONS, EXCEPT PER SHARE
Q1
AMOUNTS)
Revenues ......................................... $ 21,787 $ 19,248 $ 18,286 $ 16,410 $ 17,088 $ 16,249 $ 12,829 $ 16,586
Net income (loss) ...........................
(157)
Net income (loss) to
shareholders ...................................
Per share1
3,776
2,722
2,429
1,815
1,235
1,118
3,461
(1,493)
(656)
(293)
172
643
797
816
542
Q4
Q2
Q1
Q4
Q2
Q3
Q3
– diluted ........................................ $ 0.66 $ 0.47 $ 0.49 $ 0.77 $ 0.40 $ 0.10 $
– basic ............................................
0.49
0.69
0.51
0.79
0.41
0.10
(0.43) $
(0.20)
(0.43)
(0.20)
1. Adjusted to reflect the three-for-two stock split effective April 1, 2020.
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 ........................... $ 1,980 $
Income taxes ....................................
Net impact ........................................ $ 1,464 $
(516)
Q4
2021
2020
Q3
Q2
Q1
Q4
Q3
Q2
Q1
700 $
377 $ 2,094 $
175 $
(31) $ (1,153) $
(414)
(717)
(547)
(544)
(243)
(225)
(5)
(364)
(17) $
(170) $ 1,550 $
(68) $
(256) $ (1,158) $
(778)
Over the last eight quarters, the factors discussed below caused variations in revenues and net income to
shareholders on a quarterly basis:
•
In the fourth quarter of 2021, revenues increased relative to the prior quarter due to increased contributions
from recent acquisitions across our operating segments as well as same-store growth in most of our
businesses. The higher net income in the quarter is primarily attributable to higher fair value gains in our Real
Estate segment and lower income taxes, partially offset by lower gains from asset sale activities.
•
•
•
•
•
In the third quarter of 2021, revenues increased in comparison to the prior quarter due to same-store growth in
most of our businesses. The higher net income in the quarter is primarily attributable to higher fair value gains
in our Real Estate segment partially offset by higher income taxes.
In the second quarter of 2021, revenues increased in comparison to the prior quarter due to same-store growth
in most of our businesses. The lower net income in the quarter as compared to the first quarter of 2021, is a
result of lower fair value gains partially offset by asset sale activity within our Infrastructure segment.
In the first quarter of 2021, revenues decreased in comparison to the prior quarter primarily due to lower
same-store results due in part to seasonality across certain operating segments. The higher net income in the
quarter is a result of gains from asset sale activities.
In the fourth quarter of 2020, revenues increased in comparison to the prior quarter due to same-store growth
in most of our businesses. The higher net income in the quarter is a result of gains from asset sales in the
quarter as well as a positive contribution from our equity accounted investments and fair value changes.
In the third quarter of 2020, revenues increased relative to the prior quarter due to increased contributions
from recent acquisitions across our businesses. We had net income in the quarter, relative to the prior quarter’s
net loss, as a result of improved performance across many of our businesses and a positive contribution from
fair value changes within our consolidated investment properties, particularly within our BSREP III fund.
60
BROOKFIELD ASSET MANAGEMENT
•
In the second quarter of 2020, our revenues decreased in comparison to the prior quarter, due to the impact of
the economic shutdown for a large part of the quarter. The higher net loss in the quarter is primarily attributed
to a decline in the valuation of our investment property portfolio as cash flow assumptions were adjusted
downwards to reflect the impact of the shutdown.
•
The decrease of revenues in the first quarter of 2020 is primarily attributable to lower same-store growth as a
result of seasonality and the impact of the economic shutdown. Contributions from acquisitions across our
operating segments were partially offset by recent asset sales from our Private Equity and Renewable Power
and Transition segments. Net income also decreased due to unrealized fair value changes brought about by the
pandemic related economic shutdowns.
2021 ANNUAL REPORT
61
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 businesses and our corporate
activities, which collectively represent seven operating segments for internal and external reporting purposes. We
measure operating performance primarily using FFO generated by each operating segment and the amount of
capital invested by the Corporation in each segment using common equity. Common equity relates to invested
capital allocated to a particular business segment which we use interchangeably with segment common equity. To
further assess operating performance for our Asset Management segment we also provide unrealized carried
interest1 which represents carried interest generated on unrealized changes in value of our private fund investment
portfolios, net of realized carried interest.
Our operating segments are global in scope and are as follows:
i.
Asset Management business includes managing our long-term private funds, perpetual strategies and liquid
strategies on behalf of our investors and ourselves, as well as our share of the asset management activities of
Oaktree. 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.
Renewable Power and Transition business includes the ownership, operation and development of hydroelectric,
wind, solar and energy transition power generating assets.
iii.
Infrastructure business includes the ownership, operation and development of utilities, transport, midstream,
data and sustainable resource assets.
iv. Private Equity business includes a broad range of industries, and is mostly focused on business services,
infrastructure services and industrials.
v.
Real Estate business includes the ownership, operation and development of core investments, transitional and
development investments, and our share of LP investments, which sit within our private funds.
vi. Residential Development business consists 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 leverage, 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 assessing operating performance and capital allocation, we separately identify the portion of FFO and common
equity within our segments that relate to our perpetual affiliates (BEP, BIP, BBU, BPG). We believe that identifying
the FFO and common equity attributable to our perpetual affiliates enables investors to understand how the results
of these entities are integrated into our financial results and is helpful in analyzing variances in FFO between
reporting periods. Additional information with respect to these perpetual affiliates is available in their public filings.
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.
1.
See definition in Glossary of Terms beginning on page 136.
62
BROOKFIELD ASSET MANAGEMENT
SUMMARY OF RESULTS BY OPERATING SEGMENT
The following table presents revenues, FFO and common equity by segment on a year-over-year basis for
comparative purposes:
Revenues1
2020
FFO
2021
2021
2020
Change
Common Equity
AS AT AND FOR THE YEARS
ENDED DEC. 31
(MILLIONS)
Asset Management ........... $ 5,236 $ 3,524 $ 1,712 $ 2,614 $ 1,776 $
Renewable Power and
Transition ............................
Infrastructure .....................
Private Equity .....................
Real Estate ..........................
Residential Development
Corporate Activities ..........
(1,956)
Total segments .................. $ 81,112 $ 66,682 $ 14,430 $ 7,558 $ 5,180 $ 2,378 $ 42,210 $ 31,693 $ 10,517
838 $ 4,905 $ 4,947 $
12,673
2,646
8,908
1,072
1,095
(6,986)
(8,942)
37,775
19,331
9,301
1,044
3,965
5,154
2,243
2,730
8,883
2,552
4,085
11,947
46,683
32,004
4,580
2,560
9,955
2,030
3,022
1,185
3,565
1,044
2,392
5,264
Change
Change
(370)
(338)
(400)
(720)
(284)
2020
2021
(42)
(86)
935
192
309
110
470
228
569
876
495
317
871
151
797
258
66
—
1. Revenues include inter-segment revenues which are adjusted to arrive at external revenues for IFRS purposes. Please refer to Note 3(c) of the
consolidated financial statements for further details.
Total revenues and FFO were $81.1 billion and $7.6 billion in the current year, compared to $66.7 billion and
$5.2 billion in the prior year, respectively. FFO includes realized disposition gains of $3.1 billion, compared to
$1.6 billion in the prior year. Excluding disposition gains, FFO increased by $848 million from the prior year.
Revenues increased primarily due to organic growth initiatives across our businesses and from acquisitions
completed in the year across most segments. These increases were partially offset by sales of operating businesses
in the year.
The increase in FFO is primarily a result of:
•
•
•
•
•
•
increased fee-related earnings in our Asset Management segment driven by significant capital inflows and
strong capital deployment efforts, as well as an increase in realized carried interest1 from monetizations;
increased volumes across most operations in our Infrastructure segment;
higher contributions from our residential mortgage insurer in Canada within our Private Equity segment as a
result of our increased ownership and strong business performance;
improved contributions from our hospitality portfolio within our Real Estate segment;
organic growth in other businesses, as well as contributions from recent acquisitions net of the impact of asset
sales; and
realized disposition gains of $3.1 billion primarily from the disposition of our stake in West Fraser, the partial
sale of our graphite electrode operations within our Private Equity segment, the secondary offering of BEPC
shares in our Renewable Power and Transition segment, and the sale of our Canadian and U.S. district energy
operations within our Infrastructure segment; partially offset by
•
the absence of contributions from Norbord within our Private Equity segment as a result of the West Fraser -
Norbord strategic business combination in February 2021; and
• mark-to-market losses on our financial assets portfolio in our Corporate segment.
Common equity increased by $10.5 billion during 2021 to $42.2 billion, primarily as a result of net income
attributable to shareholders, shares issued and a gain recorded directly into equity associated with the privatization
of BPY and annual revaluation gains of our PP&E in our Renewable Power and Transition segment. These items
were partially offset by dividends paid and foreign currency translation losses.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
63
ASSET MANAGEMENT
BUSINESS OVERVIEW
Our asset management business is a premier global alternative asset manager, with approximately $690 billion in
assets under management and operations spanning more than 30 countries on five continents. We have over
1,000 investment professionals that employ a disciplined investment approach to create value and deliver strong
risk-adjusted returns for our clients across market cycles.
With an over 100-year heritage as a global owner and operator of real assets, we focus on investing in the backbone
of the global economy across renewable power and transition, infrastructure, private equity, real estate and credit.
We put our own capital to work alongside our investors’ in virtually every transaction, aligning interests and bringing
the strengths of our operational expertise, global reach and large-scale capital to bear on everything we do.
We offer our clients a large and growing number of investment products to assist them in achieving their financial
goals, providing a diverse set of long-term and perpetual private funds and dedicated public vehicles across each of
the asset classes in which we invest and spanning various investment strategies.
As the asset manager of these investment products, we earn base management fees in addition to incentive
distributions, performance fees, or carried interest depending on the product offering.
Our asset management business focuses on raising capital by establishing new investment products for our clients,
identifying and acquiring high-quality assets, delivering strong underlying investment performance and executing
timely monetizations or refinancings. If we execute in these areas, this should equate to growth in fee-bearing and
carry eligible capital1 and in turn higher fee revenues, fee-related earnings and realized carried interest over time.
1.
See definition in Glossary of Terms beginning on page 136.
64
BROOKFIELD ASSET MANAGEMENT
FIVE-YEAR REVIEW
Our asset management business has grown considerably over the past five years, nearly tripling in size. We have
scaled our flagship private funds and the capitalization or NAV of our perpetual affiliates has grown as a result of
strong investment and operating performance leading to higher market prices and increased capital market activity.
Our liquid credit strategies have also grown significantly, benefitting from the partnership with Oaktree in late 2019.
The result has been a 30% compound annual growth rate in fee-bearing capital, which has contributed to both
higher base management fee revenues and higher incentive distributions. Total fee-related earnings over the last
five years have grown by a CAGR of 23% as a result.
Over that same time period, our earlier vintage funds have matured, allowing us to realize significant amounts of
carried interest. Our accumulated unrealized carried interest1 has increased from $2.1 billion to $6.8 billion over the
past five years due to strong investment performance, as well as the growth in our fund sizes, the addition of new
products and the aforementioned partnership with Oaktree. As our asset management business has grown and
become more diversified, so has the nature of our carried interest. We expect to realize an increasing amount of
carried interest as our funds continue to monetize investments and return significant capital to investors.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
65
OUTLOOK AND GROWTH INITIATIVES
Alternative assets provide an attractive investment opportunity to institutional and high net worth investors. In
periods when global interest rates are low, alternatives continue to be an attractive investment as they have
demonstrated the ability to provide attractive risk adjusted returns and retain their value across cycles. These asset
classes also provide investors with alternatives to fixed income investments by providing a strong, inflation-linked
return profile. Institutional investors, in particular pension funds, must earn and generate returns to meet their
long-term obligations while protecting their capital. As a result, inflows to alternative asset managers are continuing
to grow and managers are focused on new product development to meet this demand.
Our business model has proven to be resilient through economic cycles, due to our strong foundation and
discipline. Overall, our business is stronger and more diversified than ever and well positioned to deliver continued
growth.
During 2021, we raised $71 billion of capital across our flagship and complementary strategies, and looking forward,
our business plan remains essentially unchanged. We are making good progress on our $100 billion fundraising
target related to this round of our flagship funds. We have held a final close for our $16 billion opportunistic credit
fund and raised $12 billion each for our inaugural transition fund and our fourth flagship real estate fund.
In addition to our flagship funds, we are actively progressing our growth strategies, including insurance solutions,
secondaries, technology and transition. These new initiatives, in addition to our five flagship funds and new,
innovative products are expected to have a very meaningful impact on our growth trajectory in the long term.
We continue to expand our investor base through existing relationships and new channels. As of the end of 2021,
we have approximately 2,100 investors with a strong base in North America and a growing proportion of third-party
commitments from Asia, Europe, the Middle East and Australia. Our high-net-worth channel also continues to grow
and is now close to 10% of current commitments today. We have a dedicated team of 70+ people that are focused
on distributing and developing catered products to the private wealth channel.
Long-term Private Funds – $169 billion fee-bearing capital
We manage and earn fees on a diverse range of renewable power and transition, infrastructure, private equity, real
estate and credit funds. These funds have a long duration, are closed-end and include opportunistic, value-add, core
and core plus investment strategies.
On long-term private fund capital, we earn:
1. Diversified and long-term base management fees on capital that is typically committed for 10 years with two
one-year extension options.
2. Carried interest, which enables us to receive a portion of overall fund profits provided that investors receive a
minimum prescribed preferred return. Carried interest is recognized when a fund’s cumulative returns are in
excess of preferred returns and when it is highly probable that a significant reversal will not occur.
3.
Transaction and advisory fees are one-time fees earned on co-investment capital related to the close of
transactions, and vary based on transaction agreements.
Perpetual Strategies – $115 billion fee-bearing capital
We manage perpetual capital in our perpetual affiliates, as well as in our core and core plus private funds, which can
continually raise new capital. From our perpetual strategies, we earn:
1.
Long-term perpetual base management fees, which are based on total capitalization or NAV of our perpetual
affiliates and the NAV of our perpetual private funds.
2.
Stable incentive distribution fees which are linked to cash distributions from perpetual affiliates (BEP/BEPC and
BIP/BIPC) that exceed pre-determined thresholds. These cash distributions have a historical track record of
growing annually and each of these perpetual affiliates target annual distribution growth rates within a range
of 5-9%.
66
BROOKFIELD ASSET MANAGEMENT
3. Performance fees based on unit price performance (BBU) and carried interest on our perpetual private funds.
Liquid Strategies – $80 billion fee-bearing capital
We manage publicly listed funds and separately managed accounts, focused on fixed income and equity securities
across real estate, infrastructure and natural resources. We earn base management fees, which are based on
committed capital and fund NAV, and performance income based on investment returns.
FEE-BEARING CAPITAL
The following table summarizes fee-bearing capital:
AS AT DEC. 31
(MILLIONS)
Renewable power and transition ...... $
Infrastructure .........................................
Private equity .........................................
Real estate ..............................................
Credit and other ....................................
December 31, 2021 ............................. $
December 31, 2020 .............................. $
Long-Term
Private Funds
Perpetual
Strategies
Liquid
Strategies
Total 2021
Total 2020
20,682 $
26,843 $
— $
47,525 $
—
—
—
67,736
34,395
82,282
45,440
62,535
30,931
61,519
31,119
26,079
52,332
39,067
36,617
8,316
29,950
12,898
169,279 $
114,624 $
80,230 $
364,133
n/a
135,462 $
103,361 $
72,797
n/a
$
311,620
80,230
132,195
111,195
We have approximately $40 billion of additional committed capital that does not currently earn fees but will
generate approximately $400 million in annual fees once deployed.
Fee-bearing capital increased by $52.5 billion during the year. The changes are set out in the following table:
AS AT AND FOR THE
YEAR ENDED DEC. 31,
2021
(MILLIONS)
Balance,
December 31,
2020 ........................ $
Inflows ....................
Outflows ................
Distributions .........
Market valuation ..
Other ......................
Change ...................
Balance,
December 31,
2021 ........................ $
Renewable Power
and Transition
Infrastructure
Private
Equity
Real Estate
Credit and
Other
Total
45,440 $
62,535 $
30,931 $
61,519 $
111,195 $
311,620
10,510
—
(1,427)
(6,169)
(829)
2,085
4,619
—
(3,708)
5,426
(1,136)
5,201
2,435
—
(1,175)
1,922
282
3,464
16,406
28,821
(385)
(8,970)
62,791
(9,355)
(2,943)
(1,855)
(11,108)
6,707
978
20,763
4,921
(1,917)
21,000
12,807
(2,622)
52,513
47,525 $
67,736 $
34,395 $
82,282 $
132,195 $
364,133
Renewable Power and Transition fee-bearing capital increased by $2.1 billion, due to:
•
•
•
$10.5 billion of inflows largely driven by the $9.3 billion of third-party capital raised for our global transition
fund; partially offset by
$6.2 billion decrease in market valuations largely as a result of the lower market capitalization of BEP; and
$1.4 billion of distributions, including quarterly distributions paid to BEP’s unitholders.
Infrastructure fee-bearing capital increased by $5.2 billion, due to:
•
•
•
$5.4 billion increase in market valuations as a result of a higher market capitalization of BIP; and
$4.6 billion of inflows with $3.5 billion raised from capital market issuances and capital deployed in our long-
term private funds within the segment; partially offset by
$3.7 billion of distributions, including quarterly distributions paid to BIP’s unitholders and capital returned to
investors.
2021 ANNUAL REPORT
67
Private Equity fee-bearing capital increased by $3.5 billion, due to:
•
•
•
$2.4 billion of inflows from capital deployed in our long-term private funds within the segment; and
$1.9 billion increase in market valuations as a result of the higher market capitalization of BBU; partially offset
by
$1.2 billion of distributions, including quarterly distributions paid to BBU’s unitholders and capital returned to
investors.
Real Estate fee-bearing capital increased by $20.8 billion, due to:
•
•
•
$16.4 billion of inflows mainly relating to capital raised for our fourth flagship fund as well as capital deployed
across various other strategies; and
$6.7 billion increase from higher valuations in our perpetual strategies during the year; partially offset by
$2.9 billion of distributions, including quarterly distributions paid to unitholders.
Credit and Other fee-bearing capital increased by $21.0 billion, due to:
•
•
•
•
$28.8 billion of inflows from our credit and insurance solutions strategies as a result of reinsurance agreements
closed during the year, capital deployed in our closed-end credit funds, and capital raised in our open-end
funds; and
$4.9 billion increase in market valuations across our perpetual private and liquid strategies; partially offset by
$9.0 billion of outflows primarily due to redemptions within open-end credit funds and our liquid strategies;
and
$1.9 billion of distributions largely from our credit long-term private funds.
CARRY ELIGIBLE CAPITAL
Carry eligible capital increased by $34.7 billion during the year to $174.3 billion as at December 31, 2021 (2020 –
$139.6 billion). The increase was related to new commitments for our fourth flagship real estate fund, our first
global transition fund, our sixth real estate debt fund, and other perpetual private funds raised during the year,
partially offset by the return of capital across various funds.
As at December 31, 2021, $112.7 billion of carry eligible capital was deployed (2020 – $90.8 billion). This capital is
either currently earning carried interest or will begin earning carried interest once its related funds have reached
their preferred return threshold. There are currently $61.6 billion of uncalled fund commitments that will begin to
earn carried interest once the capital is deployed and fund preferred returns are met (2020 – $48.8 billion).
OPERATING RESULTS
Asset management FFO includes fee-related earnings and realized carried interest earned by us in respect of capital
managed for our investors. Fee-related earnings also include fees earned on the capital invested by us in the
perpetual affiliates. This is representative of how we manage the business and measure the returns from our asset
management activities.
To facilitate analysis, the following table disaggregates our Asset Management segment revenues and FFO into fee-
related earnings and realized carried interest, net, as these are the measures that we use to analyze the
performance of the Asset Management segment. We also analyze unrealized carried interest, net, to provide insight
into the value our investments have created in the period.
68
BROOKFIELD ASSET MANAGEMENT
We have provided additional detail, where referenced, to explain significant variances from the prior year.
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Fee-related earnings ...............................................................................
Realized carried interest ........................................................................
Asset management .................................................................................
Ref.
i
ii
2021
2020
2020
$ 3,523 $ 2,840 $ 1,899 $ 1,428
348
$ 5,236 $ 3,524 $ 2,614 $ 1,776
1,713
2021
684
715
Revenues
FFO
Unrealized carried interest
Generated ..............................................................................................
Foreign exchange .................................................................................
Less: direct costs .....................................................................................
Unrealized carried interest, net ...........................................................
Less: unrealized carried interest not attributable to BAM .............
iii
$ 5,001 $ 1,206
(39)
1,167
(494)
673
(117)
556
(236)
4,765
(1,574)
3,191
(419)
$ 2,772 $
i.
Fee-Related Earnings
FOR THE YEARS ENDED DEC. 31
2020
(MILLIONS)
2021
Fee revenues
Base management fees .............................................................................................................................. $ 3,040 $ 2,509
Incentive distributions ................................................................................................................................
306
Performance fees .........................................................................................................................................
Transaction and advisory fees ..................................................................................................................
157
315
25
11
—
Less: direct costs ............................................................................................................................................
(1,468)
(1,296)
Less: fee-related earnings not attributable to BAM ...............................................................................
(116)
Fee-related earnings ..................................................................................................................................... $ 1,899 $ 1,428
(156)
2,055
1,544
3,523
2,840
Fee-related earnings increased to $1.9 billion at our share, mainly due to higher base management fees driven by
increased fee-bearing capital and performance fees from BBU, partially offset by lower transaction and advisory
fees and increased direct costs.
Base management fees increased by $531 million to $3.0 billion, a 21% increase from 2020. The increase is broken
down as follows:
•
•
•
•
•
$235 million increase in our Real Estate segment largely due to fundraising for our fourth flagship fund, higher
valuations across our perpetual strategies and capital deployed during the year;
$140 million increase in our Credit and Other business due to capital deployed within our closed-end funds and
market valuation increases in our perpetual and liquid strategies;
$85 million increase from our Infrastructure segment, primarily as a result of BIP’s increased market
capitalization and capital market issuances;
$52 million increase from our Renewable Power and Transition segment as a result of the increased average
market capitalization of BEP during the year compared to prior year; and
$19 million increase from our Private Equity segment due to the increased market capitalization of BBU.
Incentive distributions across our perpetual affiliates increased by $9 million to $315 million, a 3% increase from
2020 as higher incentive distributions earned from BIP and BEP due to higher distribution levels were partially offset
by the absence of BPY’s incentive distributions fees following its privatization in the third quarter of 2021.
2021 ANNUAL REPORT
69
Direct costs consist primarily of employee expenses and professional fees, as well as business related technology
costs and other shared services. Direct costs increased $172 million or 13% from the prior year as we continue to
scale our asset management franchise, including enhancing our fundraising and client service capabilities as well as
developing new complementary strategies.
The margin on our fee-related earnings before performance fees, including our 62% share of Oaktree’s fee-related
earnings, was 59% in the current year (2020 – 57%). Our fee-related earnings margin before performance fees,
including 100% of Oaktree’s fee-related earnings, was 56% in the current year (2020 – 54%).
ii. Realized Carried Interest
We realize carried interest when a fund’s cumulative returns are in excess of preferred returns and are no longer
subject to future investment performance (e.g., subject to “clawback”). During the quarter, we realized $715 million
of carried interest, net of direct costs (2020 – $348 million). Realizations during the year were primarily driven by
monetization activities in our Credit and Other, Infrastructure and Real Estate businesses.
We provide supplemental information and analysis below on the estimated amount of unrealized carried interest
(see Section iii) that has accumulated based on fund performance up to the date of the consolidated financial
statements.
iii. Unrealized Carried Interest
The amounts of accumulated unrealized carried interest and associated costs are not included in our Consolidated
Balance Sheets or Consolidated Statements of Operations as they are still subject to clawback. These amounts are
shown in the following table:
2021
2020
Direct
Costs
Net
Carried
Interest
Direct
Costs
Net
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Accumulated unrealized, beginning of year .. $
Carried
Interest
4,695 $ (1,774) $ 2,921 $
In-period change
Unrealized in the year .....................................
Foreign currency revaluation ........................
5,001
(1,631)
3,370
(236)
57
(179)
4,765
(1,574)
3,191
Less: realized .....................................................
(1,713)
3,052
7,747
786
(788)
(2,562)
(927)
2,264
5,185
Accumulated unrealized, end of year .............
Carried interest not attributable to BAM
shareholders ....................................................
Accumulated unrealized, end of year, net ..... $
4,212 $ (1,553) $ 2,659
1,206
(39)
1,167
(684)
483
(516)
22
(494)
273
(221)
690
(17)
673
(411)
262
4,695
(1,774)
2,921
(962)
496
(466)
(671)
351
(320)
6,785 $ (2,066) $ 4,719 $
4,024 $ (1,423) $ 2,601
Unrealized carried interest generated in the current year before foreign exchange and associated costs was
$5.0 billion, primarily related to increased valuations across our strategies.
Accumulated unrealized carried interest, net1, totaled $6.8 billion at December 31, 2021. We estimate approximately
$2.1 billion of associated costs related to the future realization of the accumulated amounts to date, predominantly
related to employee long-term incentive plans and taxes that will be incurred. We expect to recognize $2.4 billion of
this carry at our share, before costs, within the next three years; however, realization of this carried interest is
dependent on future investment performance and the timing of monetizations.
1.
See definition in Glossary of Terms beginning on page 136.
70
BROOKFIELD ASSET MANAGEMENT
RENEWABLE POWER AND
TRANSITION
BUSINESS OVERVIEW
• We own and operate renewable power and transition assets primarily through our 48% economic ownership
interest1 in BEP, which is listed on the NYSE and TSX and had a market capitalization of $23.3 billion at
December 31, 2021.
•
BEP owns one of the world’s largest publicly traded renewable power portfolios.
OPERATIONS
Hydroelectric
• We operate and invest in 229 hydroelectric generating stations on 87 river systems in North America, Brazil and
Colombia. Our hydroelectric operations have 8,133 megawatts (“MW”) of installed capacity and annualized long-
term average (“LTA”)1 generation of 19,959 gigawatt hours (“GWh”) on a proportionate basis1.
Wind
•
Our wind operations include 104 wind facilities globally with 5,411 MW of installed capacity and annualized LTA
generation of 6,607 GWh on a proportionate basis.
Solar
•
Our solar operations include 87 solar facilities globally with 2,633 MW of installed capacity and 2,153 GWh of
annualized LTA generation on a proportionate basis.
Energy Transition
•
•
Our distributed generation operation includes 5,572 facilities with 1,447 MW of installed capacity and 861 GWh
of annualized LTA generation on a proportionate basis.
Our storage operations have 3,425 MW of installed capacity at our eleven facilities and two river systems in
North America and Europe.
Energy Contracts
•
•
Based on LTA, we purchase approximately 3,600 GWh of power from BEP each year pursuant to a long-term
contract at a predetermined price, which represents 12% of BEP’s power generation.
The fixed price that we are required to pay BEP began gradually stepping down in 2021 by $3/MWh a year. This
will continue until 2025, followed by a $5/MWh reduction in 2026 resulting in an approximate $20/MWh total
reduction. The contract expires in 2046. Refer to Part 5 – Accounting Policies and Internal Controls for additional
information.
• We sell the power into the open market and also earn ancillary revenues, such as capacity fees and renewable
power credits. This provides us with increased participation in future increases or decreases in power prices.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
71
OUTLOOK AND GROWTH INITIATIVES
Revenues in our Renewable Power and Transition segment are 90% contracted with an average contract term of
15 years, on a proportionate basis, with pricing that is inflation linked. By combining this with a stable, low cost
profile, we are able to achieve consistent growth year over year within our existing business. In addition, we
consistently identify capital development projects that provide an additional source of growth. Our development
pipeline represents approximately 62,000 MW of potential capacity globally, of which 8,982 MW are currently under
construction or are construction-ready. We expect this pipeline to contribute an incremental $102 million to BEP’s
FFO when commissioned. We also have a strong track record of expanding our business through accretive
acquisitions and will continue to seek out these opportunities.
We believe that the growing global demand for low-carbon energy, especially amongst corporate off takers, will lead
to continued growth opportunities for us in the future. In 2022, we intend to remain focused on progressing our key
priorities, which include surfacing margin expansion opportunities, progressing our development pipeline and
assessing select contracting opportunities across the portfolio. We believe the investment environment for
renewable power remains favorable and we expect to continue to advance our pipeline of acquisition opportunities.
SUMMARY OF OPERATING RESULTS
The following table disaggregates segment revenues and our share of FFO and common equity of entities in our
Renewable Power and Transition segment, which was previously referred to as our Renewable Power segment. We
have provided additional detail, where referenced, to explain significant movements from the prior year.
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Renewable1
Energy contracts .......................................
Realized disposition gains .......................
............................
Ref.
iii
ii
i
Revenues
FFO
Common Equity
2021
2020
2021
2020
2021
2020
$ 4,641 $ 4,151 $
350 $
397 $ 4,641 $ 4,573
(61)
—
(66)
—
(106)
800
(126)
773
623
—
581
—
$ 4,580 $ 4,085 $ 1,044 $
1,044 $ 5,264 $ 5,154
1. Brookfield’s interest in BEP consists of 194.5 million redemption-exchange units, 68.7 million Class A limited partnership units, 4.0 million general
partnership units, as well as 44.8 million Class A shares in Brookfield Renewable Corporation (“BEPC”), together representing an economic
interest of 48% of BEP.
Compared to the prior year, revenues increased by $495 million and FFO remained consistent. The increase in
revenues was driven by contributions from organic growth initiatives and recent acquisitions, as well as higher
realized prices across most markets. These increases were partially offset by recently completed asset sales and a
lower ownership stake in BEP versus prior year. Excluding realized disposition gains, FFO decreased by $27 million
primarily due to the aforementioned decreased ownership in BEP, lower generation in the U.S. and higher
management fee expenses, partially offset by strong pricing across most of our operations.
72
BROOKFIELD ASSET MANAGEMENT
i.
Brookfield Renewable
The following table disaggregates BEP’s generation and FFO by business line to facilitate analysis of the year-over-
year variances:
Actual
Generation (GWh)1
Long-Term
Average (GWh)1
FFO
2021
18,046
FOR THE YEARS ENDED DEC.31
(GIGAWATT HOURS AND MILLIONS)
Hydroelectric ............................................................
Wind ............................................................................
Solar ............................................................................
Energy transition .....................................................
Corporate ..................................................................
Attributable to unitholders ....................................
Non-controlling interests and other2
..................
Segment reallocation3
............................................
Brookfield’s interest ................................................
6,096
1,777
1,231
—
27,150
2020
2021
2020
2021
2020
18,525 19,726
19,658 $
639 $
5,448
7,249
1,284
2,016
795
—
861
—
6,355
1,510
475
—
26,052 29,852
27,998
396
185
162
(448)
934
(524)
(60)
$
350 $
662
237
139
103
(334)
807
(386)
(24)
397
1. Proportionate to BEP; see “Proportionate basis generation” in Glossary of Terms beginning on page 136.
2.
Includes incentive distributions paid to Brookfield of $80 million (2020 – $65 million) as the general partner of BEP.
3. Segment reallocation refers to disposition gains, net of NCI, included in BEP’s operating FFO that we reclassify to realized disposition gains. This
allows us to present FFO attributable to unitholders on the same basis as BEP in the above table.
BEP’s FFO for 2021 was $934 million, of which our share was $350 million, compared to $397 million in the prior
year. Generation for the year totaled 27,150 GWh, 9% below the LTA. However, this represents a 4% increase in
actual generation compared to the prior year, mainly attributable to recent acquisitions partially offset by lower
hydrology levels. Key variances for our businesses are described below.
Hydroelectric
FFO in the current year was $23 million lower than the prior year due to lower generation in North America, partially
offset by higher realized market prices in the U.S. and the benefit of inflation indexation.
Wind
FFO in the current year included a $104 million gain on the sale of certain development assets in Europe and the
U.S. Excluding the impact of this gain, FFO increased by $55 million due to an incremental contribution from
the privatization of TerraForm Power, Inc. (“TERP”)1, as well as higher market prices and generation in Europe. These
increases were partially offset by lower generation in Canada.
Solar
FFO from our solar operations was $46 million higher than the prior year mainly as a result of our increased
ownership in TERP, newly commissioned facilities and recently acquired solar assets.
Energy Transition
FFO from our energy transition business increased by $59 million from the prior year due to the growth of our
distributed generation portfolio through our increased ownership in TERP, as well as other recent acquisitions.
Corporate
The corporate FFO deficit increased by $114 million as a result of increased management fees due to a higher
average market capitalization of BEP throughout the year.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
73
ii.
Energy Contracts
During the year, we purchased 3,283 GWh (2020 – 2,988 GWh) from BEP at $77 per MWh (2020 – $80 per MWh) and
sold the purchased generation at an average selling price of $46 per MWh (2020 – $39 per MWh). As a result, we
incurred an FFO deficit of $106 million compared to a deficit of $126 million in the prior year.
iii. Realized Disposition Gains
Disposition gains of $800 million for the year largely relate to the sale of BEPC shares through a secondary offering,
as well as the sale of certain wind assets.
Prior year disposition gains of $773 million mainly relate to the sale of BEP units and BEPC shares.
COMMON EQUITY
Common equity in our Renewable Power and Transition segment increased to $5.3 billion as at December 31, 2021
from $5.2 billion as at December 31, 2020. Contributions from FFO and revaluation gains were partially offset by the
foreign exchange impact on invested capital denominated in foreign currencies as well as our lower ownership from
the secondary offering of BEPC shares in the year. Our Renewable Power and Transition PP&E is revalued annually.
For further information, refer to our Revaluation Method for PP&E within Part 5 – Accounting Policies and Internal
Controls.
74
BROOKFIELD ASSET MANAGEMENT
INFRASTRUCTURE
BUSINESS OVERVIEW
• We own and operate infrastructure assets primarily through our 27% economic ownership interest in BIP,
which is listed on the NYSE and TSX and had a market capitalization of $31.8 billion at December 31, 2021.
•
BIP is one of the largest globally diversified owners and operators of infrastructure in the world.
• We also have direct investments in sustainable resource operations.
PRINCIPAL OPERATIONS
Utilities
•
•
Our regulated transmission business includes ~61,000 km of operational electricity transmission and
distribution lines in Australia, ~4,200 km of natural gas pipelines in North America, South America and India,
and ~5,300 km of transmission lines in Brazil, of which ~3,600 km are operational.
Our commercial and residential distribution business provides residential energy infrastructure services to
~1.9 million customers annually in the U.S., Canada, Germany, and U.K., and ~360,000 long-term contracted
sub-metering services within Canada. We own and operate ~7.3 million connections, mainly electricity and
natural gas in the U.K and Colombia.
•
These businesses typically generate long-term returns on a regulated or contractual asset base which increase
with capital we invest to upgrade and/or expand our systems.
Transport
• We operate ~22,000 km of railroad track in North America and Europe, ~5,500 km of railroad track in the
southern half of Western Australia and ~4,800 km of railroad track in Brazil.
•
•
•
Our toll road operations include ~3,800 km of motorways in Brazil, Peru and India.
Our diversified terminals operations include 13 terminals in North America, the U.K., and Australia, and we
provide ~30 million tonnes per annum in our LNG export terminal in the U.S. and ~85 million tonnes per annum
in our export facility in Australia.
These operations are comprised of networks that provide transportation for freight, commodities and
passengers. This includes businesses with price ceilings as a result of regulation, such as our rail and toll road
operations, as well as unregulated businesses, such as our diversified terminals.
Midstream
• We own and operate ~15,000 km of transmission pipelines, primarily in the U.S., and ~600 billion cubic feet of
natural gas storage in the U.S. and Canada. There are 17 natural gas and natural gas liquids processing plants
with ~5.7 Bcf per day of gross processing capacity and ~3,400 km of natural gas pipelines in Canada.
• We own and operate ~3,300 km of long-haul pipelines, ~3,900 km of short-haul/gathering pipelines and a
petrochemical complex in Canada.
•
These operations are comprised of businesses, typically unregulated or subject to price ceilings, that provide
transmission and storage services, with profitability based on the volume and price achieved for the provision
of these services.
2021 ANNUAL REPORT
75
Data
• We own and operate ~148,000 operational telecom towers in India, ~8,000 multi-purpose towers and active
rooftop sites in France and ~10,000 km of fiber backbone located in France and Brazil. In addition, we own
~1,600 cell sites and over 12,000 km of fiber optic cable in New Zealand as well as ~2,100 active telecom towers
and 70 distributed antenna systems primarily located in the U.K.
•
•
In our data storage business, we manage 50 data centers with ~1.4 million square feet of raised floors and
200 MW of critical load capacity.
These businesses provide critical infrastructure and essential services to media broadcasting and telecom
sectors and are secured by long-term inflation-linked contracts.
OUTLOOK AND GROWTH INITIATIVES
Our infrastructure business owns and operates assets that are critical to the global economy. Our expertise in
managing and developing such assets make us ideal partners for our stakeholders. Our goal is to continue to
demonstrate our stewardship of critical infrastructure which should enable us to participate in future opportunities
to acquire high-quality infrastructure businesses.
Approximately 70% of FFO should benefit from inflationary tariff increases and approximately 40% of FFO should
benefit from GDP growth by capturing increased volumes. As a result, we are able to achieve consistent growth year
over year within our existing business. In addition, we have been able to identify capital development projects that
provide an additional source of growth. At the end of 2021, total capital to be commissioned in the next two to three
years is approximately $4.5 billion. Our backlog, coupled with inflation indexation and higher volumes from our GDP
sensitive businesses, should result in another year of same-store growth at the high end of our 6 to 9% target range.
For the upcoming year, we have already secured half of our $1.5 billion new investment deployment target for 2022.
SUMMARY OF OPERATING RESULTS
The following table disaggregates segment revenues and our share of FFO and common equity of entities in our
Infrastructure segment. We have provided additional detail, where referenced, to explain significant movements
from the prior year.
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Infrastructure1
Sustainable resources and other ............
Realized disposition gains .........................
.........................
Ref.
iii
ii
i
Revenues
FFO
Common Equity
2021
2020
2021
2020
2021
2020
$ 11,709 $ 9,068 $
411 $
358 $ 2,696 $ 1,920
238
—
233
—
15
371
10
201
326
—
632
—
$ 11,947 $ 9,301 $
797 $
569 $ 3,022 $ 2,552
1. Brookfield’s interest consists of 129.1 million redemption-exchange units, 0.2 million limited partnership units, 1.6 million general partnership
units of BIP LP, as well as 8.7 million Class A shares in Brookfield Infrastructure Corporation (“BIPC”), together representing an economic interest
of approximately 27% of BIP.
Revenues and FFO generated by our Infrastructure segment increased by $2.6 billion and $228 million, respectively,
compared to the prior year. Excluding realized disposition gains, FFO increased by $58 million. These increases were
primarily driven by organic growth across our operations and the contribution from acquisitions completed in the
current year. These increases were partially offset by recent dispositions and higher management fee expenses.
76
BROOKFIELD ASSET MANAGEMENT
i.
Brookfield Infrastructure
The following table disaggregates BIP’s FFO by business line to facilitate analysis of the year-over-year variances:
FOR THE YEARS ENDED DEC. 31
2020
(MILLIONS)
Utilities .............................................................................................................................................................. $
Transport .........................................................................................................................................................
Midstream .......................................................................................................................................................
Data ...................................................................................................................................................................
Corporate .........................................................................................................................................................
Attributable to unitholders ..........................................................................................................................
Non-controlling interests and other1
........................................................................................................
Segment reallocation2
Brookfield’s interest ...................................................................................................................................... $
...................................................................................................................................
705 $
411 $
(1,301)
1,733
1,454
(403)
2021
(21)
289
358
659
590
196
492
701
238
(1,083)
(280)
(13)
1.
Includes incentive distributions paid to Brookfield of $207 million (2020 – $183 million) as the general partner of BIP.
2. Segment reallocation refers to certain items, net of NCI, included in BIP’s FFO that we reclassify. This allows us to present FFO attributable to
unitholders on the same basis as BIP in the table above.
BIP’s FFO for 2021 was $1.7 billion, of which our share was $411 million compared to $358 million in the prior year.
Key variances for our businesses are described below and on the following page.
Utilities
FFO in our utilities operations of $705 million was $46 million higher than the prior year. The increase was primarily
due to:
•
•
•
•
a recovery in connections activity at our U.K. regulated distribution business as pandemic related restrictions
impacted prior year;
benefits of inflation indexation and capital commissioned; and
contributions associated with the acquisition of the remaining interest in our Brazilian regulated gas
transmission business, completed in the second quarter of the year; partially offset by
the sales of our portfolio of smart meters in the U.K. and our district energy operations in North America during
the year.
Transport
FFO in our transport operations of $701 million was $111 million higher than the prior year. The increase is
primarily due to:
•
•
•
inflationary tariff increases and a recovery in toll road volumes driven by higher activity globally; and
contributions from our acquisition of our U.S. LNG export terminal; partially offset by
the absence of contributions associated with the partial sale of our Australian export terminal in the prior year,
as well as the sale of our Chilean toll road operation in the current quarter.
Midstream
FFO from our midstream operations of $492 million was $203 million higher than the prior year. The increase is
primarily due to:
•
•
•
contributions from our acquisition of IPL during the year;
exceptional performance at our gas storage operations due to extreme cold weather conditions experienced in
the U.S. in the first quarter;
higher market sensitive revenues from elevated commodity prices; and
2021 ANNUAL REPORT
77
•
•
the commissioning of our expansion project at our U.S. gas pipeline; partially offset by
the absence of FFO after the monetization of a 12.5% ownership in our U.S. gas pipeline in the first quarter.
Data
FFO from our data operations of $238 million was $42 million higher than the prior year primarily due to organic
growth supported by the build out of towers and contributions from our Indian telecom business acquired in the
third quarter of 2020, as well as additional towers and the roll-out of our fiber-to-the-home program at our French
telecom business.
Corporate
The Corporate FFO deficit of $403 million increased by $123 million from the prior year largely as a result of higher
base management fees from a higher market capitalization of BIP.
ii.
Sustainable Resources and Other
FFO at our sustainable resources and other operations increased by $5 million from the prior year primarily
attributable to strong results at our Brazilian agricultural operation.
iii. Realized Disposition Gains
In the current year, disposition gains of $371 million mainly relate to the sales of our North American district energy
operations and our portfolio of smart meters in the U.K. during the year.
The prior year disposition gains of $201 million primarily relate to the gain recognized on the secondary offering of
BIPC shares and the sale of our North American electricity transmission operation in Texas.
COMMON EQUITY
Common equity in our Infrastructure segment was $3.0 billion as at December 31, 2021 (December 31, 2020 –
$2.6 billion). The contributions from earnings and revaluation surplus were partially offset by the depreciation of
foreign currencies against the U.S. dollar, as well as distributions to unitholders.
This equity is primarily our investment in PP&E and certain concessions, which are recorded as intangible assets.
Our PP&E is recorded at fair value and revalued annually while concessions are considered as intangible assets
under IFRS, and therefore, recorded at historical cost and amortized over the life of the concession. Accordingly, a
smaller portion of our equity is impacted by revaluation compared to our Real Estate and Renewable Power and
Transition segments, where a larger portion of the balance sheet is subject to revaluation.
78
BROOKFIELD ASSET MANAGEMENT
PRIVATE EQUITY
BUSINESS OVERVIEW
• We own and operate private equity assets primarily through our 64% economic ownership interest in BBU. BBU
is listed on the NYSE and TSX and had a market capitalization of $6.7 billion at December 31, 2021. On March
15, 2022, BBU completed the creation of BBUC1, which provides investors with greater flexibility to invest in our
Private Equity business.
•
BBU focuses on owning and operating high-quality businesses that benefit from barriers to entry and/or low
production costs.
• We also own certain businesses directly. In the first quarter of 2021, Norbord was acquired by West Fraser. As
part of the transaction, the company’s investment in Norbord was converted into a 19% interest in West Fraser’s
outstanding common shares. Throughout 2021, we sold our stake in West Fraser.
OPERATIONS
Business Services
•
Our residential mortgage insurer is the largest private sector residential mortgage insurer in Canada, providing
mortgage default insurance to Canadian residential mortgage lenders.
• We own a leading healthcare services operation in Australia that provides doctors and patients with access to
operating theaters, nursing staff, accommodations, and other critical care and consumables.
• We provide construction operations 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. We also
provide services to residential real estate brokers through franchise arrangements under a number of brands
in Canada.
•
Investments also include a road fuels operation with significant import and storage infrastructure, an extensive
distribution network, and long-term diversified customer relationships.
Infrastructure Services
• We are the leading supplier of infrastructure services to the power generation industry, through our investment
in our nuclear technology services operation, and we generate a majority of earnings from recurring refueling
and maintenance services, primarily under long-term contracts. Our nuclear technology services operation is
the original equipment manufacturer or technology provider for approximately 50% of global commercial
nuclear power plants and services approximately two thirds of the world’s operating fleet.
• We also provide services to the offshore oil production industry, through our investment in our offshore oil
services operation, operating in the North Sea, Canada and Brazil. Our offshore oil services operation provides
marine transportation, offshore oil production, facility storage, long-distance towing and offshore installation,
maintenance and safety services to the offshore oil production industry.
• We provide scaffolding and related services to the industrial and commercial markets, through our investment
in a work access services operation, servicing over 30,000 customers in 30 countries worldwide. Our work
access services operation’s scale and reputation as a leader in engineering innovation and productivity are
competitive advantages in a fragmented industry.
•
Our modular building leasing services operation is a leading provider of modular building leasing services in
Europe and Asia-Pacific.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
79
Industrials
•
Our industrials portfolio is comprised of capital-intensive businesses with significant barriers to entry that
require technical operating expertise.
• We invest in an advanced energy storage operation, which is a global market leader in automotive batteries.
This business’ batteries power both internal combustion engine and electric vehicles.
• We invest in a leading manufacturer of a broad range of high-quality graphite electrodes. This operating entity
is a capital-intensive business with significant barriers to entry and requires technical expertise to build and
profitably operate.
• We own a leading global manufacturer of highly engineered components primarily for industrial trailers and
other towable-equipment providers.
• We also own a solar power solutions operation, which is a leading distributor of solar power solutions for the
distributed generation market in Brazil.
OUTLOOK AND GROWTH INITIATIVES
Our Private Equity segment seeks to increase the cash flows from our operations through acquisitions and organic
growth opportunities. We believe our global scale and leading operations allow us to efficiently allocate capital
around the world toward those sectors and geographies where we see the greatest opportunities to realize our
targeted returns. We also actively seek to monetize business interests as they mature and reinvest the proceeds
into higher yielding investment strategies, further enhancing returns.
Within our business services operation, our residential mortgage insurer continues to generate exceptional
performance as a result of the strong Canadian housing market. Underwriting activity reached record highs for the
year and the continued strength in home prices contributed to mortgage default rates remaining well below
normal. The business continues to focus on optimizing labor and managing higher costs associated with operating
in the current environment. In January 2021, we completed the acquisition of a technology services operation which
specializes in managing customer interactions for large global healthcare and technology clients primarily in the U.S.
