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EQUITY | 12 Months Ended
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Dec. 31, 2021
Equity [abstract] |
EQUITY | EQUITY Equity consists of the following:
AS AT DEC. 31 (MILLIONS) | Note |  | 2021 |  | 2020
Preferred equity | (a) |  | $ | 4,145 |  |  | $ | 4,145 |
Non-controlling interests | (b) |  | 88,386 |  |  | 86,804 |
Common equity | (c) |  | 42,210 |  |  | 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:
| Average Rate |  |  |  |
AS AT DEC. 31 (MILLIONS) | 2021 |  | 2020 |  | 2021 |  | 2020
Perpetual preferred shares |  |  |  |  |  |  |
Floating rate | 2.32 | % |  | 1.76 | % |  | $ | 505 |  |  | $ | 531 |
Fixed rate | 4.82 | % |  | 4.82 | % |  | 739 |  |  | 739 |
| 3.81 | % |  | 3.54 | % |  | 1,244 |  |  | 1,270 |
Fixed rate-reset preferred shares | 4.07 | % |  | 4.07 | % |  | 2,901 |  |  | 2,875 |
| 4.00 | % |  | 3.91 | % |  | $ | 4,145 |  |  | $ | 4,145 |
Further details on each series of preferred shares are as follows:
|  |  | Issued and Outstanding |  |  |  |
AS AT DEC. 31 (MILLIONS, EXCEPT PER SHARE INFORMATION) | Rate |  | 2021 |  | 2020 |  | 2021 |  | 2020
Class A preferred shares |  |  |  |  |  |  |  |  |
Perpetual preferred shares |  |  |  |  |  |  |  |  |
Series 2 | 70% P |  | 10,457,685 |  |  | 10,457,685 |  |  | $ | 169 |  |  | $ | 169 |
Series 4 | 70% P |  | 2,795,910 |  |  | 2,795,910 |  |  | 45 |  |  | 45 |
Series 8 2 | Variable up to P |  | 3,321,486 |  |  | 2,476,185 |  |  | 54 |  |  | 42 |
Series 13 | 70% P |  | 9,290,096 |  |  | 9,290,096 |  |  | 195 |  |  | 195 |
Series 15 | B.A. + 40 b.p. 1 |  | 2,000,000 |  |  | 2,000,000 |  |  | 42 |  |  | 42 |
Series 17 | 4.75 | % |  | 7,840,204 |  |  | 7,840,204 |  |  | 171 |  |  | 171 |
Series 18 | 4.75 | % |  | 7,866,749 |  |  | 7,866,749 |  |  | 178 |  |  | 178 |
Series 25 3 | — |  |  | — |  |  | 1,529,133 |  |  | — |  |  | 38 |
Series 36 | 4.85 | % |  | 7,842,909 |  |  | 7,842,909 |  |  | 197 |  |  | 197 |
Series 37 | 4.90 | % |  | 7,830,091 |  |  | 7,830,091 |  |  | 193 |  |  | 193 |
|  |  |  |  |  |  | 1,244 |  |  | 1,270 |
Rate-reset preferred shares 4 |  |  |  |  |  |  |  |  |
Series 9 2 | 2.75 | % |  | 670,680 |  |  | 1,515,981 |  |  | 9 |  |  | 21 |
Series 24 3 | 3.24 | % |  | 10,808,027 |  |  | 9,278,894 |  |  | 265 |  |  | 227 |
Series 26 | 3.47 | % |  | 9,770,928 |  |  | 9,770,928 |  |  | 240 |  |  | 240 |
Series 28 | 2.73 | % |  | 9,233,927 |  |  | 9,233,927 |  |  | 232 |  |  | 232 |
Series 30 | 4.69 | % |  | 9,787,090 |  |  | 9,787,090 |  |  | 241 |  |  | 241 |
Series 32 | 5.06 | % |  | 11,750,299 |  |  | 11,750,299 |  |  | 297 |  |  | 297 |
Series 34 5 | 4.44 | % |  | 9,876,735 |  |  | 9,876,735 |  |  | 253 |  |  | 253 |
Series 38 6 | 3.57 | % |  | 7,906,132 |  |  | 7,906,132 |  |  | 179 |  |  | 179 |
Series 40 7 | 4.03 | % |  | 11,841,025 |  |  | 11,841,025 |  |  | 271 |  |  | 271 |
Series 42 8 | 3.25 | % |  | 11,887,500 |  |  | 11,887,500 |  |  | 266 |  |  | 266 |
Series 44 | 5.00 | % |  | 9,831,929 |  |  | 9,831,929 |  |  | 187 |  |  | 187 |
Series 46 | 4.80 | % |  | 11,740,797 |  |  | 11,740,797 |  |  | 217 |  |  | 217 |
Series 48 | 4.75 | % |  | 11,885,972 |  |  | 11,885,972 |  |  | 244 |  |  | 244 |
|  |  |  |  |  |  | 2,901 |  |  | 2,875 |
Total |  | $ | 4,145 |  |  | $ | 4,145 |
