JONES LANG LASALLE INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page JONES LANG LASALLE INCORPORATED CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm, KPMG LLP, on Consolidated Financial Statements 64 Report of Independent Registered Public Accounting Firm, KPMG LLP, on Internal Control Over Financial Reporting 67 Consolidated Balance Sheets as of December 31, 2020 and 2019 69 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018 70 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019, and 2018 71 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, and 2018 72 Notes to Consolidated Financial Statements 73 63 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Jones Lang LaSalle Incorporated: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Jones Lang LaSalle Incorporated and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 18, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic 842, Leases. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 64 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Goodwill impairment analysis for the Europe, Middle East, and Africa reporting unit As described in Notes 2 and 4 to the consolidated financial statements, the Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of a reporting unit might exceed its fair value. The goodwill balance was $4,224.7 million as of December 31, 2020, of which $959.7 million related to the Europe, Middle East, and Africa (EMEA) reporting unit. We identified the evaluation of the quantitative goodwill impairment analysis for the EMEA reporting unit as a critical audit matter. The estimated fair value of the EMEA reporting unit required the evaluation of a discounted cash flow model. Our evaluation of the discounted cash flow model required us to assess assumptions that are determined based on especially subjective judgment. Specifically, the forecasted revenue growth rates, forecasted profitability margins, and the discount rate assumption used to calculate the fair value of the reporting unit were challenging to test as changes to those assumptions could have a significant effect on the Company’s assessment of the carrying value of goodwill. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment assessment process, including controls related to the determination of the fair value of the reporting unit, forecasted revenue growth rates, forecasted profitability margins, and discount rate assumptions. We evaluated the Company’s forecasted revenue growth rates and forecasted profitability margins for the EMEA reporting unit, by comparing these assumptions to current and historical performance and analysts’ revenue growth and profitability margin expectations for the Company and its peer companies. In addition, we involved valuation professionals with specialized skills and knowledge who assisted in the following: – evaluating the discount rate used in the discounted cash flow model, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities – researching analysts’ expectations of the forecasted revenue growth rates and forecasted profitability margins for the Company and its peer companies, to assist in evaluating these assumptions – developing an estimate of the EMEA reporting unit’s fair value using the reporting unit’s cash flow assumptions, and an independently developed discount rate range, and comparing the result of our estimate of fair value to the Company’s fair value estimate. Sufficiency of audit evidence over income taxes As described in Notes 2 and 8 to the consolidated financial statements, the Company recorded a provision for income taxes of $106.9 million for the year ended December 31, 2020 based on local tax rules and regulations for the tax jurisdictions in which they operate. The Company has operations which constitute a taxable income presence in 92 countries or other taxable jurisdictions outside of the U.S. We identified the evaluation of the sufficiency of audit evidence over income tax expense as a critical audit matter. The Company’s global tax structure adds complexity that required subjective auditor judgment to evaluate the sufficiency of audit of evidence obtained. This required the involvement of domestic and international tax professionals with specialized skills and knowledge, in order to assess the nature and extent of procedures performed in relation to the amounts recorded and disclosed in the consolidated financial statements. 65 Table of Contents The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s income tax process, including controls over the amounts recorded. We applied auditor judgment to determine the nature and extent of procedures to be performed over income tax expense. For certain taxing jurisdictions, we analyzed supporting documentation for the provision for income taxes. In addition, we involved tax professionals with specialized skills and knowledge who evaluated certain of the Company’s interpretations and applications of the tax rules and regulations. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed over income tax expense, including the appropriateness of the nature and extent of such evidence. /s/ KPMG LLP We have served as the Company’s auditor since 1988. Chicago, Illinois February 18, 2021 66 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Jones Lang LaSalle Incorporated: Opinion on Internal Control Over Financial Reporting We have audited Jones Lang LaSalle Incorporated and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and related notes (collectively, the consolidated financial statements), and our report dated February 18, 2021 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 67 Table of Contents Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Chicago, Illinois February 18, 2021 68 Table of Contents JONES LANG LASALLE INCORPORATED CONSOLIDATED BALANCE SHEETS December 31, (in millions, except share and per share data) 2020 2019 Assets Current assets: Cash and cash equivalents $ 574.3 451.9 Trade receivables, net of allowance of $66.5 and $68.1 1,636.1 2,034.3 Notes and other receivables 469.9 472.8 Reimbursable receivables 1,461.3 1,671.2 Warehouse receivables 1,529.2 527.1 Short-term contract assets, net of allowance of $1.8 and n/a 265.8 333.4 Prepaid & other 517.1 377.9 Total current assets 6,453.7 