Within our infrastructure services operation, our nuclear technology services performed well in the year benefiting
from higher volumes and activity levels during the fall outage season, strong execution on new plant projects and
ongoing cost savings initiatives. The business consistently provides tremendous value to its customers, and we will
continue to support its ongoing investment in new technology and research and development. In December 2021,
we closed our acquisition of a modular building leasing services operation, and we are in the early stages of
executing our improvement plans for the business. We plan to expand the value-added ancillary products and
service offerings and leverage the scale of our relationships across the infrastructure, commercial real estate,
and construction sectors to support the growth of the business.
Within our industrials operation, our advanced energy storage operation performed well and continues to make
progress on our business improvement plan focused on optimizing our U.S. operations. The outlook for the
business remains positive, supported by its global market leading position and initiatives underway to further
enhance its positioning at the forefront of automotive electrification trends. Since we closed our acquisition of an
engineered components manufacturer in October 2021, the business has completed four add-on acquisitions,
including a market leading European provider of towbar solutions, which expands its product and technology
portfolio and grows its aftermarket presence.
80
BROOKFIELD ASSET MANAGEMENT
Geographically, we continue to be committed to taking a long-term view on the regions where Brookfield has an
established presence and we are focusing efforts on accelerating growth initiatives and surfacing value
opportunities within our key regions. In October 2021, we reached an agreement to acquire a leading provider of
products and services to government sponsored global lottery programs. We plan to grow the business through
expanding its customer base, enhancing its service offerings to existing customers, and participating in the expected
growth of digital lottery programs.
SUMMARY OF OPERATING RESULTS
The following table disaggregates segment revenues and our share of FFO and common equity of entities in our
Private Equity segment. We have provided additional detail, where referenced, to explain significant movements
from the prior year.
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Business Partners1
Other investments ......................................
Realized disposition gains ........................
.................
Ref.
iii
ii
i
Revenues
2021
FFO
Common Equity
2020
2021
2020
2021
2020
$ 46,652 $ 37,710 $
597 $
498 $ 2,803 $ 2,175
31
—
65
—
57
1,376
323
114
762
—
1,790
—
$ 46,683 $ 37,775 $ 2,030 $
935 $ 3,565 $ 3,965
1. Brookfield’s interest in BBU consists of 69.7 million redemption-exchange units, 24.8 million limited partnership units and eight general
partnership units together representing an economic interest of 64% of BBU.
Revenues generated from our Private Equity segment increased by $8.9 billion, primarily due to higher prices and
volumes at our road fuels and our advanced energy storage operations, as well as the contributions from the
acquisition of our engineered components manufacturer and our solar power solutions operations during the year.
These increases were partially offset by the partial sale of our stake in our graphite electrode operations earlier this
year.
FFO increased by $1.1 billion as a result of the disposition gains of $1.4 billion in the current year, which were
primarily due to the sale of our stake in West Fraser and the aforementioned partial sale of our graphite electrode
operations. Excluding realized disposition gains, FFO decreased by $167 million to $654 million, mainly due to the
absence of contributions from Norbord subsequent to the West Fraser – Norbord strategic business combination,
as well as the aforementioned partial sale of our graphite electrode operations. These decreases were partially
offset by additional contributions from our residential mortgage insurer due to strong performance and our
increased ownership, as well as the aforementioned higher contributions at our advanced energy storage
operations.
i.
Brookfield Business Partners
The following table disaggregates BBU’s FFO by business line to facilitate analysis of the year-over-year variances:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Business services ........................................................................................................................................... $
Infrastructure services ..................................................................................................................................
Industrials ........................................................................................................................................................
Corporate .........................................................................................................................................................
Attributable to unitholders ..........................................................................................................................
Performance fees ...........................................................................................................................................
Non-controlling interests .............................................................................................................................
Segment reallocation and other1
...............................................................................................................
Brookfield’s interest ...................................................................................................................................... $
397 $
597 $
1,573
(157)
(515)
(304)
(320)
2020
2021
(99)
(59)
(52)
336
364
229
870
498
396
879
—
1.
Segment reallocation and other refers to disposition gains, net of NCI, included in BBU’s FFO that we reclassify to realized disposition gains. This
allows us to present FFO attributable to unitholders on the same basis as BBU.
2021 ANNUAL REPORT
81
BBU generated $1.6 billion of FFO compared to $870 million in the prior year, of which our share of BBU’s FFO was
$597 million, compared to $498 million in the prior year. Key variances for our businesses are described below.
Business Services
Business services’ FFO in the prior year included a gain of $57 million related to the sales of our cold storage
logistics business and the pathology business of our healthcare services operation in Australia. Excluding these
gains, FFO increased by $225 million compared to the prior year. Contributing factors include:
•
•
•
strong business performance at our residential mortgage insurer as a result of lower mortgage default rates
and higher premiums earned due to the strong Canadian housing market, as well as our increased ownership
in the business; and
higher contributions from our construction operations driven by lower losses on construction projects; partially
offset by
reduced contributions from our healthcare services operation in Australia due to the aforementioned sale of
our pathology business in the prior year.
Infrastructure Services
Within our infrastructure services operations, we generated $396 million of FFO, compared to $364 million in the
prior year. The increase was primarily due to increased contributions at our nuclear technology services and work
access services operations, partially offset by lower contributions from our offshore oil services operations.
Industrials
FFO from our industrials portfolio included a gain of $476 million related to the partial sale of our graphite electrode
operations and the sale of our investment in public securities. Excluding this gain, FFO increased by $67 million to
$403 million primarily due to:
•
•
•
•
increased contributions from our advanced energy storage operations as a result of favorable pricing and
product mix due to increased aftermarket demand;
higher realized pricing at our natural gas production; and
contributions from our acquisitions of our engineered components manufacturer and solar power solutions
operation during the year; partially offset by
lower contributions from our graphite electrode operations as a result of our decreased ownership stake.
Corporate
The Corporate FFO deficit increased by $40 million due to higher base management fees as a result of the increased
market capitalization of BBU.
ii. Other Investments
FFO from other investments decreased by $266 million to $57 million as a result of the absence of contributions
from Norbord after our investment was converted into West Fraser shares subsequent to West Fraser's acquisition
of Norbord. Since the first quarter of 2021, our shares in West Fraser have been accounted for as a financial asset
and therefore, this investment contributes to our FFO through the dividends received as opposed to our
proportionate share of earnings. We sold our stake in the business throughout 2021.
iii. Realized Disposition Gains
In the current year, realized disposition gains of $1.4 billion mainly relate to the aforementioned disposition of our
West Fraser shares and the partial sale of our graphite electrode operations.
Realized disposition gains were $114 million in the prior year, primarily due to the sale of our cold storage logistics
business and the partial sale of our graphite electrode operations.
82
BROOKFIELD ASSET MANAGEMENT
COMMON EQUITY
Common equity in our Private Equity segment was $3.6 billion as at December 31, 2021 (December 31, 2020 –
$4.0 billion). The decrease is primarily attributable to the dispositions of our West Fraser shares, distributions to
unitholders and depreciation expense. These decreases were partially offset by contributions from FFO. The
depreciable assets held in these operations are recorded at amortized cost, with depreciation recorded on a
quarterly basis, with the exception of investments in financial assets, which are carried at fair value based
predominantly on quoted prices.
2021 ANNUAL REPORT
83
REAL ESTATE
BUSINESS OVERVIEW
• We own and operate real estate assets through our 100% economic ownership interest in BPG.
•
BPG owns real estate assets directly as well as through private funds that we manage.
• We present the operating results of our Real Estate segment within three sub-segments. The sub-segments
are based on our strategy to maintain an irreplaceable portfolio of trophy mixed-use precincts in global
gateway cities (“Core”), maximize returns through a development or buy-fix-sell strategy (“Transitional and
Development”), or recycle capital from vintage funds (“LP Investments”). We also separately manage certain
corporate activities for these underlying investments.
OPERATIONS
Core
• We own interests in and operate some of the most iconic office assets, including One Manhattan West in New
York and Canary Wharf in London. We seek to maintain this irreplaceable portfolio of large-scale mixed-use
complexes in global gateway cities, which provide our tenants with a 24-hour, 7-days-a-week live, work, play
environment on a long-term basis. These 59 properties are located primarily in the world’s leading commercial
markets such as New York City, London, Toronto, Berlin, and Dubai, covering 31 million square feet.
• We also own interests in and operate 19 irreplaceable malls totaling 24 million square feet of retail space. We
intend to retain long-term ownership interests in these trophy assets, such as Ala Moana in Hawaii and Fashion
Show in Las Vegas.
• We also develop properties on a selective basis; active development and redevelopment projects consist of
three office sites, several multifamily sites and two hotel sites, totaling approximately 4 million square feet.
Transitional and Development
• We own interests in and operate office assets in gateway markets around the globe, consisting of 81 properties
totaling 65 million square feet of space. These assets represent properties with transitional operational uplift
and realization potential. They earn attractive short-term rates of return, as we acquire underperforming assets
and improve their operations. We add significant value during this transitional period before ultimately
monetizing them and reinvesting the proceeds.
•
The office properties are located primarily in the world’s leading commercial markets such as New York City,
London, Los Angeles, Washington, D.C., Toronto, Sydney and Rio de Janeiro.
• We also own 96 retail properties covering 91 million square feet of space, where we seek to maximize return
through leasing, redevelopment of existing retail, or in some cases through the addition of a mixed-use
component like multifamily or office. We add significant value during this transitional period before ultimately
monetizing them.
LP Investments
• We own and operate global portfolios of real estate investments through our real estate funds, which are
targeted to achieve higher returns than our office and retail portfolios within our Core and Transitional and
Development operations.
•
Our LP Investments business strategy is to acquire high quality assets at a discount to replacement cost or
intrinsic value, to execute clearly defined strategies for operational improvement and to achieve opportunistic
returns through net operating income (“NOI”) growth and realized gains on exit.
84
BROOKFIELD ASSET MANAGEMENT
•
Our LP Investments portfolio consists of high-quality assets with operational upside across the multifamily,
triple net lease, hospitality, office, retail, mixed-use, logistics, life science, senior living, manufactured housing
and student housing sectors.
OUTLOOK AND GROWTH INITIATIVES
Our real estate 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, primarily from our transitional
and development assets, to fund new higher yielding investments, particularly in our LP Investments. We deploy
additional capital throughout our portfolio for planned capital expansion that should continue to increase earnings
for the next several years as these projects are completed. Our development track record reflects on-time and on-
budget completions. This includes development projects in progress across our premier office buildings, retail malls
and mixed-use complexes located primarily in North America and Europe.
Within our LP Investments, we will continue to acquire high-quality properties through our global 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. We target to earn opportunistic returns in our portfolio. These
investments have a defined hold period and typically generate the majority of profits from gains recognized from
realization events, including the sale of an asset or portfolio of assets, or exit of the entire investment. Funding for
these transactions will continue to include proceeds from asset sales as part of our capital recycling program.
SUMMARY OF OPERATING RESULTS
The following table disaggregates segment revenues and our share of FFO and common equity of entities in our
Real Estate segment. We have provided additional detail, where referenced, to explain significant movements from
the prior year.
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Brookfield Property Group1
Realized disposition gains .............................
..........................
Ref.
Revenues
FFO
Common Equity
2021
2020
2021
2020
2021
2020
i
ii
$ 9,955 $ 8,883 $
747 $
483 $ 32,004 $ 19,331
—
—
438
393
—
—
$ 9,955 $ 8,883 $ 1,185 $
876 $ 32,004 $ 19,331
1. See “Economic ownership interest” in the Glossary of Terms beginning on page 136.
Revenues and FFO from our Real Estate business increased by $1.1 billion and $309 million, respectively, compared
to the prior year. Excluding realized disposition gains, FFO increased by $264 million. These increases were primarily
due to increased earnings from our hospitality portfolio held within our LP Investments, and same-property1 NOI
growth in our office and retail assets as a result of higher average occupancy. These increases were partially offset
by higher management fee expenses.
Common equity increased to $32 billion compared to 2020 mainly due to the privatization of BPY in the third
quarter of 2021 and the comprehensive income recognized during the year.
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
85
i. Brookfield Property Group
The following table disaggregates BPG’s FFO by business line to facilitate analysis of the year-over-year variances:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Core ................................................................................................................................................................... $
Transitional and Development ...................................................................................................................
LP Investments ...............................................................................................................................................
Corporate .........................................................................................................................................................
Attributable to BPG .......................................................................................................................................
Non-controlling interests .............................................................................................................................
Segment reallocation and other1
...............................................................................................................
Brookfield’s interest ...................................................................................................................................... $
747 $
557 $
(438)
(138)
2021
(82)
631
217
967
(303)
885
(344)
(58)
483
2020
566
509
113
1. Reflects preferred dividend distributions as well as fee-related earnings, net carried interest and associated asset management expenses not
included in FFO reclassified to the Asset Management segment.
BPG’s FFO for the year was $747 million compared to $483 million in the prior year. Key variances for our
businesses are described below.
Core
FFO of $557 million was consistent compared to the prior year.
Transitional and Development
FFO of $631 million was $122 million higher than the prior year primarily due to:
•
•
increased revenues and growth in same-property NOI within our retail and office portfolios; partially offset by
the absence of contributions from asset sales during the year.
LP Investments
FFO of $217 million was $104 million higher than the prior year due to:
•
•
•
increased earnings in our hospitality assets as the sector recovered from the pandemic related economic
shutdowns; partially offset by
higher management fees; and
disposition activities across the portfolio.
Corporate
Corporate expenses within our Real Estate segment of $438 million, which includes interest expense, management
fees and other costs, increased by $135 million from the prior year, primarily due to higher management fees and
interest expense on incremental borrowings relative to the prior year.
ii. Realized Disposition Gains
Realized disposition gains of $438 million in the current year and $393 million in the prior year primarily relate to
the sales of investment properties in our LP Investments and our Transitional and Development operations.
COMMON EQUITY
Common equity in our Real Estate segment increased to $32.0 billion as at December 31, 2021 compared to
$19.3 billion as at December 31, 2020. The increase relates to the incremental capital invested, associated with the
privatization of BPY which was completed on July 26, 2021, and comprehensive income for 2021. This increase was
partially offset by distributions.
86
BROOKFIELD ASSET MANAGEMENT
RESIDENTIAL DEVELOPMENT
BUSINESS OVERVIEW
•
•
•
Our Residential Development business operates predominantly in North America and Brazil.
Our North American business is conducted through Brookfield Residential Properties Inc., which is active in
18 principal markets in Canada and the U.S. and controls approximately 77,000 lots.
Our Brazilian business includes construction, sales and marketing of a broad range of residential and
commercial office units, with a primary focus on middle income residential units in Brazil’s largest markets of
São Paulo and Rio de Janeiro.
OUTLOOK AND GROWTH INITIATIVES
We have a positive outlook for our North American residential business, reflecting strong housing demand in North
America and the significant progress we have made on strategic initiatives in recent years to scale and reposition
the business to enhance our returns over the long-term. We are well-positioned around the housing and residential
land development sector in the near and medium-term, as we continue to see strong demand supported by solid
underlying fundamentals and demographics and a persistent supply shortage in the markets in which we operate.
Residential real estate development in Brazil was strong in 2021 with increased launches in São Paulo and Rio de
Janeiro. We expect 2022 to carry on the momentum with launches and sales remaining strong. We remain focused
on developing high margin projects in select key markets and excelling in all operational areas.
SUMMARY OF OPERATING RESULTS
The following table disaggregates segment revenues, FFO and common equity into the amounts attributable to the
two principal operating regions of our wholly owned residential development businesses:
Revenues
FFO
Common Equity
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
North America .......................................................... $ 2,290 $ 1,904 $
Brazil and other .......................................................
2020
2021
339
270
2021
2020
2021
2020
256 $
76 $ 1,892 $ 2,119
2
(10)
500
611
$ 2,560 $ 2,243 $
258 $
66 $ 2,392 $ 2,730
North America
FFO from our North American operations increased by $180 million to $256 million. The increase is largely driven by
higher housing and land margins due to additional home and acre closings, an increase in average home selling
prices, as well as additional joint venture income.
As at December 31, 2021, we had 69 active housing communities (December 31, 2020 – 80) and 16 active land
communities (December 31, 2020 – 22).
Brazil and Other
FFO at our Brazilian and other operations increased compared to the prior year, mainly due to cost saving initiatives
during the year.
Our Brazilian operations started 2021 with 24 projects under construction and as of December 31, 2021, we have
26 projects under construction.
2021 ANNUAL REPORT
87
COMMON EQUITY
Common equity was $2.4 billion as at December 31, 2021 (December 31, 2020 – $2.7 billion) and consists largely
of residential development inventory which is carried at the lower of cost and market value, notwithstanding
the length of time that we may have held these assets and created value through the development process. The
decrease in common equity is primarily attributable to dividends received from our North America operation as a
result of strong business performance.
88
BROOKFIELD ASSET MANAGEMENT
CORPORATE ACTIVITIES
BUSINESS OVERVIEW
•
•
Our corporate activities support the overall business, including our asset management franchise and
our invested capital, with a focus on prudent capital allocation that will compound value for our shareholders
over the long-term.
Corporate activities include, but are not limited to, the development and seeding of new fund strategies,
supporting the growth in our perpetual affiliates, and providing capital throughout the organization, when
needed. In addition, we will make direct investments on an opportunistic basis.
• We also hold cash and financial assets as part of our liquidity management operations and enter into financial
contracts to manage residual foreign exchange and other risks, as appropriate.
SUMMARY OF OPERATING RESULTS
The following table disaggregates segment revenues, FFO and common equity into the principal assets and liabilities
within our corporate operations and associated FFO to facilitate analysis:
Revenues
70 $
2021
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Corporate cash and financial assets, net ........... $
Corporate borrowings ............................................
Preferred equity1,2
...................................................
Other corporate investments ...............................
Corporate costs and taxes/net working
capital .........................................................................
Realized disposition gains .....................................
81
—
—
—
—
FFO
Common Equity
2020
2021
2020
2021
2020
422 $
42 $
377 $ 3,522 $ 4,456
—
—
449
—
—
(438)
(388)
(10,875)
—
83
(154)
97
—
5
(4,375)
2,087
(151)
71
699
—
(9,077)
(4,375)
1,268
742
—
$
151 $
871 $
(370) $
(86) $ (8,942) $
(6,986)
1.
2.
FFO excludes preferred share distributions of $157 million (2020 – $142 million).
Includes $230 million of perpetual subordinated notes issued in November 2020 by a wholly owned subsidiary of Brookfield, included within non-
controlling interest.
Our portfolio of corporate cash and financial assets is generally recorded at fair value with changes recognized
through net income, unless the underlying financial investments are classified as fair value through other
comprehensive income, in which case changes in value are recognized in other comprehensive income. Loans and
receivables are typically carried at amortized cost. As at December 31, 2021, our portfolio of corporate cash
and financial assets included $1.9 billion of cash and cash equivalents (December 31, 2020 – $3.2 billion). The
decrease from December 31, 2020 is largely attributable to $3.4 billion of cash deployed for the BPY privatization,
$2.0 billion used to repay high coupon debt, $400 million used to purchase BIP shares, dividends paid to
shareholders, funding of capital calls for fund commitments, and the repurchase of 9.7 million Class A shares. These
decreases were partially offset by operating cash flow, proceeds received from the sale of West Fraser, the
secondary offering of BEPC shares, as well as corporate debt issuances, and other asset sales during the year.
Our corporate cash and financial assets generated FFO of $42 million compared to $377 million in the prior year
primarily due to lower unrealized mark-to-market returns on our financial asset portfolio in the current year.
Corporate borrowings are generally issued with fixed interest rates. Some of these borrowings are denominated in
Canadian dollars and therefore the carrying value fluctuates with changes in the foreign 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.
The $438 million FFO expense reported through corporate borrowings reflects the interest expense on all of our
corporate borrowings. The increase from the prior year was primarily attributable to corporate debt issuances
during the year, and the impact of foreign exchange on our Canadian dollar denominated corporate debt.
2021 ANNUAL REPORT
89
Preferred equity does not revalue under IFRS and the total outstanding shares remain unchanged from year-end.
We describe cash and financial assets, corporate borrowings and preferred equity in more detail within Part 4 –
Capitalization and Liquidity.
Other corporate investments includes our equity accounted investment in BAMR, as part of the spin-out in the
second quarter of 2021. Additionally, these investments include our share of the corporate cash and financial assets
of Oaktree. The increase in FFO is primarily from strong returns on Oaktree’s balance sheet investments.
Corporate costs, taxes and net working capital were collectively in an asset position of $699 million as at
December 31, 2021, a decrease from the prior year asset balance of $742 million. Included within this balance are
net deferred income tax assets of $1.8 billion (December 31, 2020 – $1.7 billion). The FFO deficit of $154 million
includes corporate costs and cash taxes, which were relatively consistent with the prior year.
Disposition gains of $97 million were primarily due to the partial sale of a financial asset, which was previously
recognized through the consolidated statement of comprehensive income.
90
BROOKFIELD ASSET MANAGEMENT
PART 4
CAPITALIZATION AND LIQUIDITY
CAPITALIZATION
We review key components of our 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.
Corporate Capitalization1 – reflects the amount of debt held in the Corporate segment and our issued and
outstanding common and preferred shares. Corporate debt includes unsecured bonds and, from time to time,
draws on revolving credit facilities and the issuance of short-term commercial paper. At December 31, 2021, our
corporate capitalization was $62.9 billion (December 31, 2020 – $50.5 billion) with a debt to capitalization of 17%
(December 31, 2020 – 18%).
Consolidated Capitalization1 – reflects the full capitalization of wholly owned, partially owned, and managed entities
that we consolidate in our financial statements. At December 31, 2021, consolidated capitalization increased
compared to the prior year largely due to acquisitions, which resulted in additional associated borrowings, working
capital balances and non-controlling interests. Much of the borrowings issued within our managed entities are
included in our consolidated balance sheet notwithstanding that virtually none of this debt has any recourse to the
Corporation.
The following table presents our capitalization on a corporate and consolidated basis:
Corporate
AS AT DEC. 31
2021
(MILLIONS)
Corporate borrowings ..........................................................................
Non-recourse borrowings
Ref.
i
2020
$ 10,875 $ 9,077 $ 10,875 $ 9,077
2020
Consolidated
2021
Subsidiary borrowings .......................................................................
Property-specific borrowings ...........................................................
i
i
Accounts payable and other ................................................................
Deferred income tax liabilities ............................................................
Subsidiary equity obligations ..............................................................
Liabilities associated with assets classified as held for sale .........
Equity
Non-controlling interests .................................................................
Preferred equity .................................................................................
Common equity ..................................................................................
ii
iii
Total capitalization .................................................................................
—
—
10,875
5,104
299
—
—
—
—
9,077
4,963
432
—
—
13,049
152,008
175,932
52,546
20,328
4,308
3,148
10,768
128,556
148,401
50,682
15,913
3,699
2,359
86,804
230
4,145
4,145
31,693
42,210
46,585
122,642
$ 62,863 $ 50,540 $ 391,003 $ 343,696
230
4,145
31,693
36,068
88,386
4,145
42,210
134,741
Debt to capitalization ............................................................................
17%
18%
45%
43%
1.
See definition in Glossary of Terms beginning on page 136.
2021 ANNUAL REPORT
91
i.
Borrowings
Corporate Borrowings
AS AT DEC. 31
($ MILLIONS)
Term debt .................................................................
Revolving facilities ...................................................
Deferred financing costs .......................................
Total ............................................................................
Average Rate
2021
4.2%
n/a
n/a
2020
4.4%
—%
n/a
Average Term
(Years)
2021
13
4
n/a
Consolidated
2021
2020
2020
14 $ 10,039 $ 9,147
—
912
(70)
(76)
$ 10,875 $ 9,077
4
n/a
As at December 31, 2021, corporate borrowings included term debt of $10.0 billion (December 31, 2020 –
$9.1 billion) which had an average term to maturity of 13 years (December 31, 2020 – 14 years). Term debt consists
of public and private bonds, all of which are fixed rate and have maturities ranging from 2024 to 2080. These
financings provide an important source of long-term capital and are appropriately matched to our long-term asset
profile.
The increase in term debt compared to the prior year is mainly driven by the issuance of $600 million 2032 notes
and a $250 million re-opening of our 2051 notes in the third quarter of 2021.
We had $912 million of commercial paper and revolving facility draws outstanding at December 31, 2021 (December
31, 2020 – $nil). Our commercial paper program is supported by our $2.6 billion revolving term credit facilities with
maturities ranging from 2024 to 2026. As at December 31, 2021, $61 million of the facilities were utilized for letters
of credit (December 31, 2020 – $64 million).
Subsidiary Borrowings
We endeavor to capitalize our principal affiliates to enable continuous access to the debt capital markets, usually on
an investment-grade basis, thereby reducing the demand for capital from the Corporation. Subsidiary borrowings
include principal affiliates’ recourse term debt and credit facility draws. These borrowings have no recourse to the
Corporation.
Average Rate
Average Term
(Years)
2021
AS AT DEC. 31
($ MILLIONS)
Renewable power and transition ........................
Infrastructure ...........................................................
Private equity ...........................................................
Real estate ................................................................
Residential development .......................................
Total ............................................................................
3.5%
3.2%
2.6%
5.3%
3.9%
3.1%
2.7%
2.4%
5.5%
3.5%
3.9%
3.1%
2020
2021
10
12
7
4
4
7
6
3
3
6
2020
Consolidated
2021
2020
13 $ 2,147 $ 2,132
2,719
1,619
4,782
1,782
3,158
310
3,378
1,790
7 $ 13,049 $ 10,768
92
BROOKFIELD ASSET MANAGEMENT
Property-Specific Borrowings
As part of our financing strategy, the majority of our debt capital is in the form of property-specific borrowings and
project financings and is denominated in local currencies that have recourse only to the assets being financed and
have no recourse to the Corporation or the relevant perpetual affiliate.
Average Rate
2021
AS AT DEC. 31
($ MILLIONS)
Renewable power and transition ........................
Infrastructure ...........................................................
Private equity ..........................................................
Real estate ................................................................
Residential development .......................................
Total ............................................................................
4.7%
4.5%
4.0%
4.4%
4.3%
3.6%
3.8%
5.2%
4.3%
5.1%
4.3%
4.2%
2020
Average Term
(Years)
Consolidated
2021
10
2020
2021
2020
10 $ 19,893 $ 16,353
7
5
3
2
5
8
5
4
3
28,515
21,309
27,894
23,333
74,978
67,073
728
488
6 $ 152,008 $ 128,556
Property-specific borrowings have increased by $23.5 billion since December 31, 2020, which is largely attributable
to:
•
•
•
•
a combination of new acquisitions in our U.S. wind portfolio, follow-on investments in our Colombian
renewable power business and development debt for certain property-specific assets located in North and
South America within our Renewable Power and Transition segment;
the acquisition of a petroleum transportation and natural gas liquids processing business within our
Infrastructure segment;
the acquisition of an engineered components manufacturer and a modular building leasing services operation
within our Private Equity segment; and
new investments across the office, hospitality, multifamily and student housing portfolios within our Real Estate
segment.
In addition to the aforementioned acquisitions, the remainder of the increase in consolidated borrowings is driven
by drawings on new or existing subscription facilities, partially offset by asset sales across the business during the
year.
Fixed and Floating Interest Rate Exposure
Many of our borrowings, including all corporate borrowings recourse to the Corporation, are fixed rate, long-term
financings. The remainder of our borrowings are at floating rates; however, from time to time, we enter into interest
rate contracts to swap our floating rate exposure to fixed rates.
As at December 31, 2021, 72% of our share of debt outstanding, including the effect of swaps, was fixed rate.
Accordingly, changes in interest rates are typically limited to the impact of refinancing borrowings at prevailing
market rates or changes in the level of debt as a result of acquisitions and dispositions.
2021 ANNUAL REPORT
93
The following table presents the fixed and floating rates of interest expense:
Fixed Rate
Floating Rate
2021
2020
2021
2020
AS AT DEC. 31
($ MILLIONS)
Average
Rate
Average
Rate
Consolidated
Consolidated
Average
Rate
Consolidated
Average
Rate
Consolidated
Corporate
borrowings ..............
Subsidiary
borrowings ..............
Property-specific
borrowings ..............
Total ..........................
Non-controlling interests
4.2% $
10,875
4.4% $
9,077
—% $
—
—% $
—
4.0%
8,619
4.3%
7,683
2.4%
4,430
1.7%
3,085
4.8%
58,392
5.2%
54,699
3.6%
93,616
3.4%
73,857
4.7% $
77,886
5.0% $
71,459
3.5% $
98,046
3.4% $
76,942
Non-controlling interests increased in 2021 predominantly due to comprehensive income attributable to non-
controlling interests and increases from acquisitions, mainly related to IPL. These items were partially offset by a
decrease in non-controlling interests as a result of the privatization of BPY and distributions, net of equity issuances.
ii. Preferred Equity
Preferred equity represents permanent non-participating preferred shares that provide 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 .........................................................................................
Perpetual
Perpetual
Perpetual
2.3%
4.1%
4.8%
4.0%
Term
2021
4.8%
1.8%
2020
2021
2020
4.1% $ 2,901 $ 2,875
739
505
739
531
3.9% $ 4,145 $ 4,145
Average Rate
Fixed rate-reset preferred shares are issued with an initial fixed rate coupon that is reset after an initial period,
typically five years, at a predetermined spread over the Canadian five-year government bond yield. The average
reset spread as at December 31, 2021 was 279 basis points.
iii. Common Equity
Issued and Outstanding Shares
Changes in the number of issued and outstanding Class A and Class B shares during the years are as follows:
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Outstanding at beginning of year ..............................................................................................................
2021
1,510.7
20201
1,509.3
Issued (repurchased)
Issuances ......................................................................................................................................................
Repurchases .................................................................................................................................................
Long-term share ownership plans2
........................................................................................................
Dividend reinvestment plan and others ................................................................................................
Outstanding at end of year ..........................................................................................................................
61.3
(9.7)
6.4
0.1
—
(8.9)
10.1
0.2
1,568.8
1,510.7
Unexercised options and other share-based plans2 and exchangeable shares of affiliate ..........
Total diluted shares at end of year ............................................................................................................
82.8
63.0
1,651.6
1,573.7
1. Adjusted to reflect the three-for-two stock split effective April 1, 2020.
Includes management share option plan and restricted stock plan.
2.
The company holds 69.7 million Class A shares (December 31, 2020 – 64.2 million) purchased by consolidated
entities in respect of long-term share ownership programs, which have been deducted from the total amount of
94
BROOKFIELD ASSET MANAGEMENT
shares outstanding at the date acquired. Diluted shares outstanding include 25.1 million (December 31, 2020 –
14.6 million) shares issuable in respect of these plans based on the market value of the Class A shares at
December 31, 2021 and December 31, 2020, resulting in a net reduction of 44.6 million (December 31, 2020 –
49.6 million) diluted shares outstanding.
During 2021, the issuance of 61.3 million Class A shares were primarily due to the share consideration contributed
as part of the BPY privatization.
During 2021, 7.4 million options were exercised, of which 2.4 million and 0.9 million were issued on a net-settled
and gross basis, respectively, resulting in the cancellation of 4.1 million vested options.
The cash value of unexercised options was $1.2 billion as at December 31, 2021 (2020 – $1.2 billion) based on the
proceeds that would be paid on exercise of the options.
As of March 30, 2022, the Corporation had outstanding 1,567,187,392 Class A shares and 85,120 Class B shares.
Refer to Note 21 of the consolidated financial statements for additional information on equity.
LIQUIDITY
CORPORATE LIQUIDITY
We maintain significant liquidity at the corporate level. Our primary sources of liquidity, which we refer to as core
liquidity, consist of:
•
•
cash and financial assets, net of other associated liabilities; and
undrawn committed credit facilities.
We further assess overall liquidity inclusive of our principal affiliates BEP, BIP, BBU, BPG and Oaktree because of
their role in funding acquisitions both directly and through our managed funds. Overall core liquidity at year end
was $15 billion, or inclusive of investor commitments to our private funds, was $92 billion.
CAPITAL REQUIREMENTS
The Corporation has very few non-discretionary capital requirements. Our largest normal course capital
requirement is our debt maturities and there are no corporate debt maturities until March 2024 when
approximately $1.1 billion is due. Periodically, we will fund acquisitions and seed new investment strategies.
At the perpetual affiliate level, the largest normal course capital requirements are debt maturities and the pro-rata
share of private fund capital calls. New acquisitions are primarily funded through the private funds or perpetual
affiliates that we manage. We endeavor 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.
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 our perpetual affiliates. In the case of our transition,
infrastructure, private equity and real estate funds, these commitments are expected to be funded by BEP, BIP, BBU
and BPG. On January 31, 2019, the Corporation committed $2.75 billion to our third flagship real estate fund
alongside BPG’s $1 billion commitment. As of December 31, 2021, the Corporation has funded $1.9 billion of our
commitment. On May 26, 2021, the Corporation committed $2.5 billion to our fourth flagship real estate fund and
has not funded any amount associated with this commitment. On August 3, 2020, the Corporation committed
$750 million to our latest opportunistic credit fund. As of December 31, 2021, the Corporation has funded
$187.5 million of our commitment. In the case of perpetual affiliates, 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.
At the asset level, we schedule ongoing capital expenditure programs to maintain the operating capacity of our
assets at existing levels. We refer to this as sustaining capital expenditures. The sustaining capital expenditure
programs are typically funded by, and represent a relatively small proportion of, the operating cash flows within
2021 ANNUAL REPORT
95
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.
CORE AND TOTAL LIQUIDITY
The following table presents core liquidity of the Corporation, perpetual affiliates and managed funds:
AS AT DEC. 31
(MILLIONS)
Corporate1
Real
Estate1
Renewable
Power and
Transition
Infrastructure
Private
Equity1
Credit
and
Other
Total
2021
Total
2020
Cash and financial assets,
net .......................................... $
Undrawn committed
credit facilities .....................
Core liquidity2
....................
Uncalled private fund
commitments .................
Total liquidity2
................... $
3,522 $
74 $
691 $
683 $
720 $
543 $ 6,233 $ 6,823
1,618
5,140
1,515
1,589
2,062
2,753
2,532
3,215
456
1,176
595
8,778
9,194
1,138
15,011
16,017
—
25,831
12,278
11,643
9,863
17,464
77,079
60,594
5,140 $ 27,420 $
15,031 $
14,858 $ 11,039 $ 18,602 $ 92,090 $ 76,611
1. A $1 billion two-year credit facility which was secured in April 2020 to support growth initiatives was cancelled in March 2021.
2. See definition in Glossary of Terms beginning on page 136.
As at December 31, 2021, the Corporation’s core liquidity was $5.1 billion, consisting of $3.5 billion in cash and
financial assets and $1.6 billion in undrawn credit facilities. The Corporation’s liquidity is readily available for use
without any material tax consequences. We utilize this liquidity to support our asset management business which
includes supporting the activities of our perpetual affiliates and private funds, funding strategic transactions as well
as seeding new investment products.
The Corporation also has 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 on
page 98. However, this is not included in our core liquidity as we are generally able to finance our operations and
capital requirements through other means.
During 2021, we generated $6.3 billion of distributable earnings, inclusive of:
•
•
•
•
$1.9 billion fee-related earnings;
$2.2 billion of distributions from our perpetual affiliates and other principal investments, and yield earned on
corporate cash and financial assets; and
realizations, including $715 million of net realized carried interest and $2.1 billion of disposition gains from
principal investments; partially offset by
corporate costs, interest expense, and preferred share dividends, net of equity-based compensation costs, of
$630 million.
The Corporation paid $538 million in non-cash dividends in kind as part of the BAMR spin-out, as well
as $800 million in cash dividends on its common equity during the year ended December 31, 2021 (2020 –
$726 million).
96
BROOKFIELD ASSET MANAGEMENT
The following table presents distributable earnings generated by the Corporation:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Fee revenues ........................................................................................................................................ $
Direct costs ...........................................................................................................................................
Amounts attributable to non-Brookfield shareholders ..............................................................
.........................................................................................................................
Fee-related earnings1
Perpetual affiliates ..............................................................................................................................
Corporate cash and financial assets ...............................................................................................
Other principal investments .............................................................................................................
Distributions from investments ......................................................................................................
Corporate borrowings ........................................................................................................................
Corporate costs and taxes .................................................................................................................
Preferred share dividends2
...............................................................................................................
Add back: equity-based compensation costs ................................................................................
Distributable earnings before realizations ..................................................................................
2021
3,523 $
(1,468)
2,055
(156)
1,899
1,870
42
286
2,198
(438)
(154)
(592)
(157)
119
(630)
3,467
2020
2,840
(1,296)
1,544
(116)
1,428
1,460
377
9
1,846
(388)
(151)
(539)
(142)
94
(587)
2,687
Realizations
Realized carried interest, net3
...........................................................................................................
Disposition gains from principal investments ..............................................................................
Distributable earnings ........................................................................................................................ $
715
2,100
6,282 $
348
1,185
4,220
1.
2.
3.
Includes $250 million (2020 – $186 million) of fee-related earnings from Oaktree at our share.
Includes $9 million (2020 – $1 million) of dividends paid on perpetual subordinated notes for the year ended December 31, 2021.
Includes our share of Oaktree’s distributable earnings attributable to realized carried interest.
2021 ANNUAL REPORT
97
301
24
1,398
2,122
282
4
384
275
24
1,062
1,745
42
6
The following table shows the quoted market value of the company’s listed securities and annual cash distributions
of the company’s invested capital based on current distribution policies for each entity:
AS AT DEC. 31, 2021
(MILLIONS, EXCEPT PER UNIT AMOUNTS)
Ownership
%
Brookfield
Owned
Units
Distributions
Per Unit1
Quoted
Value2
Current
Distributions
(Current Rate)3
Full Year
Distributions
(Actual)
Distributions from investments
Perpetual affiliates
...........
Brookfield Renewable4
Brookfield Infrastructure 5
Brookfield Business Partners
Brookfield Property Group6
..
.....
48%
27%
64%
100%
312.0 $
1.28 $ 11,214 $
399 $
139.6
94.5
n/a
2.16
0.25
n/a
8,552
4,351
n/a
Corporate cash and financial
assets7
Other investments8
...........................................
....................
various
various
various
various
various
various
3,522
various
Total ...................................................................................................................................................... $
2,408 $
1,793
1. Based on current distribution policies.
2. Quoted value represents the value of Brookfield owned units as at market close on December 31, 2021.
3. Distributions (current rate) are calculated by multiplying units held as at December 31, 2021 by distributions per unit. Actual dividends may differ
due to timing of dividend increases and payment of special dividends, which are not factored into the current rate calculation. See definition in
Glossary of Terms beginning on page 136.
4. Brookfield owned units represent the combined units held in BEP and BEPC. On February 16, 2021, we completed the sale of 15 million class A
shares of BEPC.
5. Brookfield owned units represent the combined units held in BIP and BIPC.
6.
For the year ended December 31, 2021, BPG’s distributions include nominal amounts of preferred share dividends received by the Corporation
(2020 – nominal amounts).
Includes cash and cash equivalents and financial assets net of deposits.
7.
8. Other includes cash distributions from our listed investment within our Private Equity segment.
98
BROOKFIELD ASSET MANAGEMENT
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
2020
(MILLIONS)
Operating activities ........................................................................................................................................ $ 7,874 $ 8,341
Financing activities .........................................................................................................................................
8,698
Investing activities ..........................................................................................................................................
(13,873)
Change in cash and cash equivalents ....................................................................................................... $ 3,090 $ 3,166
(21,045)
16,261
2021
This statement reflects activities within our consolidated operations and therefore excludes activities within non-
consolidated entities.
Operating Activities
Cash flow from operating activities totaled $7.9 billion in 2021, a $467 million decrease from 2020. Excluding the net
change in non-cash working capital, cash flow from operating activities increased by $2.4 billion versus the prior
year mostly as a result of the same-store growth across our business and contributions from subsidiaries acquired,
net of disposals, in 2021.
Financing Activities
Net cash inflows from financing activities totaled $16.3 billion in 2021 versus $8.7 billion in the prior year, and
primarily related to:
•
•
•
•
•
non-recourse borrowings arranged by our subsidiaries, net of repayments, of $18.5 billion;
non-recourse credit facilities drawn, net, of $6.2 billion related to short-term borrowings backed by private fund
commitments; and
capital repaid to non-controlling interests, net of capital returned, of $2.5 billion; partially offset by
distributions to non-controlling interests and shareholders of $9.6 billion; and
redemption of subsidiary equity obligations of $1.3 billion.
Investing Activities
Net cash outflows from investing activities were $21.0 billion in 2021 versus $13.9 billion in the prior year, and
mainly related to:
•
•
•
•
acquisitions of investment properties, net of dispositions, of $5.1 billion;
acquisitions of subsidiaries, net of dispositions, of $8.6 billion primarily associated with acquisitions in our
Private Equity and Infrastructure segments;
additions to PP&E, net of dispositions, of $6.2 billion; and
dispositions of financial assets and other, net of acquisitions, of $564 million primarily as a result of investments
in debt and equity securities across our operating segments as well as financial assets associated with
managing currency risk.
Refer to Note 5 Acquisitions of Consolidated Entities and Note 10 Equity Accounted Investments in the consolidated
financial statements for further details.
2021 ANNUAL REPORT
99
CONTRACTUAL OBLIGATIONS
The following table presents the contractual obligations of the company by payment periods:
AS AT DEC. 31, 2021
(MILLIONS)
Recourse Obligations
Payments Due by Period
Less than 1
Year
1 – 3
Years
4 – 5
Years
After 5
Years
Total
Corporate borrowings ....................................... $
Accounts payable and other1
Interest expense2
Corporate borrowings .....................................
...........................
— $
1,138
$
2,566 $
7,171 $
10,875
2,515
420
133
802
12
2,444
5,104
659
3,652
5,533
Non-recourse Obligations
Principal repayments
Non-recourse borrowings of managed
entities .................................................................
Property-specific borrowings ......................
Subsidiary borrowings ..................................
Subsidiary equity obligations ......................
Accounts payable and other
Lease obligations ..............................................
Accounts payable and other1,3
.......................
Commitments ......................................................
Interest expense2,4
Non-recourse borrowings ...............................
Subsidiary equity obligations .........................
31,052
631
546
1,156
24,773
2,456
43,354
1,832
1,563
2,389
4,527
770
5,918
162
10,130
300
36,857
5,061
544
1,615
1,075
203
6,832
228
40,745
152,008
5,525
1,655
13,550
3,780
257
13,049
4,308
18,710
34,155
3,686
11,958
34,838
33
723
1. Excludes lease obligations and provisions.
2. Represents the aggregate interest expense expected to be paid over the term of the obligations.
3. Excludes insurance contract liabilities of $2 million (2020 – $1.3 billion). The decrease in insurance contract liabilities in 2021 versus 2020 is due to
the deconsolidation of our annuities business as part of the BAMR spin-out in the second quarter of 2021.
4. Variable interest rate payments have been calculated based on current rates.
The recourse obligations, those amounts that have recourse to the Corporation, which are due in less than one year
totaled $2.9 billion (2020 – $2.3 billion).
In 2014, BPY issued $1.8 billion of exchangeable preferred equity units in three $600 million tranches redeemable in
2021, 2024 and 2026, respectively. The preferred equity units were originally 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. Following the
privatization of BPY (“BPY privatization”), the preferred equity units became exchangeable into cash equal to the
value of the consideration that would have been received upon the BPY privatization (a combination of cash, BAM
shares and New LP Preferred Units), based on the value of that consideration on the date of exchange. BPY also has
the option of delivering the actual consideration (a combination of cash, BAM shares and New LP Preferred Units).
Following the BPY privatization, we have agreed with the holder to grant the company the right to purchase all or
any portion of the preferred equity units of the holder at maturity, and to grant the holder the right to sell all or any
portion of the preferred equity units of the holder at maturity, in each case at a price equal to the issue price for
such preferred equity units plus accrued and unpaid distributions. On December 30, 2021, the company acquired
the tranche redeemable in 2021 from the holder and subsequently exchanged such units for Redemption-Exchange
Units. The preferred equity units were subsequently cancelled.
Commitments of $3.7 billion (2020 – $4.1 billion) represent various contractual obligations assumed in the normal
course of business by our various operating subsidiaries. These included commitments to provide bridge financing
and letters of credit and guarantees provided in respect of power sales contracts and reinsurance obligations. These
commitments shall be funded through the cash flows of the company’s subsidiaries.
100
BROOKFIELD ASSET MANAGEMENT
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.
The company periodically enters into joint venture, consortium or other arrangements that have contingent liquidity
rights in favor 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.
We have also committed to purchase power produced by certain of BEP’s hydroelectric assets as previously
described on page 71.
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.
2021 ANNUAL REPORT
101
PART 5
ACCOUNTING POLICIES AND INTERNAL
CONTROLS
ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
OVERVIEW
We are a Canadian corporation and, as such, we prepare our consolidated financial statements in accordance with
IFRS.
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 classification is appropriate given the nature of our
business strategy.
The preparation of the consolidated financial statements requires management to select appropriate accounting
policies and to make judgments and estimates that affect the carrying 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 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. As we update the fair values of our
investment property portfolios quarterly, with gains reflected in net income, we discuss judgments and estimates
relating to the key valuation metrics in Note 11 of the audited December 31, 2021 Consolidated Financial
Statements and below.
For further reference on accounting policies, including new and revised standards issued by the IASB and judgments
and estimates, see our significant accounting policies contained in Note 2 of the December 31, 2021 consolidated
financial statements.
CONSOLIDATED FINANCIAL INFORMATION
IFRS uses a control-based model to determine if consolidation is required. Therefore, we are deemed to control an
investment if we: (1) exercise power over the investee; (2) are exposed to variable returns from our involvement
with the investee; and (3) have the ability to use our power to affect the amount of the returns. Due to the
ownership structure of many of our subsidiaries, we control entities in which we hold only a minority economic
interest. Please refer to Part 2 – Review of Consolidated Financial Results for additional information.
i.
Investment Properties
We classify the majority of the property assets within our Real Estate segment as investment properties. Our
valuations are prepared at the individual property level by internal investment professionals with the appropriate
expertise in the respective industry, geography and asset type. These valuations are updated at each balance sheet
date with gains or losses recognized in net income.
The majority of underlying cash flows in the models are comprised of contracted leases, many of which are long
term, with our office assets within our Core and Transitional and Development portfolios having a combined 89%
occupancy level and an average 8 year lease life, while our retail assets within our Core and Transitional and
Development portfolios have a combined occupancy rate of 94%. The models also include property-level
assumptions for renewal probabilities, future leasing rates and capital expenditures. These are reviewed as part of
102
BROOKFIELD ASSET MANAGEMENT
the business planning process and external market data is utilized when determining the cash flows associated with
lease renewals.
We test the outcome of our process by having a number of our properties externally appraised each year, including
appraisals for core office properties, at least on a three-year rotating basis. We compare the results of the external
appraisals to our internally prepared values and reconcile significant differences when they arise. In the current
year, 77 of our properties were externally appraised, representing a gross property value of $33 billion of assets;
external appraisals were within 1% of management’s valuations.
The valuations are most sensitive to changes in cash flows, which include assumptions relating to lease renewal
probabilities, downtime, capital expenditures, future leasing rates and associated leasing costs, discount rates and
terminal capitalization rates. The key valuation metrics of our real estate assets as of December 31, 2021
and December 31, 2020 are summarized below.
Core
Transitional and
Development
LP Investments
Weighted Average
AS AT DEC. 31
Discount rate ...................................
Terminal capitalization rate .........
Investment horizon (years) ...........
