Brookfield Asset Management (BAM) 40-F2020 FY Annual report (Canada)

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.” In particular, the forward-looking statements contained in this Report include statements referring to the impact of current market or economic conditions on our businesses and the impact of COVID-19 and the global economic shutdown on the market, economic conditions, or our businesses.

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, including the ongoing and developing COVID-19 pandemic and the global economic shutdown, which may cause the actual results, performance or achievements of the Corporation to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: (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 global economic shutdown; (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, including COVID-19; (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, infrastructure, private equity, credit and residential development activities; and (xxv) factors detailed from time to time in our documents filed with the securities regulators in Canada and the U.S., 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.

STATEMENT REGARDING USE OF NON-IFRS MEASURES

We manage and earn fees on a diverse range of real estate, renewable power, infrastructure, private equity and credit funds. These funds are long duration in nature and include closed-end value-add, credit and opportunistic strategies. On long-term private fund capital, we earn:

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.

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 listed affiliates or through our own balance sheet ensures strong alignment of interest with our investors.

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.

The Corporation has $7 billion of liquidity and $77 billion on a group basis as at December 31, 2020, and we manage our liquidity and capitalization on a group-wide basis, which we organize into three principal tiers:

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 listed affiliates and private funds, we strive to:

As at December 31, 2020, only $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.

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 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, and is computed as follows:

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:

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:

These cash flows are supplemented with carried interest as we monetize mature investments and return capital to our investors.

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.

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.

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 business or risk area. As such, business specific risks overall—such as safety, environment and other operational risks—are generally managed at the operating business group level, as the risks vary based on the nature of each business. At the same time, we monitor many of these 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 centralized approach amongst our corporate and our operating business groups. Management of strategic, reputational and regulatory compliance risks are similarly coordinated to ensure consistent focus and implementation across the organization.

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:

Brookfield’s Board of Directors 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:

We believe that acting responsibly toward our stakeholders is fundamental to operating a productive, profitable and sustainable business. This underlies our philosophy of conducting business with a long-term perspective in a sustainable and ethical manner. Our bottom line is that having robust ESG principles and practices is good business for a wide variety of reasons, and we have been imbedding many of these into our asset management activities and underlying business operations for many years.

Brookfield’s Board of Directors, through the Governance and Nominating Committee, has ultimate oversight of Brookfield’s ESG strategy and receives regular updates on the company’s ESG initiatives throughout the year. The ESG Steering Committee, which comprises senior executives from BAM and each of our business groups, is the primary decision-making body on all ESG matters and drives ESG initiatives based on our business imperatives, industry developments and best practices. The Steering Committee executes its mandate through the ESG Working Group, comprising operational professionals from each of these constituencies.

We incorporate ESG factors into our investment decisions, starting with the due diligence of a potential investment through to the exit process. During the initial due diligence phase, we utilize our operating expertise and industry-specific engagement guidance to identify material ESG risks and opportunities relevant to the potential investment. We perform deeper due diligence if required, utilizing internal experts and third-party advisors as needed. All investments made by the company are approved by our investment committees based on a comprehensive set of predetermined criteria that evaluate potential risks, mitigants and opportunities. ESG matters are part of this evaluation, including anti-bribery and corruption, health and safety, and other environmental, social and governance considerations.

As part of each acquisition, the investment teams create a tailored integration plan that, among other things, includes material ESG-related matters for review or execution. ESG risks and opportunities through the investment’s life cycle are identified and assessed during due diligence and then actively managed by each portfolio company with support from the investment team responsible for the investment. This recognizes the importance of local expertise, which provides valuable insight given the wide range of asset types and locations in which we invest, coupled with Brookfield’s broad investment expertise. We believe there is a strong correlation between actively managing all facets of ESG effectively and enhancing investment returns.

The below provides a summary of select ESG initiatives undertaken during the year. For additional information please refer to Brookfield’s ESG report, which can be accessed on the Responsibility page of the Corporation’s website.

We believe that our operating businesses are well positioned as the world transitions toward a net zero-carbon economy.

Our renewable power business continues to be one of the largest pure-play global owners and operators of hydroelectric, wind and solar power generation facilities and is committed to supporting the global transition toward a net zero-carbon economy. Further, we are one of the world’s largest owners of real estate and our office and retail portfolios are heavily weighted towards properties that meet high environmental sustainability standards consistent with the expectations of our tenants, which we view as enhancing rental revenues and lowering operating costs. Our infrastructure and private equity businesses include a wide variety of businesses, many of which are well positioned to have a positive environmental impact and benefit from our focus on operational efficiency, including energy efficiency.