5,868.6 Property and equipment, net of accumulated depreciation of $806.2 and $660.7 663.9 701.9 Operating lease right-of-use assets 707.4 804.4 Goodwill 4,224.7 4,168.2 Identified intangibles, net of accumulated amortization of $295.3 and $214.8 679.8 682.6 Investments in real estate ventures, including $340.3 and $328.6 at fair value 430.8 404.2 Long-term receivables 231.1 250.2 Deferred tax assets, net 296.5 245.4 Deferred compensation plan 446.3 349.9 Other 182.3 197.2 Total assets $ 14,316.5 13,672.6 Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities $ 1,229.8 1,289.4 Reimbursable payables 1,154.5 1,245.8 Accrued compensation & benefits 1,433.2 1,729.2 Short-term borrowings 62.0 120.1 Short-term contract liabilities and deferred income 192.9 158.8 Short-term acquisition-related obligations 91.7 74.4 Warehouse facilities 1,498.4 515.9 Short-term operating lease liabilities 165.7 153.4 Other 299.6 203.2 Total current liabilities 6,127.8 5,490.2 Credit facility, net of debt issuance costs of $8.7 and $12.3 ( 8.7 ) 512.7 Long-term debt, net of debt issuance costs of $2.5 and $3.1 702.0 664.6 Deferred tax liabilities, net 120.0 106.0 Deferred compensation 450.0 374.3 Long-term acquisition-related obligations 26.2 124.1 Long-term operating lease liabilities 683.9 751.2 Other 597.5 436.2 Total liabilities 8,698.7 8,459.3 Redeemable noncontrolling interest 7.8 8.6 Company shareholders' equity: Common stock, $0.01 par value per share, 100,000,000 shares authorized; 51,970,307 and 51,549,654 shares issued; 51,105,417 and 51,549,654 outstanding 0.5 0.5 Additional paid-in capital 2,023.3 1,962.8 Retained earnings 3,975.9 3,588.3 Treasury stock, at cost, 864,890 and - shares ( 96.1 ) — Shares held in trust ( 5.6 ) ( 5.7 ) Accumulated other comprehensive loss ( 377.2 ) ( 427.8 ) Total Company shareholders' equity 5,520.8 5,118.1 Noncontrolling interest 89.2 86.6 Total equity 5,610.0 5,204.7 Total liabilities, redeemable noncontrolling interest and equity $ 14,316.5 13,672.6 See accompanying notes to Consolidated Financial Statements. 69 Table of Contents JONES LANG LASALLE INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, (in millions, except share and per share data) 2020 2019 2018 Revenue: Revenue before reimbursements $ 8,900.1 10,030.6 9,089.5 Reimbursements 7,689.8 7,952.6 7,228.9 Total revenue $ 16,589.9 17,983.2 16,318.4 Operating expenses: Compensation and benefits $ 5,268.8 5,812.7 5,206.8 Operating, administrative and other 2,703.4 3,115.7 2,950.9 Reimbursed expenses 7,689.8 7,952.6 7,228.9 Depreciation and amortization 226.4 202.4 186.1 Restructuring and acquisition charges 142.4 184.4 38.8 Total operating expenses $ 16,030.8 17,267.8 15,611.5 Operating income $ 559.1 715.4 706.9 Interest expense, net of interest income 52.8 56.4 51.1 Equity earnings 8.0 36.3 32.8 Other income 15.3 2.3 17.4 Income before income taxes and noncontrolling interest 529.6 697.6 706.0 Provision for income taxes 106.9 159.7 214.3 Net income 422.7 537.9 491.7 Net income attributable to noncontrolling interest 20.2 2.6 7.2 Net income attributable to the Company 402.5 535.3 484.5 Dividends on unvested common stock, net of tax benefit — 0.9 0.4 Net income attributable to common shareholders $ 402.5 534.4 484.1 Basic earnings per common share $ 7.79 10.98 10.64 Basic weighted average shares outstanding (in 000's) 51,683 48,647 45,517 Diluted earnings per common share $ 7.70 10.87 10.54 Diluted weighted average shares outstanding (in 000's) 52,282 49,154 45,931 Net income attributable to the Company $ 402.5 535.3 484.5 Change in pension liabilities, net of tax ( 9.2 ) ( 14.6 ) 3.1 Foreign currency translation adjustments 59.8 43.0 ( 118.2 ) Comprehensive income attributable to the Company $ 453.1 563.7 369.4 See accompanying notes to Consolidated Financial Statements. 70 Table of Contents JONES LANG LASALLE INCORPORATED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018 (in millions, except share and per share data) Company Shareholders' Equity Common Stock Additional Shares Shares Outstanding Amount Paid-In Retained Held Treasury Total Capital Earnings in Trust Stock AOCI (1) NCI (2) Equity December 31, 2017 45,373,817 $ 0.5 1,037.6 2,649.0 ( 5.9 ) — ( 341.1 ) 38.1 $ 3,378.2 Net income — — — 484.5 — — — 7.2 491.7 Shares issued under stock compensation programs 308,843 — 2.9 — — — — — 2.9 Shares repurchased for payment of taxes on stock awards ( 83,242 ) — ( 12.4 ) — — — — — ( 12.4 ) Amortization of stock-based compensation — — 26.8 — — — — — 26.8 Shares held in trust — — — — 0.1 — — — 0.1 Dividends paid, $0.82 per share — — — ( 37.8 ) — — — — ( 37.8 ) Change in pension liabilities, net of tax — — — — — — 3.1 — 3.1 Foreign currency translation adjustments — — — — — — ( 118.2 ) — ( 118.2 ) Net decrease in amounts attributable to noncontrolling interest — — — — — — — ( 2.3 ) ( 2.3 ) Acquisition of redeemable noncontrolling interest — — 2.4 — — — — — 2.4 December 31, 2018 45,599,418 $ 0.5 1,057.3 3,095.7 ( 5.8 ) — ( 456.2 ) 43.0 $ 3,734.5 Net income (3) — — — 535.3 — — — 2.4 537.7 Shares issued under stock-based compensation programs 301,670 — 3.7 — — — — — 3.7 Acquisition of HFF 5,733,603 — 841.2 — — — — — 841.2 Shares repurchased for payment of taxes on stock-based compensation ( 85,037 ) — ( 13.6 ) — — — — — ( 13.6 ) Amortization of stock-based compensation — — 74.2 — — — — — 74.2 Shares held in trust — — — — 0.1 — — — 0.1 Dividends paid, $0.86 per share — — — ( 42.7 ) — — — — ( 42.7 ) Change in pension liabilities, net of tax — — — — — — ( 14.6 ) — ( 14.6 ) Foreign currency translation adjustments — — — — — — 43.0 — 43.0 Net increase in amounts attributable to noncontrolling interest — — — — — — — 41.2 41.2 December 31, 2019 51,549,654 $ 0.5 1,962.8 3,588.3 ( 5.7 ) — ( 427.8 ) 86.6 $ 5,204.7 Net income (3) — — — 402.5 — — — 20.5 423.0 Shares issued under stock-based compensation programs 632,638 — 0.2 — — 3.9 — — 4.1 Shares repurchased for payment of taxes on stock-based compensation ( 179,938 ) — ( 23.5 ) — — — — — ( 23.5 ) Amortization of stock-based compensation — — 83.8 — — — — — 83.8 Shares held in trust — — — — 0.1 — — — 0.1 Cumulative effect from adoption of new accounting for credit losses — — — ( 14.9 ) — — — — ( 14.9 ) Repurchase of common stock ( 896,937 ) — — — — ( 100.0 ) — — ( 100.0 ) Change in pension liabilities, net of tax — — — — — — ( 9.2 ) — ( 9.2 ) Foreign currency translation adjustments — — — — — — 59.8 — 59.8 Net decrease in amounts attributable to noncontrolling interest — — — — — — — ( 17.9 ) ( 17.9 ) December 31, 2020 51,105,417 $ 0.5 2,023.3 3,975.9 ( 5.6 ) ( 96.1 ) ( 377.2 ) 89.2 $ 5,610.0 (1) AOCI: Accumulated other comprehensive income (loss) (2) NCI: Noncontrolling interest (3) Excludes net (loss) income attributable to redeemable noncontrolling interest of $( 0.3 ) million and $ 0.2 million for the years ended December 31, 2020 and 2019, respectively. See accompanying notes to Consolidated Financial Statements. 