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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS | 6 Months Ended
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Jun. 30, 2023
Disclosure of detailed information about financial instruments [abstract] |
RISK MANAGEMENT AND FINANCIAL INSTRUMENTS | RISK MANAGEMENT AND FINANCIAL INSTRUMENTS a) Risk Management The company’s activities expose it to a variety of financial risks, including market risk (i.e., commodity price risk, interest rate risk, and foreign currency risk), credit risk and liquidity risk. We use financial instruments primarily to manage these risks. There have been no material changes to the company’s financial risk exposure or risk management activities since December 31, 2022. Please refer to Note 26 of the December 31, 2022 audited consolidated financial statements for a detailed description of the company’s financial risk exposure and risk management activities. b) Financial Instruments The following tables list the company’s financial instruments by their carrying value and fair value as at June 30, 2023 and December 31, 2022:
| 2023 |  | 2022
AS AT JUN. 30, 2023 AND DEC. 31, 2022 (MILLIONS) | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Financial assets |  |  |  |  |  |  |
Cash and cash equivalents | $ | 12,427 |  |  | $ | 12,427 |  |  | $ | 14,396 |  |  | $ | 14,396 |
Other financial assets |  |  |  |  |  |  |
Government bonds | 1,621 |  |  | 1,621 |  |  | 1,566 |  |  | 1,566 |
Corporate bonds | 2,695 |  |  | 2,695 |  |  | 2,147 |  |  | 2,147 |
Fixed income securities and other | 9,287 |  |  | 9,287 |  |  | 8,762 |  |  | 8,762 |
Common shares and warrants | 7,441 |  |  | 7,441 |  |  | 6,472 |  |  | 6,472 |
Loans and notes receivable | 8,422 |  |  | 8,422 |  |  | 7,952 |  |  | 7,952 |
| 29,466 |  |  | 29,466 |  |  | 26,899 |  |  | 26,899 |
Accounts receivable and other | 20,706 |  |  | 20,706 |  |  | 19,880 |  |  | 19,880 |
| $ | 62,599 |  |  | $ | 62,599 |  |  | $ | 61,175 |  |  | $ | 61,175 |
Financial liabilities |  |  |  |  |  |  |
Corporate borrowings | $ | 13,618 |  |  | $ | 11,920 |  |  | $ | 11,390 |  |  | $ | 9,599 |
Non-recourse borrowings of managed entities |  |  |  |  |  |  |
Property-specific borrowings | 189,798 |  |  | 187,709 |  |  | 187,544 |  |  | 184,254 |
Subsidiary borrowings | 16,287 |  |  | 15,922 |  |  | 15,140 |  |  | 14,708 |
| 206,085 |  |  | 203,631 |  |  | 202,684 |  |  | 198,962 |
Accounts payable and other | 49,360 |  |  | 49,360 |  |  | 48,559 |  |  | 48,559 |
Subsidiary equity obligations | 4,049 |  |  | 4,049 |  |  | 4,188 |  |  | 4,188 |
| $ | 273,112 |  |  | $ | 268,960 |  |  | $ | 266,821 |  |  | $ | 261,308 |
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:
| 2023 |  | 2022
AS AT JUN. 30, 2023 AND DEC. 31, 2022 (MILLIONS) | Level 1 |  | Level 2 |  | Level 3 |  | Level 1 |  | Level 2 |  | Level 3
Financial assets |  |  |  |  |  |  |  |  |  |  |
Other financial assets |  |  |  |  |  |  |  |  |  |  |
Government bonds | $ | 49 |  |  | $ | 1,572 |  |  | $ | — |  |  | $ | 91 |  |  | $ | 1,475 |  |  | $ | — |
Corporate bonds | 61 |  |  | 1,889 |  |  | 740 |  |  | 65 |  |  | 1,754 |  |  | 324 |
Fixed income securities and other | 408 |  |  | 2,067 |  |  | 4,046 |  |  | 493 |  |  | 2,099 |  |  | 3,376 |
Common shares and warrants | 3,971 |  |  | 769 |  |  | 2,701 |  |  | 3,975 |  |  | 377 |  |  | 2,120 |
Loans and notes receivables | — |  |  | 63 |  |  | 8 |  |  | 22 |  |  | 26 |  |  | 5 |
| 4,489 |  |  | 6,360 |  |  | 7,495 |  |  | 4,646 |  |  | 5,731 |  |  | 5,825 |
Accounts receivable and other | 3 |  |  | 3,553 |  |  | 19 |  |  | 12 |  |  | 3,731 |  |  | 6 |
