Brookfield’s Looking-Glass World

A wry investor might be forgiven for concluding that peering at Toronto-based Brookfield Asset Management’s filings is akin to Lewis Carroll’s Alice peeking behind the mirror and finding a universe in reverse. Consider the third-quarter earnings just released by the real estate management, energy and infrastructure conglomerate, disclosing a handsome $813 million in net income for those three months, walloping the $334 million the public company reported for the same period last year. But instead of popping corks, investors who read the filing will probably want to reach for a bottle of aspirin. The reality is that a combination of legally permissible accounting maneuvers and Brookfield Asset Management’s singular definition of profit allowed it to script a victory. Pulling the numbers apart, one can find a $77 million fair value gain, representing Brookfield Asset Management’s assessment of the appreciation of its assets.