71 Table of Contents JONES LANG LASALLE INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in millions) 2020 2019 2018 Cash flows from operating activities: Net income $ 422.7 537.9 491.7 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 226.4 202.4 186.1 Equity earnings ( 8.0 ) ( 36.3 ) ( 32.8 ) Loss (gain) on the disposition of assets 1.2 0.9 ( 12.9 ) Distributions of earnings from real estate ventures 11.7 21.0 59.5 Provision for loss on receivables and other assets 45.6 30.8 18.8 Amortization of stock-based compensation 83.8 74.2 26.8 Net non-cash mortgage servicing rights and mortgage banking derivative activity ( 66.6 ) ( 21.2 ) ( 8.3 ) Accretion of interest and amortization of debt issuance costs 5.1 5.3 4.9 Other, net ( 27.1 ) 11.3 ( 10.0 ) Change in: Receivables 414.3 ( 330.0 ) ( 229.5 ) Reimbursable receivables and reimbursable payables 122.2 26.2 ( 215.6 ) Prepaid expenses and other assets ( 32.9 ) ( 110.0 ) ( 229.2 ) Deferred tax assets, net ( 37.1 ) ( 18.7 ) ( 25.2 ) Accounts payable and accrued liabilities 177.1 ( 64.7 ) 372.4 Accrued compensation ( 223.7 ) 154.7 207.4 Net cash provided by operating activities 1,114.7 483.8 604.1 Cash flows from investing activities: Net capital additions – property and equipment ( 149.4 ) ( 187.8 ) ( 161.9 ) Net investment asset activity (less than wholly-owned) 1.0 ( 79.2 ) ( 14.3 ) Business acquisitions, net of cash acquired — ( 801.3 ) ( 101.3 ) Capital contributions to real estate ventures ( 80.3 ) ( 137.7 ) ( 58.8 ) Distributions of capital from real estate ventures 41.5 113.8 51.9 Other, net 16.6 42.5 4.0 Net cash used in investing activities ( 170.6 ) ( 1,049.7 ) ( 280.4 ) Cash flows from financing activities: Proceeds from borrowings under credit facility 5,217.0 5,864.0 3,145.0 Repayments of borrowings under credit facility ( 5,742.0 ) ( 5,339.0 ) ( 3,145.0 ) Net (repayments of) proceeds from short-term borrowings ( 64.3 ) 86.8 ( 41.4 ) Payments of deferred business acquisition obligations and earn-outs ( 44.4 ) ( 77.3 ) ( 57.1 ) Shares repurchased for payment of employee taxes on stock awards ( 23.5 ) ( 13.6 ) ( 12.4 ) Repurchase of common stock ( 100.0 ) — — Payment of dividends — ( 42.7 ) ( 37.8 ) Noncontrolling interest (distributions) contributions, net ( 0.9 ) 40.6 3.6 Other, net ( 13.1 ) 65.8 3.8 Net cash (used in) provided by financing activities ( 771.2 ) 584.6 ( 141.3 ) Effect of currency exchange rate changes on cash, cash equivalents and restricted cash 14.8 ( 0.8 ) ( 19.9 ) Net change in cash, cash equivalents and restricted cash 187.7 17.9 162.5 Cash, cash equivalents and restricted cash, beginning of the year 652.1 634.2 471.7 Cash, cash equivalents and restricted cash, end of the year $ 839.8 652.1 634.2 Supplemental disclosure of cash flow information: Restricted cash, beginning of the year $ 200.2 153.3 203.7 Restricted cash, end of the year 265.5 200.2 153.3 Cash paid during the year for: Interest $ 50.2 58.5 49.2 Income taxes, net of refunds 138.5 280.8 153.4 Operating leases 191.4 171.2 n/a Non-cash activities: Business acquisitions (including contingent consideration) $ — 846.1 11.6 Deferred business acquisition obligations — 17.0 3.9 See accompanying notes to Consolidated Financial Statements. 72 Table of Contents JONES LANG LASALLE INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION Jones Lang LaSalle Incorporated ("Jones Lang LaSalle," which we may refer to as "JLL," "we," "us," "our," or the "Company") was incorporated in 1997. We have corporate offices worldwide and nearly 91,000 employees, including approximately 41,100 employees whose costs are reimbursed by our clients. We provide comprehensive integrated real estate and investment management expertise on a local, regional and global level to owner, occupier and investor clients. We are an industry leader in property and facility management services, with a managed portfolio of approximately 5.4 billion square feet worldwide as of December 31, 2020. LaSalle Investment Management ("LaSalle") is one of the world's largest and most diversified real estate investment management firms, with $ 68.9 billion of assets under management (unaudited) as of December 31, 2020. The following table shows our revenue by service line. Year Ended December 31, (in millions) 2020 2019 2018 Real Estate Services: Leasing $ 1,884.2 2,524.0 2,372.1 Capital Markets 1,407.4 1,542.2 1,145.4 Property & Facility Management 9,485.4 9,364.7 8,782.8 Project & Development Services 2,530.1 3,121.5 2,669.0 Advisory, Consulting and Other 861.0 904.7 815.2 LaSalle 421.8 526.1 533.9 Total revenue $ 16,589.9 17,983.2 16,318.4 We work for a broad range of clients representing a wide variety of industries in markets throughout the world. Our clients vary greatly in size and include for-profit and not-for-profit entities of all kinds, public-private partnerships and governmental (public sector) entities looking to outsource real estate services. We provide real estate investment management services on a global basis for both public and private assets through LaSalle. Our integrated global business model, industry-leading research capabilities, client relationship management focus, consistent worldwide service delivery and strong brand are attributes that enhance our services. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation Our Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include the accounts of JLL and its majority-owned and controlled subsidiaries. Intercompany balances and transactions have been eliminated. Investments in real estate ventures over which we exercise significant influence, but do not control, are accounted for either at fair value or under the equity method. When applying principles of consolidation, we begin by determining whether an investee entity is a variable interest entity ("VIE") or a voting interest entity. U.S. GAAP draws a distinction between voting interest entities, which are embodied by common and traditional corporate and certain partnership structures, and VIEs, broadly defined as entities for which control is achieved through means other than voting rights. For voting interest entities, the interest holder with control through majority ownership and majority voting rights consolidates the entity. For VIEs, determination of the "primary beneficiary" dictates the accounting treatment. We identify the primary beneficiary of a VIE as the enterprise having both (i) the power to direct the activities of the VIE that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the VIE. We perform the primary beneficiary analysis as of the inception of our investment and upon the occurrence of a reconsideration event. When we determine we are the primary beneficiary of a VIE, we consolidate the VIE; when we determine we are not the primary beneficiary of the VIE, we account for our investment in the VIE at fair value or under the equity method, based upon an election made at the time of investment. 73 Table of Contents Our determination of the appropriate accounting method to apply for unconsolidated investments is based on the level of influence we have in the underlying entity. When we have an asset advisory contract with a real estate limited partnership in which we also hold an ownership interest, the combination of our limited partner interest and the advisory agreement generally provides us with significant influence over such real estate limited partnership. Accordingly, we account for such investments either at fair value or under the equity method. We eliminate transactions with such subsidiaries to the extent of our ownership in such subsidiaries. For less-than-wholly-owned consolidated subsidiaries, noncontrolling interest is the portion of equity not attributable, directly or indirectly, to JLL. We evaluate whether noncontrolling interests possess any redemption features outside of our control. If such features exist, the noncontrolling interests are presented outside of permanent equity on the Consolidated Balance Sheets within Redeemable noncontrolling interest. Redeemable noncontrolling interests are adjusted to the greater of their fair value or carrying value as of each balance sheet date through a charge to Additional paid-in capital, if necessary. If classification and presentation outside of permanent equity is not considered necessary, noncontrolling interests are presented as a component of permanent equity on the Consolidated Balance Sheets. We report revenues, expenses and net income (loss) from less-than-wholly-owned consolidated subsidiaries at the consolidated amounts, including both the amounts attributable to the Company and noncontrolling interests; the income or loss attributable to the noncontrolling interest holders is reflected in Net income attributable to noncontrolling interest on the Consolidated Statements of Comprehensive Income. Changes in amounts attributable to non-redeemable noncontrolling interests are reflected in the Consolidated Statements of Changes in Equity. Changes in amounts attributable to redeemable noncontrolling interests are presented in the following table. (in millions) Redeemable noncontrolling interests as of December 31, 2017 $ 3.8 Acquisition of redeemable noncontrolling interest (1) ( 3.8 ) Redeemable noncontrolling interests as of December 31, 2018 — Business acquisition (2) 8.4 Net income 0.2 Redeemable noncontrolling interests as of December 31, 2019 8.6 Net loss ( 0.3 ) Distribution to redeemable noncontrolling interest ( 0.5 ) Redeemable noncontrolling interests as of December 31, 2020 $ 7.8 (1) Reflects our redemption of a portion of the redeemable noncontrolling interest related to our Tenzing AB acquisition and includes $ 2.3 million, representing the difference between the redemption value and the carrying value of the acquired interest in 2018. (2) Reflects the ownership interests retained by the seller associated with our 2019 acquisition of Latitude Real Estate Investors. Use of Estimates The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires us to make estimates and assumptions about future events that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses during the reporting periods. Such estimates include the value and allocation of purchase consideration, valuation of accounts receivable, Reimbursable receivables, Warehouse receivables, Investments in real estate ventures, Goodwill, intangible assets, derivative financial instruments, other long-lived assets, earn-out liabilities, legal contingencies, assumptions used in the calculation of income taxes, incentive compensation, self-insurance program liabilities, and retirement and other post-employment benefits, among others. These estimates and assumptions are based on management's best estimate and judgment. We evaluate these estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Market factors, such as illiquid credit markets, volatile equity markets and foreign currency exchange rate fluctuations can increase the uncertainty in such estimates and assumptions. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. Although actual amounts may differ from such estimated amounts, we believe such differences are not likely to be material. 