| $ | 4,492 |  |  | $ | 9,913 |  |  | $ | 7,514 |  |  | $ | 4,658 |  |  | $ | 9,462 |  |  | $ | 5,831 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |
Accounts payable and other | $ | 4 |  |  | $ | 4,558 |  |  | $ | 2,170 |  |  | $ | 7 |  |  | $ | 4,469 |  |  | $ | 2,419 |
Subsidiary equity obligations | — |  |  | 442 |  |  | 512 |  |  | — |  |  | 441 |  |  | 673 |
| $ | 4 |  |  | $ | 5,000 |  |  | $ | 2,682 |  |  | $ | 7 |  |  | $ | 4,910 |  |  | $ | 3,092 |
During the three and six months ended June 30, 2023, 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 |  | Carrying Value Jun. 30, 2023 |  | Valuation Techniques and Key Inputs
Other financial assets |  | $ | 6,360 |  |  | Valuation models based on observable market data
Derivative assets/Derivative liabilities (accounts receivable/accounts payable) |  | 3,553 / (4,558) |  | 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) |  | (442) |  |  | 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. 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 |  | Carrying Value Jun. 30, 2023 |  | Valuation Techniques |  | Significant Unobservable Inputs |  | Relationship of Unobservable Inputs to Fair Value
Corporate bonds |  | $ | 740 |  |  | Discounted cash flows |  | • Future cash flows |  | • Increases (decreases) in future cash flows increase (decrease) fair value
|  |  |  |  |  | • Discount rate |  | • Increases (decreases) in discount rate decrease (increase) fair value
Fixed income securities and other |  | 4,046 |  |  | Discounted cash flows |  | • Future cash flows |  | • Increases (decreases) in future cash flows increase (decrease) fair value
|  |  |  |  |  | • Discount rate |  | • Increases (decreases) in discount rate decrease (increase) fair value
Common shares and warrants |  | 2,701 |  |  | Discounted cash flows |  | • Future cash flows |  | • Increases (decreases) in future cash flows increase (decrease) fair value
|  |  |  |  |  | • Discount rate |  | • Increases (decreases) in discount rate decrease (increase) fair value
|  |  |  | Black-Scholes model |  | • Volatility |  | • Increases (decreases) in volatility increase (decreases) fair value
|  |  |  |  |  | • Term to maturity |  | • Increases (decreases) in term to maturity increase (decrease) fair value
Derivative assets/Derivative liabilities (accounts receivable/payable) |  | 19 / (2,170) |  | Discounted cash flows |  | • Future cash flows |  | • Increases (decreases) in future cash flows increase (decrease) fair value
|  |  |  |  |  | • Discount rate |  | • Increases (decreases) in discount rate decrease (increase) fair value
Limited-life funds (subsidiary equity obligations) |  | (512) |  |  | Discounted cash flows |  | • Future cash flows |  | • 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
|  |  |  |  |  | • Investment horizon |  | • 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 periods ended June 30, 2023:
| Three Months Ended |  | Six Months Ended |  |
AS AT AND FOR THE PERIODS ENDED JUN. 30, 2023 (MILLIONS) | Financial Assets |  | Financial Liabilities |  | Financial Assets |  | Financial Liabilities |  |  |  |
Balance, beginning of period | $ | 6,637 |  |  | $ | 2,880 |  |  | $ | 5,831 |  |  | $ | 3,092 |  |  |  |  |
Fair value changes in net income | 146 |  |  | (162) |  |  | 222 |  |  | (385) |  |  |  |  |
Fair value changes in other comprehensive income 1 | (3) |  |  | (1) |  |  | (1) |  |  | (9) |  |  |  |  |
Additions, net of disposals | 734 |  |  | (35) |  |  | 1,462 |  |  | (16) |  |  |  |  |
Balance, end of period | $ | 7,514 |  |  | $ | 2,682 |  |  | $ | 7,514 |  |  | $ | 2,682 |  |  |  |  |
1.Includes foreign currency translation.

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