1. Rate determined quarterly. 2. 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. 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. 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 | 6,243 |  |  | 2,691 |
Accumulated other comprehensive income | 7,404 |  |  | 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 | 2021 |  | 2020
Class A shares 1 | 1,568,743,821 |  |  | 1,510,635,291 |
Class B shares | 85,120 |  |  | 85,120 |
Shares outstanding 1 | 1,568,828,941 |  |  | 1,510,720,411 |
Unexercised options, other share-based plans 2 and exchangeable shares of affiliate | 82,825,207 |  |  | 62,975,947 |
Total diluted shares | 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. 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 |  |  |  |  | 2021 |  | 2020
Outstanding, beginning of year 1 |  |  |  |  | 1,510,720,411 |  |  | 1,509,293,641 |
Issued (Repurchased) |  |  |  |  |  |  |
Issuances |  |  |  |  | 61,276,716 |  |  | — |
Repurchases |  |  |  |  | (9,662,117) |  |  | (8,932,576) |
Long-term share ownership plans 2 |  |  |  |  | 6,369,972 |  |  | 10,137,294 |
Dividend reinvestment plan and other |  |  |  |  | 123,959 |  |  | 222,052 |
Outstanding, end of year 3 |  |  |  |  | 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. Includes management share option plan and restricted stock plan. 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). 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 |  | 2020
Net income (loss) attributable to shareholders |  |  |  |  | $ | 3,966 |  |  | $ | (134) |
Preferred share dividends |  |  |  |  | (148) |  |  | (141) |
Dilutive effect of conversion of subsidiary preferred shares |  |  |  |  | (26) |  |  | 93 |
Net income (loss) available to shareholders |  |  |  |  | 3,792 |  |  | (182) |
Dilutive impact of exchangeable shares |  |  |  |  | 2 |  |  | — |
Net income (loss) available to shareholders including dilutive impact of exchangeable shares |  |  |  |  | $ | 3,794 |  |  | $ | (182) |
FOR THE YEARS ENDED DEC. 31 (MILLIONS) |  |  |  |  | 2021 |  | 2020 1
Weighted average – Class A and Class B shares |  |  |  |  | 1,536.5 |  |  | 1,511.4 |
Dilutive effect of conversion of options and escrowed shares using treasury stock method and exchangeable shares of affiliate |  |  |  |  | 50.4 |  |  | — |
Class A and Class B shares and share equivalents |  |  |  |  | 1,586.9 |  |  | 1,511.4 |
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 |  | 2020
Expense arising from equity-settled share-based payment transactions |  |  |  | $ | 110 |  |  | $ | 89 |
Expense arising from cash-settled share-based payment transactions |  |  |  | 681 |  |  | 104 |
Total expense arising from share-based payment transactions |  |  |  | 791 |  |  | 193 |
Effect of hedging program |  |  |  | (670) |  |  | (99) |
Total expense included in consolidated income |  |  |  | $ | 121 |  |  | $ | 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. 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 – $24 million). The changes in the number of options during 2021 and 2020 were as follows:
|  |  | NYSE
|  |  |  |  | Number of Options (000’s)1 |  | Weighted- Average Exercise Price
Outstanding as at January 1, 2021 |  |  |  |  |  | 47,367 |  |  | US$ | 25.08 |
Granted |  |  |  |  |  | 4,185 |  |  |  | 43.43 |
Exercised |  |  |  |  |  | (7,388) |  |  |  | 20.15 |
Cancelled |  |  |  |  |  | (370) |  |  |  | 34.49 |
Outstanding as at December 31, 2021 |  |  |  |  |  | 43,794 |  |  | US$ | 27.58 |