74 Table of Contents Revenue Recognition We earn revenue from the following: • Leasing; • Capital Markets; • Property & Facility Management; • Project & Development Services; • Advisory, Consulting and Other; and • LaSalle. Leasing Leasing revenue is earned from brokerage commissions as we represent tenants and/or landlords in connection with real estate leases. Our performance obligation is to facilitate the execution of a lease agreement, which is satisfied at a point in time, upon lease execution. Generally, we are either entitled to the full consideration upon lease execution or in part upon lease execution with the remainder upon the occurrence of a future event outside of our control (e.g. tenant occupancy, lease commencement, or rent commencement). The majority of the events that preclude our entitlement to the full consideration upon lease execution are considered to be “normal course of business” and, therefore, do not result in a constraint upon the recognition of revenue. In the infrequent instance our fee entitlement in a contract with a customer is predicated on the occurrence of a future event(s) uncertain of occurring, we constrain the recognition of revenue until the uncertainty is resolved or the future event occurs. Generally, less than 5 % of our Leasing revenue recognized in a period had previously been constrained. Capital Markets Capital Markets provides brokerage and other services for capital transactions, such as real estate sales or loan originations and refinancings. Our performance obligation is to facilitate the execution of capital transactions, and we are generally entitled to the full consideration at the point in time upon which our performance obligation is satisfied, at which time we recognize revenue. Our mortgage banking and servicing operations - such as activities related to mortgage servicing rights ("MSR" or "MSRs"), loan origination fees and servicing income - are excluded from the scope of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers, ("ASC Topic 606"). Such out-of-scope revenue was included entirely within Americas Capital Markets and is presented below. Year Ended December 31, (in millions) 2020 2019 2018 Revenue excluded from scope of ASC Topic 606 $ 305.3 204.6 135.8 Property & Facility Management Property Management provides on-site day-to-day real estate management services for owners of office, industrial, retail, multifamily residential and various other types of properties, representing a series of daily performance obligations delivered over time. Pricing is generally in the form of a monthly management fee based upon property-level cash receipts, square footage under management or some other variable metric. Although we are principal in limited situations, we generally act as agent on behalf of our Property Management clients in relation to third-party vendors and subcontractors engaged to deliver operational services to our clients' properties. In these situations, we arrange, but do not control, the services provided by third-party vendors and subcontractors prior to the transfer of the services to the client. As a result, the costs incurred on behalf of clients, along with the corresponding revenue, are presented net on our Consolidated Statements of Comprehensive Income. Facility Management primarily provides comprehensive, on-site day-to-day real estate management services to corporations and institutions across a broad range of industries that outsource the management of the real estate they occupy, representing a series of daily performance obligations delivered over time. Pricing generally includes a management fee and, in many instances, an incentive fee or other form of variable consideration. 75 Table of Contents Although we may act as agent on behalf of our clients with respect to certain mandates, we generally act as principal for our Facility Management contracts with respect to third-party vendors and subcontractors engaged to deliver operational services to our clients' facilities. In these situations, we control the services provided by such third-party vendors and subcontractors prior to the transfer of the services to the client. As a result, the costs incurred on behalf of our clients, along with the corresponding reimbursement revenue, are presented gross on our Consolidated Statements of Comprehensive Income. Project & Development Services Project & Development Services provides short-term construction-related services ranging from general contracting to project management for owners and occupiers of real estate. Depending on the terms of our engagement, our performance obligation is either to arrange for the completion of a project or to assume responsibility for completing a project on behalf of a client. Our obligations to clients are satisfied over time due to the continuous transfer of control of the underlying asset. Therefore, we recognize revenue over time, generally using input measures (e.g. to-date costs incurred relative to total estimated costs at completion). Typically, we are entitled to consideration at distinct milestones over the term of an engagement. For certain contracts where we assume responsibility for completing a project, we control the services provided by third-party vendors and subcontractors prior to transfer of the assets to the client. In these situations, the costs incurred on behalf of clients, along with the associated reimbursement revenue are presented gross on our Consolidated Statements of Comprehensive Income. For situations in which we act as agent on behalf of clients, costs incurred and the associated revenue are presented net on our Consolidated Statements of Comprehensive Income. Advisory, Consulting and Other Advisory, Consulting and Other includes a variety of different service offerings, whereby our performance obligation is to provide services as specified in the contract. Occasionally, our entitlement to consideration is predicated on the occurrence of an event such as the delivery of a report for which client acceptance is required. However, except for event-driven point-in-time transactions, the majority of services provided within this service line are delivered over time due to the continuous transfer of control to our clients. LaSalle LaSalle provides real estate investment management services to clients and generally earns consideration in the form of advisory fees, transaction fees and incentive fees. Typically, our performance obligation is to manage clients’ capital for a specified period of time and is delivered as a series of daily performance obligations over time. Revenue recognition for transaction and incentive fees is generally constrained until all contingencies have cleared due to the possibility of a significant reversal until completion of the events necessary to realize the associated consideration. Substantially all incentive fees recognized as revenue were previously constrained. Contract Costs Expenses, primarily employee commissions, incurred on leasing and