From a decarbonization standpoint, we intend to be a leader in both driving the transition to net zero and measuring and reporting on the same, in line with industry standards. We are working from a strong foundation and intend to do more. This includes enhancing our climate change mitigation and adaptation processes to ensure they are properly factored into our governance and risk management protocols and measuring and monitoring our greenhouse gas (“GHG”) emissions across the business. The latest GHG emissions information for our asset management business is available in our 2019 ESG report.

We continue our work to align with the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”). We have assessed our practices against TCFD recommendations, and are following an implementation roadmap for continued progress in our alignment.

We have also been active in the sustainable finance market, with issuances in 2020 reaching more than $3.5 billion across green bonds, sustainability-linked debt and green preferred shares, up from $2.7 billion from last year. Some of our assets and investments are well-suited for sustainable financing, and we continue to look for opportunities to access capital in this manner.

We value our 2,000 asset management employees and we actively seek opportunities to develop them and to ensure they are engaged. Our commitment to a positive, open and inclusive work environment in all of our offices globally creates an environment that encourages strong relationships, provides an environment conducive to development and enables us to benefit from diverse perspectives, further enhancing our ability to add value to our people. We also recognize that we must be positive contributors to the communities in which we operate and not just an employer.

In addition to having a positive impact on the communities in which we operate, philanthropic and other community activities are an opportunity to increase the engagement of our teams and support the development of our people. The COVID-19 pandemic was a focus for our philanthropic efforts during the year, and we were able to use the breadth of our global footprint to support relief efforts around the world. This included making donations, either in cash or supplies, to health organizations and other not-for-profit organizations focused on vulnerable members of our communities. We also expanded our global gift matching program from a one-to-one to a two-to-one match for COVID-19 related donations, and we worked with our operating businesses to find numerous ways in which to support relief efforts. Examples of these relief efforts include offering our retail parking lots for blood drives, food banks and mobile COVID-19 testing sites; providing hotel rooms for first responders; and feeding furloughed workers and their families out of hotel kitchens.

A focus on diversity and inclusion is another aspect of a positive work environment and our efforts in this regard have resulted in significant progress. Specifically, over the last five years, we have more than doubled our employee population in the asset management business and during this period, we have also doubled our female representation at the most senior level of the organization; Managing Partner/Managing Director female representation increased from 6% to 13% and Senior Vice President representation increased from 14% to 34%. In 2020, we broadened our focus beyond gender to include ethnic diversity. As a first step we created a Global Diversity Advisory Group to support this effort. The initial mandate of the group is to provide insights into the concerns, challenges, and successes around attracting and retaining members of the Black community within North America. Early initiatives include the development of a process for employees to self-identify their ethnicity to help us identify where to focus on increasing ethnic diversity. In addition, this group is providing support in the areas of recruiting, and diversity and inclusion education.

Finally, while the health and safety of our employees has always been a priority, it required additional focus as we managed through the COVID-19 pandemic. In each of our locations, as soon as it was permissible, and subject to individual personal health considerations, we brought our employees back to the office. We believe this was important to reinforce our culture of collaboration, enable the development of our employees and benefit their mental health. There were four key principles we followed to accomplish this safely: adherence to local requirements, strong safety protocols—often exceeding government requirements, mitigating the risk through continuous reviews of changing protocols, and respect for each employee’s privacy. The safety protocols included installation of glass partitions between workspaces, access to regular, free COVID-19 testing and clear protocols for addressing situations where an employee contracted COVID-19.

Health and safety in the workplace also represent an integral part of how our businesses are managed. As health and safety risk varies across industry sectors and the nature of operations, we emphasize the importance of having operating businesses directly accountable and responsible for managing and reporting risks within their operations, while Brookfield provides an important level of oversight and support. For details on our operational health and safety framework as it relates to our operating businesses, please refer to Brookfield’s 2019 ESG report.

We continue to prioritize our data privacy and security. In 2020, we undertook initiatives to further protect our environment by enhancing our access controls and anti-malware protections, and improving our detection and response capabilities through the use of automated technologies. Annually we review our cybersecurity program and periodically we have an external party assess our program maturity based on the NIST Cybersecurity Framework. The results of the recent assessment validated the strength of our program. Finally, in addition to continued mandatory cybersecurity education for all employees, we implemented additional training for specific groups, such as new employees or employees in roles where the impact of a cyber incident is greatest (e.g., finance teams, human resources). The strength of this effort was evidenced through improved results in our phishing simulations.