2021
5.9%
4.6%
11
2020
6.0%
4.6%
11
2021
7.3%
5.8%
10
2020
7.2%
5.9%
10
2021
9.1%
5.9%
13
2020
9.4%
6.0%
14
2021
7.7%
5.5%
12
2020
7.7%
5.6%
12
The following table presents the impact on the fair value of our consolidated investment properties as at
December 31, 2021 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. These amounts represent the effect on all
consolidated investment property assets within the consolidated financial statements of BAM on a pre-tax basis,
including amounts attributed to non-controlling interests in our perpetual affiliates and private fund investments.
The amounts attributable to shareholders may be significantly less than shown depending on ownership levels in
the individual assets.
AS AT DEC. 31, 2021
(MILLIONS)
Core ................................................................................................................................................................. $ 19,384 $
Transitional and Development .................................................................................................................
LP Investments .............................................................................................................................................
Other investment properties ....................................................................................................................
Total ............................................................................................................................................................... $ 100,865 $
Fair Value Sensitivity
51,620
27,669
2,192
1,941
2,183
4,734
546
64
ii.
Revaluation Method for PP&E
Within our Renewable Power and Transition and Infrastructure segments, we revalue our PP&E using a discounted
cash flow (“DCF”) approach; our Real Estate hospitality assets are valued using the depreciated replacement cost
method. PP&E within our Private Equity segment is recorded at cost less accumulated depreciation and impairment
losses.
Assets subject to the revaluation approach are revalued annually following a bottom-up approach, starting at the
operating level with local professionals, and involving multiple levels of review, including by senior management.
Changes in fair value are reported through other comprehensive income as revaluation surplus. Underlying cash
flows used in DCF models are subject to detailed reviews as part of business planning, with discount rates and other
key variable inputs reviewed for reasonability and the models reviewed for mathematical accuracy. Key inputs are
frequently compared to third-party reports commissioned by the respective entities to assess reasonability. In
addition, comparable market transactions are analyzed to consider for benchmarking. Additional information about
the revaluation methodology and current year results is provided below.
2021 ANNUAL REPORT
103
When determining the carrying value of PP&E 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
PP&E under development includes estimates in respect of the timing and cost to complete the development. This
process is further discussed in Part 2 – Review of Consolidated Financial Results.
Renewable Power and Transition
Perpetual renewable power assets, such as many of our hydroelectric facilities, are revalued using 20-year
discounted cash flow models with a terminal value that is determined, where appropriate, using the Gordon Growth
Model. For assets with finite lives, such as wind and solar farms, the cash flow model is based on the estimated
remaining service life and the residual asset value is used to represent the terminal value.
Key inputs into the models, which include forward merchant power prices, energy generation estimates, operating
and capital expenditures, tax rates, terminal capitalization rates and discount rates are assessed on an asset-by-
asset basis as part of the bottom-up preparation and review process.
The key inputs that affect cash flow projections are outlined below:
•
Pricing forecasts consist of the following inputs:
◦ Where power purchase agreements are in place, contracted power prices are utilized for the remaining
term of these agreements.
◦
◦
Thereafter, or to the extent that the underlying renewable power asset is not contracted, we estimate
merchant pricing based on a mix of external data and our own estimates. Short-term merchant pricing is
based on four years of externally sourced broker quotes in North America, two years of gas pricing in
Europe and local market pricing in South America. We ensure to link our short-term pricing by linear
extrapolation to our view of long-term power pricing below.
Long term pricing is driven by the economics required to support new entrants into the various power
markets in which we operate. The year of new entry is viewed as the point when generators must build
additional capacity to maintain system reliability and provide an adequate level of reserve generation with
the retirement of older coal-fired plants and rising environmental compliance costs in North America and
Europe, and overall increasing demand in Colombia and Brazil. Once the year of new entrant is determined,
data from industry sources, as well as inputs from our development teams, is used to model the all-in cost
of the expected technology mix of new construction, and the resulting market price required to support its
development. Our long-term pricing view is anchored to the cost of securing new energy from renewable
sources to meet future demand growth by the years 2026 to 2035 in North America, by 2029 in Colombia
and by 2025 in Brazil. For the North American businesses, we have estimated our renewable power assets
will contract at a discount to new-build wind, solar and battery prices (the most likely source of new
renewable generation in those regions). In Brazil and Colombia, the estimate of future electricity prices is
based on a similar approach as applied in North America using a forecast of the all-in cost of development.
•
Energy generation forecasts are based on LTA for which we have significant historical data. LTA for hydroelectric
facilities is based on third-party engineering reports commissioned during asset acquisitions and financing
activities. These studies are based on statistical models supported by decades of historical river flow data.
Similarly, LTA for wind facilities is based on third-party wind resource studies completed prior to construction or
acquisition. LTA for solar facilities is based on third-party irradiance level studies at the location of our project
sites during construction or acquisition.
•
Capital expenditure forecasts rely on independent engineering reports commissioned from reputable third-
party firms during underwriting or financings.
104
BROOKFIELD ASSET MANAGEMENT
Our discount rates, which are adjusted based on asset level and regional considerations, are compared to those
used by third-party valuators for reasonability.
Review of our models also includes assessing comparable market transactions and reviewing third-party valuator
reports. We compare EBITDA multiples and value per megawatt at the asset level to recent market transactions, and
on a portfolio basis, we compare the valuation multiples to our most comparable competitors in the market and the
resulting book value of our equity after revaluation to our share price in the market. Specifically, we have noted
from reviews of market transactions in the U.S. northeast that the multiples paid for the asset indicate that market
participants likely share our view on escalating power prices in the region. We also confirm the reasonability of our
values through the use of a third-party valuator which provides an opinion on the valuation method and results.
Each year we have a valuation report provided on approximately one-quarter of the assets, providing a reasonable
opinion in the range of +/– 10%. We compare our valuations to this report, along with other inputs, ensuring that
they are within the reasonable range.
In 2021, the fair value of the PP&E in our Renewable Power and Transition segment increased by $4.8 billion,
primarily attributable to lower cost of capital applied across all classes of assets, as we observed a lowering of both
interest rates and cost of equity in the market. Valuations also benefited from our continued cost savings and
revenue enhancing initiatives.
The key valuation metrics of our hydroelectric, wind and solar generating facilities at the end of 2021 and 2020 are
summarized below:
North America
Brazil
Colombia
Europe
AS AT DEC. 31
Discount rate
2021
2020
2021
2020
2021
2020
2021
2020
Contracted .................. 4.1 – 4.3% 4.1 – 4.5% 7.2% 7.3%
Uncontracted ............. 5.4 – 5.6% 5.6 – 6.0% 8.5% 8.6%
7.9%
9.2%
8.1%
9.4%
3.9% 3.0 – 3.6%
3.9% 3.6 – 4.7%
Terminal
capitalization rate1
Exit date .........................
... 4.8 – 5.1% 5.8 – 6.2%
2041
2042
n/a
2048
n/a 8.0%
2041
2048
8.9%
2040
n/a
2036
n/a
2035
1. The terminal capitalization rate applies only to hydroelectric assets in North America and Colombia.
2021 ANNUAL REPORT
105
The following table presents the impact on fair value of property, plant and equipment in our Renewable Power and
Transition segment as at December 31, 2021 from a 25-basis point change in discount and terminal capitalization
rates, as well as a 5% change in electricity prices. These amounts represent the effect on all consolidated property,
plant and equipment assets within the consolidated financial statements of BAM on a pre-tax basis, including
amounts attributed to non-controlling interests in our listed affiliates and private fund investments. The amounts
attributable to shareholders may be significantly less than shown depending on ownership levels in the individual
assets.
AS AT DEC. 31, 2021
(MILLIONS)
25 bps change in discount and terminal capitalization rates1
Fair Value Sensitivity
North America ........................................................................................................................................... $ 32,629 $
Colombia .....................................................................................................................................................
Brazil ............................................................................................................................................................
Europe .........................................................................................................................................................
8,497
3,935
3,547
5% change in electricity prices
North America ...........................................................................................................................................
Colombia .....................................................................................................................................................
Brazil ............................................................................................................................................................
Europe .........................................................................................................................................................
32,629
8,497
3,547
3,935
1. The terminal capitalization rate applies only to hydroelectric assets in North America and Colombia.
2,010
355
100
60
1,100
410
80
—
Terminal values are included in the valuation of hydroelectric assets in the U.S. 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 plus a one-time 30-year renewal term for the majority of the hydroelectric assets. The weighted-
average remaining duration at December 31, 2021, including a one-time 30-year renewal for applicable
hydroelectric assets, is 31 years (2020 – 32 years). Consequently, there is no terminal value attributed to the
hydroelectric assets in Brazil.
Energy Contracts
The New York power contract is the only power contract that remains in place between the Corporation and BEP.
Under the contract, we are required to purchase power that BEP generates at certain of its New York assets at a
fixed price. Based on LTA, we purchase approximately 3,600 GWh of power each year. The fixed price that BAM is
required to pay BEP began gradually stepping down in 2021 by $3/MWh a year. This will continue until 2025,
followed by a $5/MWh reduction in 2026 resulting in an approximate $20/MWh total reduction. The contract expires
in 2046.
The contract is valued annually based on price curves as at year end incorporating revised discount rates as
required. As at December 31, 2021, the contract was valued using weighted-average forward power price estimates
of approximately $76/MWh in years 1-10 and $142/MWh in years 11-20, using a discount rate of approximately
5.9%.
Infrastructure
Our infrastructure assets, revalued using DCF models, are generally subject to contractual and regulatory
frameworks that underpin the cash flows. We also include the benefits of development projects for existing in-place
assets to the extent that they have been determined to be feasible, typically by external parties, and have received
the appropriate approvals. We are unable to include the benefits of development projects within our business that
are not considered improvements to existing PP&E.
The underlying cash flow models supporting the revaluation process include a number of different inputs and
variables with risks mitigated through controls incorporated in the bottom-up preparation and review process.
Inputs are reviewed for qualitative and quantitative considerations and the mechanical accuracy is tested by
106
BROOKFIELD ASSET MANAGEMENT
appropriate finance and investment professionals. Once complete, the portfolio management team presents the
valuations to the infrastructure CEO, COO and CFO for approval.
As part of our process, we analyze comparable market transactions that we can consider for the purposes of
benchmarking our analysis. Metrics such as the implied current year or forward-looking EBITDA multiples are
reviewed against market transactions to assess whether our valuations are appropriate. On an overall segment
level, we also assess whether the inputs used in the models are consistent amongst asset classes and geographies,
where applicable, or that asset specific differences are supportable considering transactions in a given asset class or
market.
We obtain third-party appraisals on the assets that are held through private funds on a three-year rotating basis.
These appraisals are not directly utilized in the financial statements, rather they are used to confirm that
management’s assumptions in determining fair value are within a reasonable range.
On an aggregate basis, the value of the appraised assets is greater than the book value because a significant portion
of our infrastructure operations assets such as public service concessions are classified as intangible assets. These
intangible assets are carried at amortized cost, subject to impairment tests, and are amortized over their useful
lives. In addition, we have contracted growth projects within our businesses that cannot be included in IFRS fair
value unless these relate to improvements on existing PP&E.
Within our Infrastructure segment, we reported valuation gains of $172 million in 2021. The gain was primarily due
to revaluation gains reflecting growing cash flows and strong underlying performance at a number of businesses.
The key valuation metrics of our utilities, transport and midstream operations are summarized below:
AS AT DEC. 31
Discount rate ..........................................
Terminal capitalization multiples ......
Investment horizon/
Termination valuation date
(years) ..................................................
Real Estate
Utilities
Transport
Midstream
2021
7 – 11%
20x
2020
7 – 14%
7x – 23x
2021
7 – 14%
9x – 15x
2020
7 – 13%
9x – 14x
2021
15%
10x
2020
15%
10x
10 – 20
10
10
10
5 – 10
5 – 10
Fair values of our hospitality properties, primarily hotel and resort operations, are assessed annually using
the depreciated replacement cost method, which factors in age, physical condition and construction costs of the
properties. Fair values of hospitality properties are also reviewed in reference to each asset’s enterprise value which
is determined using a discounted cash flow model. These valuations are generally prepared by external valuation
professionals using information provided by management of the operating business. The fair value estimates for
hospitality properties represent the estimated fair value of the PP&E of the hospitality business only and do not
include, for example, any associated intangible assets.
Revaluation of our PP&E in our Real Estate segment increased the fair value of our hospitality assets by $1.1 billion.
The gain was due to improved cash flows to reflect higher occupancy at our hospitality assets, as a result of
continued recovery as mandated closures and restrictions are lifted and demand for leisure travel has increased.
iii.
Financial Instruments
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. 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. Financial assets and liabilities
may be classified as Level 1, 2 or 3 in the fair value hierarchy. Refer to Note 6 – Fair Value of Financial Instruments
within the notes to the consolidated financial statements for additional information.
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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.
iv.
Inventory
The company estimates the net realizable value of its inventory using estimates and assumptions about future
selling prices and future development costs.
v. 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. Equity accounted investment,
which follow the same accounting principles as our consolidated operations, include amounts recorded at fair value
and amounts recorded at amortized cost or cost, depending on the nature of the underlying assets.
ACCOUNTING JUDGEMENTS
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:
i.
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 it 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 as a
result of 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. Refer to Part 2 – Review of
Consolidated Financial Results for additional information.
ii.
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.
iii. 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, discount and capitalization rates. Judgment is applied when determining future electricity prices
considering broker quotes for the years in which there is a liquid market available and, for the subsequent years,
our best estimate of electricity prices from renewable sources that would allow new entrants into the market.
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iv.
Identifying Performance Obligations for Revenue Recognition
Management is required to identify performance obligations relating to contracts with customers at the inception of
each contract. IFRS 15 requires a contract’s transaction price to be allocated to each distinct performance obligation
when, or as, the performance obligation is satisfied. Judgment is used when assessing the pattern of delivery of the
product or service to determine if revenue should be recognized at a point in time or over time. For certain service
contracts recognized over time, judgment is required to determine if revenue from variable consideration such as
incentives, claims and variations from contract modifications has met the required probability threshold to be
recognized.
Management also uses judgment to determine whether contracts for the sale of products and services have distinct
performance obligations that should be accounted for separately or as a single performance obligation. Goods and
services are considered distinct if: (1) a customer can benefit from the good or service either on its own or together
with other resources that are readily available to the customer; and (2) the entity’s promise to transfer the good or
service to the customer is separately identifiable from other promises in the contract.
Additional details about revenue recognition policies across our operating segments are included in Note 3 of the
consolidated financial statements.
v.
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.
vi.
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.
vii.
Income Taxes
The company makes judgments when determining the future tax rates applicable to subsidiaries and identifying the
temporary differences 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 that would follow the disposition of the property. Otherwise, deferred taxes are
measured on the basis that the carrying value of the investment property will be recovered substantially through
use.
viii. 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.
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ix. 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.
CONSOLIDATED FINANCIAL INFORMATION
We report our financial results under IFRS while many of our peers report under U.S. GAAP. These GAAPs are
aligned in many areas, but as it relates to asset management and investment companies, there is a significant
difference between IFRS and U.S. GAAP. Under IFRS, while investment companies can account for their investments
at fair value and report them on one line in their balance sheet on a net basis, a parent of an investment company
cannot maintain that accounting and must look to whether it controls the underlying investments individually. For
our peers under U.S. GAAP, investment companies can use the same treatment as in IFRS but the parent of an
investment company would keep the same reporting as the subsidiary investment company. Therefore, the same
investment could be fully consolidated under IFRS or shown as one line on a net basis under U.S. GAAP.
IFRS uses a control-based model to determine if consolidation is required. Therefore, we are deemed to control an
investment if we: (1) exercise power over the investee; (2) are exposed to variable returns from our involvement
with the investee; and (3) have the ability to use our power to affect the amount of the returns. Our consolidation
conclusions may differ from certain of our peers who report under U.S. GAAP as they are required to evaluate
consolidation requirements using a voting interest model or a variable interest model depending on the
circumstances.
MANAGEMENT REPRESENTATIONS AND INTERNAL
CONTROLS
ASSESSMENTS 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, 2021 and based on that assessment concluded that, as of December 31, 2021, 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 quarter or year ended
December 31, 2021 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, 2021. 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, 2021 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.
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.
Refer to Note 27 Related Party Transactions in the consolidated financial statements for further details.
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PART 6
BUSINESS ENVIRONMENT AND RISKS
For purposes of Part 6 of this Report, references to the “company”, “we”, “us” or “our” refers to Brookfield Asset
Management Inc., its consolidated subsidiaries, and Oaktree.
This section contains a review of certain aspects of the business environment and risks that could materially
adversely impact our business, performance, financial condition, results of operations, cash flows and the value of
our securities. 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) Volatility in the Trading Price of Our Class A Shares
The trading price of our Class A shares is subject to volatility due to market conditions and other factors 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) actual or prospective changes in
government laws, rules or regulations affecting our businesses; (iii) material announcements by us, our affiliates or
our competitors; (iv) the general state of the securities markets; (v) market conditions and events specific to the
industries in which we operate; (vi) changes and developments in general economic, political, or social conditions,
including as a result of COVID-19 and related economic disruptions; (vii) changes in the values of our investments
(including in the market price of our listed affiliates) or changes in the amount of distributions, dividends or interest
paid in respect of investments; (viii) differences between our actual financial and operating results and those
expected by investors and analysts; (ix) changes in analysts’ recommendations or earnings projections; (x) changes
in the extent of analysts’ interest in covering the Corporation and its listed affiliates; (xi) the depth and liquidity
of the market for our Class A shares; (xii) dilution from the issuance of additional equity, including as a result of
exchanges or additional issuances of shares exchangeable for Class A Shares such as exchanges of class A
exchangeable limited voting shares of Brookfield Reinsurance; (xiii) investor perception of our businesses and the
industries in which we operate; (xiv) investment restrictions; (xv) our dividend policy; (xvi) the departure of key
executives; (xvii) sales of Class A shares by senior management or significant shareholders; and (xviii) the
materialization of other risks described in this section.
b) Reputation
Actions or conduct that have a negative impact on investors’ or stakeholders’ perception of us could adversely impact our
ability to attract and/or retain investor capital and generate fee revenue.
The growth of our asset management business relies on continuous fundraising for various private and public
investment products, and retention of capital raised from third-party investors. We depend on our business
relationships and our global reputation for integrity and high-caliber 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. Our business relationships and reputation could be negatively impacted by a number of factors
including poor performance; actual, potential or perceived conflicts of interest that are not adequately addressed;
misconduct or alleged misconduct by employees; rumors or innuendos; or failed or ineffective implementation of
new investments or strategies. If we are unable to continue to raise and retain capital from third-party investors,
either privately, publicly or both, or otherwise are unable to pursue our investment opportunities, this could
materially reduce our revenue and cash flows 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
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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.
As a global alternative asset manager with various lines of business and investment products, some of which have
overlapping mandates, we may be subject to a number of actual, potential or perceived conflicts of interest. These
conflicts may be magnified for an asset manager that has many different capital sources available to pursue
investment opportunities, including investor capital and the Corporation’s own capital. In addition, the senior
management team of the Corporation and its affiliates have 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 investors in entities
managed by the Corporation.
In addressing these conflicts, we have implemented a variety of policies and procedures; however, there can be no
assurances that these will be effective at mitigating actual, potential or perceived conflicts of interest in all
circumstances, or will not reduce the positive synergies that we seek to cultivate across our businesses. It is also
possible that actual, potential or perceived conflicts of interest if not properly addressed, 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 a priority and our reputation could be
damaged if we fail, or appear to fail, to deal appropriately with actual, potential or perceived conflicts of interest.
Asset manager conflicts are subject to enhanced regulatory scrutiny 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. For information regarding conflicts of interests between the
businesses within our asset management operations that operate on opposite sides of an information barrier, see
Item (v) herein.
Our reputation could also 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, including historical misconduct prior
to our investment. Risks associated with misconduct at our portfolio companies is heightened in cases where we do
not have legal control or significant influence over a particular portfolio company or are not otherwise involved in
actively managing a portfolio company. In such situations, given our ownership position and affiliation with the
portfolio company, we may still be negatively impacted from a reputational perspective through this association. In
addition, even where we have control over a portfolio company, if it is a newly acquired portfolio company that we
are in the process of integrating then we may face reputational risks related to historical or current misconduct or
alleged misconduct at such portfolio company for a period of time. We may also face increased risk of misconduct
to the extent our capital allocated to emerging markets and distressed companies 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 favorable or unfavorable 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, or a security breach results in an
inadvertent disclosure of such 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 or
security breaches, and the precautions we take in this regard may not be effective.
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Implementation of new investment and growth strategies involves a number of risks that could result in losses and
harm to 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 with, detract from or
compete against our existing businesses, and that the 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.
In addition to impacting our ability to raise and retain third-party capital and pursue investment opportunities,
certain of the risks identified herein that may have a negative impact on our reputation also could, in extreme cases,
result in our removal as general partner or an acceleration of the liquidation date of the private funds that we
manage. The governing agreements of our private funds provide that, subject to certain conditions (which may,
particularly in the case of our removal as general partner, include final legal adjudications of the merits of the
particular issue), 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. Additionally, at any time, investors may terminate a fund and accelerate
the liquidation date upon the vote of a super-majority of investors in such fund. A significant negative impact to our
reputation would be expected to increase the likelihood that investors could seek to terminate a private fund. This
effect would be magnified if, as is often the case, an investor is invested in more than one fund. 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.
c) Asset Management
Growth in fee-bearing capital could be adversely impacted by poor product development or marketing efforts. In addition,
investment returns could be lower than target returns due to inappropriate allocation of capital or ineffective investment
management.
Our asset management business depends on our ability to fundraise third-party capital, deploy that capital
effectively, and produce targeted investment returns.
Our ability to raise third-party capital depends on a number of factors, including many that are outside our control
such as the general economic environment and the number of other investment funds being raised at the same
time by our competitors. Investors may reduce (or even eliminate) their investment allocations to alternative
investments, including closed-ended private funds. Investors that are required to maintain specific asset class
allocations within their portfolio may be required to reduce their investment allocations to alternative investments,
particularly during periods when other asset classes such as public securities are decreasing in value. In addition,
investors may prefer to insource and make direct investments; therefore, becoming competitors and ceasing to be
clients and/or make new capital commitments.
Competition from other asset managers for raising public and private capital is intense, with competition based on a
variety of factors, including investment performance, the quality of service provided to investors, the quality and
availability of investment products, marketing efforts, investor liquidity and willingness to invest, and reputation.
Poor investment performance could hamper our ability to compete for these sources of capital or force us to
reduce our management fees. Our investors and potential investors continually assess investment performance
and our ability to raise capital for existing and future funds depends on our funds’ relative and absolute
performance. If poor investment returns or changes in investment mandates 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 will be able to find new investors. Further, as
competition and disintermediation in the asset management industry increases, we may face pressure to reduce or
modify our asset management fees, including base management fees and/or carried interest, or modify other terms
governing our current asset management fee structure, in order to attract and retain investors.
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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.
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. In pursuing investment opportunities and returns, we and our managed entities face
competition from other investment managers and investors worldwide. Each of our businesses is subject to
competition in varying degrees and our competitors may have certain competitive advantages over us when
pursuing investment opportunities. 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. 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 or other competitive processes. If we are unable to
successfully raise, retain, and deploy third-party capital into investments, we may be unable to collect management
fees, carried interest or transaction fees, which would materially reduce our revenue and cash flows and adversely
affect our financial condition.
Our approach to investing often 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. We may fail to value opportunities accurately or to
consider all relevant factors that may be necessary or helpful in evaluating an opportunity, may underestimate the
costs necessary to bring an acquisition up to standards established for its intended market position, may be
exposed to unexpected risks and costs associated with our investments, including risks arising from alternative
technologies that could impair or eliminate the competitive advantage of our business in a particular industry, and/
or may be unable to quickly and effectively integrate new acquisitions into our existing operations or exit from the
investment on favorable terms. 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.
Our credit strategies, the majority of which are managed through Oaktree, offer a broad diverse range of long-term
fund and perpetual strategies to our investors. Similar to our other long-term private funds, we earn base
management fees and carried interest on Oaktree’s fund capital in its credit strategies. Cyclicality is important to
credit strategies and weak economic environments have tended to afford the best investment opportunities and
best relative investment performance to such strategies. Any prolonged economic expansion or recession could
have an adverse impact on certain credit strategies and materially affect the ability to deliver superior investment
returns for clients or generate incentive or other income in respect of those strategies.
We generally 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.
At times, we make investments (for one or more of our funds or managed entities) in companies that we do not
control. These investments are subject to the risk that the company in which the investment is made may make
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business, financial or management decisions with which we do not agree or that the majority stakeholders or the
management of the company may take risks or otherwise act in a manner that does not serve our interests.
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 market dislocation. In addition, certain of our funds hold
publicly traded securities the price of which will be volatile and are likely to fluctuate due to a number of factors
beyond our control, including actual or anticipated changes in the profitability of the issuers of such securities;
general economic, social, or political developments; changes in industry conditions; changes in governance
regulation; inflation; the general state of the securities markets; COVID-19; and other material events.
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 flows. Alternatively, we may be
required to sell a business before it has realized our expected level of returns for such business.
If any of our managed investments perform poorly or experience prolonged periods of volatility, or we are unable to
deploy capital effectively, our fee-based revenue, cash available for distribution and/or carried interest would
decline. Moreover, we could experience losses on our capital invested in our managed entities. Accordingly, our
expected returns on these investments may be less than we have assumed in forecasting the value of our business.
d) Laws, Rules and Regulations
We are subject to numerous laws, rules, and regulatory requirements which may impact our business, including resulting
in financial penalties, loss of business, and/or damage to our reputation in instances of non-compliance.
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, our listed affiliates, or the entities that we manage to
comply with these laws, rules and regulations, or 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 obligations 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
financial services industry has been the subject of heightened scrutiny, and the Securities and Exchange
Commission has specifically focused on asset managers in recent enforcement actions. Regulatory investigations
and/or enforcement actions by our regulators could have a material adverse effect on our business and/or
reputation. In addition, 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. Although there may be some areas where governments in certain jurisdictions propose deregulation, it
is difficult to predict the timing and impact of any such deregulation, and we may not materially benefit from any
such changes.
Our asset management business is not only regulated in the U.S., but also in other jurisdictions where we conduct
operations including the E.U., the U.K., Canada, Brazil, Australia, India, South Korea and China. 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 rules and regulations in the future. These rules
and 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 participation and
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
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have. Compliance with additional regulatory requirements will impose additional restrictions and expenses for us
and could reduce our operating flexibility and fundraising opportunities.
Our broker-dealer business is regulated by the SEC, the various Canadian provincial securities commissions, as well
as self-regulatory organizations, including the Financial Industry Regulatory Authority in the U.S. 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.
The advisors of certain of our managed entities are registered as investment advisers with the SEC. Registered
investment advisers are subject to the requirements and regulations of the Investment Advisers 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 adviser may engage, suspension or revocation of the investment adviser’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, 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 face severe limitations on the operation of our business. Among other things,
we would be prohibited from engaging in certain business activities (or have conditions placed on our business
activities), face restrictions on engaging in transactions with affiliated entities and issuing certain securities or
engaging in certain types of financings, be restricted with respect to the amount and types of borrowings we are
permitted to obtain, be required to limit the amount of investments that we make as principal, and face other
limitations on our activities.
We have and may become subject to additional regulatory and compliance requirements as we expand our product
offerings and investment platform which likely will carry additional legal and compliance costs, as well as additional
operating requirements that may also increase costs.
We acquire and develop primarily real estate, 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 laws and regulations. These laws and 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 and regulations
may negatively impact us and our businesses or may benefit our competitors and 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.
e) 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. These investigations, regardless of their outcome, can be costly, divert management attention,
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and damage our reputation. The unfavorable 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 a continued global focus on the enforcement of anti-bribery and corruption legislation, and this focus has
heightened the risks that we face in this area, particularly as we continue to 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, the Canadian Corruption of Foreign Public Officials Act, and the Brazilian
Clean Company Act. This 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, in particular when conducting due diligence in connection with acquisitions, 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. When acquiring assets in distress, the quality of financial information of the
target may also make it difficult to identify irregularities.
f)
Financial Obligations and Liquidity
Cash must be available to meet our financial obligations when due and 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 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 high interest rates or on other unfavorable 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 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 indebtedness, the terms of a
refinancing may not be as favorable as the original terms for such 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, thereby causing dilution to existing shareholders. Regulatory changes 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
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and breaches of these covenants 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. Further, because our investment strategy can entail our having representation on
public portfolio company boards, we may be restricted in our ability to effect sales during certain time periods. 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, from time to time, we may 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.
g)
Foreign Exchange and Other Financial Exposures
Foreign exchange rate fluctuations could adversely impact our aggregate foreign currency exposure and hedging strategies
may not be effective.
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 the results of our operations and financial position. In addition, we are active in certain
markets where 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.
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) or 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
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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) Temporary Investments and Backstop Commitments
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 or stand in place of another entity to acquire
assets or securities in order to support our asset management franchise with the expectation that our commitment
is temporary. For example, we may acquire an asset suitable for a particular managed entity that is fundraising and
warehouse that asset through the fundraising period before transferring the asset to the managed entity for which
it was intended. As another example, we may commit capital for a particular acquisition transaction 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 and backstop commitments, 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 or commitment as we intended and therefore
may be required to take or keep ownership of assets or securities 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
alter our asset concentration outside of our desired parameters, may reduce our ability to pursue further
acquisitions, or negatively impact our ability to meet other financial commitments.
i)
Interest Rates
Rising interest rates could increase our interest costs and adversely affect our financial performance.
A number of our long-life assets are interest rate sensitive. Increases in interest rates will, other things being equal,
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 thereunder. 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.
Although interest rates have remained at relatively low levels on a historical basis, in many jurisdictions in which we
operate, a period of sharply rising interest rates may cause certain market dislocations that could negatively impact
our financial performance, increase the cost and availability of debt financing and thereby negatively impact the
ability of our businesses to obtain attractive financing or refinancing and could increase the cost of such financing if
obtained. Interest rate increases would also increase the amount of cash required to service our obligations and our
earnings could be adversely impacted as a result.
The Financial Conduct Authority (the “FCA”) in the United Kingdom ceased compelling banks to submit rates for the
calculation of LIBOR in 2021. In response, the Federal Reserve Board and the Federal Reserve Bank of New York
organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate
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("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. In November 2020,
the ICE Benchmark Administration Limited, the benchmark administrator for USD LIBOR rates, proposed extending
the publication of certain commonly-used USD LIBOR settings until June 30, 2023 and the FCA issued a statement
supporting such proposal. It is not possible to predict the effect of these changes, including when LIBOR will cease
to be available or when there will be sufficient liquidity in the SOFR markets.
We have outstanding debt and derivatives with variable rates that are indexed to LIBOR. The discontinuance of, or
changes to, benchmark interest rates may require adjustments to agreements to which we and other market
participants are parties, as well as to related systems and processes. In the transition from the use of LIBOR to SOFR
or other alternatives, uncertainty exists as to the extent and manner of which future changes may result in interest
rates and/or payments that are higher than or lower than or that do not otherwise correlate over time with the
interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current
form. Use of alternative interest rates or other LIBOR reforms could result in increased volatility or a tightening of
credit markets which could adversely affect our ability to obtain cost-effective financing. In addition, the transition
of our existing LIBOR financing agreements to alternative benchmarks may result in unanticipated changes to the
overall interest rate paid on our liabilities.
j) Human Capital
Ineffective maintenance of our culture, or ineffective management of human capital could adversely impact our asset
management business and financial performance.
Our ability to compete effectively in our businesses will depend upon our ability to attract new employees and
retain and motivate our existing employees. Our senior management team has a significant role in our success
and oversees the execution of our investment strategies. 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 ability to retain and motivate our management team, attract suitable replacements should any members of our
management team leave, or attract new investment professionals as our business grows, is dependent on, among
other things, the competitive nature of the employment market and the career opportunities and compensation
that we can offer. In all of our markets, we face intense competition in connection with the attraction and retention
of qualified employees.
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. 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. Accordingly, the loss of services from key professionals 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.
Additionally, the departure of certain individuals could trigger certain “key person” provisions in the documentation
governing certain of our private funds, which would permit the limited partners of those funds to suspend or
terminate the funds’ investment periods or withdraw their capital prior to the expiration of the applicable lock-up
date. Our key person provisions vary by both strategy and fund and, with respect to each strategy and fund, are
typically tied to multiple individuals, meaning that it would require the departure of more than one individual to
trigger the key person provisions. Our human capital risks may be exacerbated by the fact that we do not maintain
any key person insurance.
The conduct of our businesses and the execution of our strategy rely heavily on teamwork. Our continued ability 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.
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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 labor 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.
k) Geopolitical
Political instability, changes in government policy, or unfamiliar cultural factors could adversely impact the value of our
investments.
We are subject to geopolitical uncertainties in all jurisdictions in which we operate. 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 or existing markets and lead to financial losses for
us and our managed entities. There are risks of political instability in several of our major markets and in other parts
of the world in which we conduct business from factors such as political conflict, income inequality, refugee
migration, terrorism, the potential break-up of political-economic unions and political corruption; the
materialization of one or more of these risks could negatively affect our financial performance.
For example, recent military tensions and conflict in Eastern Europe could contribute to global economic uncertainty
and could significantly disrupt the free movement of goods, services, and people and also have a destabilizing effect
on energy markets, as well as potential higher costs of conducting business in Europe. Similarly, an inability of local
and national governments to effectively manage ongoing political disputes, could result in local, regional and/or
global instability. The materialization of one or more of these risks could negatively affect our financial performance
and adversely impact our business.
The transition period following the U.K.’s formal departure from the E.U. ended on December 31, 2020, and E.U. law
no longer applies in the U.K. There remains uncertainty related to the post-Brexit relationship between the U.K. and
the E.U. and it is difficult to predict what the future economic, tax, fiscal, legal, regulatory and other implications of
Brexit will be for the asset management industry, the broader European and global financial markets generally.
While we have not experienced any material financial impact from Brexit on our business to date, future impacts
could include increased legal and regulatory complexities, as well as potentially higher costs of conducting business
in Europe, which could have an adverse effect on our business.
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 and regulations, including protectionist policies, or
personnel; (ii) changes in general economic or social conditions, including as a result of COVID-19; (iii) restrictions on
currency transfer or convertibility; (iv) changes in labor relations; (v) military conflict, 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 rates of inflation; (xiv) higher
transaction costs; (xv) difficulty in enforcing contractual obligations and expropriation or confiscation of assets; and
(xvi) fewer investor protections.
In addition to the risks noted above, as a result of the rapid spread of COVID-19, many governments have imposed
restrictions on business activity and travel. Refer to Catastrophic Event/Loss, Pandemics, Climate Change, War and
Terrorism on pages 123 and 124.
Unforeseen political events in markets where we have significant investors and/or where we own and operate
assets or may look to for further growth of our businesses, such as the U.S., Canadian, Brazilian, Australian,
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European, Middle Eastern and Asian 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 investors, 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 supply chain disruptions, trade policy and
geopolitical tensions.
l)
Economic Conditions
Unfavorable 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: short-term and long-term interest rates; inflation;
credit and capital market volatility; business investment levels; government spending levels; sovereign debt risks;
consumer spending levels; changes in laws, rules or regulations; trade barriers; supply chain disruptions;
commodity prices; currency exchange rates and controls; national and international political circumstances
(including wars, terrorist acts, or security operations); catastrophic events (including pandemics/epidemics such as
COVID-19, earthquakes, tornadoes, or floods); 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 volatility across all markets, including commodity markets, which may have a negative impact on
our financial performance. Unfavorable 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.
Many of 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.
In addition, in an economic downturn, there is an increased risk of default by counterparties to our investments and
other transactions. In these circumstances, it is more likely that such transactions will fail or perform poorly, which
may in turn have a material adverse effect on our business, results of operation and financial condition.
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m) Catastrophic Event/Loss, Pandemics, Climate Change, War and Terrorism
Catastrophic events (or combination of events), such as earthquakes, tornadoes, floods, fires, pandemics/epidemics such
as COVID-19, climate change, military conflict/war or terrorism/sabotage, 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, pandemics/epidemics such as COVID-19 (including the emergence
and progression of new variants), acts of malicious destruction, climate change, war/military conflict or terrorism,
which could materially adversely impact our operations.
A local, regional, national or international outbreak of a contagious disease, such as COVID-19 which spread across
the globe at a rapid pace impacting global commercial activity and travel or future public health crises, epidemics or
pandemics, could materially and adversely affect our results of operations and financial condition due to the
disruptions to commerce, reduced economic activity and other unforeseen consequences that are beyond our
control.
The ongoing prevalence of COVID-19, the emergence and progression of new variants and actions taken in response
to COVID-19 by government authorities across various geographies in which the company owns and operates
investments have interrupted business activities and supply chains; disrupted travel; contributed to significant
volatility in the financial markets; impacted social conditions; and adversely affected local, regional, national and
international economic conditions, as well as the labor market. There can be no assurance that strategies that we
employ to address potential disruptions in operations will mitigate the adverse impacts of any of these factors.
The longer-term economic impacts of COVID-19 will depend on future developments, which are highly uncertain,
constantly evolving and difficult to predict. These developments may include the risk of new and potentially more
severe variant strains of COVID-19, and additional actions that may be taken to contain COVID-19, such as re-
imposing previously lifted measures or putting in place additional restrictions, and the pace, availability, distribution,
acceptance and effectiveness of vaccines. Such developments, depending on their nature, duration, and intensity,
could have a material adverse effect on our business, financial position, results of operations or cash flows.
In addition, the potential effects of COVID-19 on our employees, the employees of our subsidiaries, reinsurers, if
any, or the employees of other companies with which we do business could disrupt our business operations. The
effectiveness of external parties, including governmental and non-governmental organizations, in combating
the spread and severity of the pandemic could have a material impact on the adverse effects we experience. These
events, which are beyond our control, could cause a material adverse effect on our results of operations in any
period and, depending on their severity, could also materially and adversely affect our financial condition.
Natural disasters and ongoing changes to the physical climate in which we operate may have an adverse impact on
our business, financial position, results of operations or cash flows. Changes in weather patterns or extreme
weather (such as floods, droughts, hurricanes and other storms), may negatively affect our businesses’ operations
or damage assets that we may own or develop. Further, rising sea levels could, in the future, affect the value of any
low-lying coastal real assets that we may own or develop. Climate change may increase the frequency and severity
of severe weather conditions and may change existing weather patterns in ways that are difficult to anticipate.
Responses to these changes could result in higher costs, such as the imposition of new property taxes, increases in
insurance rates or additional capital expenditures.
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 or acts of war. 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
or outbreak of war 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 or in acts of war. Any damage or business interruption costs as a result of uninsured or
underinsured acts of terrorism or war 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 to
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be reasonable in the future. These risks could be heightened by foreign policy decisions of the U.S. (where we have
significant operations) and other influential countries or general geopolitical conditions.
Additionally, our businesses rely on free movement of goods, services, and capital from around the globe. Any
slowdown in international investment, business, or trade as a result of catastrophic events could also have a
material adverse effect on our business, financial position, results of operations or cash flows.
n) 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, our tax planning could be subject to negative media coverage which may adversely impact our
reputation.
The Corporation endeavors 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.
o) 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. In addition, we disclose certain
metrics that do not have standardized meaning and are based on our own methodologies and assumptions, and
which may not properly convey the information they purport to reflect.
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 IFRS. 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
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on a timely basis, or at all. Some of these processes may be new for certain subsidiaries in our structure and in the
case of acquisitions may take time to be fully implemented.
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 and U.S. 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.
p) Environment, Social and Governance Management
Ineffective management of environmental and sustainability issues, including climate change, and inadequate or
ineffective health and safety programs could damage our reputation, adversely impact our financial performance and may
lead to regulatory action.
There is increasing stakeholder interest in environment, social and governance (“ESG”) considerations and how they
are managed. ESG considerations include climate change, human capital and labor management, corporate
governance, diversity and privacy and data security, among others. Increasingly, investors and lenders are
incorporating ESG considerations into their investment or lending process, respectively, alongside traditional
financial considerations. Investors or potential investors in our managed entities or in Brookfield may not invest in
all our products given certain industries in which we operate. If we are unable to successfully integrate ESG
considerations into our practices, we may incur a higher cost of capital, lower interest in our debt securities and/or
equity securities or otherwise face a negative impact on our business, operating results and cash flows and result in
reputational damage.
Certain of our subsidiaries and affiliates may be subject to compliance with laws, regulations, regulatory rules and/
or guidance relating to ESG, and any failure to comply with these laws, regulations, regulatory rules or guidance
could expose us to material adverse consequences, including loss, limitations on our ability to undertake licensable
business, legal liabilities, financial and non-financial sanctions and penalties, and/or reputational damage. New ESG
requirements imposed by jurisdictions in which we do business, such as the EU Sustainable Finance Disclosure
Regulation (2019/2088), could (a) result in additional compliance costs, disclosure obligations or other implications
or restrictions; and/or (b) impact our established business practices, cost base and, by extension, our profitability.
ESG-related requirements and market practices differ by region, industry and issue and are evolving dynamically,
and the sustainability requirements applicable to us, our investments, or our assessment of such requirements or
practices may change over time. Under emerging sustainability requirements, we may be required to classify our
businesses against, or determine the alignment of underlying investments under, ESG-related legislative and
regulatory criteria and taxonomies, some of which can be open to subjective interpretation. Our view on the
appropriate classifications may develop over time, including in response to statutory or regulatory guidance or
changes in industry approach to classification. A change to the relevant classification may require further actions to
be taken, for example it may require further disclosures, or it may require new processes to be set up to capture
data, which may lead to additional cost, disclosure obligations or other implications or restrictions.
The transition to a lower-carbon economy has the potential to be disruptive to traditional business models and
investment strategies. Efforts to limit global warming may give rise to changes in regulations, reporting
and consumer sentiment that could have a negative impact on our existing operations by increasing the costs of
operating our business or reducing demand for our products and services. The adverse effects of climate change
and related regulation at state, provincial, federal or international levels could have a material adverse effect on our
business, financial position, results of operations or cash flows.
The ownership and operation of some of the assets held in our portfolio companies 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
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health, safety and environmental standards and the requirements set out in the relevant licenses, permits and other
approvals obtained by the portfolio companies is crucial.
Our portfolio companies have incurred and will continue to incur significant capital and operating expenditures to
comply with ESG requirements, including health and safety standards, to obtain and comply with licenses, permits
and other approvals, and to assess and manage potential liability exposure. Nevertheless, they may be unsuccessful
in obtaining or maintaining an important license, permit or other approval 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 and/or our
portfolio companies may become subject to more stringent laws and regulations in the future. The occurrence of
any adverse health, 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
operations and/or result in material expenditures.
Owners and operators of real assets may become liable for the costs of removal and remediation of certain
hazardous substances released or deposited on or in their properties, or at other locations regardless of whether
the owner and operator caused 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.
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, the imposition of more stringent conditions in those licenses or permits or legal claims for
compensation (including punitive damages) by affected stakeholders.
Global ESG challenges, such as carbon emissions, privacy and data security, demographic shifts and regulatory
pressures are introducing new risk factors for us that we may not have dealt with previously. If we are unable to
successfully manage our ESG compliance, this could have a negative impact on our reputation and our ability
to raise future public and private capital and could be detrimental to our economic value and the value of our
managed entities.
q) Data Security, Privacy, and Cyber-Terrorism
Failure to maintain the security of our information and technology systems could have a material adverse effect on us.
We rely on certain information and technology systems, including the systems of others with whom we do business,
which may be subject to security breaches or cyber-terrorism intended to obtain unauthorized access to proprietary
information or personally identifiable information, destroy data or disable, degrade or sabotage these systems,
through the introduction of computer viruses, fraudulent emails, cyber-attacks or other means. Such acts of cyber-
terrorism could originate from a variety of sources including our own employees or unknown third parties. In the
ordinary course of our business, we collect and store sensitive data, including personally identifiable information of
our employees and our clients. Data protection and privacy rules have become a focus for regulators globally. For
instance, the European General Data Protection Regulation (“GDPR”) amended data protection rules for individuals
that are residents of the EU. GDPR imposes stringent rules and penalties for non-compliance, which could have an
adverse effect on our business.
Although we take various measures to ensure the integrity of our systems and to safeguard against failures or
security breaches, there can be no assurance that these measures will provide adequate protection, and a
compromise in these systems could go undetected for a significant period of time. If these information and
technology systems are compromised, we could suffer a disruption in one or more of our businesses
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and experience, among other things, financial loss; a loss of business opportunities; misappropriation or
unauthorized release of confidential or personal information; damage to our systems and those with whom we do
business; violations of privacy and other laws, litigation, regulatory penalties or remediation and restoration costs
(particularly in light of increased regulatory focus on cyber-security by regulators around the world); as well as
increased costs to maintain our systems. This could have a negative impact on our operating results and cash flows
and result in reputational damage.
r) Dependence on Information Technology Systems
The failure of our information technology systems, or those of our third-party service providers, could adversely impact our
reputation and financial performance.
We operate in businesses that are dependent on information systems and technology, and we rely on third-party
service providers to manage certain aspects of our businesses, including for certain information systems and
technology, data processing systems, and the secure processing, storage and transmission of information. In
particular, our financial, accounting and communications processes are all conducted through data processing
systems. Our information technology and communications systems and those of our third-party service providers
are vulnerable to damages or disruption from fire, power loss, telecommunications failure, system malfunctions,
natural disasters, acts of war or terrorism, employee errors or malfeasance, computer viruses, cyber-attacks or
other events which are beyond our control.
Our information systems and technology and those of our third-party vendors 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.
Any interruption or deterioration in the performance or failures of the information systems and technology that are
necessary for our businesses, including for business continuity purposes, could impair the quality of our operations
and could adversely affect our business, financial condition and reputation.
s)
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.
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t)
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) that 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 (“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. Where group policies are in place, any payments
under such policy could have a negative impact on other entities covered under the policy as 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.
u) Credit and Counterparty Risk
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, general economic conditions or other
reasons.
We have business lines that loan 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. This impact would be
magnified if the investor that does so is in multiple funds.
v)
Information Barriers
Information barriers may give rise to certain conflicts and risks and investment teams managing the activities of businesses
that operate on opposite sides of an information barrier will not be aware of, and will not have the ability to manage, such
conflicts and risks.
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Certain businesses within our asset management operations operate largely independently of one another
pursuant to an information barrier. The information barrier restricts businesses on opposite sides from
coordinating or consulting with one another with respect to investment activities and/or decisions. Accordingly,
these businesses manage their investment operations independently of each other. The investment activities and
decisions made by a business on one side of an information barrier are not expected to be subject to any internal
approvals by any person who would have knowledge and/or decision-making control of the investment activities
and decisions made by a business on the other side of the information barrier. This absence of coordination and
consultation will give rise to certain conflicts and risks in connection with the activities of the businesses within our
asset management operations and their portfolio companies, and make it more difficult to mitigate, ameliorate or
avoid such situations. These conflicts (and potential conflicts) of interests may include: (i) competing from time to
time for the same investment opportunities, (ii) the pursuit by a business on one side of the information barrier of
investment opportunities suitable for a business on the other side of the information barrier, without making such
opportunities available to such business, and (iii) the formation or establishment of new strategies or products that
could compete or otherwise conduct their affairs without regard as to whether or not they adversely impact the
strategies or products of our businesses operating on the other side of the information barrier. Investment teams
managing the activities of businesses that operate on opposite sides of an information barrier are not expected to
be aware of, and will not have the need or ability to manage, such conflicts which may impact the investment
strategy, performance, and investment returns of certain businesses within our asset management operations and
their portfolio companies.