capital markets transactions represent substantially all our incremental costs to obtain revenue contracts. We apply the applicable practical expedient offered by ASC Topic 606 when the amortization period is one year or less and, therefore, recognize these costs as an operating expense as they are incurred. We also incur costs to fulfill revenue contracts, primarily related to transition costs incurred prior to delivering Property & Facility Management services. These costs are not expensed as incurred but are deferred and amortized as an operating expense over the expected life of the contract in accordance with the transfer of related services. These deferred costs are assessed periodically for impairment. Contract Assets and Liabilities Contract assets include amounts recognized as revenue for which we are not yet entitled to payment for reasons other than the passage of time, but that do not constrain revenue recognition. We include Contract assets in our reserving process and assess the risk of loss similar to our methodology for Trade receivables, since Contract assets are reclassified to Trade receivables when we become entitled to payment. Accordingly, a reserve is applied upon recognition of the contract asset. 76 Table of Contents Contract liabilities include advance payments we have received which relate to performance obligations we have not yet satisfied. Our contract assets, net of allowance, are included in Short-term contract assets and Other assets and our contract liabilities are included in Short-term contract liabilities and deferred income on our Consolidated Balance Sheets. The majority of contract liabilities are recognized as revenue within 90 days. Detail of our contract assets and liabilities is presented below. (in millions) December 31, 2020 December 31, 2019 Contract assets, gross $ 347.8 419.3 Allowance for contract assets ( 2.1 ) n/a Contract assets, net $ 345.7 419.3 Contract liabilities $ 111.0 87.7 Deferred Income Deferred income includes payments received from customers for which we have satisfied our performance obligations but are not yet able to recognize the related revenue because of contractual requirements. Remaining Performance Obligations Remaining performance obligations represent the aggregate transaction price for contracts where our performance obligations have not yet been satisfied. As of December 31, 2020, the aggregate amount of transaction price allocated to remaining performance obligations represented approximately 5 % of our total revenue. In accordance with ASC Topic 606, excluded from the aforementioned remaining performance obligations are (i) amounts attributable to contracts expected to be completed within 12 months and (ii) variable consideration for services performed as a series of daily performance obligations, such as property and facility management contracts and LaSalle advisory contracts. Contracts within these businesses represent a significant portion of our contracts with customers not expected to be completed within 12 months. Cash and Cash Equivalents We consider all highly-liquid investments purchased with maturities of less than three months to be cash equivalents. The carrying amount of cash equivalents approximates fair value due to the short-term maturity of these investments. Financing Receivables We account for Trade receivables, Notes and other receivables, Long-term receivables, Reimbursable receivables, and Warehouse receivables as financing receivables. Trade Receivables Pursuant to contractual arrangements, Trade receivables, net of allowances include unbilled amounts of $ 460.1 million and $ 586.6 million as of December 31, 2020 and 2019, respectively. We estimate an allowance to provide for uncollectible accounts receivable, which is applied upon recognition of the receivable. We base this estimate on historical experience combined with a review of the receivable aging, current and expected economic conditions, and client credit quality. Our estimate also includes specifically identified amounts for which payment has become unlikely. As trade receivables are due within one year, changes to economic conditions are not expected to have a significant impact on our estimate of expected credit losses. However, we will monitor economic conditions on a quarterly basis to determine if any adjustments are deemed necessary. After all collection efforts have been exhausted by management, the outstanding balance considered not collectible is written off against the allowance. 77 Table of Contents The following table details the changes in the allowance for uncollectible receivables. (in millions) 2020 2019 2018 Allowance as of January 1, (1) $ 71.7 52.0 51.3 Charged to income 24.3 30.8 18.8 Write-off of uncollectible receivables ( 29.5 ) ( 13.8 ) ( 13.9 ) Impact of exchange rate movements and other — ( 0.9 ) ( 4.2 ) Allowance as of December 31, $ 66.5 68.1 52.0 (1) January 1, 2020 includes $3.6 million adjustment due to adoption of ASC Topic 326. Refer to the "New Accounting Standards" section below for further detail. Notes and Other Receivables and Long-Term Receivables We make ongoing assessments of the collectability of outstanding Notes and other receivables and Long-term receivables, considering both objective and subjective factors such as the aging profile of outstanding balances, the contractual terms of repayment, and credit quality. Aspects of credit quality considered in our assessments of collectability include historical experience, current and expected economic conditions, and our broader business relationship with the obligor. We record an allowance against the outstanding balance when our assessments determine payment has become unlikely. After all collection efforts have been exhausted by management, the outstanding balance is written off against the reserve. Historically, credit quality deterioration to the point of impairment or non-performance in our Notes and other receivables and Long-term receivables has been limited and has not had a material impact on the Consolidated Financial Statements. Reimbursable Receivables We recognize Reimbursable receivables for costs incurred on behalf of clients, primarily while performing Property & Facility Management services. These costs include direct