Finally, we continue to align our business practices with leading frameworks for responsible investing and demonstrate our commitment by serving as a member and active participant in industry forums and other organizations. In early 2020, we became a signatory to the United Nations-supported Principles for Responsible Investment (“PRI”), which reinforces the incorporation of ESG into our investment management activities. We also are active members of several sustainability organizations, such as Accounting for Sustainability (“A4S”) and the Sustainability Accounting Standards Board (“SASB”) Alliance. Through our membership in these organizations, 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.

During 2020, we benefited from strong results and growth within our asset management businesses, while many of our underlying businesses generated strong operating performance throughout the year.

Net income was $707 million in the current year, with a $134 million loss attributable to common shareholders ($0.12 per share) and the remaining income attributable to non-controlling interests.

The $4.6 billion decrease in consolidated net income and the $2.9 billion decrease in net income attributable to common shareholders were primarily attributable to:

The following table summarizes the financial results of the company for 2020, 2019 and 2018:

Revenues for the year were $62.8 billion, a decrease of $5.1 billion compared to 2019, primarily due to the impact of the global economic shutdown, including:

A discussion of the impact on revenues and net income from recent acquisitions and dispositions can be found on pages 35 and 36.

Direct costs decreased by 10% or $5.3 billion compared to a 7% decrease in revenues. The decrease is primarily due to the aforementioned lower volumes at Greenergy and cost saving initiatives across a number of our businesses. These decreases were offset by higher direct costs related to recent acquisitions, net of dispositions, as well as incremental costs associated with organic growth initiatives at our operations.

We recorded an equity accounted loss of $79 million this year compared to an equity accounted income of $2.5 billion in the prior year. The decrease of $2.6 billion primarily relates to:

Interest expense of $7.2 billion remained consistent over the prior year as the benefits from lower interest rates on the recently issued borrowings and our variable rate debt held at our real estate operations were offset by additional interest expense paid on new debt offerings.

We recorded fair value losses of $1.4 billion, compared to $831 million in the prior year, primarily as a result of:

Refer to pages 36 and 37 for discussion on fair value changes.

Depreciation and amortization expense increased by $915 million to $5.8 billion due to businesses acquired in the year, as well as the impact of revaluation gains in the fourth quarter of 2019, which increased the current year’s opening balance of our property, plant and equipment (“PP&E”) from which the current year depreciation is determined. These increases were partially offset by the impact of recent dispositions and foreign exchange.

Income tax expense increased by $342 million primarily attributable to the absence of the prior year deferred income tax recovery of $475 million which relates to the recognition of deferred tax assets due to the projected utilization of net operating loss carryforwards.

Direct costs increased by $7.2 billion in 2019 due to the acquisitions and growth initiatives as discussed above. These increases were partially offset by the impact of adopting IFRS 16, the new lease accounting standard, which reallocated operating lease expenses previously reported through direct costs to interest expense and depreciation and amortization.

Other income and gains of $1.3 billion in 2019 include gains from the sale of our businesses, including BGIS, BGRS and our residential management services company all in the second quarter of 2019.

Interest expense increased by $2.4 billion as a result of additional borrowings associated with acquisitions across our portfolio, the addition of debt within newly acquired businesses, and additional interest expense from lease liabilities recognized on adoption of IFRS 16.

We recorded fair value losses of $831 million in 2019, compared to gains of $1.8 billion in 2018, primarily as a result of:

Depreciation and amortization expense increased by $1.8 billion to $4.9 billion primarily from the impact of acquisitions, as well as the impact of revaluation gains in the fourth quarter of 2018, which increased the carrying value of our PP&E from which depreciation is determined. The adoption of IFRS 16 also increased depreciation charges in 2019.

Income tax expense was $495 million in 2019, compared to a $248 million recovery in 2018. This increase in income tax expense was primarily due to higher taxable income in flow-through entities attributed to Brookfield compared to 2018 and a lower amount of loss carryforwards recognized in 2019.

We have summarized below the impact of recent significant acquisitions and dispositions on our results for 2020:

Acquisitions over the past year contributed incremental revenues and net income of $7.4 billion and $49 million in the current year, respectively.

Recent acquisitions contributed incremental revenues of $420 million and net loss of $147 million in 2020. The most significant contributions were from acquisitions made through Brookfield Strategic Real Estate Partners III (“BSREP III”), which added $382 million of revenues and $164 million of net loss in the current year. The net loss is largely due to impairment losses and mortgage interest expenses of the recently acquired hospitality assets in BSREP III, resulting from the impact of the economic shutdown.

