Principles of Consolidation

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Use of Estimates

The Consolidated Financial Statements of Affiliated Managers Group, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of the results have been included. All intercompany balances and transactions have been eliminated. Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for any other period or for the full year. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 includes additional information about its operations, financial position and accounting policies, and should be read in conjunction with this Quarterly Report on Form 10-Q.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

All amounts in these notes, except per share data in the text and tables herein, are stated in millions unless otherwise indicated.

Revision of Prior Periods

During the three months ended September 30, 2016, the Company reviewed its accounting for Affiliate equity transactions in preparation for the adoption of Accounting Standard Update (“ASU”) 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. During this review, the Company determined that it had incorrectly recorded deferred tax benefits, a non-cash item, on certain Affiliate equity transactions dating back to 2005. The Company assessed the impact of the error, both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108 and concluded that it was not material to any of the Company’s previously issued Consolidated Financial Statements. The Company has revised its Consolidated Financial Statements for periods prior to 2016 to reflect the correction of the error in the periods in which the deferred tax benefits were recorded. The cumulative impact of the correction has been reflected as a reclassification between the beginning Retained earnings and Additional paid-in capital balances as of December 31, 2014 in the Consolidated Statements of Changes in Equity.

The tables below show the effect of the correction on the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2015, on the Company’s Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and on the Company’s Consolidated Balance Sheet as of December 31, 2015 presented in this Form 10-Q. The correction for the six months ended June 30, 2016 of $1.8 million was recorded in Income taxes in the three months ended September 30, 2016. All financial information presented in these notes has been revised to reflect the correction of this error.

The revision had no impact on Income before income taxes, Total stockholders’ equity or Cash flow from operating activities in prior periods.



	For the Three Months Ended September 30, 2015							For the Nine Months Ended September 30, 2015
Consolidated Statements of Income	As Previously Reported		Adjustments			As Revised		As Previously Reported		Adjustments			As Revised
Income taxes	$	56.8	$	1.3		$	58.1	$	198.5	$	3.7		$	202.2
Net income	192.3		(1.3		)	191.0		602.9		(3.7		)	599.2
Net income (controlling interest)	109.0		(1.3		)	107.7		365.7		(3.7		)	362.0
Earnings per share (basic)	$	2.01	$	(0.02	)	$	1.99	$	6.71	$	(0.07	)	$	6.64
Earnings per share (diluted)	1.98		(0.02		)	1.96		6.57		(0.06		)	6.51



	December 31, 2015								For the Nine Months Ended September 30, 2015
Consolidated Balance Sheet	As Previously Reported		Adjustments			As Revised		Consolidated Statement of Cash Flows	As Previously Reported		Adjustments			As Revised
Additional paid-in capital	$	597.2	$	97.7		$	694.9	Net income	$	602.9	$	(3.7	)	$	599.2
Retained earnings	2,679.3		(97.7		)	2,581.6		Deferred income tax provision	77.0		3.7			80.7

Principles of Consolidation

The Company assesses consolidation requirements pursuant to ASU 2015-02: Consolidation, which was adopted using the modified retrospective method and resulted in an effective date of adoption of January 1, 2016.

In evaluating whether an investment must be consolidated, the Company evaluates the risk, rewards, and significant terms of each of its Affiliate and other investments to determine if an investment is considered a voting rights entity (“VRE”) or a variable interest entity (“VIE”). An entity is a VRE when the total equity investment at risk is sufficient to enable the entity to finance its activities independently and when the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact its economic performance. An entity is a VIE when it lacks one or more of the characteristics of a VRE. Assessing whether an entity is a VRE or VIE involves judgment. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a VRE or a VIE.

The Company consolidates VREs when it has control over significant operating, financial and investing decisions of the investment or holds the majority voting interest. The Company consolidates VIEs when it has a controlling financial interest, which is defined as having the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of or the right to receive benefits from the entity that could potentially be significant to the VIE.

Investments in Affiliates

For the Company’s consolidated Affiliates, the portion of the Owners’ Allocation allocated to Affiliate management is included in Net income (non-controlling interests) in the Consolidated Statements of Income. Non-controlling interests on the Consolidated Balance Sheets include capital and undistributed Operating and Owners’ Allocation owned by Affiliate management of the Company’s consolidated Affiliates. The effect of any changes in the Company’s equity interests in its consolidated Affiliates resulting from the issuance or repurchase of an Affiliate’s equity by the Company or one of its Affiliates is included as a component of stockholders’ equity, net of any related income tax effects in the period of the change. The current redemption value of non-controlling interests has been presented as Redeemable non-controlling interests on the Consolidated Balance Sheets.

The Company applies the equity method of accounting to investments where the Company does not hold a controlling equity interest but has the ability to exercise significant influence over operating and financial matters. Other investments in which the Company owns less than a 20% interest and does not exercise significant influence are accounted for under the cost method. Under the cost method, income is recognized when dividends are declared.

Affiliate Sponsored Investment Products

The Company’s consolidated Affiliates sponsor various investment products where they also act as the investment advisor, and in some cases these products are considered VIEs. These investment products are typically owned primarily by third-party investors; however, certain products are capitalized with seed capital investments from Affiliates.

Investors are generally entitled to substantially all of the economics of these VIEs, except for the management and performance fees earned by Affiliates or any gains or losses attributable to Affiliates’ investments in these products. As a result, Affiliates do not generally consolidate these VIEs unless the Affiliate’s interest in the product is considered substantial. When consolidating these VIEs, the Company retains the specialized investment company accounting principles of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities in the Consolidated Balance Sheets with corresponding changes in the investments’ fair values reflected in Other operating expenses (net) in the Consolidated Statements of Income. Purchases and sales of securities are presented within Decrease in payables, accrued liabilities and other liabilities and Increase (decrease) in other assets, respectively, in the Consolidated Statements of Cash Flows. When Affiliates no longer control these products, due to a reduction in ownership or other reasons, the products are deconsolidated.