reimbursements, primarily payroll and third-party vendor and subcontractor costs. We record an allowance based on specific identification of an uncollectible reimbursable receivable, considering current and future economic conditions as well as client credit quality. Historically, we have not experienced any material collection issues and, as such, have not applied a formulaic reserve to these receivables. Reimbursable receivables relate to our Reimbursable payables, which are typically satisfied on a pay-when-paid basis. Warehouse Receivables We classify Warehouse receivables as held-for-sale as they represent originated mortgage loans for which we have simultaneously executed commitments to sell to a third-party investor, primarily the Federal Home Loan Mortgage Corporation ( Freddie Mac ), the Federal National Mortgage Association ( Fannie Mae ), and the Government National Mortgage Association ( Ginnie Mae ). These loans (also referred to as "Warehouse receivables") are funded directly to borrowers by our warehouse facilities and are generally repaid within a 45-day period after origination when the third-party investor buys the loan(s); upon surrender of control over each loan, we account for the transfer as a sale. Warehouse receivables are measured and reported at fair value in accordance with our entity-wide election of the fair value option. As such, increases or decreases in the fair value of loans are recognized as Revenue on the Consolidated Statements of Comprehensive Income. Historically, we have not experienced credit quality deterioration or uncollectible balances with respect to our Warehouse receivables. We generally retain certain servicing rights upon sale of the mortgage loan (refer to the Mortgage Servicing Rights section below). We typically retain no exposure for credit losses on loans subsequent to sale, except for loans under Fannie Mae's Delegated Underwriting and Servicing ("DUS") program. See the following section, Financial Guarantees, as well as Note 13, Commitments and Contingencies, for additional information on the risk of loss retained related to DUS program loans. Contractually specified servicing fees related to sold warehouse receivables were $ 80.0 million, $ 63.0 million and $ 49.6 million for the years ended December 31, 2020, 2019, and 2018, respectively, and are included in Revenue on the Consolidated Statements of Comprehensive Income. 78 Table of Contents Financial Guarantees Certain loans we originate and sell under the Fannie Mae DUS program retain a percentage of the risk of loss. This loss-sharing aspect of the program represents an off-balance sheet credit exposure, and we have established a contingent reserve ("loan loss guarantee reserve") for this risk in accordance with ASC Topic 326. To estimate the reserve, we use a model that analyzes historical losses, current and expected economic conditions, and reasonable and supportable forecasts. The model also considers specific details of the underlying property used as collateral, such as occupancy and financial performance. The loan loss guarantee reserve is calculated on an individual loan level. As of December 31, 2020, the loan loss guarantee reserve was $ 36.7 million and was included within Other liabilities on the Consolidated Balance Sheets. This balance reflected a notable increase from our opening balance (included in the New Accounting Standards section below) as a result of incorporating into our model, economic conditions and projections related to the COVID-19 pandemic. For all DUS program loans with loss-sharing obligations, we record a non-contingent liability equal to the estimated fair value of the guarantee obligations undertaken upon sale of the loan, which reduces our gain on sale of the loan. Subsequently, this liability is amortized over the estimated life of the loan and recognized as Revenue on the Consolidated Statements of Comprehensive Income. The loss-sharing guarantee obligation (in accordance with ASC Topic 460, Guarantees ) is separate from the loan loss guarantee reserve discussed above. As of December 31, 2020 and 2019, loss-sharing guarantee obligations were $ 22.1 million and $ 20.6 million, respectively, and are included in Other liabilities on the Consolidated Balance Sheets. See Note 13, Commitments and Contingencies, for further information on the DUS program. Mortgage Servicing Rights We generally retain certain servicing rights in connection with the origination and sale of Warehouse receivables. We initially record MSRs based on the fair value of these rights on the date the loans are sold, which could result in net gains which we recognize as Revenue on the Consolidated Statements of Comprehensive Income. As of December 31, 2020 and 2019, we had $ 424.3 million and $ 376.4 million, respectively, of MSRs carried at the lower of amortized cost or fair value in Identified intangibles on the Consolidated Balance Sheets. We amortize servicing rights over the estimated period net servicing income is projected to be received. In addition, we evaluate MSR intangible assets for impairment on a quarterly basis, or more frequently if circumstances or events indicate a change in fair value. Other than write-offs due to prepayments of sold Warehouse receivables for which we retained the servicing rights (generally only during the last six months of loan term given the punitive contractual terms of any earlier prepayment), there have been no significant instances of impairment during the three-year period ended December 31, 2020. However, an increase in loan prepayment activity or deterioration in the credit quality of borrowers could result in a decrease to our MSR balance. MSRs do not actively trade in an open market with readily available observable prices; therefore, if necessary, the fair value of these rights are determined in part based on certain assumptions and judgments that are unobservable within the fair value hierarchy, including the estimation of the present value of future cash flows to be realized from servicing the underlying mortgages. T he estimated fair value of MSRs was $ 459.6 million and $ 423.7 million as of December 31, 2020 and 2019, respectively. See Note 4, Business Combinations, Goodwill and Other Intangible Assets for additional information on