
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 and nine months ended September 30, 2017, the amount reclassified was a cost of $0.3 million and a benefit of $0.7 million, respectively. 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"), amends and comprises ASC Topic 606, Revenue from Contracts with Customers. These ASUs, and other related ASUs, replaced 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 presented 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 our 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 presented 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 reimbursable activity in our comparative financial statements.

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 established in conjunction with our adoption of ASC Topic 606. We have reclassified reimbursable balances in our comparative financial statements.

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 and nine months ended September 30, 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 (loss) income	(341.8		)	1.0		(340.8		)

(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 presented on a gross basis.



(in millions)	Published Three months ended September 30, 2017 (unaudited)		Adjustment due to ASC Topic 606		Adjustment due to ASU 2017-07		As Restated Three months ended September 30, 2017 (unaudited)
Revenue
Revenue before reimbursements⁽¹⁾	$	1,947.0	33.7		—		$	1,980.7
Reimbursements⁽¹⁾	n/a		1,541.5		—		1,541.5
Total revenue	1,947.0		1,575.2		—		3,522.2
Operating expenses
Compensation and benefits⁽¹⁾	1,132.3		23.4		(0.3	)	1,155.4
Operating, administrative and other⁽¹⁾	651.4		(9.1	)	—		642.3
Reimbursed expenses⁽¹⁾	n/a		1,541.5		—		1,541.5
Operating income	118.1		19.4		0.3		137.8
Other income	—		—		(0.3	)	(0.3		)
Provision for income taxes	28.2		7.8		—		36.0
Net income	87.5		11.7		—		99.2
Basic earnings per common share	$	1.91	0.26		—		$	2.17
Diluted earnings per common share	$	1.89	0.26		—		$	2.15

(1) Included in "Adjustments due to ASC Topic 606" is $13.3 million representing the reclassification of historical reimbursed expenses and the corresponding reimbursement revenue into new financial statement captions, Reimbursements and Reimbursed expenses.



(in millions)	Published Nine months ended September 30, 2017 (unaudited)		Adjustment due to ASC Topic 606		Adjustment due to ASU 2017-07		As Restated Nine months ended September 30, 2017 (unaudited)
Revenue
Revenue before reimbursements⁽¹⁾	$	5,396.9	74.6		—		$	5,471.5
Reimbursements⁽¹⁾	n/a		4,638.7		—		4,638.7
Total revenue	5,396.9		4,713.3		—		10,110.2
Operating expenses
Compensation and benefits⁽¹⁾	3,146.6		52.1		0.7		3,199.4
Operating, administrative and other⁽¹⁾	1,870.0		(17.5	)	—		1,852.5
Reimbursed expenses⁽¹⁾	n/a		4,638.7		—		4,638.7
Operating income	244.7		40.0		(0.7	)	284.0
Other income	—		—		0.7		0.7
Provision for income taxes	57.3		15.8		—		73.1
Net income	177.5		24.3		—		201.8
Basic earnings per common share	$	3.88	0.53		—		$	4.41
Diluted earnings per common share	$	3.84	0.53		—		$	4.37

(1) Included in "Adjustments due to ASC Topic 606" is $43.5 million representing the reclassification of historical reimbursed expenses and the corresponding reimbursement revenue into new financial statement captions, Reimbursements and Reimbursed expenses.

The cumulative impact to our retained earnings and Condensed 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 Topic 250, which partially offset the impact of the acceleration of revenue. The cumulative impact to our retained earnings from the adoption of ASC Topic 606, as of January 1, 2016, was $62.6 million.

Recently issued accounting guidance, not yet adopted

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. In July 2018, the FASB codified an alternative (and optional) transition method via ASU No. 2018-11, Leases (Topic 842): Targeted Improvements; we will elect the use of this optional transition method.

The adoption of ASC Topic 842 will result in the recognition of additional balances on the Condensed Consolidated Balance Sheet to reflect right-of-use assets and lease liabilities primarily associated with the leases for the corporate real estate we occupy around the globe. We expect the balance of our lease population to comprise vehicle and other equipment leases. As of September 30, 2018, we have substantially completed the identification of our real estate and non-real estate leases population. Our efforts are now directed to compiling and calculating the relevant inputs to derive ASC Topic 842's impact along with designing post-implementation processes and associated internal controls. Based upon current evaluations, we expect to recognize additional assets and liabilities upon implementation of ASC Topic 842 ranging from $500 million to $750 million to reflect right-of-use assets and lease liabilities as of January 1, 2019. However, because our evaluations are ongoing, the expected impact associated with the implementation of ASC Topic 842 is subject to change. Our disclosures related to leases will expand to comply with the requirements of ASC Topic 842; we continue to evaluate other effects ASC Topic 842 will have 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 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 August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 when determining which implementation costs to capitalize as intangible assets. This ASU is effective for annual and interim periods 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.