The asset management businesses that operate on opposite sides of an information barrier are likely to be deemed
affiliates for purposes of certain laws and regulations notwithstanding that such businesses may be operationally
independent from one another. The information barrier does not eliminate the requirement that such businesses
aggregate certain investment holdings for certain securities laws and other regulatory purposes. This may result in,
among other things, earlier public disclosure of investments; restrictions on transactions (including the ability to
make or dispose of certain investments at certain times); potential short-swing profit disgorgement; penalties and/
or regulatory remedies; or adverse effects on the prices of investments for our asset management businesses that
operate on the other side of such information barrier.
Although these information barriers were implemented to address the potential conflicts of interests and
regulatory, legal and contractual requirements applicable to our asset management business, we may decide, at any
time and without notice to our company or our shareholders, to remove or modify the information barriers within
our asset management business. In addition, there may be breaches (including inadvertent breaches) of the
information barriers and related internal controls. In the event that the information barrier is removed or modified,
it would be expected that we will adopt certain protocols designed to address potential conflicts and other
considerations relating to the management of the investment activities of those businesses that previously
operated on opposite sides of an information barrier.
The breach or failure of our information barriers could result in the sharing of material non-public information
between asset management businesses that operate on opposite sides of an information barrier, which may restrict
the acquisition or disposition activities of one of our businesses and ultimately impact the returns generated for our
investors. In addition, any such breach or failure could also result in potential regulatory investigations and claims
for securities laws violations in connection with our direct and/or indirect investment activities. Any inadvertent
trading on material non-public information, or perception of trading on material non-public information by one of
our businesses or our personnel, could have a significant adverse effect on our reputation, result in the imposition
of regulatory or financial sanctions, and negatively impact our ability to raise third-party capital and provide
investment management services to our clients, all of which could result in negative financial impact to our
investment activities.
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w) Real Estate
We face risks specific to our real estate activities.
We invest in commercial properties and are therefore exposed to certain risks inherent in the commercial real
estate business. Commercial real estate 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 favorable 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 real estate business operates in industries or geographies impacted by COVID-19. Many of these are facing
financial and operational hardships due to COVID-19 and responses to it. Adverse impacts on our business may
include:
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a complete or partial closure of, or other operational issues at, one or more of our properties resulting from
government or tenant action;
a slowdown in business activity may severely impact our tenants' businesses, financial condition and liquidity
and may cause one or more of our tenants to be unable to fund their business operations, meet their
obligations to us in full, or at all, or to otherwise seek modifications of such obligations;
an increase in re-leasing timelines, potential delays in lease-up of vacant space and the market rates at which
such lease will be executed;
reduced economic activity could result in a prolonged recession, which could negatively impact consumer
discretionary spending; and
expected completion dates for our development and redevelopment projects may be subject to delay as a
result of local economic conditions that may continue to be disrupted as a result of the COVID-19 pandemic.
Our retail real estate operations are susceptible to any economic factors that have a negative impact on consumer
spending. Lower consumer spending would have an unfavorable 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 businesses 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 climate change;
hurricanes, earthquakes, tsunamis, and other natural and man-made disasters; the potential spread of contagious
diseases such as COVID-19; and insect infestations more common to rental accommodations. Such factors could
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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 real estate, as
well as on the rents realized.
x) Renewable Power and Transition
We face risks specific to our renewable power and transition activities.
Our renewable power and transition 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, irradiance and other elements beyond our control. Hydrology, wind
and irradiance 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, wind and irradiance levels at certain of our power generating
operations could occur at any time and potentially continue for indefinite periods.
A portion of our renewable power and transition 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
portion of the power we generate is sold under long-term power purchase agreements, shorter-term financial
instruments and physical electricity contracts which are intended to mitigate the impact of fluctuations in wholesale
electricity prices; however, they may not be effective in achieving this outcome. Certain of our power purchase
agreements will be subject to re-contracting in the future. If the price of electricity in power markets is declining at
the time of such re-contracting, it may impact our ability to re-negotiate or replace these contracts on terms that are
acceptable to us. Conversely, what appears to be an attractive price at the time of recontracting could, if power
prices rise over the power purchase agreement’s term, result in us having committed to sell power in the future at
below market rate. If we are unable to re-negotiate or replace these contracts, or unable to secure prices at least
equal to the current prices we receive, our business, financial condition, results of operation and prospects could be
adversely affected.
In our renewable power and transition 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. Equipment that our renewable power and transition operations
need, including spare parts and components required for project development, may become unavailable or difficult
to procure, inhibiting our ability to maintain full availability of existing plants and also our ability to complete
development projects on scope, schedule and budget.
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.
Our ability to develop greenfield renewable power projects in our development pipeline may be affected by a
number of factors, including the ability to secure approvals, licenses and permits and the ability to secure a long-
term power purchase agreement or other sales contracts on reasonable terms. The development of our pipeline of
greenfield renewable power projects is also subject to environmental, engineering and construction risks that could
result in cost-overruns, delays and reduced performance.
New regulatory initiatives related to ESG could adversely impact our business. While we believe that regulatory
initiatives and market trends towards an increased focus on ESG are generally beneficial to our renewable power
and transition group, any such regulatory initiatives also have the potential to adversely impact us. For example,
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regulatory initiatives seeking to reorient investment toward sustainability by regulating green financial products
could have the effect of increasing burdensome disclosure requirements around ESG and prescribing approaches to
ESG policies that are inconsistent with our current practices. If regulators disagree with the ESG disclosures that we
make, or with the categorization of our financial products, we may face regulatory enforcement action, and our
business or reputation could be adversely affected.
y)
Infrastructure
We face risks specific to our infrastructure activities.
Our infrastructure operations include utilities, transport, midstream, data, timberlands and agriculture operations.
Our infrastructure assets include toll roads, telecommunication towers, electricity transmission systems, terminal
operations, electricity and gas distribution companies, rail networks, ports and data centers. 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 a reduction in
volumes, 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.
z) 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. Our private equity platform is exposed to
industrial, business services and infrastructure services businesses, many of which can be cyclical and/or illiquid and
therefore may be difficult to monetize at our discretion, limiting our flexibility to react to changing economic or
investment conditions. In addition, increasingly we have certain private equity businesses that provide goods and
services directly to consumers across a variety of industries. These businesses are prone to greater liabilities, as well
as reputational, litigation and other risks by virtue of being more public-facing and reliant on their ability to develop
and preserve consumer relationships and achieve consumer satisfaction.
Unfavorable economic conditions, including those driven by the impact of the ongoing COVID-19 pandemic, could
negatively impact the ability of investee companies to repay debt. Even with our support, such adverse economic
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
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future. These risks are compounded by recent growth, as new acquisitions have increased the scale and scope of
our operations, including in new geographic areas and industry sectors, and we may have difficulty managing these
additional operations.
We may invest in companies that are experiencing significant financial or business difficulties, including companies
involved in work-outs, liquidations, spin-outs, reorganizations, bankruptcies and similar transactions. Such an
investment entails the risk that the transaction 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 in
respect of which such distribution is received. In addition, if an anticipated transaction does not occur, we may be
required to sell our investment at a loss. Investments in businesses we target may become subject to legal and/or
regulatory proceedings and our investment may be adversely affected by external events beyond our control,
leading to legal, indemnification or other expenses.
We have several companies that operate in the highly competitive service industry. A wide variety of micro and
macroeconomic factors affecting our clients and over which we have no control can impact how these companies
operate. For example, our Canadian residential mortgage insurance services business is subject to significant
regulation and may be adversely affected by changes in government policy. In addition, the majority of the revenue
from our healthcare services business is derived from private health insurance funds, which may be affected by a
deterioration in the economic climate, a change in economic incentives, increases in private health insurance
premiums and other factors. In addition, alternative technologies in the health care industry could impact the
demand for, or use of, our services and could impair or eliminate the competitive advantage of our businesses in
this industry.
Our infrastructure services operations include companies in nuclear technology services, marine transportation and
scaffolding services. The nuclear fuel and power industries are heavily regulated and could be significantly impacted
by changes in government policies and priorities such as increased regulation and/or more onerous operating
requirements that negatively impact our nuclear technology services. A future accident at a nuclear reactor could
result in the shutdown of existing plants or impact the continued acceptance by the public and regulatory
authorities of nuclear energy and the future prospects for nuclear generators. Accidents, terrorism, natural
disasters or other incidents occurring at nuclear facilities or involving shipments of nuclear materials could reduce
the demand for nuclear technology services. Marine transportation and oil production is inherently risky,
particularly in the extreme conditions in which many of our vessels operate. An incident involving significant loss of
product or environmental contamination by any of our vessels could harm our reputation and business. Our
scaffolding services business is subject to the risks inherent to construction operations, including risks relating to
seasonal fluctuations in the demand for our services, a dependence on labor and performance being materially
impacted by a lack of availability of labor force or increases in the cost of labor available, and operational hazards
that could result in personal injury or death, work stoppage or serious property and equipment damage.
aa) Residential Development
We face risks specific to our residential development and mixed-use activities.
Our residential homebuilding and land development operations are cyclical and significantly affected by changes in
general and local economic, political and industry conditions, such as consumer confidence, employment levels,
inflation 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.
COVID-19 has also resulted in a lack of availability or increased costs of required materials, utilities and resources
which could delay or increase the cost of home construction and which could adversely affect our business and
results of operations. For example, in 2020 and 2021 there was extreme volatility in the price of lumber as a result
of curtailed production from lumber mill closures due to COVID-19, forest fires in California and the Pacific
2021 ANNUAL REPORT
133
Northwest followed by a surge in demand for single family homes in the latter half of 2021. Similar events in the
future could result in construction delays and increased costs which may not be fully passed on to our buyers.
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. Notwithstanding relatively low interest rates, our Canadian markets
continue to be impacted by changes to mortgage qualification rules that introduced stress tests for homebuyers
and government policies relating to the Ontario real estate market and the Alberta energy sector surrounding
pipeline approval. In the U.S., significant expenses incurred for purposes of owning a home, including mortgage
interest expense and real estate taxes, generally are deductible expenses for an individual’s U.S. federal and, in
some cases, state income taxes.
COVID-19 and the current economic environment also continues to impact the industry for retail and office
properties in our mixed-use projects. As we depend on office, retail, and apartment tenants to generate income
from these mixed-use projects, our results of operations and cash flows may be adversely affected by vacancies and
tenant defaults or bankruptcy in our mixed-use properties, and we may be unable to renew leases or re-lease space
in our mixed-use properties as leases expire.
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.
Our residential development and mixed-use business is susceptible to adverse weather conditions, other
environmental conditions, and natural disasters, as well as pandemics/epidemics such as COVID-19, each of which
could adversely affect our business and results of operations. For example, while none of our U.S. properties were
materially adversely affected by the recent significant wildfires throughout Southern California, we could experience
labor shortages, construction delays, or utility company delays, which in turn could impact our results.
ab) Reinsurance
We face risks specific to Brookfield Reinsurance and its reinsurance activities.
We completed the spin-out of Brookfield Reinsurance in 2021 to own and operate a leading reinsurance business
focused on providing capital-based and annuity solutions to insurance and reinsurance companies and pension risk
transfer (PRT) products for pension plan sponsors and we continue to hold a significant economic interest in
Brookfield Reinsurance.
Brookfield Reinsurance class A exchangeable shares have been structured with the intention of providing an
economic return equivalent to our Class A shares. Each Brookfield Reinsurance class A exchangeable share is
exchangeable on a one-for-one basis at the option of the holder for our Class A shares (or its cash equivalent) and
distributions on Brookfield Reinsurance class A exchangeable shares are expected to be paid at the same time and
in the same amount as cash dividends are paid on our Class A shares. In addition, we have entered into a number
of important agreements with Brookfield Reinsurance to support the economic equivalence between our Class A
shares and Brookfield Reinsurance class A exchangeable shares, including: (i) a support agreement pursuant to
which we have agreed to, among other things, take all actions reasonably necessary to enable Brookfield
Reinsurance to pay quarterly distributions and the liquidation amount or amount payable on a redemption of
Brookfield Reinsurance class A exchangeable shares; and (ii) the provision of certain equity capital and debt
financing to Brookfield Reinsurance on an as-needed basis to fund the growth of and maximize flexibility for
Brookfield Reinsurance. While Brookfield Reinsurance and its operating businesses will generally be required to
satisfy their own working capital requirements and service any debt obligations, in the event Brookfield Reinsurance
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BROOKFIELD ASSET MANAGEMENT
is unable to meet its financial obligations, it will be required to rely on us for support pursuant to the support
agreement and our equity capital and debt financing. Further, we or Brookfield Reinsurance may issue additional
shares in the future in the public markets, including to fund future growth of Brookfield Reinsurance or in lieu of
incurring indebtedness, which could depress the market price or dilute the percentage interest of existing holders
of our Brookfield Class A Shares and Brookfield Reinsurance class A exchangeable shares in aggregate. Additionally,
any Brookfield Reinsurance class A exchangeable shares issued by Brookfield Reinsurance in the future will be
exchangeable on the same terms as the Brookfield Reinsurance class A exchangeable shares and any future
exchanges satisfied by the delivery of our Class A Shares would dilute the percentage interest of existing holders of
the Brookfield Class A Shares.
Brookfield Reinsurance's business is presently conducted under two operating segments, which it refers to as its
reinsurance business and PRT business. Going forward, Brookfield Reinsurance plans to grow both of these
businesses; however, there is no guarantee that it will be successful in doing so. A key part of Brookfield
Reinsurance's growth strategy will involve executing new PRT arrangements and reinsurance contracts and may
also include the acquisition of, or material investments in, existing reinsurance and insurance platforms. Such
initiatives, if successful, would significantly increase the scale, scope and diversity of Brookfield Reinsurance. While
Brookfield Reinsurance has reviewed and has successfully executed transactions in the past to facilitate its growth,
competition exists in the market for profitable reinsurance and PRT arrangements and businesses and Brookfield
Reinsurance may not be successful in executing on future opportunities.
Brookfield Reinsurance makes and relies on certain assumptions and estimates in order to make decisions
regarding pricing, target returns, reserve levels and other factors affecting its business operations. Its underwriting
results depend upon the extent to which actual claims experience and benefit payments under its reinsurance
contracts are consistent with the assumptions used in setting prices and establishing liabilities for such contracts.
Such amounts are established based on actuarial estimates of how much Brookfield Reinsurance will need to pay
for future benefits and claims based on data and models that include many assumptions and projections, which are
inherently uncertain and involve significant judgment, including assumptions as to the levels and/or timing of
receipt or payment of premiums, benefits, claims, expenses, interest credits and investment results (including
equity and other market returns). If the assumptions and estimates of Brookfield Reinsurance differ significantly
from the actual outcomes and results, its business, financial condition, results of operations, liquidity and cash flows
may be materially and adversely affected, which in turn may negatively impact the value of our interest in the
business.
Brookfield Reinsurance’s business prospects must be considered in light of the risks and uncertainties encountered
by an early-stage company. Some of these risks relate to the potential inability of Brookfield Reinsurance to
effectively manage its business and operations, recruit and retain key personnel, contain costs with expansion in the
scale of the business, navigate a complex regulatory environment, manage growth in personnel and operations,
develop new products that complement its existing business and successfully address the other risks faced by
Brookfield Reinsurance.
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135
GLOSSARY OF TERMS
The below summarizes certain terms relating to our business that are made throughout the MD&A and it defines
IFRS performance measures, non-IFRS performance measures and key operating measures that we use to analyze
and discuss our results.
REFERENCES
“Brookfield,” the “company,” “we,” “us” or “our” refers to Brookfield Asset Management Inc. and its consolidated
subsidiaries. The “Corporation” refers to our asset management business which is comprised of our asset
management and corporate business segments.
We refer to investors in the Corporation as shareholders and we refer to investors in our private funds and
perpetual affiliates as investors.
We use asset manager to refer to our Asset Management segment which offers a variety of investment products to
our investors:
• We have over 40 active funds across major asset classes: renewable power and transition, infrastructure,
private equity and real estate. These funds include core, credit, value-add and opportunistic closed-end funds
and core long-life funds. We refer to these funds as our private funds.
• We refer to BEP, BEPC, BIP, BIPC, BBU and BPG, as our perpetual affiliates.
• We refer to our public securities group as liquid strategies. This group manages fee-bearing capital through
numerous funds and separately managed accounts, focused on fixed income and equity securities.
Throughout the MD&A and consolidated financial statements, the following operating companies, joint ventures
and associates, and their respective subsidiaries, will be referenced as follows:
• BAMR – Brookfield Asset Management Reinsurance
• BPY – Brookfield Property Partners L.P.
Partners Ltd.
• BSREP III – Brookfield Strategic Real Estate Partners III
• BBU – Brookfield Business Partners L.P.
• Forest City – Forest City Realty Trust, Inc.
• BBUC – Brookfield Business Corporation
• BEP – Brookfield Renewable Partners L.P.
• IPL – Inter Pipeline Ltd.
• Norbord – Norbord Inc.
• BEPC – Brookfield Renewable Corporation
• Oaktree – Oaktree Capital Management
• BIP – Brookfield Infrastructure Partners L.P.
• TERP – TerraForm Power, Inc.
• BIPC – Brookfield Infrastructure Corporation
• West Fraser – West Fraser Timber Co.
• BPG – Brookfield Property Group
PERFORMANCE MEASURES
Definitions of performance measures, including IFRS, non-IFRS and operating measures, are presented below in
alphabetical order. We have specifically identified those measures which are IFRS or non-IFRS measures; the
remainder are operating measures.
Assets under management (“AUM”) refers to the total fair value of assets that we manage, on a gross asset value
basis, including assets for which we earn management fees and those for which we do not. AUM is calculated as
follows: (i) for investments that Brookfield consolidates for accounting purposes or actively manages, including
investments of which Brookfield or a controlled investment vehicle is the largest shareholder or the primary
operator or manager, at 100% of the investment’s total assets on a fair value basis; and (ii) for all other investments,
at Brookfield’s or its controlled investment vehicle’s, as applicable, proportionate share of the investment’s total
assets on a fair value basis. Brookfield’s methodology for determining AUM may differ from the methodology
employed by other alternative asset managers and Brookfield’s AUM presented herein may differ from our AUM
reflected in other public filings and/or our Form ADV and Form PF.
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BROOKFIELD ASSET MANAGEMENT
Base management fees, which are determined by contractual arrangements, are typically equal to a percentage of
fee-bearing capital and are accrued quarterly. Base management fees, including private fund base fees and
perpetual affiliate base fees, are IFRS measures.
Private fund base fees are typically earned on fee-bearing capital from third-party investors only and are earned on
invested and/or uninvested fund capital, depending on the stage of the fund life.
Perpetual affiliate base fees are earned on the total capitalization or net asset value of our perpetual affiliates,
which includes our investment. Base fees for BEP include a quarterly fixed fee amount of $5 million, with additional
fees of 1.25% on the increase in capitalization above their initial capitalization of $8 billion. Base fees for BIP and
BBU are 1.25% of total capitalization. Base fees for BPG are 1.05% of net asset value, excluding its interests in
private funds and investments which were held directly by Brookfield prior to the recent BPY privatization.
Perpetual affiliate capitalization as at December 31, 2021, was as follows: BEP/BEPC – $26.8 billion; BIP/BIPC –
$34.9 billion; BBU – $8.3 billion; and BPG – $20.4 billion.
Carried interest is a contractual arrangement whereby we receive a fixed percentage of investment gains
generated within a private fund provided that the investors receive a pre-determined minimum return. Carried
interest is typically paid towards the end of the life of a fund after the capital has been returned to investors and
may be subject to “clawback” until all investments have been monetized and minimum investment returns are
sufficiently assured.
Realized carried interest is an IFRS measure and represents our share of investment returns based on realized
gains within a private fund. Realized carried interest earned is recognized when an underlying investment is
profitably disposed of and the fund’s cumulative returns are in excess of preferred returns, in accordance with the
respective terms set out in the fund’s governing agreements, and when the probability of clawback is remote. We
include realized carried interest when determining our Asset Management segment results within our consolidated
financial statements.
Realized carried interest, net is a non-IFRS measure and represents realized carried interest after direct costs,
which include employee expenses and cash taxes. A reconciliation of realized carried interest to realized carried
interest, net, is shown below:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Realized carried interest1
Less: direct costs associated with realized carried interest.................................................
............................................................................................................ $
1,713 $
(786)
2021
684
(273)
2020
Less: realized carried interest not attributable to BAM ........................................................
Realized carried interest, net ...................................................................................................... $
927
(212)
715 $
411
(63)
348
1.
Includes $1.2 billion of realized carried interest related to Oaktree (2020 – $339 million). For segment reporting, Oaktree’s revenue is shown on a
100% basis.
Carry eligible capital represents the capital committed, pledged or invested in the private funds that we manage
and which entitle us to earn carried interest. Carry eligible capital includes both invested and uninvested (i.e.
uncalled) private fund amounts as well as those amounts invested directly by investors (co-investments) if those
entitle us to earn carried interest. We believe this measure is useful to investors as it provides additional insight into
the capital base upon which we have potential to earn carried interest once minimum investment returns are
sufficiently assured.
Adjusted carry eligible capital excludes uncalled fund commitments and funds that have not yet reached their
preferred return, as well as co-investments and separately managed accounts that are subject to lower carried
interest than our standard funds.
2021 ANNUAL REPORT
137
A reconciliation from carry eligible capital to adjusted carry eligible capital is provided below:
AS AT DEC. 31
(MILLIONS)
Carry eligible capital1
Less:
2020
..................................................................................................................................... $ 115,523 $ 85,330
2021
Uncalled private fund commitments ......................................................................................................
Co-investments and other ........................................................................................................................
Funds not yet at target preferred return ...............................................................................................
(16,863)
Adjusted carry eligible capital ..................................................................................................................... $ 49,147 $ 33,393
(43,269)
(27,624)
(7,434)
(7,450)
(15,673)
1. Excludes carry eligible capital related to Oaktree.
Consolidated capitalization reflects the full capitalization of wholly owned and partially owned entities that we
consolidate in our financial statements. Our consolidated capitalization includes 100% of the debt of the
consolidated entities even though in many 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 accounted for following the equity method, such as our investments in Canary Wharf and several
other businesses.
Core liquidity represents the amount of cash, financial assets and undrawn credit lines at the Corporation,
perpetual affiliates and directly held investments. We use core liquidity as a key measure of our ability to fund
future transactions and capitalize quickly on opportunities as they arise. Our core liquidity also allows us to
backstop the transactions of our various businesses as necessary and fund the development of new activities that
are not yet suitable for our investors.
Total liquidity represents the sum of core liquidity and uncalled private fund commitments and is used to pursue
new transactions.
Corporate capitalization represents the amount of debt issued by the Corporation, accounts payable and deferred
tax liability in our Corporate segment as well as our issued and outstanding common and preferred shares.
Distributions (current rate) represents the distributions that we would receive during the next twelve months
based on the current distribution rates of the investments that we currently hold. The dividends from our listed
investments are calculated by multiplying the number of shares held by the most recently announced distribution
policy. The yield on cash and financial assets portfolio is equal to an estimated 8% on the ending balance as of the
end of the current year. Distributions on our unlisted investments are calculated based on the distributions received
in the most recent fiscal year.
Distributable earnings is a non-IFRS measure that provides insight into earnings received by the Corporation that
are available for distribution to common shareholders or to be reinvested into the business. It is calculated as the
sum of our Asset Management segment FFO (i.e., fee-related earnings and realized carried interest, net);
distributions from our perpetual affiliates, other investments that pay regular cash distributions and FFO from our
corporate cash and financial assets; other invested capital earnings, which include FFO from our residential
operations, energy contracts, sustainable resources and other real estate, private equity, corporate investments
that do not pay regular cash distributions, corporate costs and corporate interest expense; excluding equity-based
compensation costs and net of preferred share dividend payments. As of January 1, 2021, we now include
realizations from our principal investments as these are earnings that are directly received by the Corporation and
are available for distribution to common shareholders or to be reinvested into the business. Comparative figures
have been revised accordingly. See below for a table which reconciles distributable earnings, fee-related earnings
and total FFO to net income, the most comparable IFRS measure.
Economic ownership interest represents the company’s proportionate equity interest in our listed partnerships
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, as well as any units or shares issued in
subsidiaries that are exchangeable for units in our listed partnerships (“exchange units”). REUs and exchange units
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BROOKFIELD ASSET MANAGEMENT
share the same economic attributes as the Class A limited partnership units in all respects except for our
redemption right, which the listed partnership can satisfy through the issuance of Class A limited partnership units.
The REUs, general partnership units and exchange 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.
Fee-bearing capital represents the capital committed, pledged or invested in the perpetual affiliates, private funds
and liquid strategies that we manage which entitles us to earn fee revenues. Fee-bearing capital includes both called
(“invested”) and uncalled (“pledged” or “committed”) amounts. When reconciling period amounts, we utilize the
following definitions:
•
•
•
Inflows include capital commitments and contributions to our private and liquid strategies funds and equity
issuances in our perpetual affiliates.
Outflows represent distributions and redemptions of capital from within the liquid strategies capital.
Distributions represent quarterly distributions from perpetual affiliates as well as returns of committed capital
(excluding market valuation adjustments), redemptions and expiry of uncalled commitments within our private
funds.
• Market valuation includes gains (losses) on portfolio investments, perpetual affiliates and liquid strategies
based on market prices.
•
Other includes changes in net non-recourse leverage included in the determination of perpetual affiliate
capitalization and the impact of foreign exchange fluctuations on non-U.S. dollar commitments.
Fee-related earnings is a non-IFRS measure and is comprised of fee revenues less direct costs associated with
earning those fees, which include employee expenses and professional fees as well as business related technology
costs, other shared services and taxes. We use this measure to provide additional insight into the operating
profitability of our asset management activities. See below for a table which reconciles fee-related earnings and
total FFO to net income, the most comparable IFRS measure.
Fee revenues is a non-IFRS measure and includes base management fees, incentive distributions, performance fees
and transaction fees presented within our Asset Management segment. Many of these items do not appear in
consolidated revenues because they are earned from consolidated entities and are eliminated on consolidation. The
following table reconciles fee revenues to revenue, the most comparable IFRS measure:
FOR THE YEARS ENDED DEC. 31
2020
(MILLIONS)
Revenue ........................................................................................................................................................... $ 75,731 $ 62,752
Add: revenues from Oaktree
897
Add: Inter-segment and other revenues ..................................................................................................
Less: external revenues from consolidated subsidiaries of other segments ..................................
(62,506)
Fee Revenues .................................................................................................................................................. $ 3,523 $ 2,840
(75,425)
1,062
2,155
1,697
2021
Funds from operations (“FFO”) is a key measure of our financial performance. We use FFO to assess operating
results and the performance of our businesses on a segmented basis. While we use segment FFO as our segment
measure of profit and loss (see Note 3 to our consolidated financial statements), the sum of FFO for all our
segments, or total FFO, is a non-IFRS measure.
2021 ANNUAL REPORT
139
The following table reconciles total FFO, fee-related earnings, and distributable earnings to net income:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Net income ..................................................................................................................................................
Financial statement components not included in FFO:
..................................................
Equity accounted fair value changes and other non-FFO items1
Fair value changes ....................................................................................................................................
Depreciation and amortization .............................................................................................................
Deferred income taxes ............................................................................................................................
Realized disposition gains recorded as fair value changes or equity ..............................................
Non-controlling interest in FFO2
...............................................................................................................
Total FFO ......................................................................................................................................................
Less: total disposition gains ......................................................................................................................
Less: net invested capital FFO ...................................................................................................................
Less: realized carried interest, net ...........................................................................................................
Fee-related earnings ................................................................................................................................
Distributions from investments ...............................................................................................................
Corporate activities .....................................................................................................................................
Preferred share dividends .........................................................................................................................
Add back: equity-based compensation costs ........................................................................................
Distributable earnings before realizations ......................................................................................
Realized carried interest, net ....................................................................................................................
Disposition gains from principal investments ......................................................................................
Distributable earnings ............................................................................................................................
Total
2021
2020
$ 12,388 $
707
1,355
(5,151)
6,437
1,210
2,861
3,170
1,423
5,791
81
1,554
(11,542)
(7,546)
7,558
(3,082)
(1,862)
(715)
1,899
2,198
(592)
(157)
119
3,467
715
2,100
5,180
(1,552)
(1,852)
(348)
1,428
1,846
(539)
(142)
94
2,687
348
1,185
$ 6,282 $ 4,220
1. Other non-FFO items correspond to amounts that are not directly related to revenue earning activities and are not normal or recurring items
necessary for business operations. In addition, this adjustment is to back out non-FFO expenses (income) that are included in consolidated equity
accounted income including depreciation and amortization, deferred taxes and fair value changes from equity accounted investments.
2. Amounts attributable to non-controlling interests are calculated based on the economic ownership interests held by non-controlling interests in
consolidated subsidiaries. By adjusting FFO attributable to non-controlling interests, we are able to remove the portion of FFO earned at non-
wholly owned subsidiaries that is not attributable to Brookfield.
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, 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 borrowings or the cost of borrowings as well as other
costs incurred to operate our business.
We use realized disposition gains and 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 equity 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 increases 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.
Our definition of FFO differs 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,
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BROOKFIELD ASSET MANAGEMENT
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 do not use FFO as a
measure of cash generated from our operations.
Incentive distributions is an IFRS measure and is determined by contractual arrangements; incentive distributions
are paid to us by BEP and BIP and represent a portion of distributions paid by perpetual affiliates above a
predetermined hurdle. Incentive distributions are accrued on the record date of the associated distributions of the
entity.
A summary of our distribution hurdles and current distribution rates is as follows:
AS AT DEC. 31, 2021
Brookfield Infrastructure (BIP)3
Brookfield Renewable (BEP)4
.................................................. $
......................................................
Distribution
Current
Hurdles
Distribution
(per unit)2
Rate1
2.16 $ 0.73 / $ 0.79
1.28
0.80 /
0.90
Incentive
Distributions
15% / 25%
15% / 25%
1. Current rate based on most recently announced distribution rates.
2.
3.
4.
Incentive distributions equate to 18% and 33% of limited partner distribution increases over the first and second hurdles, respectively.
Incentive distributions from Brookfield Infrastructure are earned on distributions made by BIP and BIPC.
Incentive distributions from Brookfield Renewable are earned on distributions made by BEP and BEPC.
Invested capital consists of investments in our perpetual affiliates, other listed securities, unlisted investments and
corporate working capital. Our invested capital provides us with FFO and cash distributions.
Invested capital, net consists of invested capital and leverage.
Leverage represents the amount of corporate borrowings and perpetual preferred shares held by the company.
Long-term average (“LTA”) generation is used in our Renewable Power and Transition segment and is determined
based on expected electrical generation from its assets in commercial operation during the year. For assets
acquired or reaching commercial operation during the year, LTA generation is calculated from the acquisition or
commercial operation date. In Brazil, assured generation levels are used as a proxy for LTA. We compare LTA
generation to actual generation levels to assess the impact on revenues and FFO of hydrology, wind generation
levels and irradiance, which vary from one period to the next.
Performance fees is an IFRS measure. Performance fees are paid to us when we exceed predetermined investment
returns within BBU and on certain liquid strategies portfolios. BBU performance fees are accrued quarterly based
on the volume-weighted average increase in BBU unit price over the previous threshold, whereas performance fees
within liquid strategies funds are typically determined on an annual basis. Performance fees are not subject
to clawback.
Proportionate basis generation is used in our Renewable Power and Transition segment to describe the total
amount of power generated by facilities held by BEP, at BEP’s respective economic ownership interest percentage.
Realized disposition gains/losses is a component of FFO and includes gains or losses arising from transactions
during the reporting period together with any fair value changes and revaluation surplus recorded in prior periods,
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.
2021 ANNUAL REPORT
141
Same-store or same-property represents the earnings contribution from assets or investments held throughout
both the current and prior reporting period on a constant ownership basis. We utilize same-store analysis to
illustrate the growth in earnings excluding the impact of acquisitions or dispositions.
Unrealized carried interest is the change in accumulated unrealized carried interest from prior period and
represents the amount of carried interest generated during the period. We use this measure to provide insight into
the value our investments have created in the period.
Accumulated unrealized carried interest is based on carried interest that would be receivable under the
contractual formula at the period end date as if a fund was liquidated and all investments had been monetized at
the values recorded on that date. We use this measure to provide insight into our potential to realize carried
interest in the future. Details of components of our accumulated unrealized carried interest are included in the
definition of unrealized carried interest below.
Accumulated unrealized carried interest, net is after direct costs, which include employee expenses and taxes.
The following table identifies the inputs of accumulated unrealized carried interest to arrive at unrealized carried
interest generated in the year:
AS AT DEC. 31
(MILLIONS)
Adjusted
Carry
Eligible
Capital1
Adjusted
Multiple of
Capital2
Fund Target
Carried
Interest3
Current
Carried
Interest4
2021
Real Estate ................................................................... $
Infrastructure .............................................................
Private Equity .............................................................
$
2020
Real Estate ..................................................................... $
Infrastructure ...............................................................
Private Equity ................................................................
$
18,332
23,822
6,993
49,147
8,950
19,964
4,479
33,393
1.5x
1.5x
1.8x
1.5x
1.4x
2.0x
20%
20%
20%
20%
20%
20%
23%
18%
17%
19%
17%
13%
1. Excludes uncalled private fund commitments, co-investment capital and funds that have not met their preferred return.
2. Adjusted Multiple of Capital represents the ratio of total distributions plus estimates of remaining value to the equity invested, and reflects
performance net of fund management fees and expenses, before carried interest. Our core, credit and value add funds pay management fees of
0.90-1.50% and our opportunistic and private equity funds pay fees of 1.50-2.00%. Funds typically incur fund expenses of approximately 0.35% of
carry eligible capital annually.
Fund target carried interest percentage is the target carry average of the funds within adjusted carry eligible capital as at each period end.
3.
4. When a fund has achieved its preferred return, we earn an accelerated percentage of the additional fund profit until we have earned the fund
target carried interest percentage. Funds in their early stage of earning carry will not yet have earned the full percentage of total fund profit to
which we are entitled.
The following table summarizes the unrealized carried interest generated in the current and prior year periods:
Accumulated Unrealized
Carried Interest
Change
FOR THE YEARS ENDED DEC. 31
2021
(MILLIONS)
Real Estate ................................................................. $
Infrastructure ............................................................
Private Equity ............................................................
Credit and other .......................................................
Accumulated unrealized carried interest ...........
Less: associated expenses1
....................................
Accumulated unrealized carried interest, net ... $
4,719 $
2,147 $
1,292 $
2,601 $
855 $
986 $
(2,066)
(1,258)
(1,423)
6,785
2,064
1,027
1,547
2,389
2,118
2,761
4,024
1,492
1,078
1,175
3,647
(643)
2019
2020
596
428
890
599
572
469
(131)
317
3
188
377
(165)
212
2021 vs.
2020
2020 vs.
2019
1. Carried interest generated is subject to taxes and long-term incentive expenses to investment professionals. These expenses are typically 30-35%
of carried interest generated.
142
BROOKFIELD ASSET MANAGEMENT
Internal Control Over Financial Reporting
MANAGEMENT’S REPORT ON
REPORTING
INTERNAL CONTROL OVER FINANCIAL
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, 2021,
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, 2021,
Brookfield’s internal control over financial reporting is effective. Management excluded from its assessment the internal
control over financial reporting at Inter Pipeline Ltd., Everise Holdings Pte Ltd., Aldo Componentes Eletrônicos LTDA,
DexKo Global Inc., Modulaire Investments 2 S.à r.l., Hospitality Investors Trust, the portfolio of life sciences assets in the
U.K., the 845 MW wind portfolio in the U.S. and the 360 MW distributed generation portfolio in the U.S., which were acquired
during 2021, and whose total assets, net assets, revenues and net income constitute approximately 9%, 8%, 3% and less than
1%, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 2021.
Brookfield’s internal control over financial reporting as of December 31, 2021, 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, 2021. 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, 2021.
Bruce Flatt
Chief Executive Officer
March 30, 2022
Toronto, Canada
Nicholas Goodman
Chief Financial Officer
2021 ANNUAL REPORT
143
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Brookfield Asset Management Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Brookfield Asset Management Inc. and subsidiaries (the
“Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021 of the Company and our
report dated March 30, 2022, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its
assessment the internal control over financial reporting at Inter Pipeline Ltd., Everise Holdings Pte Ltd., Aldo Componentes
Eletrônicos LTDA, DexKo Global Inc., Modulaire Investments 2 S.à r.l., Hospitality Investors Trust, the portfolio of life
sciences assets in the U.K., the 845 MW wind portfolio in the U.S., and the 360 MW distributed generation portfolio in the
U.S., which were acquired during 2021, and whose financial statements constitute, in aggregate, 9% of total assets, 8% of net
assets, 3% of revenues, and less than 1% of net income of the consolidated financial statement amounts as of and for the year
ended December 31, 2021. Accordingly, our audit did not include the internal control over financial reporting at Inter Pipeline
Ltd., Everise Holdings Pte Ltd., Aldo Componentes Eletrônicos LTDA, DexKo Global Inc., Modulaire Investments 2 S.à r.l.,
Hospitality Investors Trust, the portfolio of life sciences assets in the U.K., the 845 MW wind portfolio in the U.S., and the 360
MW distributed generation portfolio in the U.S.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
144
BROOKFIELD ASSET MANAGEMENT
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. 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 generally accepted accounting principles, 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
March 30, 2022
2021 ANNUAL REPORT
145
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 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 149 through 238 in accordance with the standards of the Public Company Accounting
Oversight Board (United States) to enable them to express to the shareholders and the board of directors 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.
Bruce Flatt
Chief Executive Officer
March 30, 2022
Toronto, Canada
Nicholas Goodman
Chief Financial Officer
146
BROOKFIELD ASSET MANAGEMENT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Brookfield Asset Management Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Brookfield Asset Management Inc. and subsidiaries (the
“Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in
equity, and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for each of the two years in the
period ended December 31, 2021, in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 30, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating
the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
Fair Value of Investment Properties and Property, Plant and Equipment – Refer to Notes 2(h)(i), 2(h)(ii), 11,
and 12 to the financial statements
Critical Audit Matter Description
The Company has elected the fair value model for investment properties and the revaluation model for certain classes of property,
plant and equipment, namely the Company’s renewable power generating, utilities, transport, midstream, data, and hospitality
operating assets. The Company measures these assets at fair value or revalued amount subsequent to initial recognition on the balance
sheet.
The investment properties and certain classes of property, plant and equipment have limited observable market activity, which requires
management to make significant estimates and assumptions in the determination of fair value. The estimates and assumptions with the
highest degree of subjectivity and impact on fair values are future expected market rents and revenues, operating margins, terminal
value multiples, terminal capitalization rates, and discount rates. Auditing these estimates and assumptions required a high degree of
auditor judgment as the estimations made by management contains significant measurement uncertainty. This resulted in an increased
extent of audit effort, including the need to involve fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to future expected market rents and revenues, operating margins, terminal value multiples, terminal
capitalization rates, and discount rates of investment properties and certain classes of property, plant and equipment included the
following, among others:
2021 ANNUAL REPORT
147
•
•
•
•
Evaluated the effectiveness of controls, including those related to management’s process for determining investment properties
and certain classes of property, plant and equipment fair values including those over determining future expected market rents
and revenues, operating margins, terminal value multiples, terminal capitalization rates, and discount rates.
Tested management’s future expected market rents and revenues, operating margins, terminal value multiples, terminal
capitalization rates, and discount rates through independent analysis and comparison to external sources including objective
contractual information, and observable economic indicators, where applicable.
Evaluated management’s ability to accurately estimate fair value and future expected market rents and revenues and operating
margins by comparing management’s historical fair value estimates to market transactions and forecasts to actual results.
Evaluated the impact of current market events and conditions, including relevant comparable transactions, on the assumptions
used by management.
• With the assistance of fair value specialists, evaluated the reasonableness of management’s determination of terminal value
multiples, terminal capitalization rates, and discount rates by (1) testing the source information underlying the determination of
terminal value multiples, terminal capitalization rates, and discount rates; (2) developing a range of independent estimates and
comparing those to the terminal value multiples, terminal capitalization rates, and discount rates selected by management; and (3)
considering recent market transactions and industry surveys.
Acquisition of Inter Pipeline Ltd. – Refer to Notes 2(d)(i), 2(r), and 5 to the financial statements
Critical Audit Matter Description
The Company acquired several businesses during the year. When each business was acquired, the Company assessed the degree of
influence it exerted and whether it had control. Once it was established that control existed, the Company accounted for the business
combination using the acquisition method of accounting. The purchase price of each acquisition was allocated to the assets acquired
and liabilities assumed based on their respective fair values at the date of acquisition.
While there were several estimates made by management in the determination of the fair value of the assets acquired and the liabilities
assumed, the estimates with the greatest measurement uncertainty for the acquisition of Inter Pipeline Ltd. (“IPL”) were forecasted
revenue and discount rates in the valuation of certain property, plant and equipment and intangible assets. Auditing these estimates
required a high degree of auditor judgment and this resulted in an increased extent of audit effort, including the involvement of fair
value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the estimates made by management in the acquisition of IPL businesses included the following, among
others:
•
Evaluated the effectiveness of controls over management’s process for determining the fair value of property, plant and
equipment and intangible assets, including those over forecasted revenue and discount rates.
• With the assistance of capital project specialists, evaluated the reasonableness of management’s forecasted revenue used in the
valuation of property, plant and equipment by comparing the projections to engineering reports, analyst industry reports and
evidence obtained in other areas of the audit.
• With the assistance of fair value specialists, evaluated the reasonableness of the discount rates used in the valuation of property,
plant and equipment and intangible assets, including testing the source information underlying the determination of the discount
rates, testing the mathematical accuracy of the calculation, and developing a range of independent estimates, comparing it to the
discount rates selected by management.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
March 30, 2022
We have served as the Company’s auditor since 1971.
148
BROOKFIELD ASSET MANAGEMENT
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
AS AT DEC. 31
(MILLIONS)
Note
2021
2020
Assets
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 ...................................................................................................
6
6
7
8
9
10
11
12
13
14
15
$
12,694 $
16,546
21,760
11,415
11,958
46,100
100,865
115,489
30,609
20,227
3,340
9,933
17,730
18,928
10,360
5,917
41,327
96,782
100,009
24,658
14,714
3,338
Total assets .............................................................................................................................
$
391,003 $
343,696
Liabilities and equity
Corporate borrowings ...........................................................................................................
Accounts payable and other ..................................................................................................
Liabilities associated with assets classified as held for sale .................................................
Non-recourse borrowings of managed entities .....................................................................
Deferred income tax liabilities .............................................................................................
Subsidiary equity obligations ...............................................................................................
Equity
Preferred equity ....................................................................................................................
Non-controlling interests ......................................................................................................
Common equity ....................................................................................................................
16
17
9
18
15
19
21
21
21
$
10,875 $
52,546
3,148
9,077
50,682
2,359
165,057
139,324
20,328
4,308
15,913
3,699
4,145
88,386
42,210
4,145
86,804
31,693
Total equity ..............................................................................................................................
134,741
122,642
Total liabilities and equity ....................................................................................................
$
391,003 $
343,696
2021 ANNUAL REPORT
149
2020
62,752
(53,177)
785
(79)
(7,213)
(101)
(1,423)
(837)
707
(134)
841
707
(0.12)
(0.12)
(64,000)
3,099
2,451
(7,604)
(116)
5,151
(2,324)
12,388 $
3,966 $
8,422
12,388 $
2.39 $
2.47
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DEC. 31
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
Note
2021
$
75,731 $
Revenues ................................................................................................................
Direct costs .............................................................................................................
Other income and gains ..........................................................................................
22
23
Equity accounted income (loss) .............................................................................
10
Expenses
Interest .................................................................................................................
Corporate costs ....................................................................................................
Fair value changes ..................................................................................................
Income taxes ...........................................................................................................
Net income .............................................................................................................
Net income (loss) attributable to:
Shareholders ........................................................................................................
Non-controlling interests .....................................................................................
Net income (loss) per share:
Diluted .................................................................................................................
Basic ....................................................................................................................
24
15
21
21
$
$
$
$
150
BROOKFIELD ASSET MANAGEMENT
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Note
2021
Net income ........................................................................................................................
$
12,388 $
Other comprehensive income (loss)
Items that may be reclassified to net income
Financial contracts and power sale agreements ...........................................................
Marketable securities ...................................................................................................
Equity accounted investments ......................................................................................
10
Foreign currency translation ........................................................................................
Income taxes ................................................................................................................
15
Items that will not be reclassified to net income
Revaluation of property, plant and equipment .............................................................
Revaluation of pension obligations ..............................................................................
Equity accounted investments ......................................................................................
12
17
10
Marketable securities ...................................................................................................
Income taxes ................................................................................................................
15
Other comprehensive income ...........................................................................................
Comprehensive income .....................................................................................................
Attributable to:
Shareholders
Net income (loss) .........................................................................................................
Other comprehensive income ......................................................................................
Comprehensive income ................................................................................................
Non-controlling interests
Net income ...................................................................................................................
Other comprehensive income ......................................................................................
Comprehensive income ................................................................................................
$
$
$
$
$
517
214
43
(1,910)
(64)
(1,200)
6,135
545
893
568
(1,707)
6,434
5,234
17,622 $
3,966 $
1,844
5,810 $
8,422 $
3,390
11,812 $
2020
707
(218)
285
(82)
(1,294)
(38)
(1,347)
4,794
(298)
36
316
(1,188)
3,660
2,313
3,020
(134)
818
684
841
1,495
2,336
2021 ANNUAL REPORT
151
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Accumulated Other
Comprehensive Income (Loss)
AS AT AND FOR THE YEAR
ENDED DEC. 31, 2021
(MILLIONS)
Balance as at
Common
Share
Capital
Contributed
Surplus
Retained
Earnings
Ownership
Changes1
Revaluation
Surplus
Currency
Translation
Other
Reserves2
Total
Common
Equity
Preferred
Equity
Non-
controlling
Interests
Total
Equity
December 31, 2020 .......... $
7,368
$
285
$
15,178
$
2,691
$
7,530
$
(2,133) $
774
$
31,693
$
4,145
$
86,804
$ 122,642
Changes in year:
Net income ...........................
Other comprehensive
income (loss) .....................
Comprehensive income
(loss) ..................................
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 ...........
3,170
Balance as at
—
—
—
—
—
—
—
—
—
—
—
—
3,966
—
3,966
(1,338)
(148)
—
3,170
(32)
(325)
—
—
67
—
35
(21)
393
2,527
—
—
—
—
—
—
—
—
—
—
1,502
1,502
(318)
(318)
—
—
—
—
—
—
—
—
—
—
3,552
3,552
(751)
751
164
(154)
—
660
660
—
—
—
—
—
(24)
636
3,966
1,844
5,810
(1,338)
(148)
—
2,813
46
3,334
10,517
—
—
—
—
—
—
—
—
—
—
8,422
12,388
3,390
5,234
11,812
17,622
—
—
(1,338)
(148)
(8,163)
(8,163)
2,468
5,281
—
46
(4,535)
(1,201)
1,582
12,099
December 31, 2021 .......... $
10,538
$
320
$
17,705
$
6,243
$
8,281
$
(2,287) $
1,410
$
42,210
$
4,145
$
88,386
$ 134,741
1.
2.
Includes gains or losses on changes in ownership interests of consolidated subsidiaries.
Includes changes in fair value of marketable securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of
associated income taxes.