Within our Renewable Power segment, incremental revenues of $294 million and net income of $79 million are primarily due to acquisitions of wind and solar assets completed in late 2019.

Further details relating to the significant acquisitions described above that were completed during the year ended December 31, 2020 are provided in Note 5 of the consolidated financial statements.

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

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

Valuation losses of $1.7 billion are mainly attributable to changes to a number of assumptions on a space-by-space basis to reflect the impacts of the economic shutdown. We revised valuation metrics where necessary to reflect changes in certain property level risk profiles.

Appraisal losses of $683 million in the prior year were due to lower assumed future cash flows on certain consolidated retail assets and adjustments to the timing of when those cash flows are received, partially offset by a decrease in capitalization and discount rates.

Valuation gains of $1.6 billion relate primarily to:

In the prior year, valuation gains of $1.4 billion were primarily related to improved market conditions in Brazil and India. In addition, a decrease in terminal capitalization rates and higher projected cash flows at our U.K. student housing portfolio as well as strong leasing activity in our directly held portfolios contributed to the valuation gains.

Transaction related gains, net of expenses, totaled $20 million for the year. These gains were primarily due to a restructuring gain on our Australian coal export terminal business in our Infrastructure segment and a gain from debt restructuring at an operating company within our Private Equity segment; partially offset by the early redemption of debt across a number of our businesses as well as restructuring costs and transaction costs related to recent acquisitions.

The prior year transaction related expenses of $895 million primarily relate to the acquisition of Oaktree, Clarios, Genesee & Wyoming and Aveo Group.

Financial contracts include mark-to-market gains and losses on financial contracts related to foreign currency, interest rate and pricing exposures that are not designated as hedges.

Unrealized losses of $140 million in the prior year primarily relate to mark-to-market movements on our interest rate and cross-currency swaps and fair value changes on our currency hedges, which do not qualify for hedge accounting.

Impairment and provision expense for the year of $808 million are primarily related to the impact of the economic shutdown on operating businesses within our Private Equity segment and hospitality assets in our Real Estate segment. Included in this balance is the impairment taken on vessels at Altera related to the reassessment of future assumptions surrounding estimated salvage values, expected earnings and redeployment opportunities.

We recorded an aggregate income tax expense of $837 million in 2020 (2019 – $495 million), including current tax expenses of $756 million (2019 – $970 million) and deferred tax expense of $81 million (2019 – recovery of $475 million).

The increase in the effective income tax rate is primarily attributed to minimal tax implications from valuation losses incurred in our Real Estate segment, which are subject to lower global tax rates. As a result, the international operations subject to different tax rates contributed 52% to the increase of our effective tax rate in 2020.

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

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.

Total assets were $343.7 billion at December 31, 2020, an increase of $19.7 billion compared to December 31, 2019. The increase is driven by both business combinations and asset acquisitions, which totaled $28.5 billion for the year. Recently completed business combinations added $11.0 billion of total assets, whereas asset acquisitions contributed $17.5 billion. 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 assets sold during the year.

We have summarized the impact of business combinations as well as equity accounted investment, investment properties and property, plant and equipment additions for the year ended December 31, 2020 in the table below:

We have summarized below the major contributors to the year-over-year variances for the statement of financial position.

PP&E increased by $10.7 billion primarily as a result of:

We provide a continuity of PP&E in Note 12 of the consolidated financial statements.

Investment properties consist primarily of the company’s real estate assets. The balance as at December 31, 2020 remained consistent compared to the prior year after accounting for the following:

We provide a continuity of investment properties in Note 11 of the consolidated financial statements.

Equity accounted investments increased by $629 million to $41.3 billion in the current year, mainly due to:

We provide a continuity of equity accounted investments in Note 10 of the consolidated financial statements.

Cash and cash equivalents increased by $3.2 billion as at December 31, 2020 compared to the prior year end 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, partially offset by cash used in business combinations completed during the year. 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.

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. Goodwill increased by $164 million due to the acquisition of new businesses and the impact of foreign exchange, partially offset by the sale of the pathology business at Healthscope.

Other assets are comprised of inventory, deferred income tax assets, assets classified as held for sale and other financial assets. The increase of $7.5 billion is primarily a result of:

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 during the year. These were partially offset by a repayment of a $251 million (C$350 million) note in the first quarter.

Non-recourse borrowings of managed entities increased by $3.0 billion as a result of:

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. Non-current accounts payable and other increased by $4.5 billion, primarily due to the aforementioned acquisitions as well as an increase in lease obligations in our Real Estate segment. Please see Note 17 of the consolidated financial statements for further information.