1. Options to acquire NYSE listed Class A shares.
|  |  | NYSE
|  |  |  |  | Number of Options (000’s)1 |  | Weighted- Average Exercise Price
Outstanding as at January 1, 2020 |  |  |  |  |  | 50,703 |  |  | US$ | 22.69 |
Granted |  |  |  |  |  | 3,341 |  |  |  | 45.21 |
Exercised |  |  |  |  |  | (6,382) |  |  |  | 16.50 |
Cancelled |  |  |  |  |  | (295) |  |  |  | 27.80 |
Outstanding as at December 31, 2020 |  |  |  |  |  | 47,367 |  |  | US$ | 25.08 |
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 – $5.54), and was determined using the Black-Scholes valuation model, with inputs to the model as follows:
FOR THE YEARS ENDED DEC. 31 | Unit |  | 2021 |  | 2020
Weighted-average share price | US$ |  | 43.43 |  |  | 45.21 |
Average term to exercise | Years |  | 7.5 |  |  | 7.5 |
Share price volatility 1 | % |  | 24.4 |  |  | 17.0 |
Liquidity discount | % |  | 25.0 |  |  | 25.0 |
Weighted-average annual dividend yield | % |  | 1.7 |  |  | 1.5 |
Risk-free rate | % |  | 1.0 |  |  | 1.4 |
1. Share price volatility was determined based on historical share prices over a similar period to the average term to exercise. At December 31, 2021, the following options to purchase Class A shares were outstanding:
|  |  |  | Options Outstanding (000’s)
Exercise Price |  | Weighted-Average Remaining Life |  | Vested |  | Unvested |  | Total
US$10.30 – US$15.35 |  | 0.2 years |  | 629 |  |  | — |  |  | 629 |
US$16.81 – US$20.39 |  | 2.8 years |  | 10,238 |  |  | — |  |  | 10,238 |
US$22.50 – US$26.93 |  | 5.0 years |  | 14,473 |  |  | 3,856 |  |  | 18,329 |
US$29.48 – US$38.64 |  | 7.2 years |  | 3,083 |  |  | 4,173 |  |  | 7,256 |
US$43.43 – US$45.21 |  | 8.7 years |  | 646 |  |  | 6,696 |  |  | 7,342 |
|  |  |  | 29,069 |  |  | 14,725 |  |  | 43,794 |
At December 31, 2020, the following options to purchase Class A shares were outstanding:
|  |  |  | Options Outstanding (000’s)
Exercise Price |  | Weighted-Average Remaining Life |  | Vested |  | Unvested |  | Total
US$10.30 – US$15.35 |  | 1.0 years |  | 2,254 |  |  | — |  |  | 2,254 |
US$15.58 – US$20.39 |  | 3.8 years |  | 11,860 |  |  | 1,131 |  |  | 12,991 |
US$22.50 – US$26.93 |  | 5.9 years |  | 14,280 |  |  | 7,010 |  |  | 21,290 |
US$29.48 – US$38.64 |  | 8.2 years |  | 1,833 |  |  | 5,672 |  |  | 7,505 |
US$45.21 |  | 9.2 years |  | — |  |  | 3,327 |  |  | 3,327 |
|  |  |  | 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 – $5.54), and was determined using the Black-Scholes model of valuation with inputs to the model as follows:
FOR THE YEARS ENDED DEC. 31 | Unit |  | 2021 |  | 2020
Weighted-average share price | US$ |  | 43.53 |  |  | 45.21 |
Average term to exercise | Years |  | 7.5 |  |  | 7.5 |
Share price volatility 1 | % |  | 24.4 |  |  | 17.0 |
Liquidity discount | % |  | 25.0 |  |  | 25.0 |
Weighted-average annual dividend yield | % |  | 1.6 |  |  | 1.5 |
Risk-free rate | % |  | 1.0 |  |  | 1.4 |
1. Share price volatility was determined based on historical share prices over a similar period to the average term to exercise. The change in the number of ES shares during 2021 and 2020 was as follows:
| Number of Units (000’s) |  | Weighted- Average Exercise Price
Outstanding at January 1, 2021 | 46,716 |  |  | $ | 28.88 |
Granted | 5,300 |  |  | 43.53 |
Exercised | (1,621) |  |  | 20.01 |
Cancelled | (17) |  |  | 44.35 |
Outstanding at December 31, 2021 | 50,378 |  |  | $ | 30.70 |
| Number of Units (000’s) |  | Weighted- Average Exercise Price |
Outstanding at January 1, 2020 | 54,791 |  |  | $ | 25.82 |  |
Granted | 3,841 |  |  | 45.21 |  |
Exercised | (11,613) |  |  | 19.66 |  |
Cancelled | (303) |  |  | 35.85 |  |
Outstanding at December 31, 2020 | 46,716 |  |  | $ | 28.88 |  |
Restricted Stock Plan 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 – $5 million), net of the impact of hedging arrangements. The change in the number of DSUs and RSUs during 2021 and 2020 was as follows:
| DSUs |  | RSUs
| Number of Units (000’s) |  | Number of Units (000’s) |  |  | Weighted- Average Exercise Price
Outstanding at January 1, 2021 | 18,721 |  |  | 13,679 |  |  | C$ | 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$ | 6.14 |
Granted and reinvested | 623 |  |  | — |  |  |  | — |
Exercised and cancelled | (3,106) |  |  | (2,131) |  |  |  | 6.35 |
Outstanding at December 31, 2020 | 18,721 |  |  | 13,679 |  |  | C$ | 6.10 |
The fair value of each DSU is equal to the traded price of the company’s common shares.
| Unit |  | Dec. 31, 2021 |  | Dec. 31, 2020
Share price on date of measurement | C$ |  | 76.39 |  |  | 52.62 |
Share price on date of measurement | US$ |  | 60.38 |  |  | 41.27 |
The fair value of RSUs was determined primarily using the following inputs:
| Unit |  | Dec. 31, 2021 |  | Dec. 31, 2020
Share price on date of measurement | C$ |  | 76.39 |  |  | 52.62 |
Weighted-average fair value of a unit | C$ |  | 70.29 |  |  | 46.52 |

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