AS AT AND FOR THE YEAR
ENDED DEC. 31, 2020
(MILLIONS)
Balance as at
Common
Share
Capital
Contributed
Surplus
Retained
Earnings
Ownership
Changes1
Revaluation
Surplus
Currency
Translation
Other
Reserves2
Total
Common
Equity
Preferred
Equity
Non-
controlling
Interests
Total
Equity
December 31, 2019 .......... $
7,305
$
286
$
16,026
$
1,010
$
7,876
$
(2,017) $
382
$
30,868
$
4,145
$
81,833
$ 116,846
Accumulated Other
Comprehensive Income (Loss)
Changes in year:
Net (loss) income .................
Other comprehensive
income (loss) ....................
Comprehensive (loss)
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
—
—
—
—
—
—
63
—
—
63
—
—
—
—
—
—
(134)
—
(134)
(726)
(141)
—
(60)
(273)
59
—
(1)
(23)
449
(848)
—
—
—
—
—
—
—
—
—
—
1,005
1,005
(332)
(332)
—
—
—
—
—
—
—
—
—
—
1,681
1,681
(1,351)
(346)
216
(116)
—
145
145
—
—
—
—
—
247
392
(134)
818
684
(726)
(141)
—
(270)
36
1,242
825
—
—
—
—
—
—
—
—
—
—
841
707
1,495
2,313
2,336
3,020
—
—
(726)
(141)
(6,493)
(6,493)
12,719
12,449
—
36
(3,591)
(2,349)
4,971
5,796
December 31, 2020 .......... $
7,368
$
285
$
15,178
$
2,691
$
7,530
$
(2,133) $
774
$
31,693
$
4,145
$
86,804
$ 122,642
1.
2.
Includes gains or losses on changes in ownership interests of consolidated subsidiaries.
Includes changes in fair value of marketable securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of
associated income taxes.
152
BROOKFIELD ASSET MANAGEMENT
24
23
15
27
27
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Operating activities
Net income ............................................................................................................................
Other income and gains ........................................................................................................
Share of undistributed equity accounted (earnings) loss ......................................................
Fair value changes ................................................................................................................
Depreciation and amortization ..............................................................................................
Deferred income taxes ..........................................................................................................
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 ...............................................................................
Deposits from related parties ................................................................................................
Deposits provided to related parties .....................................................................................
Capital provided from non-controlling interests ..................................................................
Capital repaid to non-controlling interests ...........................................................................
Repayment of lease liabilities ...............................................................................................
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 ....................................................................................
Net change in cash classified within assets held for sale .....................................................
Foreign exchange revaluation ...............................................................................................
Balance, beginning of year ...................................................................................................
Balance, end of year .............................................................................................................
Supplemental cash flow disclosures
Income taxes paid .................................................................................................................
Interest paid ..........................................................................................................................
Note
2021
2020
$
12,388 $
(3,099)
(693)
(5,151)
6,437
1,210
(34)
(3,184)
7,874
707
(785)
1,347
1,423
5,791
81
51
(274)
8,341
2,216
(251)
—
37,594
(33,496)
(1,705)
231
(246)
—
—
16,312
(3,593)
(602)
17
(419)
(6,493)
(867)
8,698
(5,111)
(4,012)
(3,733)
(25,536)
(3,453)
2,266
125
215
22,557
3,415
(606)
(13,873)
3,166
23
(34)
6,778
9,933
1,350
(526)
912
80,376
(61,923)
6,222
450
(1,314)
806
(1,155)
14,190
(11,722)
(1,411)
23
(368)
(8,163)
(1,486)
16,261
(11,286)
(6,881)
(3,708)
(35,058)
(14,559)
6,219
723
1,711
35,622
5,952
220
(21,045)
3,090
(207)
(122)
9,933
12,694 $
$
$
$
1,116 $
7,001 $
1,101
6,583
2021 ANNUAL REPORT
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND CAPITAL MANAGEMENT
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 renewable power and transition,
infrastructure, private equity, real estate and credit. The Corporation is listed on the New York and Toronto stock exchanges
under the symbols BAM and BAM.A, 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.
Capital Management
The company utilizes the Corporation’s Capital to manage the business in a number of ways, including operating performance,
value creation, credit metrics and capital efficiency. The performance of the Corporation’s Capital is closely tracked and
monitored by the company’s key management personnel and evaluated relative to management’s objectives. The primary goal
of the company is to earn a 12-15% return compounded over the long term while always maintaining excess capital to support
ongoing operations.
The Corporation’s Capital consists of the capital invested in its asset management activities, including investments in entities
that it manages, its corporate investments that are held outside of managed entities and its net working capital. The
Corporation’s Capital is funded with common equity, preferred equity and corporate borrowings issued by the Corporation.
As at December 31, 2021, the Corporation’s Capital totaled $57.5 billion (2020 – $45.1 billion), and is computed as follows:
AS AT DEC. 31
(MILLIONS)
Cash and cash equivalents ......................................................................................................................... $
Other financial assets .................................................................................................................................
Common equity in managed investments ..................................................................................................
Other assets and liabilities of the Corporation ...........................................................................................
Corporation’s Capital ................................................................................................................................. $
Corporation’s Capital is comprised of the following:
Common equity ....................................................................................................................................... $
Preferred shares .......................................................................................................................................
Non-controlling interest ..........................................................................................................................
Corporate borrowings ..............................................................................................................................
$
2021
1,197 $
3,430
46,248
6,585
57,460 $
42,210 $
4,145
230
10,875
57,460 $
2020
1,283
3,809
33,732
6,321
45,145
31,693
4,145
230
9,077
45,145
The Corporation generates returns on its capital through management fees and performance revenues earned as an asset
manager, as well as distributions or dividends earned from its capital invested in managed entities, and through performance of
the Corporation’s financial asset investments. Prudent levels of corporate borrowings and preferred equity are utilized to
enhance returns to shareholders’ common equity.
154
BROOKFIELD ASSET MANAGEMENT
A reconciliation of the Corporation’s Capital to the company’s consolidated balance sheet as at December 31, 2021 is as
follows:
The
Corporation
Managed
Investments
Elimination1
AS AT DEC. 31, 2021
(MILLIONS)
Cash and cash equivalents ............................................................. $
Other financial assets ....................................................................
Accounts receivable and other1
......................................................
Inventory ........................................................................................
Assets classified as held for sale ....................................................
Equity accounted investments ........................................................
Investment properties .....................................................................
Property, plant and equipment .......................................................
Intangible assets .............................................................................
Goodwill ........................................................................................
Deferred income tax assets ............................................................
Accounts payable and other1
..........................................................
Liabilities associated with assets classified as held for sale ..........
Deferred income tax liabilities .......................................................
Subsidiary equity obligations .........................................................
Total ...............................................................................................
Common equity in managed investments2
.....................................
Corporation’s Capital
Less:
Corporate borrowings ..................................................................
Non-recourse borrowings of managed entities ............................
Amounts attributable to preferred equity ....................................
Amounts attributable to non-controlling interests .......................
Common equity ............................................................................ $
1,197 $
3,430
2,697
2
—
6,553
16
215
215
361
2,064
(5,104)
—
(299)
(135)
11,212
46,248
57,460
10,875
—
4,145
230
42,210 $
11,497 $
13,116
19,694
11,413
11,958
39,547
100,849
115,274
30,394
19,866
1,276
(48,073)
(3,148)
(20,029)
(4,173)
299,461
—
299,461
—
165,057
—
88,156
46,248 $
— $
—
(631)
—
—
—
—
—
—
—
—
631
—
—
—
—
Total
Consolidated
12,694
16,546
21,760
11,415
11,958
46,100
100,865
115,489
30,609
20,227
3,340
(52,546)
(3,148)
(20,328)
(4,308)
310,673
—
310,673
(46,248)
(46,248)
—
—
—
—
(46,248) $
10,875
165,057
4,145
88,386
42,210
1. Contains the gross up of intercompany balances, including accounts receivable and other, and accounts payable and other of $631 million and $631 million,
respectively, between entities within the Corporation and its managed investments.
2. Represents the value of the Corporation’s managed investments.
Common equity in managed investments is a measure routinely evaluated by our company’s key management personnel and
represents the net equity in our consolidated financial statements outside of our corporate and asset management segments,
excluding non-controlling interests. This measure is equal to the sum of the common equity in our Renewable Power and
Transition, Infrastructure, Private Equity, Real Estate and Residential Development operating segments.
2021 ANNUAL REPORT
155
A reconciliation of the Corporation’s Capital to the company’s consolidated balance sheet as at December 31, 2020 is as
follows:
The
Corporation
Managed
Investments
Elimination1
AS AT DEC. 31, 2020
(MILLIONS)
Cash and cash equivalents ............................................................. $
Other financial assets ....................................................................
Accounts receivable and other1
......................................................
Inventory ........................................................................................
Assets classified as held for sale ....................................................
Equity accounted investments ........................................................
Investment properties .....................................................................
Property, plant and equipment .......................................................
Intangible assets .............................................................................
Goodwill ........................................................................................
Deferred income tax assets ............................................................
Accounts payable and other1
..........................................................
Liabilities associated with assets classified as held for sale ..........
Deferred income tax liabilities .......................................................
Subsidiary equity obligations .........................................................
Total ...............................................................................................
Common equity in managed investments2
.....................................
Corporation’s Capital
Less:
Corporate borrowings ..................................................................
Non-recourse borrowings of managed entities ............................
Amounts attributable to preferred equity ....................................
Amounts attributable to non-controlling interests .......................
Common equity ............................................................................ $
1,283 $
3,809
3,632
2
—
5,361
17
122
285
368
2,159
(5,134)
—
(414)
(77)
11,413
33,732
45,145
9,077
—
4,145
230
31,693 $
8,650 $
13,921
17,401
10,358
5,917
35,966
96,765
99,887
24,373
14,346
1,179
(47,653)
(2,359)
(15,499)
(3,622)
259,630
—
259,630
—
139,324
—
86,574
33,732 $
Total
Consolidated
9,933
17,730
18,928
10,360
5,917
41,327
96,782
100,009
24,658
14,714
3,338
(50,682)
(2,359)
(15,913)
(3,699)
271,043
—
271,043
— $
—
(2,105)
—
—
—
—
—
—
—
—
2,105
—
—
—
—
(33,732)
(33,732)
—
—
—
—
(33,732) $
9,077
139,324
4,145
86,804
31,693
1. Contains the gross up of intercompany balances, including accounts receivable and other, and accounts payable and other of $2.1 billion and $2.1 billion, respectively,
between entities within the Corporation and its managed investments.
2. Represents the value of the Corporation’s managed investments.
156
BROOKFIELD ASSET MANAGEMENT
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 consolidated financial statements were authorized for issuance by the Board of Directors of the company on March 30, 2022.
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, 2021. The new standards were applied as follows:
i.
Interest Rate Benchmark Reform
The company adopted Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16
(“Phase II Amendments”), effective January 1, 2021. The Phase II amendments provide additional guidance to address issues
that will arise during the transition of benchmark interest rates. The Phase II Amendments primarily relate to the modification
of financial assets, financial liabilities and lease liabilities where the basis for determining the contractual cash flows changes as
a result of IBOR reform, allowing for prospective application of the applicable benchmark interest rate and to the application of
hedge accounting, providing an exception such that changes in the formal designation and documentation of hedge accounting
relationships that are needed to reflect the changes required by IBOR reform do not result in the discontinuation of hedge
accounting or the designation of new hedging relationships. The adoption did not have a significant impact on our company’s
financial reporting.
c) Future Changes in Accounting Standards
i.
Insurance Contracts
In May 2017, the IASB published IFRS 17, Insurance Contracts (“IFRS 17”), which establishes principles for the recognition,
measurement, presentation and disclosure of insurance contracts. IFRS 17 will replace IFRS 4, Insurance Contracts, and will
be applied retrospectively. In June 2020, the IASB proposed an amendment to IFRS 17 providing a one-year deferral on the
effective date of the standard to January 1, 2023. IFRS 17 requires insurance contract liabilities to be measured at a
current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts.
The company is currently assessing the impact of IFRS 17 on its operations.
ii. Amendments to IAS 1 – Presentation of Financial Statements (“IAS 1”)
The amendments clarify how to classify debt and other liabilities as current or non-current. The amendments to IAS 1 apply to
annual reporting periods beginning on or after January 1, 2023.
The company is currently assessing the impact of these amendments.
iii. Amendments to IFRS 3 – Business Combinations (“IFRS 3”) - Reference to Conceptual Framework
The amendments add an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses
arising from liabilities and contingent liabilities that would be within the scope of IAS 37, Provisions, Contingent Liabilities
and Contingent Assets (“IAS 37”), or IFRIC 21, Levies (“IFRIC 21”), if incurred separately. The exception requires entities to
apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine whether a present
obligation exists at the acquisition date. At the same time, the amendments add a new paragraph to IFRS 3 to clarify that
contingent assets do not qualify for recognition at the acquisition date. The amendments apply to annual reporting periods
beginning on or after January 1, 2022.
The company is currently assessing the impact of these amendments.
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 is able to exercise power over the investee, is exposed
to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the
2021 ANNUAL REPORT
157
amount of its returns. Subsidiaries are consolidated from the date control is obtained and continue to be consolidated until
the date when control is lost. The company includes 100% of its subsidiaries’ revenues and expenses in the Consolidated
Statements of Operations and 100% of its subsidiaries’ assets and liabilities on the Consolidated Balance Sheets, with non-
controlling interests in the equity of the company’s subsidiaries included within the company’s equity. All intercompany
balances, transactions, unrealized gains and losses are eliminated in full.
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 control of an investee.
Certain of the company’s subsidiaries are subject to profit sharing arrangements, such as carried interest, 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 and correspondingly reduces non-controlling interests’ attributable share of those profits.
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 we
dispose of all or part of a subsidiary resulting in a loss of control, the difference between the carrying value of what is sold and
the proceeds from disposition is recognized within other income and gains in the Consolidated Statements of Operations.
Refer to Note 2(r) for an explanation of the company’s accounting policy for business combinations and 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 indicators of 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(m).
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 that 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.
158
BROOKFIELD ASSET MANAGEMENT
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 are 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 losses on translation of these items are included in net income. Gains or losses on transactions that
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. The
majority of transactions with related parties are between consolidated entities and eliminate on consolidation. The company and
its subsidiaries may also transact with entities over which the company has significant influence or joint control. Amounts
owed to and by associates and joint ventures are not eliminated on consolidation. 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.
In addition to our subsidiaries and equity accounted investments, we consider key management personnel, the Board of
Directors and material shareholders to be related parties. See additional details in Note 27.
h) Operating Assets
i.
Investment Properties
The company uses the fair value method to account for real estate classified as investment properties. 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 properties are initially measured at cost including transaction costs, or at fair value 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 completed by undertaking one of two accepted approaches: (i) discounting the expected future cash flows,
generally over a term of 10 years including a terminal value based on the application of a capitalization rate to estimated
year 11 net operating income, typically used for our office, retail and logistics assets; or (ii) undertaking a direct capitalization
approach for certain of our LP investments and directly held multifamily assets whereby a capitalization rate is applied to
estimated stabilized annual net operating income. 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.
Commercial developments are also measured using a discounted cash flow model, net of costs to complete, as of the balance
sheet date. Development sites in the planning phases are carried at cost.
ii. Property, Plant and Equipment
The company uses the revaluation method of accounting for certain classes of property, plant and equipment (“PP&E”) as well
as certain assets which are under development for future use as PP&E. PP&E measured using the revaluation method is initially
measured at cost, or at fair value 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 revaluation loss recorded through net income, in which case that
portion of the increase is recognized in net income.
2021 ANNUAL REPORT
159
Where the carrying amount of an asset decreases, the decrease is recognized in other comprehensive income to the extent there
is 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.
PP&E held in our Private Equity segment, which include leasehold improvements, are measured at cost less accumulated
depreciation and accumulated impairment losses, if any. Land is carried at cost whereas finite-life assets such as buildings and
equipment are carried at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is
calculated on a systematic basis over the assets’ useful life.
Depreciation methods and useful lives are reassessed at least annually regardless of the measurement method used.
Renewable Power and Transition
Renewable power and transition generally determines the fair value of its PP&E by using a 20-year discounted cash flow model
for the majority of its assets. This model incorporates future cash flows from long-term power purchase agreements that are in
place where it is determined that the power purchase agreements are linked specifically to the related power generating assets.
The model also includes estimates of future electricity prices, anticipated long-term average generation, estimated operating
and capital expenditures, and assumptions about future inflation rates and discount rates by geographical location.
Depreciation on renewable power assets is calculated on a straight-line basis over the estimated service lives of the assets,
which are as follows:
(YEARS)
Useful Lives
Dams ....................................................................................................................................................................................
Up to 115
Penstocks .............................................................................................................................................................................
Up to 60
Powerhouses ........................................................................................................................................................................
Up to 115
Hydroelectric generating units ............................................................................................................................................
Up to 115
Wind generating units .........................................................................................................................................................
Solar generating units ..........................................................................................................................................................
Gas-fired cogenerating (“Cogeneration”) units ...................................................................................................................
Other assets .........................................................................................................................................................................
Up to 30
Up to 35
Up to 40
Up to 60
Cost is allocated to the significant components of power generating assets, and each component is depreciated separately.
The depreciation of PP&E in our Brazilian renewable power and transition operations is based on the duration of
the authorization or the useful life of a concession. The weighted-average remaining duration at December 31, 2021, is 31 years
(2020 – 32 years). Land rights are included as part of the concession or authorization and are subject to depreciation.
Infrastructure
Utilities, transport, midstream and data assets within our Infrastructure segment as well as assets under development classified
as PP&E on the Consolidated Balance Sheets are accounted for using the revaluation method. The company determines the fair
value of its utilities, transport, midstream and data assets using both the discounted cash flow and depreciated replacement cost
methods, which include 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.
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Depreciation on utilities, transport, midstream and data assets is calculated on a straight-line or declining balance basis over the
estimated service lives of the components of the assets, which are as follows:
(YEARS)
Buildings ..............................................................................................................................................................................
Transmission stations, towers and related fixtures ..............................................................................................................
Leasehold improvements .....................................................................................................................................................
Plant and equipment ............................................................................................................................................................
Network systems ..................................................................................................................................................................
Track ....................................................................................................................................................................................
District energy systems ........................................................................................................................................................
Pipelines ...............................................................................................................................................................................
Gas storage assets ................................................................................................................................................................
Useful Lives
Up to 75
Up to 40
Up to 50
Up to 40
Up to 65
Up to 40
Up to 50
Up to 20
Up to 50
The fair value and the estimated remaining service lives are reassessed annually.
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.
In our sustainable resources operations, land used in the production of standing timber, as well as bridges and buildings used in
sustainable resources production, are accounted for using the revaluation method and included in PP&E. Bridges, buildings,
vehicles and equipment are depreciated over their useful lives, generally 3 to 25 years.
Real Estate – Hospitality Assets
Hospitality operating assets within our Real Estate segment are classified as PP&E and are accounted for using the revaluation
method. The company determines the fair value for these assets by using a depreciated replacement cost method based on the
age, physical condition and the construction costs of the assets. Fair value of hospitality properties are also reviewed in
reference to each hospitality asset’s enterprise value which is determined using a discounted cash flow model.
Depreciation on hospitality assets is calculated on a straight-line basis over the estimated useful lives of each component of the
asset as follows:
(YEARS)
Useful Lives
Building and building improvements ..................................................................................................................................
2 to 50+
Land improvements .............................................................................................................................................................
15
Furniture, fixtures and equipment .......................................................................................................................................
1 to 10
Private Equity
The company accounts for its private equity PP&E using the cost model. Costs include expenditures that are directly
attributable to the acquisition of the asset. Depreciation of an asset commences when it is available for use. PP&E is
depreciated for each component of the following asset classes as follows:
a) On a straight-line basis
(YEARS)
Buildings .............................................................................................................................................................................
Leasehold improvements .....................................................................................................................................................
Machinery and equipment ...................................................................................................................................................
Vessels .................................................................................................................................................................................
b) Not on a straight-line basis
(YEARS)
Useful Lives
Up to 50
Up to 40
Up to 30
Up to 35
Useful Lives
Oil and gas related equipment ................................................................................................................................. Units of production
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iii. Inventory
Private Equity
Fuel inventories within our Private Equity segment are traded in active markets and are purchased with the view to resell in the
near future, generating a profit from fluctuations in prices or margins. As a result, fuel inventories are carried at market value
by reference to prices in a quoted active market, in accordance with the commodity broker-trader exemption granted by IAS 2,
Inventories. Changes in fair value less costs to sell are recognized in the Consolidated Statements of Operations through direct
costs. Fuel products that are held for extended periods in order to benefit from future anticipated increases in fuel prices or
located in territories where no active market exists are recognized at the lower of cost and net realizable value. Products and
chemicals used in the production of biofuels are valued at the lower of cost and net realizable value.
Real Estate
Develop-for-sale multifamily projects, residential development lots, homes and residential condominium projects are recorded
in inventory. Residential development lots are recorded at the lower of cost, which includes 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 salable acreage of each project or subdivision in proportion to
the anticipated revenue.
Residential Development
Inventories consist of land held for development, land under development, homes under construction, completed homes and
model homes. In addition to direct land acquisitions, land development and improvement costs and home construction costs,
costs also include interest, real estate taxes and direct overhead related to development and construction, which are capitalized
to inventory during the period beginning with the commencement of development and ending with the completion of
construction or development. Indirect costs are allocated to homes or lots based on the number of units in a community.
Land and housing assets are recorded at the lower of cost 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.
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 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.
Refer to the investment properties and revaluation of PP&E explanations for the approach taken to determine the fair value of
these operating assets.
Further information on fair value measurements is available in Notes 6, 7, 11 and 12.
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j) Accounts Receivable
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest
method, less an allowance for expected credit losses for uncollectability.
k) 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 direct costs 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.
Infrastructure
Intangible assets within our Infrastructure segment primarily consist of conservancy rights, service concession arrangements,
customer order backlogs, track access rights, operating network agreements and customer contracts and relationships.
Concession arrangements, accounted for as intangible assets under IFRIC 12, Service Concession Arrangements (“IFRIC 12”),
were mostly acquired through acquisitions of gas transmission, electricity transmission and toll road businesses and are
amortized on a straight-line basis over the term of the arrangement.
The intangible assets at the Brazilian regulated gas transmission operation and Brazilian electricity transmission operation
relate to concession contracts. For our Brazilian regulated gas transmission operation, the concession arrangement provides the
operation with the right to operate the asset perpetually. As a result, the intangible asset is amortized over its estimated useful
life. For our Brazilian electricity transmission operation, the intangible asset is amortized on a straight-line basis over the life of
the contractual arrangement. The intangible assets at the Indian and Peruvian toll roads relate to the right to operate a road and
charge users a specified tariff for a contractual length of time and is amortized over the life of the contractual arrangement with
an average of 15 and 21 years remaining, respectively.
Refer to Note 13 of the consolidated financial statements for additional information on these concession arrangements.
The intangible assets at our residential infrastructure operation are comprised of contractual customer relationships, customer
contracts, proprietary technology and brands. The contractual customer relationships and customer contracts represent ongoing
economic benefits from leasing customers and annuity-based management agreements. Proprietary technology is recognized
for the development of new metering technology, which allows the business to generate revenue through its sub-metering
business. Brands represent the intrinsic value customers place on the operation’s various brand names.
Private Equity
Our Private Equity segment includes intangible assets across a number of operating companies. The majority are finite life
intangible assets that are amortized on a straight-line basis over the following useful lives:
(YEARS)
Water and sewage concession agreements ...................................................................................................................
Brand names .................................................................................................................................................................
Computer software .......................................................................................................................................................
Customer relationships .................................................................................................................................................
Value of insurance contracts acquired ..........................................................................................................................
Patents and trademarks .................................................................................................................................................
Proprietary technology .................................................................................................................................................
Product development costs ...........................................................................................................................................
Distribution networks ...................................................................................................................................................
Loyalty program ...........................................................................................................................................................
Useful Lives
Up to 40
Up to 20
Up to 10
Up to 30
Up to 15
Up to 40
Up to 20
Up to 5
Up to 25
Up to 15
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Real Estate
Intangible assets in our Real Estate segment are primarily trademarks associated with hospitality assets. These trademarks have
indefinite lives.
l) 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.
m) Impairment of Long-Lived Assets
At each balance sheet date or more often if events or circumstances indicate there may be impairment, 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.
n) Subsidiary Equity Obligations
Subsidiary equity obligations include subsidiary preferred equity units, subsidiary preferred shares and capital securities as well
as 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 at amortized cost 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 fair value are recorded in net income in the period of the change.
o) Revenue from Contracts with Customers
IFRS 15, Revenue from Contracts with Customers (“IFRS 15”), specifies how and when revenue should be recognized and
requires disclosures about the nature, amount, timing and uncertainty of revenues and cash flows arising from customer
contracts.
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Where available, the company has elected the practical expedient available under IFRS 15 for measuring progress toward
complete satisfaction of performance obligation and for disclosure requirements of remaining performance obligations. This
permits the company to recognize revenue in the amount to which we have the right to invoice such that the company has a
right to the consideration in an amount that corresponds directly with the value to the customer for performance completed to
date.
Revenue Recognition Policies by Segment
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on
behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of
goods and services) to the customer and is the unit of account in IFRS 15. A contract’s transaction price is allocated to each
distinct performance obligation and recognized as revenue, as, or when, the performance obligation is satisfied. The company
recognizes revenue when it transfers control of a product or service to a customer.
The company recognizes revenue from the following major sources:
Asset Management
The company’s primary asset management revenue streams, which include base management fees, incentive fees (including
incentive distributions and performance fees) and realized carried interest, are satisfied over time. A significant portion of our
asset management revenue is inter-segment in nature and thus eliminated on consolidation; that which survives is recorded as
revenue in the Consolidated Statements of Operations.
The company earns base management fees in accordance with contractual arrangements with our long-term private funds,
perpetual strategies and liquid securities’ investment vehicles. Fees are typically equal to a percentage of fee-bearing capital
within the respective fund or entity and are accrued quarterly. These fees are earned over the period of time that the
management services are provided and are allocated to the distinct services provided by the company during the reporting
period.
Incentive distributions and performance fees are incentive payments to reward the company for meeting or exceeding certain
performance thresholds of managed entities. Incentive distributions, paid to us by certain of our perpetual affiliates, are
determined by contractual arrangements and represent a portion of distributions paid by the perpetual affiliates above a
predetermined hurdle. They are accrued as revenue on the respective affiliates’ distribution record dates if that hurdle has been
achieved. BBU pays performance fees if the growth in its unit price exceeds a predetermined threshold, with the unit price
based on the quarterly volume-weighted average price of publicly traded units. These fees are accrued on a quarterly basis
subject to the performance of the listed vehicle.
Carried interest is a performance fee arrangement in which we receive a percentage of investment returns, generated within a
private fund on carry eligible capital, based on a contractual formula. We are eligible to earn carried interest from a fund once
returns exceed the fund’s contractually defined performance hurdles at which point we earn an accelerated percentage of the
additional fund profit until we have earned the percentage of total fund profit, net of fees and expenses, to which we are
entitled. We recognize this carried interest when a fund’s cumulative returns are in excess of preferred returns and when it
is highly probable that a significant reversal will not occur, which are generally met when an underlying fund investment is
profitably disposed of. Typically carried interest is not recognized as revenue until the fund is near the end of its life.
Renewable Power and Transition
Revenue is earned by selling electricity sourced from our power generating facilities. It is derived from the output delivered and
capacity provided at rates specified under contract terms or at prevailing market rates if the sale is uncontracted. Performance
obligations are satisfied over time as the customer simultaneously receives and consumes benefits as we deliver electricity and
related products.
We also sell power and related products under bundled arrangements. Energy, capacity and renewable credits within power
purchase agreements (“PPA”) are considered to be distinct performance obligations. A contract’s transaction price is allocated
to each distinct performance obligation and recognized as revenue over time as the performance obligation is satisfied. The sale
of energy and capacity are distinct goods that are substantially the same and have the same pattern of transfer as measured by
the output method. Renewable credits are performance obligations satisfied at a point in time. Measurement of satisfaction and
transfer of control to the customer of renewable credits in a bundled arrangement coincides with the pattern of revenue
recognition of the underlying energy generation.
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165
Infrastructure
Our infrastructure revenue is predominantly recognized over time as services are rendered. Performance obligations are
satisfied based on actual usage or throughput depending on the terms of the arrangement. Contract progress is determined using
a cost-to-cost input method. Any upfront payments that are separable from the recurring revenue are recognized over time for
the period the services are provided.
In addition, we have certain contracts where we earn revenue at a point in time when control of the product ultimately transfers
to the customer, which for our sustainable resources operations coincides with product delivery.
Private Equity
Revenue from our Private Equity segment primarily consists of: (i) sale of goods or products which is recognized as revenue
when the product is shipped and title passes to the customer; and (ii) the provision of services which are recognized
as revenue over the period of time that they are provided.
Revenue recognized over a period of time is determined using the cost-to-cost input method to measure progress towards
complete satisfaction of the performance obligations as the work performed on the contracts creates or enhances an asset that is
controlled by the customer. As work is performed, a contract asset in the form of contracts-in-progress is recognized, which
is reclassified to accounts receivable when invoiced to the customer. If payment is received in advance of work being
completed, a contract liability is recognized. Variable consideration, such as claims, incentives and variations resulting from
contract modifications, is only recognized in the transaction price to the extent that it is highly probable that a significant
reversal in the amount of revenue recognized will not occur when the uncertainty associated with the variable consideration is
subsequently resolved.
Real Estate
Revenue from hospitality operations is generated by providing accommodation, food and beverage and leisure facilities to hotel
guests. Revenue from accommodation is recognized over the period that the guest stays at the hotel; food and beverage revenue
as well as revenue from leisure activities is recognized when goods and services are provided.
Real estate rental income is recognized in accordance with IFRS 16, Leases. As the company retains substantially all the risks
and benefits of ownership of its investment properties, it accounts for leases with its tenants as operating leases and begins
recognizing revenue 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 representing the difference between rental revenue recorded and
the contractual amount received. Percentage participating rents are recognized when tenants’ specified sales targets have been
met.
Residential Development
Revenue from residential land sales, sales of homes and the completion of residential condominium projects is recognized at
the point in time when our performance obligations are met. Performance obligations are satisfied when we transfer title over a
product to a customer and all material conditions of the sales contract have been met. If title of a property transfers but material
future development is required, revenue will be delayed until the point in time at which the remaining performance obligations
are satisfied.
Corporate Activities and Other
Dividend and interest income from other financial assets are recognized as revenue when declared or on an accrual basis using
the effective interest method, in accordance with IFRS 9, Financial Instruments (“IFRS 9”).
Interest revenue from loans and notes receivable, less a provision for uncollectable amounts, is recorded on the accrual basis
using the effective interest method, in accordance with IFRS 9.
p) Financial Instruments
Classification of Financial Instruments
The company classifies its financial assets as fair value through profit and loss (“FVTPL”), fair value through other
comprehensive income (“FVTOCI”) and amortized cost according to the company’s business objectives for managing the
financial assets and based on the contractual cash flow characteristics of the financial asset. The company classifies its financial
liabilities as amortized cost or FVTPL.
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•
•
•
Financial instruments that are not held for the sole purpose of collecting contractual cash flows are classified as FVTPL
and are initially recognized at their fair value and are subsequently measured at fair value at each reporting date. Gains and
losses recorded on each revaluation date are recognized within profit or loss. Transaction costs of financial assets classified
as FVTPL are expensed in profit or loss.
Financial assets classified as FVTOCI are initially recognized at their fair value and are subsequently measured at fair
value at each reporting date. The cumulative gains or losses related to FVTOCI equity instruments are not reclassified to
profit or loss on disposal, whereas the cumulative gains or losses on all other FVTOCI assets are reclassified to profit or
loss on disposal, when 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. The
cumulative gains or losses on all FVTOCI liabilities are reclassified to profit or loss on disposal.
Financial instruments that are held for the purpose of collecting contractual cash flows that are solely payments of
principal and interest are classified as amortized cost and are initially recognized at their fair value and are subsequently
measured at amortized cost using the effective interest rate method. Transaction costs of financial instruments classified as
amortized cost are capitalized and amortized in profit or loss on the same basis as the financial instrument.
Expected credit losses associated with debt instruments carried at amortized cost and FVTOCI are assessed on a forward-
looking basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk
since initial recognition. Impairment charges are recognized in profit or loss based on the expected credit loss model.
The following table presents the types of financial instruments held by the company within each financial instrument
classification:
Financial Instrument Type
Financial Assets
Measurement
Cash and cash equivalents ......................................................................................................... Amortized cost
Other financial assets
Government bonds ................................................................................................................... FVTOCI
Corporate bonds ....................................................................................................................... FVTPL, FVTOCI, Amortized cost
Fixed income securities and other ............................................................................................ FVTPL, FVTOCI, Amortized cost
Common shares and warrants .................................................................................................. FVTPL, FVTOCI
Loan and notes receivable ........................................................................................................ FVTPL, Amortized cost
Accounts receivable and other1
.................................................................................................. FVTPL, Amortized cost
Financial Liabilities
Corporate borrowings ................................................................................................................ Amortized cost
Non-recourse borrowings of managed entities
Property-specific borrowings ................................................................................................... Amortized cost
Subsidiary borrowings ............................................................................................................. Amortized cost
Accounts payable and other1
Subsidiary equity obligations ..................................................................................................... FVTPL, Amortized cost
...................................................................................................... FVTPL, Amortized cost
1.
Includes derivative instruments.
Other Financial Assets
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 of 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.
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 FVTPL, 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 FVTPL are recorded at fair value, with changes in fair value recorded in net income in the period
in which they arise.
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167
Allowance for Credit Losses
For financial assets classified as amortized cost or debt instruments as FVTOCI, at each reporting period, the company assesses
if there has been a significant increase in credit risk since the asset was originated to determine if a 12-month expected credit
loss or a life-time expected credit loss should be recorded regardless of whether there has been an actual loss event. The
company uses unbiased, probability-weighted loss scenarios which consider multiple loss scenarios based on reasonable and
supportable forecasts in order to calculate the expected credit losses.
The company assesses the carrying value of FVTOCI and amortized cost securities for impairment when there is objective
evidence that the asset is impaired such as when an asset is in default. Impaired financial assets continue to record life-time
expected credit losses; however interest revenue is calculated based on the net amortized carrying amount after deducting the
loss allowance. When objective evidence of impairment exists, losses arising from impairment are reclassified from
accumulated other comprehensive income to net income.
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.
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 as 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.
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 changes 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 for the 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
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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.
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) Leases
The company accounts for leases under IFRS 16 Leases (“IFRS 16”). Under IFRS 16, the company must assess whether a
contract is, or contains, a lease at inception of the contract. A contract is, or contains, a lease if it conveys the right to control
the use of an identified asset for a period of time in exchange for consideration. Control exists if a customer can make the
important decisions governing the use of an asset specified in a contract similar to decisions made over assets owned by
the business. The company has elected to not allocate contract consideration between lease and non-lease components, but
rather account for each lease and non-lease component as a single lease component. This election is made by asset class.
For lessors, a lease shall be classified as either a finance or operating lease on commencement of the lease contract. If the
contract represents a finance lease in which the risk and rewards of ownership have transferred to the lessee, a lessor shall
recognize a finance lease receivable at an amount equal to the net investment in the lease discounted using the interest rate
implicit in the lease. Subsequently, finance income is recognized at a constant rate on the net investment of the finance lease.
Lease payments received from operating leases shall be recognized into income on a straight-line or other systematic basis.
For lessees, the company recognizes a right-of-use (“ROU”) asset and lease liability at the lease commencement date. The
ROU asset is initially measured based on the calculated lease liability plus initial direct costs incurred by the lessee, estimates
to dismantle and restore the underlying asset at the end of the lease term and lease payments made net of incentives received at
or before the lease commencement date. It is classified as either investment PP&E, or inventory depending on the nature of the
asset and is subsequently accounted for consistently with owned assets within the respective asset classes with the exception of
PP&E. Unlike most of the company’s owned assets within PP&E, lease assets classified within PP&E are subsequently
measured applying the cost method rather than the revaluation method. The ROU asset is depreciated applying a straight-line
method or other systematic basis over the shorter of the useful life of the underlying asset or the term of the lease. Lease
contracts often include an option to extend the term of the lease and such extensions are factored into the lease term if the
company is reasonably certain to exercise that option. ROU assets are tested for impairment in accordance with IAS 36,
Impairment of Assets. Refer to Note 2(h) for additional details of our accounting policies governing investment properties,
PP&E and inventory.
Lease liabilities are classified within accounts payable and other and are recognized at the commencement of the lease, initially
measured at the present value of future lease payments not paid as at the commencement date, discounted using the interest rate
implicit in the lease, or the lessee’s incremental borrowing rate if the implicit rate cannot be readily determined. Lease
liabilities are subsequently measured at amortized cost by applying the effective interest method. Lease liabilities are
remeasured if there is reassessment of the timing or amount of future lease payments arising from a change in an index or rate,
revisions to estimates of the lease term or residual value guarantee, or a change in the assessment of an option to purchase the
underlying asset. Such remeasurements of the lease liability are generally recognized as an adjustment to the ROU asset unless
further reduction in the measurement of the lease liability would reduce a ROU asset below zero, in which case it is recorded in
the Consolidated Statements of Operations.
2021 ANNUAL REPORT
169
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the ROU
asset. The related payments are recognized as an expense in the period in which the event or condition that triggers those
payments occurs and are classified within direct costs in the Consolidated Statements of Operations.
We are applying certain practical expedients as permitted by the standard; specifically, we have elected to apply practical
expedients associated with short-term and low-value leases that allow the company to record operating expenses on such leases
on a straight-line basis without having to capitalize the lease arrangement.
We have also applied a number of critical judgments in applying this standard, including: i) identifying whether a contract (or
part of a contract) includes a lease; ii) determining whether it is reasonably certain that lease extension or termination options
will be exercised in determining the lease term; and iii) determining whether variable payments are in-substance fixed. Critical
estimates used in the application of IFRS 16 include estimating the lease term and determining the appropriate rate at which to
discount the lease payments.
t) 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 (“DSUs”) and Restricted Share Units (“RSUs”), 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 on the Consolidated
Balance Sheets 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 expenses, which include the current year’s service
cost, are 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 within accounts payable and other on the
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
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 in the Consolidated Statements of Operations.
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BROOKFIELD ASSET MANAGEMENT
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 unfavorable outcome and the
amount of loss.
u) Critical Estimates and Judgments
The preparation of financial statements requires management to make estimates and judgments that affect the carried amounts
of certain assets and liabilities, disclosures 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 and judgments 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 estimates and judgments 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: discount rates and
terminal capitalization rates for properties valued using a discounted cash flow model and capitalization rates for properties
valued using a direct capitalization approach. Management also uses assumptions and estimates in determining expected future
cash flows in discounted cash flow models and stabilized net operating income used in values determined using the direct
capitalization approach. 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 PP&E 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 PP&E 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 PP&E 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 and 25.
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.
2021 ANNUAL REPORT
171
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 it 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 as a result of 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 PP&E requires critical judgments over the assessment of carrying value, whether
certain costs are additions to the carrying amount of the PP&E 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,
discount and capitalization rates. Judgment is applied when determining future electricity prices considering broker quotes for
the years in which there is a liquid market available and, for the subsequent years, our best estimate of electricity prices from
renewable sources that would allow new entrants into the market.
d.
Identifying Performance Obligations for Revenue Recognition
Management is required to identify performance obligations relating to contracts with customers at the inception of each
contract. IFRS 15 requires a contract’s transaction price to be allocated to each distinct performance obligation and
subsequently recognized into income when, or as, the performance obligation is satisfied. Judgment is used when assessing the
pattern of delivery of the product or service to determine if revenue should be recognized at a point in time or over time. For
certain service contracts recognized over time, judgment is required to determine if revenue from variable consideration such as
incentives, claims and variations from contract modifications has met the required probability threshold to be recognized.
Management also uses judgment to determine whether contracts for the sale of products and services have distinct performance
obligations that should be accounted for separately or as a single performance obligation. Goods and services are considered
distinct if: (1) a customer can benefit from the good or service either on its own or together with other resources that are readily
available to the customer; and (2) the entity’s promise to transfer the good or service to the customer is separately identifiable
from other promises in the contract.
Additional details about revenue recognition policies across our operating segments are included in Note 2(o) of the
consolidated financial statements.
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BROOKFIELD ASSET MANAGEMENT
e. 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.
f.
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.
g.
Income Taxes
The company makes judgments when determining the future tax rates applicable to subsidiaries and identifying the temporary
differences 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 that would follow 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.
h. 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.
i. 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
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:
The Corporation:
i.
Asset Management business include managing our long-term private funds, perpetual strategies and liquid strategies on
behalf of our investors and ourselves, as well as our share of the asset management activities of Oaktree Capital
Management (“Oaktree”). 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. Corporate Activities include the investment of cash and financial assets, as well as the management of our corporate
leverage, 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.
2021 ANNUAL REPORT
173
Managed investments:
i.
ii.
Renewable Power and Transition business includes the ownership, operation and development of hydroelectric, wind,
solar and energy transition power generating assets.
Infrastructure business includes the ownership, operation and development of utilities, transport, midstream, data and
sustainable resource assets.
iii. Private Equity business includes a broad range of industries, and is mostly focused on business services, infrastructure
services and industrials.
iv. Real Estate business includes the ownership, operation and development of core investments, transitional and development
investments, and our share of LP investments, which sit within our private funds.
v. Residential Development business consists of homebuilding, condominium development and land development.
b) Segment Financial Measures
FFO is a key measure of our financial performance and our segment measure of profit and loss. It is utilized by our Chief
Operating Decision Maker in assessing 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 and 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 and amounts that are recorded
directly in equity, such as ownership changes.
We use FFO to assess our performance as an asset manager and as an investor in our assets. FFO from our Asset Management
segment includes fees, net of the associated costs, that we earn from managing capital in our perpetual affiliates, private funds
and liquid strategies accounts. We are also eligible to earn incentive payments in the form of incentive distributions,
performance fees or carried interest. As an investor in our assets, our FFO represents the company’s share of revenues less
costs incurred within our operations, which include interest expenses and other costs. Specifically, it includes the impact of
contracts that we enter into to generate revenues, including power sales agreements, contracts that our operating businesses
enter into such as leases and take or pay contracts and sales of inventory. FFO includes the impact of changes in leverage or the
cost of that financial leverage and other costs incurred to operate our business.
We use realized disposition gains and 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 equity 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 increases 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.
Our definition of FFO differs 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 do not use FFO as a measure of cash generated from our operations.
We illustrate how we derive FFO for each operating segment and reconcile total FFO to net income in Note 3(c)(v) of the
consolidated financial statements.
Segment Balance Sheet Information
We use common equity by segment as our measure of segment assets when reviewing our deconsolidated balance sheet
because it is utilized by our Chief Operating Decision Maker for capital allocation decisions.
174
BROOKFIELD ASSET MANAGEMENT
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 expenses recorded as corporate costs within the relevant segment. These amounts
are based on the in-place terms of the asset management contracts between the consolidated entities. Inter-segment revenues are
determined under terms that approximate market value.
The company allocates the costs of shared functions that would otherwise be included within its Corporate Activities segment,
such as information technology and internal audit, pursuant to formal policies.
c) Reportable Segment Measures
AS AT AND FOR THE YEAR
ENDED DEC. 31, 2021
(MILLIONS)
Asset
Management
Corporate
Activities
Renewable
Power and
Transition
Infrastructure
Private
Equity
Real Estate
Residential
Development
Total
Segments
Note
External revenues .................... $
Inter-segment and other
revenues1
..................................
Segmented revenues ................
FFO from equity accounted
investments1
.............................
Interest expense .......................
Current income taxes ...............
FFO1
.........................................
Common equity .......................
Equity accounted investments .
Additions to non-current
assets2
.......................................
306
$
169 $
4,580
$
11,941
$ 46,252
$
9,923
$
2,560
$
75,731
4,930
5,236
558
—
—
2,614
4,905
4,496
(18)
151
63
(414)
(38)
(370)
(8,942)
2,056
—
1,332
—
4,580
187
(892)
(43)
1,044
5,264
1,801
5,001
6
431
11,947
46,683
1,697
448
(1,502)
(1,503)
(402)
797
3,022
9,569
(537)
2,030
3,565
2,945
32
9,955
742
(3,225)
(77)
1,185
32,004
24,829
—
2,560
111
(68)
(17)
258
2,392
404
5,381
i
81,112
3,806
(7,604)
(1,114)
7,558
42,210
46,100
ii
iii
iv
v
18,248
14,161
21,918
171
60,831
1. We equity account for our investment in Oaktree and include our share of the FFO and FFO from equity accounted investments at 62%. However, for segment
reporting, Oaktree’s revenue is shown on a 100% basis. For the year ended December 31, 2021, $2.3 billion of Oaktree’s revenues was included in our Asset
Management segment revenue.
Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.
2.
AS AT AND FOR THE YEAR
ENDED DEC. 31, 2020
(MILLIONS)
Asset
Management
Corporate
Activities
Renewable
Power and
Transition
Infrastructure
Private
Equity
Real Estate
Residential
Development
Total
Segments
Note
External revenues .................... $
Inter-segment and other
revenues1
..................................
Segmented revenues ................
FFO from equity accounted
investments1
.............................
Interest expense .......................
Current income taxes ...............
FFO1
.........................................
Common equity .......................
Equity accounted investments .
Additions to non-current
assets2
.......................................
246
$
872 $
4,085
$
9,294
$ 37,161
$
8,851
$
2,243
$
62,752
3,278
3,524
277
—
—
1,776
4,947
4,530
64
(1)
871
(17)
(388)
(67)
(86)
(6,986)
830
234
—
4,085
116
(885)
(66)
1,044
5,154
1,444
1,677
7
614
9,301
37,775
1,329
600
(1,224)
(1,573)
(247)
569
2,552
10,530
(286)
935
3,965
2,623
32
8,883
765
(3,117)
(82)
876
19,331
21,024
—
2,243
21
(29)
(8)
66
2,730
346
3,930
i
66,682
3,091
(7,216)
(756)
5,180
31,693
41,327
ii
iii
iv
v
11,200
3,535
10,117
45
26,872
1. We equity account for our investment in Oaktree and include our share of the FFO and FFO from equity accounted investments at 62%. However, for segment
reporting, Oaktree’s revenue is shown on a 100% basis. For the year ended December 31, 2020, $1.2 billion of Oaktree’s revenues was included in our Asset
Management segment revenue.
Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.
2.
i.
Inter-Segment Revenues
For the year ended December 31, 2021, the adjustment to external revenues when determining segmented revenues consists of
asset management revenues earned from consolidated entities and asset management revenues earned by Oaktree totaling
$4.9 billion (2020 – $3.3 billion), revenues earned on construction projects between consolidated entities totaling $418 million
(2020 – $610 million), and other revenues totaling a net income of $33 million (2020 – $42 million), which were eliminated on
consolidation to arrive at the company’s consolidated revenues.
2021 ANNUAL REPORT
175
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 company’s consolidated equity accounted income to
FFO from equity accounted investments:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Consolidated equity accounted income (loss) ..................................................................................... $
Non-FFO items from equity accounted investments1
FFO from equity accounted investments ............................................................................................. $
..........................................................................
2021
2,451 $
1,355
3,806 $
2020
(79)
3,170
3,091
1. Adjustment to back out non-FFO expenses (income) that are included in consolidated equity accounted income including depreciation and amortization, deferred taxes
and fair value changes from equity accounted investments.
iii. Interest Expense
For the year ended December 31, 2021, the adjustment to interest expense consists of interest on loans between consolidated
entities totaling $28 million (2020 – $8 million) that is eliminated on consolidation, along with the associated revenue.
iv. Current Income Taxes
Current income taxes are included in FFO but are aggregated with deferred income taxes in income tax expense on the
company’s Consolidated Statements of Operations. The following table reconciles consolidated income taxes to current and
deferred income taxes:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
Current income tax expense ................................................................................................................... $
(1,114) $
Deferred income tax expense .................................................................................................................
(1,210)
Income tax expense ................................................................................................................................ $
(2,324) $
2020
(756)
(81)
(837)
v. Reconciliation of Net Income to Total FFO
The following table reconciles net income to total FFO:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Net income ................................................................................................................................
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 ............................................................................................................
Realized disposition gains in fair value changes or equity .......................................................
Non-controlling interests in FFO ..............................................................................................
Total FFO ..................................................................................................................................
Note
2021
12,388 $
$
2020
707
1,355
(5,151)
6,437
1,210
2,861
(11,542)
$
7,558 $
3,170
1,423
5,791
81
1,554
(7,546)
5,180
vi
vi. 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 sold.
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, revaluation surplus or directly in equity were $2.9 billion for the
year ended December 31, 2021 (2020 – $1.6 billion), of which $2.0 billion relates to prior periods (2020 – $499 million),
$751 million has been recorded directly in equity as changes in ownership (2020 – $1.1 billion) and a gain of $136 million has
been recorded in fair value changes (2020 – loss of $29 million).
176
BROOKFIELD ASSET MANAGEMENT
d) Geographic Allocation
The company’s revenues by location of operations are as follows:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
U.S. ....................................................................................................................................................... $
Canada ..................................................................................................................................................
U.K. ......................................................................................................................................................
Brazil ....................................................................................................................................................
Europe ...................................................................................................................................................
Australia ................................................................................................................................................
India ......................................................................................................................................................
Colombia ..............................................................................................................................................
Other Asia ............................................................................................................................................
Other .....................................................................................................................................................
$
2021
19,694 $
7,548
21,497
3,730
8,491
5,892
2,520
1,890
2,708
1,761
75,731 $
2020
18,048
5,906
16,032
3,323
6,191
5,528
1,284
1,762
2,388
2,290
62,752
The company’s consolidated assets by location are as follows:
AS AT DEC. 31
(MILLIONS)
2021
2020
U.S. ...................................................................................................................................................... $
172,952 $
159,684
Canada ..................................................................................................................................................
U.K. ......................................................................................................................................................
Brazil ....................................................................................................................................................
Europe ..................................................................................................................................................
Australia ...............................................................................................................................................
India .....................................................................................................................................................
Colombia ..............................................................................................................................................
Other Asia ...........................................................................................................................................
Other ....................................................................................................................................................
52,989
36,740
22,052
32,065
20,767
20,935
11,065
12,866
8,572
36,403
31,598
20,675
22,267
22,000
21,438
10,919
9,343
9,369
$
391,003 $
343,696
2021 ANNUAL REPORT
177
4. SUBSIDIARIES
The following table presents the details of the company’s subsidiaries with significant non-controlling interests:
AS AT DEC. 31
Brookfield Renewable Partners L.P. (“BEP”)3
Brookfield Infrastructure Partners L.P. (“BIP”)4
Brookfield Business Partners L.P. (“BBU”) ............................................................
Brookfield Property Group (“BPG”)5
......................................................................
........................................................
.....................................................
Jurisdiction of
Formation
Bermuda
Bermuda
Bermuda
Bermuda
Ownership Interest Held by
Non-Controlling Interests1, 2
2021
51.7%
72.8%
35.6%
—%
2020
49.3%
71.5%
36.5%
38.3%
1. Control and associated voting rights of the limited partnerships (BEP, BIP and BBU) reside 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 payments in the form of incentive distribution rights or
performance fees.
2. The company’s ownership interest in BEP, BIP, BBU and BPG includes a combination of redemption-exchange units (REUs), Class A limited partnership units, special
limited partnership units, general partnership units and units or shares that are exchangeable for units in our listed partnerships, in each subsidiary, where applicable.
Each of BEP, BIP, BBU and BPG’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. Ownership interest held by non-controlling interests represents the combined units not held in BEP and Brookfield Renewable Corporation (“BEPC”).
4. Ownership interest held by non-controlling interests represents the combined units not held in BIP and Brookfield Infrastructure Corporation (“BIPC”).
5. BPG includes Brookfield Property Partners L.P. and Brookfield’s wholly owned real estate directly held entities. The ownership interest held by non-controlling
interests as at December 31, 2020 represents the ownership interest of non-controlling interests in BPY as of that date.
The table below presents the exchanges on which the company’s subsidiaries with significant non-controlling interests were
publicly listed as of December 31, 2021:
BEP ....................................................................................................................................................................
BEP.UN
BIP .....................................................................................................................................................................
BIP.UN
BBU ...................................................................................................................................................................
BBU.UN
BEP
BIP
BBU
TSX
NYSE
The following table outlines the composition of accumulated non-controlling interests presented within the company’s
consolidated financial statements:
AS AT DEC. 31
(MILLIONS)
2021
2020
BEP .................................................................................................................................................................... $ 19,355 $ 17,194
BIP .....................................................................................................................................................................
BBU ...................................................................................................................................................................
BPG1
Individually immaterial subsidiaries with non-controlling interests .................................................................
..................................................................................................................................................................
23,695
10,197
28,064
7,075
19,753
9,162
33,345
7,350
$ 88,386 $ 86,804
1. This balance represents non-controlling interests within the consolidated funds of BPG.
178
BROOKFIELD ASSET MANAGEMENT
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 is set out below. The summarized financial information represents amounts before intra-group
eliminations:
BEP
BIP
BBU
BPG
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
2021
2020
2021
2020
2021
2020
Current assets .......................................... $ 2,861 $ 1,742 $ 4,896 $ 3,711 $ 15,418 $ 14,493 $ 23,487 $ 12,270
Non-current assets ...................................
53,006
47,980
69,065
57,620
48,801
40,253
140,510
132,178
Current liabilities ....................................
(3,222)
(2,761)
(8,661)
(5,524)
(13,912)
(12,133) (34,158)
(27,949)
Non-current liabilities .............................
(28,649)
(25,194)
(38,909)
(34,134)
(37,307)
(31,276) (69,771)
(63,823)
Non-controlling interests ........................
(19,355)
(17,194)
(23,695)
(19,753)
(10,197)
(9,162) (28,064)
(33,345)
Equity attributable to Brookfield ............ $ 4,641 $ 4,573 $ 2,696 $ 1,920 $ 2,803 $ 2,175 $ 32,004 $ 19,331
Revenues ................................................. $ 4,096 $ 3,810 $ 11,537 $ 8,885 $ 46,587 $ 37,635 $ 9,955 $ 8,883
Net income (loss) attributable to:
Non-controlling interests ..................... $
151 $
162 $ 2,489 $
863 $ 1,846 $
686 $ 3,831 $
(336)
Shareholders .........................................
(217)
(207)
230
41
307
(106)
1,616
(1,321)
$
(66) $
(45) $ 2,719 $
904 $ 2,153 $
580 $ 5,447 $ (1,657)
Other comprehensive income (loss)
attributable to:
Non-controlling interests ..................... $ 1,835 $ 1,621 $
197 $
(82) $
218 $
25 $
857 $
Shareholders .........................................
931
653
63
20
65
47
442
$ 2,766 $ 2,274 $
260 $
(62) $
283 $
72 $ 1,299 $
464
401
865
The summarized cash flows of the company’s subsidiaries with material non-controlling interests are as follows:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Cash flows from (used in):
BEP
BIP
BBU
BPG
2021
2020
2021
2020
2021
2020
2021
2020
Operating activities ............................... $
734 $ 1,296 $ 2,772 $ 2,530 $ 1,693 $ 4,205 $ 3,924 $
(439)
Financing activities ...............................
2,143
Investing activities ................................
Distributions paid to non-controlling
interests in common equity .................... $
(2,504)
(792)
(426)
(995)
2,126
7,063
(1,077)
7,790
4,330
(1,173)
(4,609)
(8,926)
(2,334) (10,210)
(3,401)
456 $
323 $
715 $
642 $
13 $
13 $
120 $
528
2021 ANNUAL REPORT
179
5. ACQUISITIONS OF CONSOLIDATED ENTITIES
a) Completed During 2021
The following table summarizes the balance sheet impact as a result of business combinations that occurred in the year ended
December 31, 2021. The valuations of the assets acquired are still under evaluation and as such the business combinations have
been accounted for on a provisional basis:
(MILLIONS)
Private Equity
Infrastructure
Real Estate
Renewable
Power and
Transition
and Other
Cash and cash equivalents .............................. $
288 $
217 $
78 $
3 $
Accounts receivable and other ........................
Inventory .........................................................
Equity accounted investments ........................
Investment properties .....................................
Property, plant and equipment ........................
Intangible assets ..............................................
Goodwill .........................................................
Deferred income tax assets .............................
826
690
20
—
2,518
4,535
3,960
6
Total assets .....................................................
12,843
Less:
Accounts payable and other .........................
Non-recourse borrowings ............................
Deferred income tax liabilities ....................
Non-controlling interests1
............................
(1,811)
(132)
(1,215)
(22)
455
23
—
—
10,179
3,734
2,400
9
17,017
(3,271)
(6,698)
(1,430)
(156)
104
2
7
988
2,172
67
113
—
100
6
45
—
2,366
—
118
—
3,531
2,638
(131)
(1,452)
(113)
(3)
(188)
(975)
—
(2)
Total
586
1,485
721
72
988
17,235
8,336
6,591
15
36,029
(5,401)
(9,257)
(2,758)
(183)
Net assets acquired ......................................... $
9,663 $
5,462 $
1,832 $
1,473 $
18,430
(3,180)
(11,555)
(1,699)
(1,165)
(17,599)
Consideration2
................................................ $
9,663 $
5,462 $
1,832 $
1,473 $
18,430
1.
Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the identifiable assets and liabilities on the
date of acquisition.
2. Total consideration, including amounts paid by non-controlling interests that participated in the acquisition as investors in Brookfield-sponsored private funds or as
co-investors.
Brookfield recorded $2.8 billion of revenue and $3 million of net income in 2021 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
$8.6 billion and $351 million to total revenues and net income, respectively.
180
BROOKFIELD ASSET MANAGEMENT
The following table summarizes the balance sheet impact as a result of significant business combinations that occurred in 2021.
The valuations of the assets acquired are still under evaluation and as such the business combinations have been accounted for
on a provisional basis.
Private Equity
Infrastructure Real Estate
Renewable Power and
Transition
Modulaire
DexKo
Aldo
100 $
106 $
59 $
Life
Sciences
Assets
U.S. Wind
6 $
1 $
U.S.
Distributed
Generation
1
IPL
121 $
(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:
418
104
—
—
1,963
1,941
1,667
—
6,193
278
436
19
—
462
2,212
1,408
6
4,927
31
48
—
—
5
295
421
—
859
420
20
—
—
9,865
2,569
2,096
—
15,091
1
—
—
988
—
2
36
—
1,033
71
6
—
—
1,643
—
—
—
1,721
Accounts payable and
other ..................................
Non-recourse borrowings .
Deferred income tax
liabilities ...........................
Non-controlling interests1
.
Net assets acquired ............. $
(817)
(27)
(637)
(2)
(590)
—
(1,434)
4,759 $
(504)
(10)
(1,153)
3,774 $
(136)
—
(100)
—
(236)
623 $
(3,012)
(6,185)
(7)
—
(1,229)
—
(10,426)
4,665 $
(36)
—
(43)
990 $
(142)
(835)
—
—
(977)
744 $
28
—
—
—
723
—
117
—
869
(45)
(140)
—
—
(185)
684
Consideration2
..................... $
4,759 $
3,774 $
623 $
4,665 $
990 $
744 $
684
1.
Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the identifiable assets and liabilities on the
date of acquisition.
2. Total consideration, including amounts paid by non-controlling interests that participated in the acquisition as investors in Brookfield-sponsored private funds or as
co-investors.
Private Equity
On August 31, 2021, a subsidiary of the company, alongside institutional partners, acquired a 100% interest in Aldo
Componentes Eletrônicos LTDA (“Aldo”), a leading distributor of solar power solutions for the distributed generation market
in Brazil. The total consideration paid for the business was $623 million, comprising of $295 million of cash consideration and
$328 million of contingent consideration payable to the former shareholder if certain performance targets are met. Goodwill of
$421 million was recognized, which is not deductible for income tax purposes. Total revenues and net income that would have
been recorded if the transaction had occurred at the beginning of the year are $553 million and $68 million, respectively.
On October 4, 2021, a subsidiary of the company, alongside institutional partners, acquired a 100% interest in DexKo Global
Inc. (“DexKo”), a leading global manufacturer of highly engineered components primarily for industrial trailers and other
towable-equipment providers. The total consideration paid for the business was $3.8 billion, comprising of $1.1 billion of cash,
$2.6 billion of debt raised for the acquisition and $30 million of contingent consideration. Goodwill of $1.4 billion was
recognized, which is not deductible for income tax purposes. Total revenues and net loss that would have been recorded if the
transaction had occurred at the beginning of the year are $2.5 billion and $139 million, respectively.
On December 15, 2021, a subsidiary of the company, alongside institutional partners, acquired a 100% interest in Modulaire
Investments 2 S.à.r.l. (“Modulaire”), a provider of modular building leasing services in Europe and Asia-Pacific. The total
consideration paid for the business was $4.8 billion, comprising of $1.6 billion of cash and $3.2 billion of debt raised for the
acquisition. Goodwill of $1.7 billion was recognized, which is not deductible for income tax purposes. Total revenues and net
income that would have been recorded if the transaction had occurred at the beginning of the year are $1.7 billion
and $135 million, respectively.
2021 ANNUAL REPORT
181
Infrastructure
During 2021, a subsidiary of the company, alongside institutional partners, acquired a 100% interest in Inter Pipeline Ltd.
(“IPL”). The transaction was accounted for as a business combination as of the initial acquisition on August 20, 2021. The total
consideration paid for the business was $4.7 billion, comprising of $1.9 billion of cash, $0.2 billion of BIPC exchangeable LP
units, $1.1 billion of BIPC exchangeable shares, $0.9 billion of debt raised on closing, and an existing 10% interest valued at
$0.6 billion on the initial acquisition date. Goodwill of $2.1 billion was recognized, which is not deductible for income tax
purposes. Total revenues and net income that would have been recorded if the transaction had occurred at the beginning of the
year are $2.5 billion and $274 million, respectively.
Real Estate
On June 16, 2021, a subsidiary of the company, alongside institutional partners, acquired a portfolio of life sciences assets in
the U.K., through our BSREP III fund. The total consideration paid for the portfolio was $990 million, comprising of
$352 million of cash with the remainder funded through non-recourse borrowings raised concurrently on closing. Total
revenues and net income that would have been recorded if the transaction had occurred at the beginning of the year are
$34 million and $86 million, respectively.
Renewable Power and Transition
On March 24, 2021, a subsidiary of the company, alongside institutional partners, completed the acquisition of 100% of a
portfolio of three wind generation facilities and development projects located in the U.S. The total consideration paid for the
portfolio was $744 million. Total revenues and net income that would have been recorded if the transaction had occurred at the
beginning of the year are $183 million and $12 million, respectively.
On March 31, 2021, a subsidiary of the company, alongside institutional partners, completed the acquisition of 100% of a
distributed generation business in the U.S. The total consideration paid for the business was $684 million. Total revenues
and net income that would have been recorded if the transaction had occurred at the beginning of the year are $79 million and
$6 million, respectively.
182
BROOKFIELD ASSET MANAGEMENT
b) Completed During 2020
The following table summarizes the balance sheet impact as a result of business combinations that occurred in the year ended
December 31, 2020. No material changes were made to those allocations disclosed in the 2020 consolidated financial
statements:
(MILLIONS)
Private Equity
Infrastructure
Real Estate,
Renewable Power
and Transition and
Other
Cash and cash equivalents ........................ $
Accounts receivable and other ..................
Inventory ...................................................
Property, plant and equipment ..................
Intangible assets ........................................
Goodwill ...................................................
Deferred income tax assets .......................
105 $
1,441
12
84
27
63
31
Total assets ................................................
1,763
Less:
Accounts payable and other ...................
Non-recourse borrowings .......................
Deferred income tax liabilities ...............
Non-controlling interests1
......................
(55)
(1,016)
—
(227)
(1,298)
Net assets acquired .................................... $
465 $
— $
38 $
408
—
7,334
532
27
—
8,301
(2,518)
(2,356)
(22)
—
(4,896)
3,405 $
76
55
661
66
55
15
966
(227)
(470)
(12)
(47)
(756)
210 $
Total
143
1,925
67
8,079
625
145
46
11,030
(2,800)
(3,842)
(34)
(274)
(6,950)
4,080
Consideration2
........................................... $
465 $
3,405 $
210 $
4,080
1.
Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the identifiable assets and liabilities on the
date of acquisition.
2. Total consideration, including amounts paid by non-controlling interests that participated in the acquisition as investors in Brookfield-sponsored private funds or as co-
investors.
Brookfield recorded $621 million of revenue and $10 million of net income in 2020 from the acquired operations as a result of
the acquisitions made in 2020. If the acquisitions had occurred at the beginning of 2020, they would have contributed
$1.6 billion and $25 million to total revenue and net losses, respectively.
2021 ANNUAL REPORT
183
The following table summarizes the balance sheet impact as a result of significant business combinations that occurred in 2020.
No material changes were made to those allocations disclosed in the 2020 consolidated financial statements.
(MILLIONS)
Cash and cash equivalents ........................................................................................... $
Accounts receivable and other .....................................................................................
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
.........................................................................................
Private Equity
IndoStar
Infrastructure
Summit DigiTel
78 $
1,391
9
20
21
28
1,547
(30)
(1,003)
—
(219)
(1,252)
—
408
7,334
532
27
—
8,301
(2,518)
(2,356)
(22)
—
(4,896)
3,405
Net assets acquired ...................................................................................................... $
295 $
Consideration2
.............................................................................................................. $
295 $
3,405
1.
Includes non-controlling interests recognized on business combinations measured as the proportionate share of fair value of the identifiable assets and liabilities on the
date of acquisition.
2. Total consideration, including amounts paid by non-controlling interests that participated in the acquisition as investors in Brookfield-sponsored private funds or as
co-investors.
Private Equity
During 2020, a subsidiary of the company, together with institutional partners, acquired a 57% ownership interest in IndoStar,
an Indian financing company focused on commercial vehicle lending and affordable home finance. The transaction was
accounted for as a business combination achieved in stages on May 27, July 8 and 9, 2020. The subsidiary’s previously held
investment in IndoStar was remeasured to fair value prior to the acquisition of additional interests. The fair value approximated
carrying value and no cumulative gain or loss arising from changes in the fair value of the investment was recognized. Total
consideration of $295 million was comprised of an existing equity interest of $276 million and $19 million of cash on hand.
Total revenues and net loss that would have been recorded during 2020 if the transaction had occurred at the beginning of 2020
are $175 million and $37 million, respectively.
Infrastructure
On August 31, 2020, a subsidiary of the company, alongside institutional partners, acquired a 100% interest in an Indian
telecom tower operation for a total of approximately $3.4 billion. Consideration paid was funded fully by cash on hand.
Goodwill in the amount of $27 million was recognized, which is not deductible for income tax purposes. Total revenues and net
income that would have been recorded during 2020 if the transaction had occurred at the beginning of 2020 are $1.1 billion and
$9 million, respectively.
184
BROOKFIELD ASSET MANAGEMENT
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
a) Financial Instruments Classification
The following tables list the company’s financial instruments by their respective classification as at December 31, 2021 and
2020:
AS AT DEC. 31, 2021
(MILLIONS)
Financial assets1
Cash and cash equivalents ........................................................... $
Fair Value
Through
Profit or Loss
Fair Value
Through OCI
Amortized
Cost
Total
— $
— $
12,694 $
12,694
Other financial assets
Government bonds ....................................................................
Corporate bonds ........................................................................
Fixed income securities and other ............................................
Common shares and warrants ...................................................
Loans and notes receivable .......................................................
Accounts receivable and other2
...................................................
Financial liabilities
—
514
1,484
3,492
5
5,495
2,345
2,020
2,004
1,637
2,435
—
8,096
—
—
3
120
—
2,832
2,955
12,973
$
7,840 $
8,096 $
28,622 $
2,020
2,521
3,241
5,927
2,837
16,546
15,318
44,558
Corporate borrowings .................................................................. $
— $
— $
10,875 $
10,875
Non-recourse borrowings of managed entities
Property-specific borrowings ...................................................
Subsidiary borrowings ..............................................................
Accounts payable and other2
Subsidiary equity obligations ......................................................
.......................................................
—
—
—
5,490
1,538
—
—
—
—
—
152,008
13,049
165,057
38,014
2,770
152,008
13,049
165,057
43,504
4,308
$
7,028 $
— $
216,716 $
223,744
1.
2.
Financial assets include $10.1 billion of assets pledged as collateral.
Includes derivative instruments which are elected for hedge accounting, totaling $1.1 billion included in accounts receivable and other and $1.5 billion included in
accounts payable and other, for which changes in fair value are recorded in other comprehensive income.
2021 ANNUAL REPORT
185
AS AT DEC. 31, 2020
(MILLIONS)
Financial assets1
Fair Value
Through
Profit or Loss
Fair Value
Through OCI Amortized Cost
Total
Cash and cash equivalents .......................................................... $
— $
— $
9,933 $
9,933
Other financial assets
Government bonds ...................................................................
Corporate bonds .......................................................................
Fixed income securities and other ...........................................
Common shares and warrants ..................................................
Loans and notes receivable2
....................................................
Accounts receivable and other3
..................................................
Financial liabilities
356
1,094
1,079
3,287
110
5,926
1,766
2,295
2,148
1,191
3,227
—
8,861
—
—
357
—
—
2,586
2,943
11,906
$
7,692 $
8,861 $
24,782 $
2,651
3,599
2,270
6,514
2,696
17,730
13,672
41,335
Corporate borrowings ................................................................. $
— $
— $
9,077 $
9,077
Non-recourse borrowings of managed entities
Property-specific borrowings ..................................................
Subsidiary borrowings .............................................................
Accounts payable and other3
......................................................
Subsidiary equity obligations .....................................................
—
—
—
5,889
1,457
—
—
—
—
—
128,556
10,768
139,324
35,228
2,242
128,556
10,768
139,324
41,117
3,699
$
7,346 $
— $
185,871 $
193,217
1.
2.
3.
Financial assets include $9.7 billion of assets pledged as collateral.
Includes a shareholder loan of $500 million receivable from our U.S. gas pipeline.
Includes derivative instruments which are elected for hedge accounting, totaling $888 million included in accounts receivable and other and $2.4 billion included in
accounts payable and other, for which changes in fair value are recorded in other comprehensive income.
Gains or losses arising from changes in fair value through profit or loss (“FVTPL”) financial assets are presented in the
Consolidated Statements of Operations in the period in which they arise. Dividends from FVTPL and fair value through other
comprehensive income (“FVTOCI”) financial assets are recognized in the Consolidated Statements of Operations when the
company’s right to receive payment is established. Interest on FVTOCI financial assets is calculated using the effective interest
method and reported in the Consolidated Statements of Operations.
FVTOCI debt and equity securities are recorded on the balance sheet at fair value with changes in FVTOCI. As at
December 31, 2021, the unrealized gains and losses relating to the fair value of FVTOCI securities amounted to $996 million
(2020 – $916 million) and $213 million (2020 – $322 million), respectively.
During the year ended December 31, 2021, net deferred income of $1 million (2020 – losses of $7 million) previously
recognized in accumulated other comprehensive income were reclassified to net income as a result of the disposition or
impairment of certain of our FVTOCI financial assets that are not equity instruments.
Included in cash and cash equivalents is cash of $10.8 billion (2020 – $8.2 billion) and short-term deposits of $1.9 billion (2020
– $1.8 billion) as at December 31, 2021.
186
BROOKFIELD ASSET MANAGEMENT
b) Carrying and Fair Value
The following table lists the company’s financial instruments by their respective classification as at December 31, 2021 and
2020:
AS AT DEC. 31
(MILLIONS)
Financial assets
2021
2020
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Cash and cash equivalents ...................................................................................... $ 12,694 $ 12,694 $
9,933 $
9,933
Other financial assets
Government bonds ...............................................................................................
Corporate bonds ...................................................................................................
Fixed income securities and other .......................................................................
Common shares and warrants ..............................................................................
Loans and notes receivable ..................................................................................
Accounts receivable and other ................................................................................
2,020
2,521
3,241
5,927
2,837
16,546
15,318
2,020
2,521
3,241
5,927
2,837
16,546
15,318
2,651
3,599
2,270
6,514
2,696
17,730
13,672
2,651
3,599
2,270
6,514
2,696
17,730
13,672
$ 44,558 $ 44,558 $ 41,335 $ 41,335
Financial liabilities
Corporate borrowings ............................................................................................. $ 10,875 $ 11,993 $
9,077 $ 10,540
Non-recourse borrowings of managed entities
Property-specific borrowings ..............................................................................
152,008
153,844
128,556
131,099
Subsidiary borrowings .........................................................................................
13,049
13,415
10,768
11,085
165,057
167,259
139,324
142,184
Accounts payable and other ....................................................................................
43,504
Subsidiary equity obligations .................................................................................
4,308
43,504
4,308
41,117
3,699
41,117
3,699
$ 223,744 $ 227,064 $ 193,217 $ 197,540
The current and non-current balances of other financial assets are as follows:
AS AT DEC. 31
(MILLIONS)
2021
2020
Current ............................................................................................................................................................... $
6,963 $
5,483
Non-current ........................................................................................................................................................
9,583
12,247
Total ................................................................................................................................................................... $ 16,546 $ 17,730
2021 ANNUAL REPORT
187
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:
AS AT DEC. 31
(MILLIONS)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
2021
2020
Financial assets
Other financial assets
Government bonds ................................................... $
48 $
1,972 $
— $
7 $
2,644 $
Corporate bonds .......................................................
Fixed income securities and other ............................
85
762
Common shares and warrants ..................................
4,063
Loans and notes receivables .....................................
Accounts receivable and other ....................................
—
4,958
3
2,050
1,908
548
—
6,478
2,265
383
451
1,316
5
2,155
77
192
867
4,548
—
5,614
50
2,764
912
577
42
6,939
1,581
—
286
491
1,389
68
2,234
135
$
4,961 $
8,743 $
2,232 $
5,664 $
8,520 $
2,369
Financial liabilities
Accounts payable and other ........................................ $
29 $
4,150 $
1,311 $
75 $
5,090 $
724
Subsidiary equity obligations ......................................
—
135
1,403
—
77
1,380
$
29 $
4,285 $
2,714 $
75 $
5,167 $
2,104
During the year ended December 31, 2021 and 2020, there were no transfers between Level 1, 2 or 3.
Fair values of financial instruments are determined by reference to quoted bid or ask prices, as appropriate. If bid and ask prices
are unavailable, the closing price of the most recent transaction of that instrument is used. In the absence of an active market,
fair values are determined based on prevailing market rates for instruments with similar characteristics and risk profiles or
internal or external valuation models, such as option pricing models and discounted cash flow analysis, using observable
market inputs.
The following table summarizes the valuation techniques and key inputs used in the fair value measurement of Level 2
financial instruments:
(MILLIONS)
Type of Asset/Liability
Other financial assets .....................
Carrying Value
Dec. 31, 2021
$
Valuation Techniques and Key Inputs
6,478 Valuation models based on observable market data
Derivative assets/Derivative
liabilities (accounts receivable/
accounts payable) ...........................
2,265 /
(4,150)
Foreign currency forward contracts – discounted cash flow model –
forward exchange rates (from observable forward exchange rates at the end
of the reporting period) and discounted at credit adjusted rate
Interest rate contracts – discounted cash flow model – forward interest rates
(from observable yield curves) and applicable credit spreads discounted at a
credit adjusted rate
Energy derivatives – quoted market prices, or in their absence internal
valuation models, corroborated with observable market data
Redeemable fund units (subsidiary
equity obligations) .........................
(135) Aggregated market prices of underlying investments
Fair values determined using valuation models requiring the use of unobservable inputs (Level 3 financial assets and liabilities)
include assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining those
unobservable inputs, the company uses observable external market inputs such as interest rate yield curves, currency rates and
price and rate volatilities, as applicable, to develop assumptions regarding those unobservable inputs.
188
BROOKFIELD ASSET MANAGEMENT
The following table summarizes the valuation techniques and significant unobservable inputs used in the fair value
measurement of Level 3 financial instruments:
(MILLIONS)
Type of Asset/Liability
Corporate bonds ........................
Carrying Value
Dec. 31, 2021
$
Valuation
Techniques
383 Discounted cash
Significant
Unobservable Inputs
• Future cash flows
flows
• Discount rate
Relationship of Unobservable
Inputs to Fair Value
• Increases (decreases) in
future cash flows increase
(decrease) fair value
• Increases (decreases) in
discount rate decrease
(increase) fair value
Fixed income securities and
other ..........................................
451 Discounted cash
• Future cash flows
• Increases (decreases) in
flows
• Discount rate
future cash flows increase
(decrease) fair value
• Increases (decreases) in
discount rate decrease
(increase) fair value
Common shares and warrants ...
1,316 Discounted cash
• Future cash flows
• Increases (decreases) in
flows
• Discount rate
Black-Scholes
model
• Volatility
future cash flows increase
(decrease) fair value
• Increases (decreases) in
discount rate decrease
(increase) fair value
• Increases (decreases) in
volatility increase (decreases)
fair value
• Term to maturity
• Increases (decreases) in term
Derivative assets/Derivative
liabilities (accounts receivable/
payable) ....................................
77 /
(1,311)
Discounted cash
flows
• Future cash flows
• Discount rate
Limited-life funds (subsidiary
equity obligations) ....................
(1,403) Discounted cash
flows
• Future cash flows
• Discount rate
• Terminal
capitalization rate
• Investment horizon
to maturity increase
(decrease) fair value
• Increases (decreases) in
future cash flows increase
(decrease) fair value
• Increases (decreases) in
discount rate decrease
(increase) fair value
• Increases (decreases) in
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 decrease
(increase) fair value
The following table presents the changes in the balance of financial assets and liabilities classified as Level 3 for the years
ended December 31, 2021 and 2020:
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Financial
Assets
Financial
Liabilities
Financial
Assets
Financial
Liabilities
Balance, beginning of year ..................................................................................... $
2,369 $
2,104 $
1,780 $
2,542
Fair value changes in net income ...........................................................................
Fair value changes in other comprehensive income1
Disposals, net of additions ......................................................................................
..............................................
160
(8)
(289)
96
94
420
(92)
15
666
(111)
4
(331)
Balance, end of year ............................................................................................... $
2,232 $
2,714 $
2,369 $
2,104
2021
2020
1.
Includes foreign currency translation.
2021 ANNUAL REPORT
189
The following table categorizes liabilities measured at amortized cost, but for which fair values are disclosed based upon the
fair value hierarchy levels:
AS AT DEC. 31
(MILLIONS)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Corporate borrowings ................................................. $ 11,906 $
87 $
— $ 10,443 $
97 $
—
Property-specific borrowings .....................................
12,163
65,234
76,447
Subsidiary borrowings ................................................
6,831
Subsidiary equity obligations .....................................
—
—
544
6,584
2,226
3,406
7,825
—
57,927
69,766
3
73
3,257
2,169
2021
2020
Fair values of Level 2 and Level 3 liabilities measured at amortized cost but for which fair values are disclosed are determined
using valuation techniques such as adjusted public pricing and discounted cash flows.
d) Hedging Activities
The company uses derivatives and non-derivative financial instruments to manage or maintain exposures to interest, currency,
credit and other market risks. Derivative financial instruments are recorded at fair value. For certain derivatives which are used
to manage exposures, the company determines whether hedge accounting can be applied. Hedge accounting is applied when the
derivative is designated as a hedge of a specific exposure and there is assurance that it will continue to be highly effective as a
hedge based on an expectation of offsetting cash flows or fair value. Hedge accounting is discontinued prospectively when the
derivative no longer qualifies as a hedge or the hedging relationship is terminated. Once discontinued, the cumulative change in
fair value of a derivative that was previously recorded in other comprehensive income by the application of hedge accounting is
recognized in profit or loss over the remaining term of the original hedging relationship as amounts related to the hedged item
are recognized in profit or loss. The assets or liabilities relating to unrealized mark-to-market gains and losses on derivative
financial instruments are recorded in financial assets and liabilities, respectively.
i. Cash Flow Hedges
The company uses the following cash flow hedges: energy derivative contracts to hedge the sale of power; interest rate swaps
to hedge the variability in cash flows or future cash flows related to a variable rate asset or liability; and equity derivatives
to hedge long-term compensation arrangements. For the year ended December 31, 2021, pre-tax net unrealized gains of
$582 million (2020 – net unrealized losses of $479 million) were recorded in other comprehensive income for the effective
portion of the cash flow hedges. As at December 31, 2021, there was an unrealized derivative liability balance of $232 million
relating to derivative contracts designated as cash flow hedges (2020 – liability of $689 million).
ii. Net Investment Hedges
The company uses foreign exchange contracts and foreign currency denominated debt instruments to manage its foreign
currency exposures arising from net investments in foreign operations. For the year ended December 31, 2021, unrealized pre-
tax net gains of $407 million (2020 – losses of $182 million) were recorded in other comprehensive income for the
effective portion of hedges of net investments in foreign operations. As at December 31, 2021, there was an unrealized
derivative liability balance of $163 million relating to derivative contracts designated as net investment hedges (2020 –
liability of $868 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.
190
BROOKFIELD ASSET MANAGEMENT
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:
AS AT DEC. 31
(MILLIONS)
Gross amounts of financial instruments before netting .......................................... $
Gross amounts of financial instruments set-off in the Consolidated Balance
Sheets .....................................................................................................................
2021
2020
2021
2020
4,814 $
2,195 $
5,037 $
4,379
(2,469)
(429)
(2,452)
(351)
Net amount of financial instruments in the Consolidated Balance Sheets ............. $
2,345 $
1,766 $
2,585 $
4,028
Accounts Receivable
and Other
Accounts Payable
and Other
7. ACCOUNTS RECEIVABLE AND OTHER
AS AT DEC. 31
(MILLIONS)
Accounts receivable ............................................................................................................................
Prepaid expenses and other assets .......................................................................................................
Restricted cash ....................................................................................................................................
Sustainable resources ..........................................................................................................................
Total ....................................................................................................................................................
Note
2021
2020
(a)
(a)
(b)
(c)
$ 11,332 $ 10,113
8,162
2,266
—
6,335
2,395
85
$ 21,760 $ 18,928
The current and non-current balances of accounts receivable and other are as follows:
AS AT DEC. 31
2020
(MILLIONS)
Current .............................................................................................................................................................. $ 16,098 $ 14,187
Non-current .......................................................................................................................................................
4,741
Total ................................................................................................................................................................... $ 21,760 $ 18,928
5,662
2021
a) Accounts Receivable and Other Assets
Accounts receivable includes contract assets of $651 million (2020 – $632 million). Contract assets primarily relate to work-in-
progress on our long-term construction services contracts for which customers have not yet been billed.
b) Restricted Cash
Restricted cash primarily relates to the financing arrangements including defeasement of debt obligations, debt service accounts
and deposits held by the company’s insurance operations across our segments.
c) Sustainable Resources
The following table presents the change in the balance of timber and other agricultural assets:
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year ................................................................................................................................ $
Additions ............................................................................................................................................................
Dispositions........................................................................................................................................................
Fair value adjustments ......................................................................................................................................
Decrease due to harvest ....................................................................................................................................
Foreign currency changes .................................................................................................................................
Balance, end of year ........................................................................................................................................... $
2021
85 $
2020
109
28
(63)
(5)
(41)
(4)
— $
75
—
2
(61)
(40)
85
Dispositions of $63 million in 2021 mainly relate to the sale of our agricultural asset portfolio.
2021 ANNUAL REPORT
191
The carrying values are based on external appraisals 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
Techniques
Discounted
cash flow
analysis
Significant
Unobservable Inputs
• Future cash flows
Relationship of Unobservable Inputs
to Fair Value
• Increases (decreases) in future cash
flows increase (decrease) fair value
• Timber / agricultural
• Increases (decreases) in price increase
prices
(decrease) fair value
• Discount rate /
terminal
capitalization rate
• Increases (decreases) in discount rate
or terminal capitalization rate decrease
(increase) fair value
• Exit Date
• Increases (decreases) in exit date
decrease (increase) 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 price tend to be
accompanied by increases (decreases) in
discount rates that may offset changes
in fair value from price
• Decreases (increases) in discount rates or
terminal capitalization rates tend to be
accompanied by increases (decreases) in
cash flows that may offset changes in fair
value from rates
• 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
As at December 31, 2021, there are no sustainable resources in our accounts receivable and other balance. Key valuation
assumptions in the prior year included a weighted-average discount and terminal capitalization rate of 4.6% and terminal
valuation dates of up to 18 years. Timber and agricultural asset prices were based on a combination of forward prices available
in the market and price forecasts.
192
BROOKFIELD ASSET MANAGEMENT
8. INVENTORY
The following table presents the components of inventory:
AS AT DEC. 31
(MILLIONS)
2021
2020
Residential properties under development ......................................................................................................... $
2,135 $
2,816
Land held for development ...............................................................................................................................
Completed residential properties ......................................................................................................................
1,802
1,869
2,015
743
Industrial products .............................................................................................................................................
Other1
Total ................................................................................................................................................................... $ 11,415 $ 10,360
.................................................................................................................................................................
3,113
2,175
2,496
2,611
1. Other includes fuel inventory of $731 million (2020 – $651 million) and office developments of $213 million (2020 – $581 million).
The current and non-current balances of inventory are as follows:
AS AT DEC. 31
(MILLIONS)
2021
2020
Current .............................................................................................................................................................. $
8,557 $
6,337
Non-current .......................................................................................................................................................
2,858
4,023
Total ................................................................................................................................................................... $ 11,415 $ 10,360
During the year ended December 31, 2021, the company recognized $35.7 billion of inventory relating to cost of goods sold
(2020 – $24.6 billion) and a $96 million expense for impaired inventory (2020 – $107 million). The carrying amount of
inventory pledged as collateral at December 31, 2021 was $6.8 billion (2020 – $6.0 billion).
2021 ANNUAL REPORT
193
9. HELD FOR SALE
The following is a summary of the assets and liabilities classified as held for sale as at December 31, 2021 and 2020:
AS AT DEC. 31
Infrastructure
(MILLIONS)
Assets
Real Estate
Renewable Power
and Transition
and Other
2021 Total
2020 Total
Cash and cash equivalents ................................ $
Accounts receivable and other ..........................
Equity accounted investments ...........................
Investment properties ........................................
Property, plant and equipment ..........................
Goodwill ...........................................................
Other long-term assets ......................................
Deferred income tax assets ...............................
Assets classified as held for sale .......................... $
Liabilities
Accounts payable and other .............................. $
Non-recourse borrowings of managed
entities ...............................................................
Deferred income tax liabilities ..........................
Liabilities associated with assets classified as
held for sale .......................................................... $
204 $
295
130
9,053
1,820
220
—
24
11,746 $
— $
—
146
—
—
—
—
—
146 $
9 $
3
—
—
54
—
—
—
66 $
213 $
298
276
9,053
1,874
220
—
24
11,958 $
6
67
1,533
4,224
82
—
5
—
5,917
136 $
— $
3 $
139 $
118
3,006
—
—
—
3
—
3,009
—
2,234
7
3,142 $
— $
6 $
3,148 $
2,359
As at December 31, 2021, assets held for sale within our Real Estate segment include a triple net lease portfolio, a hospitality
portfolio, ten malls, an office asset, a multifamily asset and a hotel in the U.S., as well as a mixed-use asset in South Korea and
an office asset in Brazil.
For the year ended December 31, 2021, we disposed of $13.9 billion and $6.3 billion of assets and liabilities, respectively. The
majority of disposals relate to the sale of a portfolio of investment properties within our Real Estate segment, our North
American district energy operations and our Chilean toll road operation within our Infrastructure segment, our U.S. wind
portfolio within our Renewable Power and Transition segment, and the derecognition of Norbord within our Private Equity
segment.
194
BROOKFIELD ASSET MANAGEMENT
10. EQUITY ACCOUNTED INVESTMENTS
The following table presents the ownership 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)
Oaktree ....................................................................................................................
Ownership Interest1
Carrying Value
2021
62%
2020
2021
2020
62% $
5,596 $
5,317
Real estate
Associates
LP investments and other ..................................................................................
13 – 31% 16 – 50%
251
136
Joint ventures
Core ...................................................................................................................
15 – 56% 15 – 56%
Transitional and Development ...........................................................................
22 – 68% 22 – 68%
LP investments and other ..................................................................................
8 – 91%
9 – 84%
Infrastructure
Associates
Utilities ..............................................................................................................
11 – 50% 11 – 50%
Transport ............................................................................................................
21 – 58% 21 – 58%
Data ....................................................................................................................
45 – 50% 45 – 50%
Other ..................................................................................................................
22 – 50% 22 – 50%
Joint ventures
Midstream ..........................................................................................................
Other ..................................................................................................................
50%
50%
50%
50%
Private equity
Associates
Industrial operations ..........................................................................................
24 – 54% 24 – 54%
Other ..................................................................................................................
14 – 70% 14 – 70%
Renewable power and transition and other
Renewable power and transition associates .........................................................
Other equity accounted investments2
..................................................................
3 – 65% 12 – 60%
22 – 70% 14 – 77%
9,819
9,946
4,813
8,866
9,684
2,338
24,829
21,024
946
4,724
3,076
106
653
64
1,010
5,114
3,209
130
841
226
9,569
10,530
787
2,158
2,945
1,801
1,360
3,161
834
1,789
2,623
1,444
389
1,833
Total ................................................................................................................................................................... $ 46,100 $ 41,327
1.
Joint ventures or associates in which the ownership interest is greater than 50% represent investments for which control is either shared or does not exist resulting in the
investment being equity accounted.
2. Carrying value of joint ventures in other equity accounted investments is $404 million (2020 – $346 million).
2021 ANNUAL REPORT
195
The following table presents the change in the balance of investments in associates and joint ventures:
Private
Equity
2,623 $
517
Renewable
2020
2021
Power and
Other
Total
Total
1,833 $ 41,327 $ 40,698
2,568
4,013
1,235
............
Infrastructure
Oaktree Real Estate
5,317 $
195
10,530 $
(594)
21,024 $
2,660
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Balance, beginning of year ............. $
Additions, net of disposals1
Acquisitions through business
combinations ..................................
Share of comprehensive income
(loss) ...............................................
Distributions received ....................
Return of capital .............................
Foreign currency translation and
other ................................................
Balance, end of year ..................... $
(134)
24,829 $
1,737
(194)
(271)
—
5,596 $
(454)
9,569 $
(32)
2,945 $
685
(598)
—
(12)
(169)
(2)
665
(581)
—
312
(216)
—
45
—
20
—
7
72
—
3,387
(1,758)
(273)
(125)
(1,268)
(115)
(48)
(431)
3,161 $ 46,100 $ 41,327
(668)
1.
Includes assets sold and amounts reclassified to held for sale.
Additions, net of disposals, of $4.0 billion during the year primarily relate to the equity accounted investment in our German
office portfolio in our Real Estate segment and the equity accounted investment in Brookfield Asset Management Reinsurance
Partners Ltd. (“BAMR”) as part of the spin-out. These items were partially offset by the sale of an equity accounted investment
at our advanced energy storage operations within our Private Equity segment and the partial sale of a stake in our U.S. gas
pipeline within our Infrastructure segment. The deconsolidation and recognition of our graphite electrode operations as an
equity accounted investment within our Private Equity segment also contributed to additions for our equity accounted
investments balance.
196
BROOKFIELD ASSET MANAGEMENT
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)
Current
Assets
Non-
Current
Assets
Current
Liabilities
Non-
Current
Liabilities
Current
Assets
Non-
Current
Assets
Current
Liabilities
Non-
Current
Liabilities
Oaktree .............................................. $ 2,136 $ 20,351 $
1,936 $
9,229 $ 2,253 $ 17,056 $ 2,146 $ 7,487
2021
2020
Real estate
Associates
LP investments and other .............
17
1,070
19
757
21
1,207
42
958
Joint ventures
Core ..............................................
1,985
39,322
2,272
17,787
2,496
36,668
3,485
17,107
Transitional and Development .....
1,170
33,679
749
13,734
1,230
33,082
673
13,721
LP investments and other .............
1,854
19,622
1,214
9,164
1,279
12,288
903
7,290
Infrastructure
Associates
Utilities .........................................
359
5,723
Transport ......................................
1,325
24,322
Data ..............................................
1,054
13,394
Other ............................................
30
321
444
2,160
1,727
20
3,738
646
6,142
12,981
1,223
25,078
6,284
841
13,308
84
34
356
Joint ventures
Midstream ....................................
Other ............................................
197
32
6,097
115
215
12
4,003
63
161
43
6,157
685
487
1,929
1,263
32
230
30
4,238
9,538
6,081
143
3,945
299
Private equity
Associates
Industrial operations .....................
1,421
Other ............................................
1,946
1,169
9,162
640
1,206
330
1,096
7,217
2,077
736
9,303
505
1,357
222
6,697
Renewable power and transition and
other
Renewable power and transition
associates ........................................
Other equity accounted
investments ....................................
2,763
12,675
2,546
6,811
1,355
7,492
635
3,307
2,631
10,840
1,773
8,825
210
790
67
178
$ 18,920 $ 197,862 $ 16,933 $ 101,007 $ 14,965 $ 170,348 $ 13,784 $ 81,211
Certain of the company’s investments in associates are subject to restrictions on the extent to which they can remit funds to
the company in the form of cash dividends or repay loans and advances as a result of borrowing arrangements, regulatory
restrictions and other contractual requirements.
2021 ANNUAL REPORT
197
The following table presents total revenues, net income and other comprehensive income (“OCI”) of the company’s
investments in associates and joint ventures:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Revenue
2021
Net
Income
OCI
Revenue
2020
Net
Income
Oaktree ........................................................................ $
2,308 $
1,355 $
7 $
1,104 $
158 $
OCI
(2)
Real estate
Associates
LP investments and other ......................................
84
(133)
949
99
(145)
(941)
Joint ventures
Core .......................................................................
Transitional and Development ...............................
LP investments and other ......................................
1,917
1,844
1,114
1,404
919
457
100
—
321
1,866
1,944
945
311
(1,471)
(376)
(113)
—
5
Infrastructure
Associates
Utilities ..................................................................
1,336
Transport ................................................................
11,685
Data ........................................................................
2,460
Other ......................................................................
50
Joint ventures
Midstream ..............................................................
Other ......................................................................
783
123
521
1,570
70
(66)
137
4
28
(433)
73
56
—
(2)
1,715
4,054
2,245
41
736
107
364
169
293
(23)
244
2
Private equity
Associates
West Fraser ............................................................
Industrial operations ..............................................
Other ......................................................................
—
3,082
5,215
—
424
—
(4)
(233)
(113)
2,407
2,713
4,332
386
132
(130)
(205)
(1,451)
374
(245)
—
33
12
—
48
Renewable power and transition and other
Renewable power and transition associates .............
Other equity accounted investments ........................
2,891
8,102
(208)
250
(15)
(15)
737
192
219
56
174
(2)
$ 42,994 $
6,471 $
952 $ 25,237 $
189 $
(2,313)
Certain of the company’s investments are publicly listed entities with active pricing in a liquid market.
198
BROOKFIELD ASSET MANAGEMENT
11. INVESTMENT PROPERTIES
The following table presents the change in the fair value of the company’s investment properties:
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
Fair value, beginning of year ............................................................................................................................... $ 96,782 $ 96,686
Additions .............................................................................................................................................................
13,558
8,180
Acquisitions through business combinations ......................................................................................................
Changes in basis of accounting ...........................................................................................................................
Dispositions1
Fair value changes .............................................................................................................................................
........................................................................................................................................................
988
599
—
193
(15,017)
(9,284)
5,073
(269)
(1,118)
1,276
Foreign currency translation and other ................................................................................................................
Fair value, end of year2
....................................................................................................................................... $ 100,865 $ 96,782
Includes amounts reclassified to held for sale.
1.
2. As at December 31, 2021, the ending balance includes $94.9 billion (2020 – $90.4 billion) of investment properties leased to third parties and $4.1 billion of ROU
investment properties (December 31, 2020 – $3.3 billion).
Investment properties include the company’s office, retail, multifamily and other properties, as well as highest and best-use
land within the company’s sustainable resources operations. Additions of $13.6 billion primarily relate to the purchases of
investment properties within our real estate funds and enhancement of existing assets during the year.
Dispositions of $15.0 billion (2020 – 9.3 billion) included the sale of multiple triple net lease investment properties, multi-
family and retail assets in the U.S. In addition, the current period includes the reclassification of certain assets held within our
real estate funds to assets held for sale.
Investment properties generated $5.7 billion (2020 – $5.7 billion) in rental income and incurred $2.6 billion (2020 –
$2.5 billion) in direct operating expenses. Most of our investment properties are pledged as collateral for the non-recourse
borrowings at their respective properties.
The following table presents our investment properties measured at fair value:
AS AT DEC. 31
(MILLIONS)
2021
2020
Core .................................................................................................................................................................... $ 19,384 $ 19,339
Transitional and Development ...........................................................................................................................
LP investments ...................................................................................................................................................
Other investment properties ...............................................................................................................................
27,669
51,620
2,192
29,764
45,857
1,822
$ 100,865 $ 96,782
2021 ANNUAL REPORT
199
Significant unobservable inputs (Level 3) are utilized when determining the fair value of investment properties. The significant
Level 3 inputs include:
Valuation
Technique
Discounted cash
flow analysis1
Significant Unobservable
Inputs
• Future cash flows –
primarily driven by net
operating income
Relationship of Unobservable
Inputs 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 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
• Terminal capitalization
• Increases (decreases) in
• Increases (decreases) in terminal
rate
terminal capitalization rate
decrease (increase) fair value
capitalization rates tend to be accompanied
by increases (decreases) in cash flows that
may offset changes in fair value from
terminal capitalization rates
• Investment horizon
• Increases (decreases) in the
• Increases (decreases) in the investment
investment horizon decrease
(increase) fair value
horizon 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
1. Certain investment properties are valued using the direct capitalization method instead of a discounted cash flow model. Under the direct capitalization method, a
capitalization rate is applied to estimated current year cash flows.
The company’s investment properties are diversified by asset type, asset class, geography and market. Therefore, there may be
mitigating factors in addition to those noted above, such as changes to assumptions that vary in direction and magnitude across
different geographies and markets.
The following table summarizes the key valuation metrics of the company’s investment properties:
AS AT DEC. 31
Core .................................................
Transitional and Development1
.......
LP investments1
...............................
Other investment properties2
...........
2021
Terminal
Capitalization
Rate
4.6%
5.8%
5.9%
n/a
Discount
Rate
5.9%
7.3%
9.1%
8.7%
Investment
Discount
Horizon
Rate
(years)
6.0%
11
7.2%
10
13
9.4%
n/a 5.0 – 8.7%
2020
Terminal
Capitalization
Rate
4.6%
5.9%
6.0%
n/a
Investment
Horizon
(years)
11
10
14
n/a
1. The rates presented are for investment properties valued using the discounted cash flow method. These rates exclude multifamily, triple net lease, student housing,
manufactured housing and other investment properties valued using the direct capitalization method.
2. Other investment properties include investment properties held in our Infrastructure and Residential Development segments.
200
BROOKFIELD ASSET MANAGEMENT
12. PROPERTY, PLANT AND EQUIPMENT
The company’s property, plant and equipment relates to the operating segments as shown below:
Renewable
Power and
Transition (a)
Infrastructure (b)
Real Estate (c)
Private Equity
and Other (d)
Total
2021
2020
AS AT DEC. 31
2020
2020
(MILLIONS)
Costs ................................... $ 30,588 $ 28,838 $ 39,769 $ 31,212 $ 11,396 $ 9,251 $ 21,255 $ 18,770 $ 103,008 $ 88,071
Accumulated fair value
changes ...............................
Accumulated depreciation .
Total1
.................................. $ 50,317 $ 45,206 $ 38,655 $ 32,167 $ 10,864 $ 8,432 $ 15,653 $ 14,204 $ 115,489 $ 100,009
28,384
(16,446)
31,074
(18,593)
3,077
(4,191)
393
(1,212)
881
(1,413)
(1,022)
(4,580)
(873)
(3,693)
4,626
(3,671)
28,138
(8,409)
24,238
(7,870)
2021
2021
2021
2021
2020
2020
1. As at December 31, 2021, the total includes $5.8 billion (2020 – $3.9 billion) of property, plant and equipment leased to third parties as operating leases. Our ROU
PP&E assets include $415 million (2020 – $393 million) in our Renewable Power and Transition segment, $4.0 billion (2020 – $4.1 billion) in our Infrastructure
segment, $905 million (2020 – $856 million) in our Real Estate segment, and $1.7 billion (2020 – $1.3 billion) in our Private Equity and other segments, totaling
$7.0 billion (2020 – $6.7 billion) of ROU assets.
For the year ended December 31, 2021, we recorded an impairment expense of $240 million (2020 – $284 million) primarily in
our Private Equity segment.
Renewable Power and Transition, Infrastructure and Real Estate 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. The carrying amount
that would have been recognized had our assets been accounted for under the cost model is $72.0 billion (2020 – $59.0 billion).
As at December 31, 2021, $66.2 billion (2020 – $80.2 billion) of property, plant and equipment, at cost, were pledged as
collateral for the property debt at their respective properties.
2021 ANNUAL REPORT
201
a) Renewable Power and Transition
Our renewable power and transition property, plant and equipment consists of the following:
Hydroelectric
Wind
Solar and Other
Total
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
2021
2020
2021
2020
2021
2020
Cost, beginning of year ........................... $ 13,899 $ 14,074 $ 8,398 $ 8,459 $ 6,541 $ 5,287 $ 28,838 $ 27,820
Additions, net of disposals and assets
reclassified as held for sale .....................
Acquisitions through business
combinations ...........................................
1,643
2,366
(907)
734
661
425
284
648
475
723
700
661
(9)
—
—
—
Foreign currency translation ...................
(762)
(600)
(101)
(52)
(228)
309
(1,091)
(343)
Cost, end of year .....................................
13,871
13,899
9,033
8,398
7,684
6,541
30,588
28,838
Accumulated fair value changes,
beginning of year ....................................
Fair value changes ..................................
Dispositions and assets reclassified as
held for sale ............................................
Foreign currency translation ...................
Accumulated fair value changes, end
of year .....................................................
19,865
16,927
2,908
4,581
3,221
(44)
2,588
402
1,465
282
950
24,238
20,465
530
4,819
4,153
—
—
(473)
(283)
(354)
(49)
—
(82)
—
—
(43)
(15)
(354)
(565)
—
(380)
23,973
19,865
2,461
2,908
1,704
1,465
28,138
24,238
Accumulated depreciation, beginning of
year .........................................................
Depreciation expenses ............................
Dispositions and assets reclassified as
51
held for sale ............................................
134
Foreign currency translation ...................
Accumulated depreciation, end of year ..
(7,870)
Balance, end of year ............................... $ 32,693 $ 29,033 $ 9,408 $ 9,013 $ 8,216 $ 7,160 $ 50,317 $ 45,206
17
181
(4,731)
22
114
(5,151)
792
14
(2,086)
1
28
(1,172)
815
156
(8,409)
25
9
(2,293)
(4,412)
(517)
9
(56)
(846)
(6,690)
(1,365)
(7,870)
(1,510)
(4,731)
(556)
(2,293)
(599)
(1,781)
(546)
(497)
(302)
(846)
(355)
202
BROOKFIELD ASSET MANAGEMENT
The following table presents our renewable power and transition property, plant and equipment measured at fair value by
geography:
AS AT DEC. 31
(MILLIONS)
2021
2020
North America ................................................................................................................................................... $ 32,629 $ 28,044
Colombia ............................................................................................................................................................
Europe ................................................................................................................................................................
Brazil ..................................................................................................................................................................
Other1
.................................................................................................................................................................
8,497
3,935
3,547
1,709
8,150
4,912
3,005
1,095
$ 50,317 $ 45,206
1. Other refers primarily to China, India and Chile.
Renewable power and transition assets are accounted for under the revaluation model and the most recent date of revaluation
was December 31, 2021. Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of
renewable power and transition assets. The significant Level 3 inputs include:
Valuation
Technique
Discounted cash
flow analysis
Significant
Unobservable Inputs
• Future cash flows –
primarily impacted by
future electricity price
assumptions
Relationship of Unobservable Inputs
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) in terminal
capitalization rate decrease (increase)
fair value
• Exit date
• Increases (decreases) in the exit date
decrease (increase) 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
• Increases (decreases) in terminal
capitalization rates tend to be
accompanied by increases
(decreases) in cash flows that may
offset changes in fair value from
terminal capitalization rates
• 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
Key valuation metrics of the company’s hydroelectric, wind and solar generating facilities at the end of 2021 and 2020 are
summarized below.
AS AT DEC. 31
Discount rate
North America
Brazil
Colombia
Europe
2021
2020
2021
2020
2021
2020
2021
2020
Contracted ................ 4.1 – 4.3% 4.1 – 4.5%
Uncontracted ............ 5.4 – 5.6% 5.6 – 6.0%
Terminal
capitalization rate1
Exit date ......................
...... 4.8 – 5.1% 5.8 – 6.2%
2042
2041
7.2%
8.5%
n/a
2048
7.3%
8.6%
n/a
2048
7.9%
9.2%
8.0%
2041
8.1%
9.4%
8.9%
2040
3.9%
3.0 – 3.6%
3.9%
3.6 – 4.7%
n/a
2036
n/a
2035
1.
Terminal capitalization rate applies only to hydroelectric assets in North America and Colombia.
Terminal values are included in the valuation of hydroelectric assets in the U.S., Canada and Colombia. 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 as at December 31, 2021, which
includes a one-time 30-year renewal for applicable hydroelectric assets completed in the current year, is 31 years (2020 –
32 years). Consequently, there is no terminal value attributed to the hydroelectric assets in Brazil.
2021 ANNUAL REPORT
203
Key assumptions on contracted generation and future power pricing are summarized below:
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 DEC. 31, 2021
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) ....................
Colombia (prices in COP$/MWh) .........
Europe (prices in €/MWh) .....................
48%
83%
30%
94%
17%
61%
1%
66%
82
306
71
358
77
282
114
345
251,000
313,000
290,000
439,000
44
39
34
39
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 between 2025 and 2035 (2020 – between 2023 and 2035), which will
maintain system reliability and provide adequate levels of reserve generation.
b) Infrastructure
Our infrastructure property, plant and equipment consists of the following:
Utilities
Transport
Midstream
Data
Sustainable
Resources and
Other
Total
AS AT AND FOR THE YEARS
ENDED DEC. 31
(MILLIONS)
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Cost, beginning of year ................... $
9,306
$ 8,654
$ 8,698
$ 8,309
$ 4,321
$ 3,971 $ 8,593
$ 1,131
$
294
$ 389
$ 31,212
$ 22,454
Additions, net of disposals and
assets reclassified as held for sale ...
Acquisitions through business
combinations ...................................
(1,788)
550
312
146
511
277
(103)
51
(294)
(16)
(1,362)
1,008
180
—
134
—
9,865
—
—
7,334
—
—
10,179
7,334
Foreign currency translation ...........
(116)
102
(145)
243
165
73
(166)
77
Cost, end of year .............................
7,582
9,306
8,999
8,698
14,862
4,321
8,324
8,593
2
2
(79)
(260)
416
294
39,769
31,212
Accumulated fair value changes,
beginning of year ............................
Disposition and assets reclassified
as held for sale ................................
Fair value changes ...........................
Foreign currency translation ...........
Accumulated fair value changes,
end of year .......................................
2,917
2,187
1,047
857
338
317
—
—
324
416
4,626
3,777
(1,399)
—
—
—
—
—
—
—
(244)
—
(1,643)
134
(26)
652
78
48
113
70
21
—
—
(80)
6
(50)
77
—
—
—
—
(2)
(98)
172
(78)
—
792
57
1,626
2,917
1,045
1,047
408
338
—
—
(2)
324
3,077
4,626
Accumulated depreciation,
beginning of year ............................
(1,613)
(1,172)
(1,404)
(950)
(356)
(208)
(263)
(88)
Depreciation expenses ....................
(352)
(419)
(481)
(498)
(270)
(141)
(419)
(189)
Dispositions and assets reclassified
as held for sale ................................
Foreign currency translation ...........
Accumulated depreciation, end of
year ..................................................
682
11
12
161
134
20
—
(34)
56
(90)
(16)
(7)
45
8
17
(3)
(1,272)
(1,613)
(1,668)
(1,404)
(622)
(356)
(629)
(263)
(35)
(4)
(41)
(10)
(3,671)
(2,459)
(1,526)
(1,257)
38
1
—
7
9
946
60
170
(125)
(35)
(4,191)
(3,671)
Balance, end of year ........................ $
7,936
$ 10,610 $ 8,376
$ 8,341
$ 14,648
$ 4,303 $ 7,695
$ 8,330
$
—
$ 583
$ 38,655
$ 32,167
Infrastructure’s PP&E assets are accounted for under the revaluation model, and the most recent date of revaluation was
December 31, 2021. The utilities assets consist of regulated transmission and regulated distribution networks, which are
operated primarily under regulated rate base arrangements. In the transport operations, the PP&E assets consist of railroads, toll
roads and ports. PP&E assets in the midstream operations are comprised of energy transmission, distribution and storage. Data
PP&E include mainly telecommunications towers, fiber optic networks and data storage assets. PP&E within our sustainable
resource operations include standing timber, land and roads.
204
BROOKFIELD ASSET MANAGEMENT
Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of infrastructure’s utilities,
transport, midstream, data and sustainable resources assets. The significant Level 3 inputs include:
Valuation
Technique
Discounted cash
flow analysis
Significant
Unobservable Inputs
• Future cash flows
Relationship of Unobservable Inputs
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 multiple
• Increases (decreases) in terminal
capitalization multiple increases
(decreases) fair value
• Investment horizon
• Increases (decreases) in the
investment horizon decrease
(increase) 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
• Increases (decreases) in terminal
capitalization multiple tend to be
accompanied by increases
(decreases) in cash flows that may
offset changes in fair value from
terminal capitalization multiple
• Increases (decreases) in the
investment horizon 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
Key valuation metrics of the company’s utilities, transport, midstream and sustainable resources assets at the end of 2021 and
2020 are summarized below.
Utilities
Transport
Midstream
Sustainable Resources
AS AT DEC. 31
2021
2020
2021
2020
Discount rates .....................................
7 – 11%
7 – 14%
7 – 14%
7 – 13%
Terminal capitalization multiples .......
20x
7x – 23x
9x – 15x
9x – 14x
2021
15%
10x
2020
15%
10x
Investment horizon/Exit date (years) ..
10 – 20
10
10
10
5 – 10
5 – 10
2021
n/a
n/a
n/a
2020
6%
6x
10
2021 ANNUAL REPORT
205
c) Real Estate
Cost
Accumulated Fair
Value Changes
Accumulated
Depreciation
Total
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
2021
2020
2021
2020
2021
2020
Balance, beginning of year ................... $ 9,251 $ 9,890 $
393 $ 1,366 $ (1,212) $ (1,527) $ 8,432 $ 9,729
Changes in basis of accounting ............
(38)
(1,895)
8
(681)
1
786
(29)
(1,790)
Additions/(dispositions)1, net of assets
reclassified as held for sale ...................
Acquisitions through business
combinations ........................................
Foreign currency translation .................
Fair value changes ................................
Depreciation expenses ..........................
203
1,023
(631)
(135)
262
2,172
(192)
—
—
—
233
—
—
—
(2)
1,113
—
—
2
(159)
—
—
35
—
(499)
(457)
27
—
(41)
—
(166)
2,172
(159)
1,113
(499)
915
—
194
(159)
(457)
Balance, end of year ............................. $ 11,396 $ 9,251 $
881 $
393 $ (1,413) $ (1,212) $ 10,864 $ 8,432
1.
For accumulated depreciation, (additions)/dispositions.
The company’s real estate PP&E assets include hospitality assets accounted for under the revaluation model, with the most
recent revaluation as at December 31, 2021. The company determined fair value for these assets by using the depreciated
replacement cost method. Valuations utilize significant unobservable inputs (Level 3) when determining the fair value of real
estate assets. The significant Level 3 inputs include estimates of assets’ replacement cost and remaining economic life.
d) Private Equity and Other
Private equity and other PP&E includes assets owned by the company’s private equity and residential development businesses.
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 PP&E assets included in these businesses:
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
2021
2020
2021
2020
2021
2020
Balance, beginning of year .............................. $ 18,770 $ 17,269 $ (873) $
(643) $ (3,693) $ (2,458) $ 14,204 $ 14,168
Cost
Accumulated
Impairment
Accumulated
Depreciation
Total
Changes in basis of accounting .......................
Additions/(dispositions)1, net of assets
reclassified as held for sale ..............................
Acquisitions through business combinations ..
Foreign currency translation ............................
(337)
Depreciation expenses .....................................
Impairment charges .........................................
—
—
543
—
—
(820)
—
1,124
2,518
874
84
—
(3)
97
(3)
—
57
—
(3)
301
—
(522)
—
277
290
1,498
1,221
—
—
2,518
36
(61)
(304)
84
479
—
—
(1,501)
(1,464)
(1,501)
(1,464)
(240)
(284)
—
—
(240)
(284)
Balance, end of year ........................................ $ 21,255 $ 18,770 $ (1,022) $
(873) $ (4,580) $ (3,693) $ 15,653 $ 14,204
1. For accumulated depreciation, (additions)/dispositions.
206
BROOKFIELD ASSET MANAGEMENT
13. INTANGIBLE ASSETS
The following table presents a continuity of the company’s intangible assets:
Cost
Accumulated
Amortization and
Impairment
Total
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2020
2021
2021
2020
2021
2020
Balance, beginning of year ......................................... $ 27,946 $ 30,232 $
(3,288) $
(2,522) $ 24,658 $ 27,710
Additions ....................................................................
Disposals1
Acquisitions through business combinations .............
...................................................................
Amortization ...............................................................
251
(972)
8,639
—
452
(2,246)
703
—
—
383
—
—
307
7
251
(589)
8,639
452
(1,939)
710
(1,477)
(1,310)
(1,477)
(1,310)
Foreign currency translation .......................................
(1,054)
(1,195)
181
230
(873)
(965)
Balance, end of year ................................................... $ 34,810 $ 27,946 $
(4,201) $
(3,288) $ 30,609 $ 24,658
1.
Includes assets sold and amounts reclassified to held for sale.
Intangible assets are allocated to the following operating segments:
AS AT DEC. 31
(MILLIONS)
Note
2021
2020
Private Equity .....................................................................................................................................
Infrastructure ......................................................................................................................................
Real Estate ..........................................................................................................................................
Renewable Power and Transition and other .......................................................................................
(a)
(b)
(c)
$ 14,806 $ 11,261
14,214
11,769
1,226
363
1,177
451
$ 30,609 $ 24,658
a) Private Equity
The intangible assets in our Private Equity segment are primarily related to:
•
•
Customer relationships of $7.5 billion (2020 – $5.1 billion), which increased from prior year primarily due to the
acquisitions of a modular building leasing services operation and an engineered components manufacturer. The customer
relationships acquired have a useful life of up to 23 years.
Computer software, patents, trademarks and proprietary technology of $3.9 billion (2020 – $3.2 billion), which increased
from prior year mainly due to the acquisitions completed in 2021. The proprietary technology has the potential to provide
competitive advantages and product differentiation and has a useful life of 15 years.
• Water and sewage concession agreements, the majority of which are arrangements with municipal governments across
Brazil, of $1.8 billion (2020 – $1.8 billion). The concession agreements provide the company the right to charge fees to
users over the terms of the agreements in exchange for water treatment services, ongoing and regular maintenance work on
water distribution assets and improvements to the water treatment and distribution systems. The concession agreements
have expiration dates that range from 2037 to 2056, which is the basis for the company’s determination of the assets’
remaining useful life. Upon expiry of the agreements, the assets will be returned to the government.
•
Brand names of $1.0 billion (2020 – $423 million), which increased from prior year mainly due to the acquisition of the
aforementioned modular building leasing services operation, have an indefinite useful life.
b) Infrastructure
The intangible assets in our Infrastructure segment are primarily related to:
•
•
Concession arrangements of $2.6 billion (2020 – $2.9 billion) at our Brazilian regulated transmission operation that
provide the right to charge a tariff over the term of the agreements. The agreements have an expiration date between 2039
and 2041 until the approval of new legislation in April 2021, which extended these finite authorizations in perpetuity.
These assets are amortized on a straight-line basis over 31 years, on average.
Customer relationships and shipping agreements of $2.5 billion (2020 – $nil) at our Canadian diversified midstream
operation, relating to long-term take-or-pay and fee-for-service contractual arrangements. These agreements are with
investment grade counterparties. These assets are amortized on a straight-line basis over the estimated useful life.
2021 ANNUAL REPORT
207
•
•
•
•
•
Customer relationships, operating network agreements and track access rights of $1.7 billion (2020 – $1.9 billion) at our
North American rail operations. These intangible assets are long-term leases and not expected to be negatively impacted in
the long term.
Concession arrangements totaling $1.6 billion (2020 – $2.6 billion) relating to our Peruvian and Indian toll roads, which
provide the right to charge a tariff to users of the roads over the terms of the concessions. The decrease from 2020 is
primarily due to the disposition of our Chilean toll roads. The Peruvian concessions have an expiration date of 2043, while
the Indian concessions have expiration dates from 2026 to 2041. The company uses these expiration dates as a basis for
determining the assets’ remaining useful lives.
Concession arrangements of $1.4 billion (2020 – $270 million) at our Brazilian electricity transmission operation, which
grants the right to construct, maintain and operate the transmission lines. Concessions are awarded for a period of 30 years.
Contractual customer relationships, customer contracts and proprietary technology of $1.3 billion (2020 – $1.4 billion) at
our North American residential energy infrastructure operations. This business generates revenue under long-term
contracts with a diversified customer base across North America.
Indefinite life intangible assets of $899 million (2020 – $876 million).
c) Real Estate
The intangible assets in our Real Estate segment are primarily attributable to indefinite life trademarks associated with the
hospitality assets, which include Center Parcs U.K. properties (“Center Parcs”). 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.
Inputs Used to Determine Recoverable Amounts of Intangible Assets
We test finite life intangible assets for impairment when an impairment indicator is identified. Indefinite life intangible assets
are tested for impairment annually. We use a discounted cash flow valuation to determine the recoverable amount and consider
the following significant unobservable inputs as part of our valuation:
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 increase (decrease) the
recoverable amount
• Discount rate
• Increases (decreases) in discount rate
decrease (increase) the recoverable
amount
• Terminal capitalization
• Increases (decreases) in terminal
rate
capitalization rate decrease (increase)
the recoverable amount
• Exit date
• Increases (decreases) in the exit date
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 recoverable
amounts from cash flows
• Increases (decreases) in discount
rates tend to be accompanied by
increases (decreases) in cash flows
that may offset changes in
recoverable amounts from discount
rates
• Increases (decreases) in terminal
capitalization rates tend to be
accompanied by increases
(decreases) in cash flows that may
offset changes in recoverable
amounts from terminal
capitalization rates
• 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
208
BROOKFIELD ASSET MANAGEMENT
14. GOODWILL
The following table presents the balance and nature of the changes in goodwill:
AS AT AND FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
2021
2020
2021
2020
Balance, beginning of year ...................................... $ 15,539 $ 15,412 $
(825) $
(862) $
14,714 $ 14,550
Cost
Accumulated
Impairment
Total
Acquisitions through business combinations ..........
6,591
145
Impairment losses ....................................................
Foreign currency translation and other1
Balance, end of year ................................................ $ 21,216 $ 15,539 $
...................
(18)
(914)
—
—
—
(177)
13
—
(3)
40
6,591
(177)
(901)
145
(3)
22
(989) $
(825) $
20,227 $ 14,714
1.
Includes adjustment to goodwill based on final purchase price allocation.
Goodwill is allocated to the following operating segments:
AS AT DEC. 31
(MILLIONS)
Note
2021
2020
Infrastructure ......................................................................................................................................
Private Equity .....................................................................................................................................
Real Estate ..........................................................................................................................................
Renewable Power and Transition .......................................................................................................
Asset Management .............................................................................................................................
Corporate Activities and Residential Development ...........................................................................
(a)
(b)
(c)
(d)
$
8,979 $
6,634
8,585
1,248
966
361
88
5,244
1,404
970
368
94
Total ....................................................................................................................................................
$ 20,227 $ 14,714
a) Infrastructure
Goodwill in our Infrastructure segment increased from prior year primarily due to the acquisition of IPL completed in 2021.
In addition to goodwill from acquisitions completed in 2021, goodwill is attributable to our North American rail operations,
North American residential energy infrastructure operation, Western Canadian natural gas gathering and processing operation,
U.S. data center operation, Brazilian regulated transmission operation, Colombian natural gas distribution operation, and U.K.
telecom tower operation.
The valuation assumptions used to determine the recoverable amount of goodwill has been determined using a discounted
cash flow model. The key inputs are discount rates ranging from 11% – 14%, terminal capitalization multiples of 6x – 20x and
cash flow periods from 6 – 20 years. The recoverable amounts for the years ended 2021 and 2020 were determined to be in
excess of their carrying values.
b) Private Equity
Goodwill in our Private Equity segment increased from prior year largely due to the acquisitions of a modular building leasing
services operation and an engineered components manufacturer. These acquisitions were partially offset by the adverse impact
of foreign currency translation and an impairment loss in our offshore oil services operation.
c) Real Estate
Goodwill in our Real Estate segment is primarily attributable to Center Parcs U.K. Its recoverable amounts for the years ended
2021 and 2020 were determined to be in excess of its carrying values.
The valuation assumptions used to determine the recoverable amount for Center Parcs were a discount rate of 9.3% (2020 –
9.5%) based on a market-based-weighted-average cost of capital, and a long-term growth rate of 3.0% (2020 – 3.0%).
The valuation assumptions used to determine the recoverable amount for IFC Seoul in 2020 were a discount rate of 7.2% based
on a market-based-weighted-average cost of capital and a long-term growth rate of 2.8%. IFC Seoul has been classified as an
asset held for sale in 2021.
2021 ANNUAL REPORT
209
d) Renewable Power and Transition
Goodwill in our Renewable Power and Transition segment, which is primarily attributable to a hydroelectric portfolio, arose
from the inclusion of a deferred tax liability as the tax bases of the net assets acquired were lower than their fair values. The
goodwill is recoverable as long as the tax circumstances that gave rise to the goodwill do not change. To date, no such changes
have occurred.
Inputs used to Determine Recoverable Amounts of Goodwill
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 increase (decrease) the
recoverable amount
• Discount rate
• Increases (decreases) in discount rate
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 recoverable
amounts from cash flows
• Increases (decreases) in discount
rates tend to be accompanied by
increases (decreases) in cash flows
that may offset changes in
recoverable amounts from discount
rates
• Terminal capitalization
• Increases (decreases) in terminal
• Increases (decreases) in terminal
rate/multiple
capitalization rate/multiple decrease
(increase) the recoverable amount
• Exit date/terminal year
of cash flows
• Increases (decreases) in the exit date/
terminal year of cash flows decrease
(increase) the recoverable amount
capitalization rates/multiple tend to
be accompanied by increases
(decreases) in cash flows that may
offset changes in recoverable
amounts from terminal
capitalization rates
• 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 terminal
year
210
BROOKFIELD ASSET MANAGEMENT
15. INCOME TAXES
The major components of income tax expense for the years ended December 31, 2021 and 2020 are set out below:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
Current income tax expense ............................................................................................................................... $
1,114 $
2020
756
Deferred income tax expense / (recovery)
Origination and reversal of temporary differences .........................................................................................
1,044
(103)
(Recovery) / expense arising from previously unrecognized tax assets ........................................................
Change of tax rates and new legislation .........................................................................................................
(251)
417
Total deferred income tax expense ....................................................................................................................
1,210
Income tax expense ............................................................................................................................................ $
2,324 $
2
182
81
837
The company’s Canadian domestic statutory income tax rate has remained consistent at 26% throughout both of 2021 and
2020. 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 ...................................................................................................................................
2021
26%
2020
26%
Increase (reduction) in rate resulting from:
Change in tax rates and new legislation ..........................................................................................................
International operations subject to different tax rates .....................................................................................
Taxable income attributable to non-controlling interests ...............................................................................
Portion of gains subject to different tax rates .................................................................................................
Recognition of deferred tax assets ..................................................................................................................
Non-recognition of the benefit of current year’s tax losses ............................................................................
Other ...............................................................................................................................................................
3
(1)
(10)
(3)
(2)
2
1
12
52
(31)
(10)
(10)
8
7
Effective income tax rate ...................................................................................................................................
16%
54%
Deferred income tax assets and liabilities as at December 31, 2021 and 2020 relate to the following:
AS AT DEC. 31
(MILLIONS)
2021
Non-capital losses (Canada) .............................................................................................................................. $
1,339 $
Capital losses (Canada) ......................................................................................................................................
Losses (U.S.) ......................................................................................................................................................
Losses (International) .........................................................................................................................................
53
3,561
1,474
2020
916
48
3,338
1,415
Difference in basis .............................................................................................................................................
(23,415)
(18,292)
Total net deferred tax liabilities ......................................................................................................................... $ (16,988) $ (12,575)
The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax liabilities
have not been recognized as at December 31, 2021 is approximately $9 billion (2020 – approximately $5 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.
2021 ANNUAL REPORT
211
The following table details the expiry date, if applicable, of the unrecognized deferred tax assets:
AS AT DEC. 31
(MILLIONS)
2021
2020
One year from reporting date ............................................................................................................................. $
8 $
Two years from reporting date ...........................................................................................................................
Three years from reporting date .........................................................................................................................
After three years from reporting date .................................................................................................................
Do not expire ......................................................................................................................................................
30
15
487
1,891
4
20
20
465
1,473
Total ................................................................................................................................................................... $
2,431 $
1,982
The components of the income taxes in other comprehensive income for the years ended December 31, 2021 and 2020 are set
out below:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
Revaluation of property, plant and equipment ................................................................................................... $
1,549 $
1,214
Financial contracts and power sale agreements .................................................................................................
Fair value through OCI securities ......................................................................................................................
Foreign currency translation ..............................................................................................................................
Revaluation of pension obligation .....................................................................................................................
89
83
(21)
71
(59)
74
37
(40)
Total deferred tax in other comprehensive income ............................................................................................ $
1,771 $
1,226
212
BROOKFIELD ASSET MANAGEMENT
16. CORPORATE BORROWINGS
AS AT DEC. 31
(MILLIONS)
Annual Rate
Currency
Maturity
2021
2020
Term debt
Public – Canadian ............................................................... Mar. 31, 2023
Public – Canadian ............................................................... Mar. 8, 2024
Public – U.S. .......................................................................
Apr. 1 , 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. .......................................................................
Jan. 25, 2028
Public – U.S. ....................................................................... Mar. 29, 2029
Public – U.S. ....................................................................... Apr. 15, 2030
Public – U.S. ....................................................................... Apr. 15, 2031
Public – U.S. .......................................................................
Jan. 30, 2032
Public – U.S. ....................................................................... Mar. 1, 2033
Public – Canadian ...............................................................
Jun. 14, 2035
Private – Japanese ..............................................................
Dec. 1, 2038
Public – U.S. .......................................................................
Sep. 20, 2047
Public – U.S. ....................................................................... Apr. 15, 2050
Public – U.S. ....................................................................... Mar. 30, 2051
Public – U.S. ....................................................................... Oct. 16, 2080
4.54 %
5.04 %
4.00 %
4.00 %
4.82 %
4.25 %
3.80 %
3.90 %
4.85 %
4.35 %
2.72 %
2.34 %
7.38 %
5.95 %
1.42 %
4.70 %
3.45%
3.50%
4.63%
C$ $
C$
US$
US$
C$
US$
C$
US$
US$
US$
US$
US$
US$
C$
JPY
US$
US$
US$
US$
— $
396
749
500
679
497
396
649
999
749
500
600
250
334
87
902
594
758
400
472
393
749
500
675
497
393
649
999
749
—
—
250
331
97
902
594
497
400
10,039
9,147
..............................................................
Revolving facilities1
Deferred financing costs2
Total .................................................................................................................................................................. $ 10,875 $
..................................................................................................................................
(76)
912
—
(70)
9,077
1. Reflects commercial paper and credit facility draws outstanding as at December 31, 2021.
2. Deferred financing costs are amortized to interest expense over the term of the borrowing using the effective interest method.
Corporate borrowings, excluding revolving facilities, have a weighted-average interest rate of 4.2% (2020 – 4.4%). A portion
of corporate borrowings are denominated in foreign currencies, which include C$2.3 billion (2020 – C$2.9 billion) payable
in Canadian dollars or $1.8 billion (2020 – $2.3 billion) and ¥10 billion (2020 – ¥10 billion) payable in Japanese Yen or
$87 million (2020 – $97 million).
2021 ANNUAL REPORT
213
17. ACCOUNTS PAYABLE AND OTHER
AS AT DEC. 31
(MILLIONS)
2021
2020
Accounts payable ............................................................................................................................................... $ 11,258 $
9,543
Provisions ...........................................................................................................................................................
Lease liabilities ..................................................................................................................................................
4,244
9,041
5,065
8,223
Other liabilities ...................................................................................................................................................
28,003
27,851
Total ................................................................................................................................................................... $ 52,546 $ 50,682
The current and non-current balances of accounts payable, provisions and other liabilities are as follows:
AS AT DEC. 31
(MILLIONS)
2021
2020
Current ............................................................................................................................................................... $ 29,136 $ 25,857
Non-current ........................................................................................................................................................
23,410
24,825
Total ................................................................................................................................................................... $ 52,546 $ 50,682
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’ valuation change during the year was an increase of $545 million (2020 – a decrease of
$298 million). The discount rate used was 3% (2020 – 2%) with an increase in the rate of compensation of 1% (2020 – 1%),
and an investment rate of 4% (2020 – 3%).
AS AT DEC. 31
(MILLIONS)
2021
2020
Plan assets .......................................................................................................................................................... $
3,503 $
3,335
Less accrued benefit obligation:
Defined benefit pension plan ..........................................................................................................................
(4,352)
(4,613)
Other post-employment benefits .....................................................................................................................
(163)
(185)
Net liability ........................................................................................................................................................
(1,012)
(1,463)
Less: net actuarial (losses) gains and other ........................................................................................................
(29)
11
Accrued benefit liability .................................................................................................................................... $
(1,041) $
(1,452)
214
BROOKFIELD ASSET MANAGEMENT
18. NON-RECOURSE BORROWINGS OF MANAGED ENTITIES
AS AT DEC. 31
(MILLIONS)
Note
2021
2020
Subsidiary borrowings ........................................................................................................................
Property-specific borrowings .............................................................................................................
(a)
(b)
$ 13,049 $ 10,768
152,008
128,556
Total ....................................................................................................................................................
$ 165,057 $ 139,324
a) Subsidiary Borrowings
Principal repayments on subsidiary borrowings due over the next five calendar years and thereafter are as follows:
(MILLIONS)
Real Estate
Renewable
Power and
Transition
Infrastructure
Private
Equity
Residential
Development
2022 ................................................. $
180 $
— $
431 $
— $
24 $
2023 .................................................
2024 .................................................
2025 .................................................
2026 .................................................
Thereafter .........................................
Total Principal repayments ..............
Deferred financing costs and other ..
396
792
396
2,760
316
4,840
(58)
—
—
317
—
1,839
2,156
(9)
—
554
—
—
1,753
2,738
(19)
—
—
—
1,619
—
1,619
—
60
41
—
—
1,648
1,773
9
Total – Dec. 31, 2021 ...................... $
4,782 $
2,147 $
2,719 $
1,619 $
1,782 $
Total – Dec. 31, 2020 ....................... $
3,378 $
2,132 $
3,158 $
310 $
1,790 $
The weighted-average interest rate on subsidiary borrowings as at December 31, 2021 was 3.5% (2020 – 3.5%).
The current and non-current balances of subsidiary borrowings are as follows:
AS AT DEC. 31
(MILLIONS)
2021
Current ............................................................................................................................................................... $
635 $
Total
635
456
1,387
713
4,379
5,556
13,126
(77)
13,049
10,768
2020
317
Non-current ........................................................................................................................................................
12,414
10,451
Total ................................................................................................................................................................... $ 13,049 $ 10,768
Subsidiary borrowings by currency include the following:
AS AT DEC. 31
(MILLIONS)
Local Currency
2021
2020
U.S. dollars ................................................................. $
6,535
Canadian dollars .........................................................
6,429
Brazilian reais .............................................................
85
Total ............................................................................ $ 13,049
US$
C$
Rs
6,535
8,130
472
4,376
6,254
138
$ 10,768
Local Currency
US$
C$
Rs
4,376
7,963
715
2021 ANNUAL REPORT
215
b) Property-Specific Borrowings
Principal repayments on property-specific borrowings due over the next five calendar years and thereafter are as follows:
(MILLIONS)
Real Estate
Renewable
Power and
Transition
Infrastructure
2022 ................................................. $
22,314 $
1,952 $
4,230 $
2023 .................................................
2024 .................................................
2025 .................................................
2026 .................................................
Thereafter .........................................
Total Principal repayments ..............
13,538
14,965
8,287
5,244
11,037
75,385
Deferred financing costs and other ..
(407)
2,768
1,393
1,142
2,004
10,616
19,875
18
2,806
3,223
2,863
5,522
9,848
28,492
23
Private
Equity
2,544 $
1,877
2,523
4,227
7,792
9,494
28,457
(563)
Residential
Development
204 $
157
371
2
—
—
734
(6)
Total
31,244
21,146
22,475
16,521
20,562
40,995
152,943
(935)
Total – Dec. 31, 2021 ...................... $
74,978 $
19,893 $
28,515 $
27,894 $
728 $
152,008
Total – Dec. 31, 2020 ....................... $
67,073 $
16,353 $
21,309 $
23,333 $
488 $
128,556
The weighted-average interest rate on property-specific borrowings as at December 31, 2021 was 4.0% (2020 – 4.2%).
The current and non-current balances of property-specific borrowings are as follows:
AS AT DEC. 31
(MILLIONS)
2021
2020
Current ............................................................................................................................................................... $ 31,244 $ 20,970
Non-current ........................................................................................................................................................
120,764
107,586
Total ................................................................................................................................................................... $ 152,008 $ 128,556
Property-specific borrowings by currency include the following:
AS AT DEC. 31
(MILLIONS)
Local Currency
2021
2020
Local Currency
U.S. dollars ............................................................... $ 86,437
US$
86,437 $ 78,223
US$
78,223
British pounds ..........................................................
12,446
£
9,197
10,341
Indian rupees ............................................................
Canadian dollars .......................................................
Euros ........................................................................
Australian dollars .....................................................
Brazilian reais ..........................................................
Colombian pesos ......................................................
Korean won ..............................................................
Chilean unidades de fomento ...................................
8,223
16,660
12,722
4,392
4,919
2,367
1,910
—
Rs
C$
€
A$
R$
613,684
21,054
11,204
6,048
27,449
COP$ 9,480,307
₩ 2,271,074
—
UF
Other currencies .......................................................
1,932
n/a
n/a
8,978
8,458
7,816
4,799
3,487
2,141
2,082
1,187
1,044
Total ......................................................................... $ 152,008
$ 128,556
£
7,565
Rs
655,328
C$
10,771
€
A$
6,398
6,237
R$
18,147
COP$ 7,332,845
₩ 2,268,301
29
UF
n/a
n/a
216
BROOKFIELD ASSET MANAGEMENT
19. SUBSIDIARY EQUITY OBLIGATIONS
Subsidiary equity obligations consist of the following:
AS AT DEC. 31
(MILLIONS)
Note
2021
2020
Subsidiary preferred equity units ........................................................................................................
Limited-life funds and redeemable fund units ....................................................................................
Subsidiary preferred shares and capital ..............................................................................................
(a)
(b)
(c)
$
1,585 $
1,679
1,538
1,185
1,456
564
Total ....................................................................................................................................................
$
4,308 $
3,699
a) Subsidiary Preferred Equity Units
In 2014, BPY issued $1.8 billion of exchangeable preferred equity units in three $600 million tranches redeemable in 2021,
2024 and 2026, respectively. The preferred equity units were originally 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. Following the privatization of BPY
(“BPY privatization”), the preferred equity units became exchangeable into cash equal to the value of the consideration that
would have been received upon the BPY privatization (a combination of cash, BAM shares and New LP Preferred Units),
based on the value of that consideration on the date of exchange. BPY also has the option of delivering the actual consideration
(a combination of cash, BAM shares and New LP Preferred Units). Following the BPY privatization, we have agreed with the
holder to grant the company the right to purchase all or any portion of the preferred equity units of the holder at maturity, and
to grant the holder the right to sell all or any portion of the preferred equity units of the holder at maturity, in each case at a
price equal to the issue price for such preferred equity units plus accrued and unpaid distributions. On December 30, 2021, the
company acquired the tranche redeemable in 2021 from the holder and exchanged such units for Redemption-Exchange Units.
The preferred equity units were subsequently cancelled, as further described in Note 28(a).
Subsidiary preferred equity units include $474 million at December 31, 2021 (2020 – $nil) of preferred equity interests issued
in connection with the BPY privatization which have been classified as a liability due to the fact the holders of such interests
can demand cash payment upon maturity on July 26, 2081, for the liquidation preference of $25.00 per unit and any
accumulated unpaid dividends.
AS AT DEC. 31
(MILLIONS, EXCEPT PER SHARE INFORMATION)
Shares
Outstanding
Cumulative
Dividend Rate
Local
Currency
2021
2020
Series 1 .........................................................................
—
Series 2 .........................................................................
24,000,000
Series 3 .........................................................................
24,000,000
New LP Preferred Units ...............................................
19,273,654
6.25%
6.50%
6.75%
6.25%
US$ $
— $
US$
US$
US$
565
546
474
586
555
538
—
Total .................................................................................................................................................................
$
1,585 $
1,679
b) Limited-Life Funds and Redeemable Fund Units
Limited-life funds and redeemable fund units represent interests held in our consolidated funds by third-party investors that
have been classified as a liability, as holders of these interests can cause our funds to redeem their interest in the fund for cash
equivalents at a specified time. As at December 31, 2021, we have $1.5 billion (2020 – $1.5 billion) of subsidiary equity
obligations arising from limited-life funds and redeemable fund units.
In our Real Estate business, limited-life fund obligations include $859 million (2020 – $864 million) of equity interests held by
third-party investors in two consolidated funds that have been classified as a liability, as holders of these interests can cause the
funds to redeem their interests in the fund for cash equivalents at the fair value of the interest at a set date.
As at December 31, 2021, we have $545 million (2020 – $517 million) of subsidiary equity obligations arising from limited-
life fund units in our Infrastructure business. These obligations are primarily composed of the portion of the equity interest held
by third-party investors in our timberland funds that are attributed to the value of the land held in the fund. The value of this
equity interest has been classified as a liability, as we are obligated to purchase the land from the third-party investors on
maturity of the fund.
We also have $134 million of redeemable fund units (2020 – $75 million) in certain funds managed by our public securities
business.
2021 ANNUAL REPORT
217
c) Subsidiary Preferred Shares and Capital
Preferred shares are classified as liabilities if the holders of the preferred shares have the right, after a fixed date, to convert
the shares into common equity of the issuer based on the market price of the common equity of the issuer at that time unless
they are previously redeemed by the issuer. The dividends paid on these securities are recorded in interest expense. As at
December 31, 2021 and 2020, the balances consist of the following:
Local
AS AT DEC. 31
Currency
(MILLIONS, EXCEPT PER SHARE INFORMATION)
Brookfield Property Split Corp.
(“BOP Split”) senior preferred shares
Cumulative
Dividend Rate
Shares
Outstanding
2021
2020
Series 1 ..........................................................................
Series 2 ..........................................................................
Series 3 ..........................................................................
Series 4 ..........................................................................
BSREP II RH B LLC (“Manufactured Housing”)
preferred capital
842,534
556,746
781,592
582,894
5.25%
5.75%
5.00%
5.20%
—
9.00%
Rouse Series A preferred shares ......................................
5,600,000
Brookfield India Real Estate Trust (“BIRET”) ...............
India Infrastructure Investment Trusts
BSREP II Vintage Estate Partners LLC (“Vintage
Estates”) preferred shares
BIP Investment Corporation Series 1 Senior preferred
shares
138,181,800
371,800,000
—
4,000,000
5.00%
See footnote1
See footnote1
5.00%
5.85%
US$ $
21 $
C$
C$
C$
US$
US$
US$
INR
US$
C$
11
15
12
—
142
440
471
—
73
Total ..................................................................................................................................................................
$
1,185 $
1. The dividend rate pertaining to BIRET and India Infrastructure Investment Trusts is equal to a minimum of 90% of net distributable cash flows.
21
11
16
12
249
142
—
—
40
73
564
Each series of the BOP Split senior preferred shares are redeemable at the option of either the issuer or the holder as the
redemption and conversion option dates have passed.
On December 31, 2020, subsidiary preferred capital was $249 million related to preferred equity interests held by a third-party
investor in Manufactured Housing, which was previously classified as a liability, due to the fact that the holders were only
entitled to distributions equal to their capital balance plus a 9% annual return payable in monthly distributions until maturity in
December 2025. The preferred capital was issued to partially fund the acquisition of the Manufactured Housing portfolio
during the first quarter of 2017 and was redeemed in the second quarter of 2021.
Subsidiary preferred capital includes $440 million at December 31, 2021 (2020 – $nil) of preferred equity interests held by
third-party investors in BIRET, which have been classified as a liability, due to the fact BIRET has a contractual obligation to
make distributions to unitholders every six months at an amount no less than 90% of net distributable cash flows.
Subsidiary preferred capital also includes $471 million at December 31, 2021 (2020 – $nil) of preferred equity interests held by
third-party investors in India Infrastructure Investment Trusts, which have been classified as liabilities, as a result of contractual
obligations to make distributions at an amount no less than 90% of net distributable cash flows.
Subsidiary preferred shares include $142 million at December 31, 2021 (2020 – $142 million) of preferred equity interests held
by a third-party investor in Rouse Properties, L.P., which have been classified as a liability, due to the fact that the interests 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.
218
BROOKFIELD ASSET MANAGEMENT
20. SUBSIDIARY PUBLIC ISSUERS AND FINANCE SUBSIDIARY
Brookfield Finance Inc. (“BFI”) was incorporated on March 31, 2015 under the Business Corporations Act (Ontario) and is an
indirect 100% owned subsidiary of the Corporation that may offer and sell debt securities. Any debt securities issued by BFI
are fully and unconditionally guaranteed by the Corporation. BFI issued:
•
•
•
•
•
•
•
•
•
•
•
$500 million of 4.25% notes due in 2026 on June 2, 2016;
$550 million of 4.70% notes due in 2047 on September 14, 2017;
$350 million of 4.70% notes due in 2047 on January 17, 2018;
$650 million of 3.90% notes due in 2028 on January 17, 2018;
$1.0 billion of 4.85% notes due in 2029 on January 29, 2019;
$600 million of 4.35% notes due in 2030 on April 9, 2020;
$150 million of 4.35% notes due in 2030 on April 14, 2020;
$500 million of 3.50% notes due in 2051 on September 28, 2020;
$400 million of 4.625% subordinated notes due in 2080 on October 16, 2020;
$500 million of 2.724% notes due in 2031 on April 12, 2021; and
$250 million of 3.50% notes due in 2051 on July 26, 2021.
Brookfield Finance LLC (“BFL”) is a Delaware limited liability company formed on February 6, 2017 and an indirect 100%
owned subsidiary of the Corporation. Brookfield Finance II Inc. (“BFI II”) was incorporated on September 24, 2020 under
the Business Corporations Act (Ontario) and is a direct 100% owned subsidiary of the Corporation. Brookfield Finance
(Australia) Pty Ltd (“BF AUS”) was incorporated on September 24, 2020 under the Corporations Act 2001 (Commonwealth of
Australia) and is an indirect 100% owned subsidiary of the Corporation. Brookfield Finance I (UK) PLC (“BF U.K.”) was
incorporated on September 25, 2020 under the U.K. Companies Act 2006 and is an indirect 100% owned subsidiary of the
Corporation. Brookfield Finance II LLC (“BFL II”) was formed on September 24, 2020 under the Delaware Limited Liability
Company Act and is an indirect 100% owned subsidiary of the Corporation. BFL, BFL II, BF AUS and BF U.K. are
consolidated subsidiaries of the Corporation that may offer and sell debt securities or, in the case of BFL II, preferred shares
representing limited liability company interests. Any debt securities issued by BFL and BF U.K. are, and any debt securities
issued by BF AUS and BFI II and any preferred shares representing limited liability company interests issued by BFL II will
be, fully and unconditionally guaranteed as to payment of principal, premium (if any), interest and certain other amounts by the
Corporation.
On March 10, 2017, BFL issued $750 million of 4.00% notes due in 2024. On December 31, 2018, as part of an internal
reorganization, the 2024 notes were transferred to BFI. On February 21, 2020, BFL issued $600 million of 3.45% notes due in
2050. On November 24, 2020, BF U.K. issued $230 million of 4.50% perpetual subordinated notes. On July 26, 2021, BF U.K.
issued $600 million of 2.34% notes due in 2032. BFI II, BFL, BFL II, BF AUS and BF U.K. have no independent activities,
assets or operations other than in connection with any securities that they may issue.
Brookfield Investments Corporation (“BIC”) is an investment company that holds investments in the real estate, renewable
power and infrastructure sectors, as well as a portfolio of preferred shares issued by the Corporation’s subsidiaries. The
Corporation provided a full and unconditional guarantee of the Class 1 Senior Preferred Shares, Series A issued by BIC. As at
December 31, 2021, C$37 million of these senior preferred shares were held by third-party shareholders and are retractable
at the option of the holder.
On February 4, 2022, BFI issued an additional $400 million of its existing 3.90% notes due in 2028 and issued $400 million of
3.625% notes due in 2052.
2021 ANNUAL REPORT
219
The following tables contain summarized financial information of the Corporation, BFI, BFI II, BFL, BFL II, BF AUS,
BF U.K., BIC and non-guarantor subsidiaries:
AS AT AND FOR THE YEAR
ENDED DEC. 31, 2021
(MILLIONS)
The
Corporation1
BFI
BFI II
BFL BFL II
BF
AUS
BF
U.K.
BIC
Other
subsidiaries of
the Corporation2
Consolidating
Adjustments3
The Company
Consolidated
Revenues ................................ $
1,373 $ 250 $ — $ 33 $ — $ — $
9 $ 121 $
82,663 $
(8,718) $
75,731
Net income (loss) attributable
to shareholders ........................
3,966
(8)
—
—
—
—
5
(251)
6,100
(5,846)
3,966
Total assets .............................
84,793
8,256
—
607
—
—
843
5,433
400,288
(109,217)
391,003
Total liabilities ........................
38,438
6,387
—
597
—
—
603
3,734
237,100
(30,597)
256,262
Non-controlling interest –
preferred equity ......................
—
—
—
—
—
—
230
—
—
—
230
AS AT AND FOR THE YEAR
ENDED DEC. 31, 2020
(MILLIONS)
The
Corporation1
BFI
BFI II
BFL BFL II
BF
AUS
BF
U.K.
BIC
Other
subsidiaries of
the Corporation2
Consolidating
Adjustments3
The Company
Consolidated
Revenues ................................ $
626 $ 280 $ — $ 28 $ — $ — $
2 $ 163 $
70,385 $
(8,732) $
62,752
Net income (loss) attributable
to shareholders ........................
(134)
73
—
—
—
—
1
91
6,368
(6,533)
(134)
Total assets .............................
73,898
7,207
—
600
—
—
233
4,280
350,687
(93,209)
343,696
Total liabilities ........................
38,060
5,547
—
596
—
—
3
2,690
206,877
(32,719)
221,054
Non-controlling interest –
preferred equity ......................
—
—
—
—
—
—
230
—
—
—
230
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, BFL, BIC, BFI II, BF AUS, BF U.K. and BFL II on a combined basis.
3. This column includes the necessary amounts to present the company on a consolidated basis.
220
BROOKFIELD ASSET MANAGEMENT
21. EQUITY
Equity consists of the following:
AS AT DEC. 31
(MILLIONS)
Preferred equity .................................................................................................................................
Non-controlling interests ....................................................................................................................
Common equity .................................................................................................................................
Note
2021
2020
(a)
(b)
(c)
$
4,145 $
4,145
88,386
42,210
86,804
31,693
$ 134,741 $ 122,642
a) Preferred Equity
Preferred equity includes perpetual preferred shares and rate-reset preferred shares and consists of the following:
AS AT DEC. 31
(MILLIONS)
2021
2020
2021
2020
Average Rate
Perpetual preferred shares
Floating rate .........................................................................................................
Fixed rate .............................................................................................................
Fixed rate-reset preferred shares ............................................................................
2.32%
4.82%
3.81%
4.07%
4.00%
1.76% $
505 $
4.82%
3.54%
4.07%
739
1,244
2,901
531
739
1,270
2,875
3.91% $
4,145 $
4,145
2021 ANNUAL REPORT
221
Further details on each series of preferred shares are as follows:
AS AT DEC. 31
(MILLIONS, EXCEPT PER SHARE INFORMATION)
Class A preferred shares
Perpetual preferred shares
Series 2 ........................................................
Series 4 .......................................................
Series 82
......................................................
Series 13 ......................................................
Series 15 ......................................................
Series 17 ......................................................
Series 18 .....................................................
Series 253
....................................................
Series 36 ......................................................
Series 37 ......................................................
Rate-reset preferred shares4
Series 92
......................................................
Series 243
....................................................
Series 26 ......................................................
Series 28 ......................................................
Series 30 .....................................................
Series 32 ......................................................
Series 345
....................................................
Series 386
....................................................
Series 407
....................................................
Series 428
....................................................
Series 44 ......................................................
Series 46 ......................................................
Series 48 ......................................................
Issued and Outstanding
Rate
2021
2020
2021
2020
70% P
70% P
Variable up to P
70% P
B.A. + 40 b.p.1
4.75%
4.75%
—
4.85%
4.90%
10,457,685
2,795,910
3,321,486
9,290,096
2,000,000
7,840,204
7,866,749
—
7,842,909
7,830,091
10,457,685 $
2,795,910
2,476,185
9,290,096
2,000,000
7,840,204
7,866,749
1,529,133
7,842,909
7,830,091
2.75%
3.24%
3.47%
2.73%
4.69%
5.06%
4.44%
3.57%
4.03%
3.25%
5.00%
4.80%
4.75%
670,680
10,808,027
9,770,928
9,233,927
9,787,090
11,750,299
9,876,735
7,906,132
11,841,025
11,887,500
9,831,929
11,740,797
11,885,972
1,515,981
9,278,894
9,770,928
9,233,927
9,787,090
11,750,299
9,876,735
7,906,132
11,841,025
11,887,500
9,831,929
11,740,797
11,885,972
169 $
45
54
195
42
171
178
—
197
193
1,244
9
265
240
232
241
297
253
179
271
266
187
217
244
2,901
4,145 $
169
45
42
195
42
171
178
38
197
193
1,270
21
227
240
232
241
297
253
179
271
266
187
217
244
2,875
4,145
Total ...................................................................................................................................................................
$
8,202 shares were converted from Series 8 to Series 9 and 853,503 shares were converted from Series 9 to Series 8 on November 1, 2021.
1. Rate determined quarterly.
2.
3. All Series 25 shares were converted into Series 24 on a one-for-one basis effective June 30, 2021.
4. Dividend rates are fixed for 5 to 6 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, December 31, 2016 and December 31, 2017, respectively and reset after
5 to 6 years to the 5-year Government of Canada bond rate plus between 180 and 417 basis points.
5. Dividend rate reset commenced March 31, 2019.
6. Dividend rate reset commenced March 31, 2020.
7. Dividend rate reset commenced September 30, 2019.
8. Dividend rate reset commenced June 30, 2020.
P – Prime Rate, B.A. – Bankers’ Acceptance Rate, b.p. – Basis Points.
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$25.00 per share.
222
BROOKFIELD ASSET MANAGEMENT
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)
2021
2020
Common equity .................................................................................................................................................. $ 82,898 $ 80,915
Preferred equity ..................................................................................................................................................
5,488
5,889
Total ................................................................................................................................................................... $ 88,386 $ 86,804
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)
2021
2020
Common shares .................................................................................................................................................. $ 10,538 $
7,368
Contributed surplus ............................................................................................................................................
320
285
Retained earnings ...............................................................................................................................................
17,705
15,178
Ownership changes ............................................................................................................................................
Accumulated other comprehensive income .......................................................................................................
6,243
7,404
2,691
6,171
Common equity .................................................................................................................................................. $ 42,210 $ 31,693
The company is authorized to issue an unlimited number of Class A Limited Voting Shares ("Class A shares") and
85,120 Class B Limited Voting Shares ("Class B shares"). The company’s Class A shares and Class B shares have no stated par
value. The holders of Class A shares and Class B shares rank on par 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
half of the Board of Directors of the company and holders of the Class B shares are entitled to elect the other 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 Class A and Class B shares, 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 is diluted.
On April 1, 2020, the company completed a three-for-two stock split of the company’s outstanding Class A shares. All share
count and per-share disclosure are presented on a post-split basis.
On June 28, 2021, the company completed the spin-out of BAMR by paying a special dividend to the holders of the company’s
Class A shares and Class B shares. The special dividend of $538 million recorded in equity was based on the fair value of the
assets distributed.
On July 26, 2021, the company issued 60.9 million Class A shares in connection with the privatization of Brookfield Property
Partners L.P. (“BPY”).
The holders of the company’s Class A shares and Class B shares received cash dividends during 2021 of $0.52 per share
(2020 – $0.48 per share).
The number of issued and outstanding Class A and Class B shares and unexercised options are as follows:
.................................................................................................................................
AS AT DEC. 31
Class A shares1
Class B shares ..................................................................................................................................
Shares outstanding1
..........................................................................................................................
Unexercised options, other share-based plans2 and exchangeable shares of affiliate ......................
Total diluted shares ..........................................................................................................................
2021
2020
1,568,743,821
1,510,635,291
85,120
85,120
1,568,828,941
1,510,720,411
82,825,207
62,975,947
1,651,654,148
1,573,696,358
1. Net of 69,663,192 Class A shares held by the company in respect of long-term compensation agreements as at December 31, 2021 (December 31, 2020 – 64,197,815).
2.
Includes management share option plan and escrowed stock plan.
2021 ANNUAL REPORT
223
The authorized common share capital consists of an unlimited number of Class A shares and 85,120 Class B shares. Shares
issued and outstanding changed as follows:
FOR THE YEARS ENDED DEC. 31
Outstanding, beginning of year1
Issued (Repurchased)
......................................................................................................
2021
2020
1,510,720,411
1,509,293,641
Issuances ........................................................................................................................................
61,276,716
—
Repurchases ...................................................................................................................................
Long-term share ownership plans2
Dividend reinvestment plan and other ...........................................................................................
Outstanding, end of year3
.................................................................................................................
.................................................................................................
(9,662,117)
(8,932,576)
6,369,972
10,137,294
123,959
222,052
1,568,828,941
1,510,720,411
1. Net of 64,197,815 Class A shares held by the company in respect of long-term compensation agreements as at December 31, 2020 (December 31, 2019 – 63,417,346).
2.
3. Net of 69,663,192 Class A shares held by the company in respect of long-term compensation agreements as at December 31, 2021 (December 31, 2020 – 64,197,815).
Includes management share option plan and restricted stock plan.
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)
2021
Net income (loss) attributable to shareholders ................................................................................................... $
3,966 $
Preferred share dividends ...................................................................................................................................
Dilutive effect of conversion of subsidiary preferred shares .............................................................................
(148)
(26)
Net income (loss) available to shareholders ......................................................................................................
3,792
Dilutive impact of exchangeable shares ............................................................................................................
2
2020
(134)
(141)
93
(182)
—
Net income (loss) available to shareholders including dilutive impact of exchangeable shares ....................... $
3,794 $
(182)
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Weighted average – Class A and Class B shares ...............................................................................................
Dilutive effect of conversion of options and escrowed shares using treasury stock method and
exchangeable shares of affiliate .......................................................................................................................
Class A and Class B shares and share equivalents ............................................................................................
50.4
1,586.9
2021
1,536.5
1. Adjusted to reflect the three-for-two stock split effective on April 1, 2020.
Share-Based Compensation
The expense recognized for share-based compensation is summarized in the following table:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
Expense arising from equity-settled share-based payment transactions ............................................................ $
110 $
Expense arising from cash-settled share-based payment transactions ...............................................................
Total expense arising from share-based payment transactions ..........................................................................
681
791
Effect of hedging program .................................................................................................................................
(670)
Total expense included in consolidated income ................................................................................................ $
121 $
20201
1,511.4
—
1,511.4
2020
89
104
193
(99)
94
The share-based payment plans are described below. There were no cancellations of or modifications to any of the plans during
2021 and 2020.
224
BROOKFIELD ASSET MANAGEMENT
Number of
Options
(000’s)1
47,367 US$
Weighted-
Average
Exercise Price
4,185
(7,388)
(370)
3,341
(6,382)
(295)
25.08
43.43
20.15
34.49
27.58
22.69
45.21
16.50
27.80
25.08
Number of
Options
(000’s)1
50,703 US$
Weighted-
Average
Exercise Price
Equity-settled Share-based Awards
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
ten 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. For the year ended December 31, 2021, the total expense incurred with respect to MSOP totaled $25 million
(2020 – $24 million).
The changes in the number of options during 2021 and 2020 were as follows:
NYSE
Outstanding as at January 1, 2021 ......................................................
Granted ..............................................................................................
Exercised ............................................................................................
Cancelled ...........................................................................................
Outstanding as at December 31, 2021 ................................................
43,794 US$
1. Options to acquire NYSE listed Class A shares.
NYSE
Outstanding as at January 1, 2020 ......................................................
Granted ..............................................................................................
Exercised ............................................................................................
Cancelled ...........................................................................................
Outstanding as at December 31, 2020 ................................................
47,367 US$
1. Options to acquire NYSE listed Class A shares.
The weighted-average fair value of options granted for the year ended December 31, 2021 was $6.97 (2020 – $5.54), and was
determined using the Black-Scholes valuation model, with inputs to the model as follows:
FOR THE YEARS ENDED DEC. 31
Unit
2021
Weighted-average share price ......................................................................................................
US$
43.43
Average term to exercise .............................................................................................................
Share price volatility1
Liquidity discount ........................................................................................................................
...................................................................................................................
Weighted-average annual dividend yield .....................................................................................
Risk-free rate ................................................................................................................................
Years
%
%
%
%
7.5
24.4
25.0
1.7
1.0
2020
45.21
7.5
17.0
25.0
1.5
1.4
1.
Share price volatility was determined based on historical share prices over a similar period to the average term to exercise.
2021 ANNUAL REPORT
225
At December 31, 2021, the following options to purchase Class A shares were outstanding:
Exercise Price
Weighted-Average
Remaining Life
Vested
Unvested
US$10.30 – US$15.35 ..............................................................................
US$16.81 – US$20.39 ..............................................................................
US$22.50 – US$26.93 ..............................................................................
US$29.48 – US$38.64 ..............................................................................
US$43.43 – US$45.21 ..............................................................................
0.2 years
2.8 years
5.0 years
7.2 years
8.7 years
629
10,238
14,473
3,083
646
—
—
3,856
4,173
6,696
Total
629
10,238
18,329
7,256
7,342
Options Outstanding (000’s)
29,069
14,725
43,794
At December 31, 2020, the following options to purchase Class A shares were outstanding:
Exercise Price
Weighted-Average
Remaining Life
Vested
Unvested
US$10.30 – US$15.35 ..............................................................................
US$15.58 – US$20.39 ..............................................................................
US$22.50 – US$26.93 ..............................................................................
US$29.48 – US$38.64 ..............................................................................
US$45.21 ..................................................................................................
1.0 years
3.8 years
5.9 years
8.2 years
9.2 years
2,254
11,860
14,280
1,833
—
—
1,131
7,010
5,672
3,327
Total
2,254
12,991
21,290
7,505
3,327
Options Outstanding (000’s)
30,227
17,140
47,367
Escrowed Stock Plan
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 by the company. The ES shares generally vest
over five years and must be held to the fifth anniversary of the grant date. At a date no more than ten 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 2021, 5.3 million Class A shares were purchased in respect of ES shares granted to executives under the ES Plan
(2020 – 3.8 million Class A shares) during the year. For the year ended December 31, 2021, the total expense incurred with
respect to the ES Plan totaled $41 million (2020 – $35 million).
The weighted-average fair value of escrowed shares granted for the year ended December 31, 2021 was $6.99 (2020 – $5.54),
and was determined using the Black-Scholes model of valuation with inputs to the model as follows:
FOR THE YEARS ENDED DEC. 31
Unit
2021
Weighted-average share price ......................................................................................................
US$
43.53
Average term to exercise .............................................................................................................
Share price volatility1
Liquidity discount ........................................................................................................................
...................................................................................................................
Weighted-average annual dividend yield .....................................................................................
Risk-free rate ................................................................................................................................
Years
%
%
%
%
7.5
24.4
25.0
1.6
1.0
2020
45.21
7.5
17.0
25.0
1.5
1.4
1.
Share price volatility was determined based on historical share prices over a similar period to the average term to exercise.
226
BROOKFIELD ASSET MANAGEMENT
The change in the number of ES shares during 2021 and 2020 was as follows:
Outstanding at January 1, 2021 ............................................................................................................
46,716 $
Granted .................................................................................................................................................
Exercised ..............................................................................................................................................
Cancelled ..............................................................................................................................................
5,300
(1,621)
(17)
Outstanding at December 31, 2021 ......................................................................................................
50,378 $
28.88
43.53
20.01
44.35
30.70
Number of
Units (000’s)
Weighted-
Average
Exercise Price
Number of
Units (000’s)
Weighted-
Average
Exercise Price
Outstanding at January 1, 2020 ............................................................................................................
54,791 $
Granted .................................................................................................................................................
Exercised ..............................................................................................................................................
Cancelled ..............................................................................................................................................
Outstanding at December 31, 2020
Restricted Stock Plan
3,841
(11,613)
(303)
46,716 $
25.82
45.21
19.66
35.85
28.88
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 are subject to a hold
period of up to five years. Holders of 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 2021, Brookfield granted 3.1 million Class A shares (2020 – 1.0 million) pursuant to the terms and conditions of the
Restricted Stock Plan, in which 1.5 million were converted from BPY units in connection with the BPY privatization, resulting
in the recognition of $43 million (2020 – $30 million) of compensation expense.
Cash-settled Share-based Awards
Deferred Share Unit Plan and Restricted Share Unit Plan
The Deferred Share Unit Plan and Restricted Share Unit Plan provide for the issuance of DSUs and RSUs, respectively. Under
these plans, qualifying employees and directors receive varying percentages of their annual incentive bonus or directors’ fees in
the form of DSUs and RSUs. 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. 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, 2021 was
$1.9 billion (2020 – $1.3 billion).
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. For the year ended December 31, 2021, employee compensation expense
totaled $11 million (2020 – $5 million), net of the impact of hedging arrangements.
2021 ANNUAL REPORT
227
The change in the number of DSUs and RSUs during 2021 and 2020 was as follows:
DSUs
RSUs
Number
of Units
(000’s)
Number
of Units
(000’s)
Weighted-
Average
Exercise
Price
Outstanding at January 1, 2021 ............................................................................................
18,721
13,679 C$
6.10
Granted and reinvested ........................................................................................................
1,929
Exercised and cancelled .......................................................................................................
(2,364)
—
—
—
—
Outstanding at December 31, 2021 ......................................................................................
18,286
13,679 C$
6.10
DSUs
RSUs
Number
of Units
(000’s)
Number
of Units
(000’s)
Weighted-
Average
Exercise
Price
Outstanding at January 1, 2020 ............................................................................................
21,204
15,810 C$
Granted and reinvested ........................................................................................................
623
—
Exercised and cancelled .......................................................................................................
(3,106)
(2,131)
Outstanding at December 31, 2020 ......................................................................................
18,721
13,679 C$
6.14
—
6.35
6.10
The fair value of each DSU is equal to the traded price of the company’s common shares.
Share price on date of measurement ......................................................................................
C$
Share price on date of measurement ......................................................................................
US$
76.39
60.38
52.62
41.27
Unit
Dec. 31, 2021
Dec. 31, 2020
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 ...................................................................................
Unit
Dec. 31, 2021
Dec. 31, 2020
C$
C$
76.39
70.29
52.62
46.52
22. REVENUES
We perform a disaggregated analysis of revenues considering the nature, amount, timing and uncertainty of revenues. This
includes disclosure of our revenues by segment and type, as well as a breakdown of whether revenues from goods or services
are recognized at a point in time or delivered over a period of time.
a) Revenue by Type
FOR THE YEAR ENDED
DEC. 31, 2021
(MILLIONS)
Revenue from contracts
Asset
Management
Corporate
Activities
Renewable
Power and
Transition
Infrastructure
Private
Equity
Real Estate
Residential
Development
Total
Revenues
with customers ............................. $
306
$
—
$
4,041
$
11,204
$
44,558
$
3,259
$
2,463
$
65,831
Other revenue ....................................
—
169
539
737
1,694
6,664
97
9,900
$
306
$
169
$
4,580
$
11,941
$
46,252
$
9,923
$
2,560
$
75,731
FOR THE YEAR ENDED
DEC. 31, 2020
(MILLIONS)
Asset
Management
Corporate
Activities
Renewable
Power and
Transition
Infrastructure
Private
Equity
Real Estate
Residential
Development
Total
Revenues
Revenue from contracts
with customers ............................. $
246
$
—
$
3,757
$
8,611
$
35,599
$
2,403
$
2,170
$
52,786
Other revenue ....................................
—
872
328
683
1,562
6,448
73
9,966
$
246
$
872
$
4,085
$
9,294
$
37,161
$
8,851
$
2,243
$
62,752
228
BROOKFIELD ASSET MANAGEMENT
b) Timing of Recognition of Revenue from Contracts with Customers
FOR THE YEAR ENDED
DEC. 31, 2021
(MILLIONS)
Goods and services provided at a
Asset
Management
Corporate
Activities
Renewable
Power and
Transition
Infrastructure
Private
Equity
Real Estate
Residential
Development
Total
Revenues
point in time ................................. $
—
$
—
$
137
$
137
$
37,676
$
637
$
2,450
$
41,037
Services transferred over a period of
time ....................................................
306
$
306
$
—
—
3,904
11,067
6,882
2,622
13
24,794
$
4,041
$
11,204
$
44,558
$
3,259
$
2,463
$
65,831
FOR THE YEAR ENDED
DEC. 31, 2020
(MILLIONS)
Goods and services provided at a
Asset
Management
Corporate
Activities
Renewable
Power and
Transition
Infrastructure
Private
Equity
Real Estate
Residential
Development
Total
Revenues
point in time ................................. $
—
$
—
$
143
$
160
$
28,944
$
553
$
2,167
$
31,967
Services transferred over a period of
time ....................................................
246
—
3,614
8,451
6,655
1,850
3
20,819
$
246
$
—
$
3,757
$
8,611
$
35,599
$
2,403
$
2,170
$
52,786
Remaining Performance Obligation
Private Equity
In our construction services operation, backlog is defined as revenue yet to be delivered (i.e. remaining performance
obligations) on construction projects that have been secured via an executed contract, work order or letter of intent. As at
December 31, 2021, our backlog of construction projects was approximately $7.5 billion (2020 – $5.6 billion).
In our Brazilian water and wastewater services operation, our long-term, inflation-adjusted concession service contracts with
various municipalities have an average remaining contract duration of 24 years as at December 31, 2021 (2020 – 24 years).
Others
In our Asset Management, Infrastructure and Renewable Power and Transition businesses, revenue is generally recognized as
invoiced for contracts recognized over a period of time as the amounts invoiced are commensurate with the value provided to
the customers.
c) Lease Income
Our leases in which the company is a lessor are primarily operating in nature. Total lease income from our assets leased out on
operating leases totaled $6.7 billion (2020 – $6.7 billion) including $147 million (2020 – $75 million) of income related to
variable lease income that is not dependent on an index or rate.
The following table presents the undiscounted contractual earnings receivable of the company’s leases by expected period of
receipt:
Payments Receivable by Period
AS AT DEC. 31, 2021
(MILLIONS)
Less than 1
Year
1 – 3
Years
4 – 5
Years
After 5
Years
Total
Receivables from lease contracts ................................ $
5,072 $
8,090 $
6,333 $
14,355 $
33,850
AS AT DEC. 31, 2020
(MILLIONS)
Less than 1
Year
1 – 3
Years
4 – 5
Years
After 5
Years
Total
Receivables from lease contracts ................................ $
4,738 $
8,385 $
6,661 $
15,971 $
35,755
Payments Receivable by Period
2021 ANNUAL REPORT
229
23. DIRECT COSTS
Direct costs include all attributable expenses except interest, taxes and fair value changes, and primarily relate to cost of sales
and compensation. The following table lists direct costs for 2021 and 2020 by nature:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
Cost of sales ....................................................................................................................................................... $ 44,149 $ 35,150
Compensation ....................................................................................................................................................
Depreciation and amortization ...........................................................................................................................
Selling, general and administrative expenses ....................................................................................................
Property taxes, sales taxes and other ..................................................................................................................
7,804
6,437
3,197
2,413
6,857
5,791
2,860
2,519
$ 64,000 $ 53,177
During the fourth quarter of 2021, the company reclassified $6.4 billion of depreciation and amortization, which were
previously presented as a separate line item, to direct costs. The prior period amount was also adjusted to reflect this change,
which resulted in an increase to direct costs of $5.8 billion for the year ended December 31, 2020, with equal and offsetting
decreases to depreciation and amortization. This reclassification had no impact on revenues, net income, or basic and diluted
earnings per share.
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 are comprised of the
following:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
Investment properties ......................................................................................................................................... $
5,073 $
(269)
Transaction related gains, net of expenses .........................................................................................................
Financial contracts .............................................................................................................................................
Impairment and provisions ................................................................................................................................
Other fair value changes ....................................................................................................................................
714
984
(654)
(966)
20
686
(808)
(1,052)
$
5,151 $
(1,423)
230
BROOKFIELD ASSET MANAGEMENT
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, 2021 and 2020 is as follows:
AS AT DEC. 31
(MILLIONS)
Foreign exchange ................................................................................................................................
Interest rates ........................................................................................................................................
Equity derivatives ...............................................................................................................................
Note
(a)
(b)
(c)
2021
2020
$ 63,083 $ 39,284
61,111
2,081
55,899
4,448
Commodity instruments .....................................................................................................................
Energy (GWh) .................................................................................................................................
Natural gas (MMBtu – 000’s) .........................................................................................................
(d)
35,156
246,375
27,564
121,468
a) Foreign Exchange
The company held the following foreign exchange contracts with notional amounts at December 31, 2021 and 2020:
(MILLIONS)
Foreign exchange contracts
Notional Amount
(U.S. Dollars)
2021
2020
Average Exchange Rate
2020
2021
Canadian dollars .................................................................................................. $ 11,689 $
British pounds .....................................................................................................
European Union euros .........................................................................................
Australian dollars ................................................................................................
Indian rupee .........................................................................................................
Chilean peso ........................................................................................................
Korean won1
........................................................................................................
Chinese yuan1
......................................................................................................
Japanese yen1
.......................................................................................................
Colombian pesos1
................................................................................................
Brazilian reais ......................................................................................................
Swedish krona .....................................................................................................
Other currencies ..................................................................................................
12,089
9,939
4,791
3,281
—
756
2,484
793
740
1,291
1,475
2,799
Cross currency interest rate swaps
Canadian dollars ..................................................................................................
European Union euros .........................................................................................
Australian dollars ................................................................................................
Japanese yen1
.......................................................................................................
British pounds .....................................................................................................
Colombian pesos1
................................................................................................
Foreign exchange futures
Brazilian reais ......................................................................................................
Foreign exchange options
5,566
848
1,317
750
298
—
7,539
3,986
4,561
2,632
1,288
159
700
1,633
212
96
276
1,647
903
6,868
1,914
1,374
750
275
88
0.81
1.19
1.14
0.72
78.90
—
1,151
6.02
111.27
3,937
0.16
9.08
Various
0.63
1.06
0.98
113.33
1.48
—
0.76
1.31
1.17
0.69
77.56
770.89
1,175
7.05
105.82
3,621
0.19
8.58
Various
0.77
1.06
0.53
113.33
1.49
3,880
175
105
0.18
0.19
Canadian dollars ..................................................................................................
European Union euros .........................................................................................
Indian rupee .........................................................................................................
—
1,430
572
2,030
245
—
—
1.11
74.56
0.74
1.17
—
1. Average rate is quoted using USD as base currency.
Included in net income are unrealized net losses on foreign currency derivative contracts amounting to $53 million
(2020 – losses of $41 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 $367 million (2020 – gains of
$28 million).
2021 ANNUAL REPORT
231
b) Interest Rates
At December 31, 2021, the company held interest rate swap and forward starting swap contracts having an aggregate
notional amount of $28.6 billion (2020 – $30.2 billion), interest rate swaptions with an aggregate notional amount of
$0.2 billion (2020 – $3.9 billion) and interest rate cap contracts with an aggregate notional amount of $27.1 billion (2020 –
$27 billion).
c) Equity Derivatives
At December 31, 2021, the company held equity derivatives with a notional amount of $4.4 billion (2020 – $2.1 billion)
which includes $1.8 billion (2020 – $1.3 billion) notional amount that hedges long-term compensation arrangements. The
balance represents common equity positions established in connection with the company’s investment activities as well as
general equity market hedges. The fair value of these instruments was reflected in the company’s consolidated financial
statements at year end.
d) Commodity Instruments
The company has entered into energy derivative contracts primarily to hedge the sale of generated power. The company
endeavors 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 financial contracts outstanding on 246,375,000 MMBtu’s (2020 –
121,468,000 MMBtu’s) of natural gas 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, 2021 and 2020 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:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
Cash flow hedges1
Net investment hedges ...............................................
...................................................... $ 43,776 $
582 $
24 $ 39,128 $
(479) $
43,997
407
(14)
17,788
182
$ 87,773 $
989 $
10 $ 56,916 $
(297) $
10
10
20
2021
2020
Notional
Effective
Portion
Ineffective
Portion
Notional
Effective
Portion
Ineffective
Portion
1. Notional amount does not include 17,753 GWh, 93,623 MMBtu – 000’s and 1,152 bbls – millions of commodity derivatives at December 31, 2021 (2020 –
13,950 GWh, 82,663 MMBtu – 000’s and 1,302 bbls – millions).
232
BROOKFIELD ASSET MANAGEMENT
The following table presents the change in fair values of the company’s derivative positions during the years ended
December 31, 2021 and 2020, for derivatives that are fair valued through profit or loss, and derivatives that qualify for hedge
accounting:
(MILLIONS)
Unrealized
Gains
During 2021
Unrealized
Losses
During 2021
Net Change
During 2021
Net Change
During 2020
Foreign exchange derivatives ............................................................... $
191 $
(244) $
(53) $
Interest rate derivatives .........................................................................
Equity derivatives .................................................................................
Commodity derivatives .........................................................................
332
788
44
(149)
(31)
(227)
183
757
(183)
$
1,355 $
(651) $
704 $
(41)
(227)
850
(42)
540
The following table presents the notional amounts underlying the company’s derivative instruments by term to maturity as at
December 31, 2021 and 2020, for derivatives that are classified as fair value through profit or loss, and derivatives that qualify
for hedge accounting:
AS AT DEC. 31
(MILLIONS)
1 to 5 Years
>5 Years
<1 Year
Total Notional
Amount
2021
2020
Total Notional
Amount
Fair value through profit or loss
Foreign exchange derivatives ....................... $
8,836 $
1,829 $
268 $
10,933 $
Interest rate derivatives .................................
Equity derivatives .........................................
9,409
3,334
Commodity instruments
Energy (GWh) ...........................................
Natural gas (MMBtu – 000’s) ...................
2,335
134,298
Elected for hedge accounting
10,012
1,019
12,602
18,455
240
—
2,466
—
19,661
4,353
17,403
152,753
Foreign exchange derivatives ....................... $
16,494 $
34,763 $
893 $
52,150 $
Interest rate derivatives .................................
Equity derivatives .........................................
Commodity instruments
Energy (GWh) ...........................................
Natural gas (MMBtu – 000’s) ...................
11,494
95
6,165
58,741
22,846
—
7,780
34,882
1,898
—
3,809
—
36,238
95
17,754
93,623
12,178
27,080
2,081
13,613
38,805
27,106
34,032
—
13,950
82,664
2021 ANNUAL REPORT
233
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 exchange 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 by 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
changes in value 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 $283 million (2020 – $156 million) on a current basis.
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 before tax of $101 million (2020 – $137 million) and an increase in other comprehensive income of
$318 million (2020 – $363 million), for the years ended December 31, 2021 and 2020, respectively.
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 a $109 million (2020 – $117 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 $509 million
(2020 – $235 million) as at December 31, 2021, 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.
234
BROOKFIELD ASSET MANAGEMENT
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 $303 million (2020 – $186 million)
and decreased other comprehensive income by $122 million (2020 – $161 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 $98 million (2020 – $69 million). This increase would be offset by a $116 million (2020 – $78 million) change in
value of the associated equity derivatives of which $98 million (2020 – $69 million) would offset the above-mentioned increase
in compensation expense and the remaining $18 million (2020 – $9 million) would be recorded in net 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, 2021 by approximately
$49 million (2020 – $16 million) and decreased other comprehensive income by $27 million (2020 – $19 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.
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 creditworthiness of each counterparty before entering into contracts with a view to ensuring that
counterparties meet minimum credit quality requirements. Management evaluates and monitors counterparty credit risk for
derivative financial instruments and endeavors 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 U.K. 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.
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 help ensure the company is able to react to contingencies and investment opportunities quickly, the company maintains
sources of liquidity at the corporate and subsidiary levels. 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.
2021 ANNUAL REPORT
235
The following tables present the contractual maturities of the company’s financial liabilities at December 31, 2021 and 2020.
Payments Due by Period
AS AT DEC. 31, 2021
<1 Year
(MILLIONS)
Principal repayments
4 to 5 Years
1 to 3 Years
After 5 Years
Total
Corporate borrowings1
Non-recourse borrowings of managed
............................. $
entities .................................................
Subsidiary equity obligations ..................
Interest expense2
Corporate borrowings ..............................
Non-recourse borrowings ........................
Subsidiary equity obligations ..................
......................................
Lease Obligations3
— $
1,138 $
2,566 $
7,171 $
10,875
31,683
546
420
5,918
162
1,156
45,186
1,563
802
10,130
300
2,389
41,918
544
659
6,832
228
1,615
46,270
1,655
3,652
11,958
33
13,550
165,057
4,308
5,533
34,838
723
18,710
Payments due in the 4 to 5 year period include $912 million of commercial paper and credit facility draws outstanding as at December 31, 2021.
1.
2. 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.
3. The lease obligations as disclosed in the table above include leases that are classified as finance leases, short-term leases, low-value leases and variable lease payments
not based on an index or rate, which are immaterial.
Payments Due by Period
AS AT DEC. 31, 2020
<1 Year
(MILLIONS)
Principal repayments
4 to 5 Years
1 to 3 Years
After 5 Years
Total
Corporate borrowings .............................. $
— $
467 $
1,630 $
6,980 $
9,077
Non-recourse borrowings of managed
entities .................................................
Subsidiary equity obligations ..................
Interest expense1
Corporate borrowings ..............................
Non-recourse borrowings ........................
Subsidiary equity obligations ..................
.......................................
Lease obligations2
21,108
799
405
5,145
147
815
29,399
1,147
793
8,788
213
1,682
40,049
800
659
6,310
171
1,123
48,768
953
3,593
8,313
44
11,755
139,324
3,699
5,450
28,556
575
15,375
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.
2. The lease obligations as disclosed in the table above include leases that are classified as finance leases, short-term leases, low-value leases and variable lease payments
not based on an index or rate, which are immaterial.
236
BROOKFIELD ASSET MANAGEMENT
27. RELATED PARTY TRANSACTIONS
a) Related Parties
Related parties include subsidiaries, associates, joint ventures, 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 Executives. 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 key management personnel and Directors of the company during the years ended December 31, 2021 and
2020 was as follows:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
2020
Salaries, incentives and short-term benefits ....................................................................................................... $
16 $
Share-based payments ........................................................................................................................................
56
$
72 $
14
81
95
The remuneration of key management personnel and Directors is determined by the Management Resources and 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 that 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. Transactions and balances between consolidated entities
are fully eliminated upon consolidation. However, transactions and balances between the company and equity accounted
investments do not eliminate.
The following table lists the related party balances included within the consolidated financial statements for the years ended
December 31, 2021 and 2020:
FOR THE YEARS ENDED DEC. 31
(MILLIONS)
2021
Management fees received ................................................................................................................................. $
24 $
2020
31
The company provided BAMR an equity commitment in the amount of $2 billion to fund future growth, which BAMR may
draw on from time to time. As of December 31, 2021, there was no amount drawn under this equity commitment.
During the year, subsidiaries of BAMR purchased investments of $0.9 billion from the company.
Throughout 2021, under a deposit arrangement on arms’ length terms, wholly owned subsidiaries of the company provided
working capital to BAMR. During the year, BAMR drew down under this arrangement approximately $742 million of cash to
temporarily fund new reinsurance and pension risk transfer transactions, as well as various other investments.
2021 ANNUAL REPORT
237
28. OTHER INFORMATION
a) 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. As at December 31, 2021, the company had
$3.7 billion (2020 – $4.1 billion) of such commitments outstanding.
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
favor of the company or its counterparties. These include buy sell arrangements, registration rights and other customary
arrangements that 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, 2021 could result in a material settlement liability.
The company has insurance for damage and business interruption costs sustained as a result of an act of terrorism. The amount
of coverage is reviewed on an individual basis and can range up to $4 billion. However, a terrorist act could have a material
effect on the company’s assets to the extent damages exceed 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.
As discussed in Note 19 Subsidiary Equity Obligations, in 2014, BPY issued $1.8 billion of exchangeable preferred equity
units in three $600 million tranches redeemable in 2021, 2024 and 2026, respectively. The preferred equity units were
originally 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. Following the BPY privatization, the preferred equity units became exchangeable into cash equal to the value
of the consideration that would have been received upon the BPY privatization (a combination of cash, BAM shares and New
LP Preferred Units), based on the value of that consideration on the date of exchange. BPY also has the option of delivering the
actual consideration (a combination of cash, BAM shares and New LP Preferred Units). Following the BPY privatization, we
have agreed with the holder to grant the company the right to purchase all or any portion of the preferred equity units of the
holder at maturity, and to grant the holder the right to sell all or any portion of the preferred equity units of the holder at
maturity, in each case at a price equal to the issue price for such preferred equity units plus accrued and unpaid distributions.
On December 30, 2021, the company acquired the tranche redeemable in 2021 from the holder and exchanged such units for
Redemption-Exchange Units. The preferred equity units were subsequently cancelled.
b) Supplemental Cash Flow Information
During the year, the company capitalized $387 million (2020 – $310 million) of interest primarily to investment properties and
residential inventory under development.
238
BROOKFIELD ASSET MANAGEMENT
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
E: enquiries@brookfield.com
www.bam.brookfield.com
Shareholder enquiries relating to dividends, address changes and share
certificates should be directed to our Transfer Agent:
TSX Trust Company
P.O. Box 700, Station B
Montreal, Quebec H3B 3K3
T: 1-877-715-0498 (North America)
1-514-985-8843 (Outside North America)
F: 1-888-249-6189
E: shareholderinquiries@tmx.com
www.tsxtrust.com
Stock Exchange Listings
Class A Limited Voting Shares
Class A Preference Shares
Symbol
BAM
BAM.A
Stock Exchange
New York
Toronto
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
Series 48
BAM.PR.B
BAM.PR.C
BAM.PR.E
BAM.PR.G
BAM.PR.K
BAM.PR.M
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
BAM.PF.J
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
Toronto
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 2021 Annual Report is available in French on request from the
company and is filed with and available through SEDAR at www.sedar.com.
Dividends
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 U.S. 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 board lots of Class A Shares have traded on the New York Stock
Exchange based on the average closing price during each of the five trading days
immediately preceding the relevant Investment Date1 on which at least one
board lot of Class A Shares has traded, as reported by the New York Stock
Exchange (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 Investment 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.
1 “Investment Date” means each dividend payment date upon which cash dividends paid on all Class A Shares registered in the name of a shareholder, net of any
applicable withholding taxes, are reinvested.
Dividend Record and Payment Dates
Security1
Record Date2
Payment Date3
Class A and Class B shares
Class A Preference shares
Series 2, 4, 13, 17, 18, 24, 25, 26, 28, 30
Last day of February, May, August and November
Last day of March, June, September and December
32, 34, 36, 37, 38, 40, 42, 44, 46 and 48
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
15th day of January, April, July and October
12th day of following month
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 Date will be the previous business day.
2021 ANNUAL REPORT
239
Board of Directors and Officers
BOARD OF DIRECTORS
M. Elyse Allan, C.M.
Former President and Chief Executive
Officer, General Electric Canada
Company Inc. and former Vice-President,
General Electric Company
Jeffrey M. Blidner
Vice Chair,
Brookfield Asset Management Inc.
Angela F. Braly
Former Chair of the Board, President and
Chief Executive Officer, WellPoint, Inc.
(now known as Anthem, Inc.)
Jack L. Cockwell, C.M.
Chair, Brookfield Partners Foundation
Marcel R. Coutu
Former President and
Chief Executive Officer,
Canadian Oil Sands Limited and
former Chair of Syncrude Canada Ltd.
Bruce Flatt
Chief Executive Officer,
Brookfield Asset Management Inc.
Hon. Frank J. McKenna, P.C., O.C., O.N.B.
Chair, Brookfield Asset Management Inc.
and Deputy Chair, TD Bank Group
Janice Fukakusa, C.M., F.C.P.A., F.C.A.
Former Chief Administrative Officer and
Chief Financial Officer, Royal Bank of
Canada
Maureen Kempston Darkes, O.C., O.ONT.
Former President, Latin America, Africa
and Middle East, General Motors
Corporation
Brian D. Lawson
Vice Chair, and former Chief Financial
Officer,
Brookfield Asset Management Inc.
Howard Marks
Co-chair,
Oaktree Capital Group, LLC.
Rafael Miranda
Former Chief Executive Officer,
Endesa, S.A.
Lord O’Donnell
Chair, Frontier Economics Ltd.
Hutham S. Olayan
Chair of The Olayan Group and former
President and CEO of Olayan America
Seek Ngee Huat
Chair, GLP IM Holdings Limited and Former
Chair, Global Logistic Properties Ltd., and
former President of GIC Real Estate Pte. Ltd.
Diana L. Taylor
Former Vice Chair, Solera Capital LLC
Details on Brookfield’s directors are provided in the Management Information Circular and on Brookfield’s website at
www.brookfield.com.
CORPORATE OFFICERS
Bruce Flatt, Chief Executive Officer
Nicholas Goodman, Chief Financial Officer
Justin B. Beber, Chief Legal Officer
Brookfield incorporates sustainable development practices within our corporation.
This document was printed in Canada using vegetable-based inks on FSC® stock.
240
BROOKFIELD ASSET MANAGEMENT
BROOKFIELD ASSET MANAGEMENT INC.
Brookfield.com
NYSE: BAM
TSX: BAM.A
BROOKFIELD CORPORATE OFFICES
United States
Brookfield Place
250 Vesey Street
15th Floor
New York, NY
10281-0221
+1.212.417.7000
Canada
United Kingdom
Australia
Brookfield Place
One Canada Square
Brookfield Place
181 Bay Street, Suite 300
Level 25
Level 19
Bay Wellington Tower
Toronto, ON M5J 2T3
+1.416.363.9491
Canary Wharf
London E14 5AA
+44.20.7659.3500
10 Carrington Street
Sydney, NSW 2000
+61.2.9158.5100
Brazil
United Arab Emirates
India
China
Avenida das Nações Unidas,
Level 16, ICD Brookfield Place
Unit 1
Suite 1201, Tower B, One East
Al Mustaqbal Street, DIFC
4th Floor, Godrej BKC
No. 736 South Zhongshan 1st Road
P.O. Box 507234
Bandra Kurla Complex
Huangpu District
Mumbai 400 051
+91.22.6600.0700
Shanghai 200021
+86.21.2306.0700
14.261
Edifício WT Morumbi
Ala B - 20º andar
Dubai
Morumbi - São Paulo - SP
+971.4.597.0100
CEP 04794-000
+55 (11) 2540.9150
OAKTREE CORPORATE OFFICES
United States
United States
United Kingdom
Hong Kong
333 South Grand Avenue
1301 Avenue of the Americas
Verde
Suite 2001, 20/F
28th Floor
Los Angeles, CA 90071
+1.213.830.6300
34th Floor
New York, NY 10019
+1.212.284.1900
10 Bressenden Place
Champion Tower
London SW1E 5DH
+44.20.7201.4600
3 Garden Road
Central
+852.3655.6800
REGIONAL OFFICES (BROOKFIELD & OAKTREE)
North America
South America
Europe / UAE
Asia Pacific
Bermuda
Calgary
Chicago
Houston
Los Angeles
Vancouver
Bogotá
Lima
Rio de Janeiro
Amsterdam
Dublin
Frankfurt
Helsinki
Luxembourg
Paris
Madrid
Dubai
Sydney
Beijing
Hong Kong
Shanghai
Seoul
Singapore
Tokyo