The increase of other liabilities of $4.4 billion is 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. Please see Note 9 of the consolidated financial statements for further information.

Refer to Part 4 – Capitalization and Liquidity for more information.

Consolidated assets as at December 31, 2019 were $324.0 billion, compared to $256.3 billion as at December 31, 2018. Year-over-year increases were primarily due to business combinations and asset acquisitions completed in 2019. Our acquisition of Oaktree further increased the assets in our equity accounted investment. The adoption of IFRS 16 increased our property, plant and equipment and investment properties through the recognition of right-of-use (“ROU”) assets. These increases were partially offset by assets sold in 2019.

Investment properties were $12.4 billion higher at the end of 2019 compared to 2018 primarily due to the impact of various real estate investments completed in 2019, in particular our acquisition of Aveo Group. The adoption of IFRS 16 in 2019 resulted in the recognition of ROU investment properties, primarily land leases on which some of our investment properties are built. In addition, the impact of capital expenditures and valuation gains were partially offset by losses in our core retail portfolio and numerous asset sales across our core office and LP investments portfolios.

Property, plant and equipment increased by $22.0 billion during 2019. The increase was primarily a result of acquisitions completed across our operating segments during the year and revaluation gains largely in our Renewable Power segment. The increase was also due to the recognition of property, plant and equipment ROU assets upon adopting IFRS 16 in 2019. These increases were partially offset by dispositions and reclassification to assets held for sale as well as depreciation recorded during the year.

Equity accounted investments were $40.7 billion as at December 31, 2019, an increase of $7.1 billion compared to 2018. The increase was mainly due to $9.1 billion of additions across multiple businesses, including the acquisition of interest in Oaktree and the equity accounted investments assumed within the acquisition of Clarios in our Private Equity segment. In addition, the increase from our share of comprehensive income from equity accounted investments was partially offset by the aforementioned step-up to a controlling interest of a portfolio of retail malls in our Real Estate segment as well as dispositions and reclassifications to held for sale.

Cash and cash equivalents decreased by $1.6 billion as at December 31, 2019 compared to 2018 primarily due to the impact of cash used in business combinations, net of cash acquired, and the timing of recent asset sales and debt refinancings.

Intangible assets and goodwill increased by $8.9 billion and $5.7 billion, respectively, due to the acquisitions completed in our Private Equity and Infrastructure segments in 2019, partially offset by the impact of amortization, impairment and foreign exchange.

Other assets increased by $11.7 billion as a result of acquisitions completed in our Private Equity segment, including the increase in inventory and other financial assets, as well as additions and appreciation of our existing financial asset portfolios. In addition, the increase was due to reclassifying certain assets in our Infrastructure segment to assets held for sale; partially offset by the sale of assets in our Real Estate and Renewable Power segments.

Corporate borrowings increased by $674 million as the issuance of $1.0 billion 10-year note as well as the impact of strengthened foreign exchange rates during 2019 were partially offset by a repayment of a $450 million (C$600 million) note.

Non-recourse borrowings increased by $24.5 billion in 2019 as result of increased borrowings to finance acquisitions, including our acquisition of Genesee & Wyoming in our Infrastructure segment, Aveo Group in our Real Estate segment, Clarios, Healthscope and the Brazilian heavy equipment and light vehicle fleet management company in our Private Equity segment. These increases were partially offset by the partial repayment of credit facilities within our Real Estate segment as well as dispositions and reclassification of businesses to held for sale.

Other non-current financial liabilities increased by $10.5 billion in 2019 primarily due to the recognition of non-current lease liabilities on adoption of IFRS 16, aforementioned acquisitions, higher insurance liabilities within our annuities business and a higher stock compensation liability due to share price appreciation.

Other liabilities increased by $12.4 billion primarily due to the impact of acquisitions in 2019, including deferred income tax liabilities recorded in business combinations, and current lease liabilities recognized on adoption of IFRS 16 in 2019.

The significant variances in common equity and non-controlling interests are discussed below. Preferred equity is discussed in Part 4 of this MD&A.

The following table presents the major contributors to the year-over-year variances for common equity:

Non-controlling interests in our consolidated results primarily consist of third-party interests in BPY, BEP, BIP, BBU, and their consolidated entities as well as co-investors and other participating interests in our consolidated investments as follows:

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.

Our consolidation conclusions under IFRS may differ from our peers who report under U.S. GAAP for two primary reasons:

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.

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 of this MD&A.

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:

The following table disaggregates the impact of foreign currency translation on our equity by the most significant non-U.S. currencies: