
2.	NEW ACCOUNTING STANDARDS

Recently adopted accounting guidance

Effective January 1, 2018, we adopted Accounting Standards Update ("ASU") No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires an employer to disaggregate the employer service cost component from the other components of net periodic pension cost. The primary impact for JLL is the requirement to present the components of net periodic pension cost that do not represent the employer service cost outside of the subtotal "Operating income" on the Condensed Consolidated Statements of Comprehensive Income. As full retrospective application is required, we recast our comparative information, reclassifying the components of net periodic pension cost, other than the employer service cost component, from Compensation and benefits expense to Other income on the Condensed Consolidated Statements of Comprehensive Income. For the three months ended March 31, 2017, the amount reclassified was a benefit of $1.0 million. The adoption of ASU 2017-07 had no impact on our Condensed Consolidated Balance Sheets or Condensed Consolidated Statements of Cash Flows. Refer to the table below for the impact of adopting this ASU on our comparative Condensed Consolidated Statement of Comprehensive Income.

Effective January 1, 2018, we adopted ASU No. 2016-18, Restricted Cash, which addresses classification and presentation of changes in restricted cash on the statement of cash flows. Specifically, this ASU requires a statement of cash flows to explain the changes during the period in cash, cash equivalents, and amounts reported as restricted cash or restricted cash equivalents. The primary effect of the adoption was the inclusion of restricted cash along with cash and cash equivalents in reconciling the beginning and ending total amounts shown on the Condensed Consolidated Statements of Cash Flows. We adopted this ASU on a full retrospective basis. Restricted cash is included in Prepaid and other current assets on the Condensed Consolidated Balance Sheets.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers; in March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations and together with ASU No. 2014-09 (collectively the "ASUs"), as discussed below, amends and comprises ASC Topic 606, Revenue from Contracts with Customers. These ASUs, and other related ASUs, replace most existing revenue recognition guidance in U.S. generally accepted accounting principles ("U.S. GAAP"). Effective January 1, 2018, we adopted ASC Topic 606 on a full retrospective basis.

The adoption of ASC Topic 606 resulted in an acceleration of the timing of revenue recognition for certain brokerage-related transaction commissions and advisory services. These items include variable consideration or other aspects, such as contingencies, that precluded revenue recognition contemporaneous with the satisfaction of our performance obligations within the previous revenue recognition framework. The acceleration of the timing of revenue recognition also resulted in the acceleration of expense recognition relating to direct commissions expense payable to brokers.

Implementation of the updated principal versus agent considerations in ASC Topic 606 resulted in a significant increase to the proportion of our Property & Facility Management and Project & Development Services contracts accounted for on a gross basis (hereafter “gross contracts”). Under the previous principal versus agent framework, our evaluations for presentation of a service contract contemplated both performance and payment risk. Contractual provisions with clients and third-party vendors and subcontractors, such as “pay-when-paid”, that substantially mitigate payment risk with respect to on-site personnel and other expenses incurred on our clients’ behalf have historically resulted in the majority of our service contracts being accounted for on a net basis. However, within ASC Topic 606, payment risk is not an evaluation factor; instead, control of the service before transfer to the customer is the focal point of current principal versus agent assessments. As a result, we determined that costs associated with all client-dedicated JLL personnel, even when directly reimbursed by clients, and arrangements where we control the services provided by a third-party prior to the transfer to the customer will now be presented on a gross basis. The incremental expenses and corresponding revenue recognized as a result of the adoption of the new principal versus agent framework are presented in new financial statement captions, Reimbursed expenses and Reimbursements, respectively, in our Condensed Consolidated Statements of Comprehensive Income. We have reclassified such reimbursable activity in our comparative financial statements for comparability.

Finally, the adoption of ASC Topic 606 resulted in a material increase to total assets and total liabilities to reflect (i) contract assets and accrued commissions payable recognized upon acceleration of the timing of revenue recognition for certain transactions commissions and advisory services and (ii) assets and liabilities relating to service contracts now reported on a gross basis. Balance sheet activity associated with contracts now reported on a gross basis is most prominently reflected within Reimbursable receivables and Reimbursable payables, new financial statement captions following our adoption of ASC Topic 606. We have reclassified reimbursable activity in our comparative financial statements for comparability.

The impact of adopting new accounting pronouncements on a retrospective basis to the Consolidated Balance Sheet as of December 31, 2017, and Condensed Consolidated Statement of Comprehensive Income for the three months ended March 31, 2017, were as follows (for impacted financial statement captions):



(in millions)	Published December 31, 2017 (audited)			Adjustment due to ASC Topic 606		As Restated December 31, 2017 (unaudited)
Assets
Trade receivables, net of allowances⁽¹⁾	$	2,118.1		(378.7	)	$	1,739.4
Note and other receivables⁽¹⁾	393.6			(8.3	)	385.3
Reimbursable receivables	n/a			1,263.3		1,263.3
Short-term contract assets	n/a			178.4		178.4
Prepaid & other current assets⁽²⁾	257.7			131.4		389.1
Long-term receivables	168.6			(3.9	)	164.7
Other assets	97.8			57.7		155.5
Liabilities and equity
Accounts payable and accrued liabilities⁽¹⁾	$	1,011.6		(18.5	)	$	993.1
Reimbursable payables	n/a			1,022.6		1,022.6
Accrued compensation & benefits	1,309.0			110.1		1,419.1
Short-term contract liabilities and deferred income⁽¹⁾	158.9			(3.5	)	155.4
Other current liabilities⁽¹⁾	263.8			(7.0	)	256.8
Deferred tax liabilities, net	23.9			39.3		63.2
Retained earnings	2,552.8			96.2		2,649.0
Accumulated other comprehensive income (loss)	(341.8		)	1.0		(340.8		)



(in millions)	Published Three months ended March 31, 2017 (unaudited)		Adjustment due to ASC Topic 606		Adjustment due to ASU 2017-07		As Restated Three months ended March 31, 2017 (unaudited)
Revenue
Revenue before reimbursements⁽³⁾	$	1,615.2	1.1		—		$	1,616.3
Reimbursements⁽³⁾	n/a		1,501.4		—		1,501.4
Total revenue	1,615.2		1,502.5		—		3,117.7
Operating expenses
Compensation and benefits⁽³⁾	965.3		11.3		1.0		977.6
Operating, administrative and other⁽³⁾	583.8		(4.3	)	—		579.5
Reimbursed expenses⁽³⁾	n/a		1,501.4		—		1,501.4
Operating income	22.3		(5.9	)	(1.0	)	15.4
Other income	—		—		1.0		1.0
Provision for income taxes	3.6		(2.3	)	—		1.3
Net income	11.3		(3.6	)	—		7.7
Basic earnings per common share	$	0.24	(0.08	)	—		$	0.16
Diluted earnings per common share	$	0.24	(0.08	)	—		$	0.16

(1) Adjustments in these captions reflect reclassifications to new financial statement captions, Reimbursable receivables and Reimbursable payables.

(2) Adjustments in this caption reflect an increase to restricted cash held on behalf of clients for contracts now reported on a gross basis.

(3) Included in "Adjustments due to ASC Topic 606" is $14.9 million representing the reclassification of historical reimbursable expenses and the corresponding reimbursement revenue into new financial statement captions, Reimbursements and Reimbursed expenses.

The cumulative impact to our retained earnings and recast Consolidated Statement of Comprehensive Income includes certain direct expenses, such as accrued commissions and deferred income taxes, resulting from the changes in accounting principle in accordance with ASC 250, Accounting Changes, which offset the impact of the acceleration of revenue. The cumulative impact to our retained earnings as of January 1, 2016 was $62.6 million.

Recently issued accounting guidance, not yet adopted

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. The annual goodwill impairment test will require companies to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge when the carrying amount exceeds the fair value of the reporting unit. This ASU is effective for annual and interim goodwill impairment tests beginning after December 15, 2019, with early adoption permitted. We do not believe this guidance will have a material impact on our financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which creates a new framework to evaluate financial instruments, such as trade receivables, for expected credit losses. This new framework replaces the existing incurred loss approach and is expected to result in more timely recognition of credit losses. ASU No. 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is not permitted until years beginning after December 15, 2018. We are evaluating the effect this guidance will have on our financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which increases transparency and comparability by requiring the recognition of lease assets and lease liabilities on the balance sheet as well as requiring the disclosure of key information about leasing arrangements. This ASU is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. We anticipate the adoption of this ASU will result in an increase to the Condensed Consolidated Balance Sheet to reflect right-of-use assets and lease liabilities primarily associated with our office leases around the world. However, we have not yet quantified this impact nor the impact associated with non-real estate leases. We continue to evaluate any other effect the guidance will have on our financial statements and related disclosures.