MSRs. Restricted Cash Restricted cash primarily consists of cash amounts set aside to satisfy legal or contractual requirements arising in the normal course of business. We are restricted in our ability to withdraw these funds other than for their specified use. Restricted cash was included in Prepaid and other current assets on the Consolidated Balance Sheets. Property and Equipment We record property and equipment at cost and depreciate these assets over their relevant useful lives. We capitalize certain direct costs relating to internal-use software when incurred during the application development phase. We evaluate property and equipment for impairment whenever events or circumstances indicate the carrying value of an asset group may not be recoverable. We record an impairment loss to the extent the carrying value exceeds the estimated fair value. We did not recognize any significant impairment losses related to property and equipment during the three years ended December 31, 2020. 79 Table of Contents We calculate depreciation on property and equipment for financial reporting purposes using the straight-line method based on the estimated useful lives of our assets. Depreciation expense related to property and equipment for the years ended December 31, 2020, 2019 and 2018 was $ 169.3 million, $ 157.6 million, and $ 156.5 million, respectively. The following table shows the gross value of major asset categories and the standard depreciable lives, as of December 31, 2020, for each of these asset categories. December 31, ($ in millions) 2020 2019 Depreciable Life Furniture, fixtures and equipment $ 127.9 115.4 3 to 13 years Computer equipment and software 829.8 752.9 3 to 10 years Leasehold improvements 352.4 308.6 1 to 10 years Other (1) 160.0 185.7 2 to 30 years Total 1,470.1 1,362.6 Less: Accumulated depreciation 806.2 660.7 Net property and equipment $ 663.9 701.9 (1) Other includes certain assets, such as land, which are not depreciated. Business Combinations, Goodwill and Other Intangible Assets We have historically grown, in part, through a series of acquisitions. Consistent with the services nature of the majority of businesses we have acquired, we have recognized significant goodwill and intangible assets resulting from these acquisitions. Intangible assets are initially recorded at their respective acquisition date fair values and amortized on a straight-line basis over their estimated useful lives. They primarily represent customer relationships, management contracts and customer backlogs acquired as part of our acquisitions. We evaluate goodwill for impairment at least annually. We define our four reporting units as the three geographic regions of RES (i) Americas, (ii) Europe, Middle East and Africa ("EMEA") and (iii) Asia Pacific; and (iv) LaSalle. We have considered qualitative and quantitative factors while performing our annual impairment test of goodwill (as of July 1, 2020) and determined it is not more-likely-than-not that the fair value of our Americas, Asia Pacific, and LaSalle reporting units are less than their carrying values. In performing our assessments of all reporting units, we primarily considered (i) macroeconomic and industry trends, (ii) our overall financial performance, and nature of the key drivers thereof, during the year at both the reporting unit and consolidated reporting levels, (iii) near and longer-term forecasts of operating income and cash flows generated by our reporting units in relation to the carrying values of the net assets of each reporting unit, and (iv) our market capitalization in relation to the aggregate carrying value of our net assets. With respect to our EMEA reporting unit, we performed Step 1 of the goodwill impairment analysis during our 2020 annual impairment test, which indicated the estimated fair value exceeded the carrying value by over 20%. In performing Step 1, we relied on the discounted cash flow (“DCF”) method, an income approach, in determining the estimated fair value. Our DCF analysis relied on significant judgments and assumptions in determining the inputs, specifically, forecasted revenue growth, forecasted profitability margin, and the discount rate used to present value the estimated future cash flows. In addition to our annual impairment evaluation, we evaluated whether events or circumstances have occurred in the period subsequent to our annual impairment testing and determined it is not more-likely-than-not that the fair value of all our reporting units are less than their respective carrying values. It is possible our determination that goodwill for a reporting unit is not impaired could change in the future if current economic or other conditions deteriorate. We will continue to monitor the relationship between our market capitalization and carrying value, as well as the ability of our reporting units to deliver current and projected earnings and cash flows sufficient to support the carrying values of the net assets of their respective businesses. We evaluate our Identified intangibles for impairment annually or more frequently if other events or circumstances indicate the carrying value may be impaired. See Note 4, Business Combinations, Goodwill and Other Intangible Assets, for additional information on business combinations, goodwill and other intangible assets. 80 Table of Contents Investments in Real Estate Ventures We invest in certain ventures that primarily own and operate commercial real estate on a global basis across a wide array of sectors including retail, residential and office. Historically, these investments have primarily been co-investments in funds our LaSalle business establishes in the ordinary course of business for its clients. These investments take the form of equity ownership interests generally ranging from less than 1 % to 10 % of the respective ventures and, based upon investment-specific objectives, have generally included five to nine-year investment periods. Typically, our investments in real estate ventures are not redeemable until the earlier of the disposition of the underlying real estate investments or the end of the fund's life. When in place, such restrictions are a result of our role beyond that of a passive investor, which generally means an advisory or management responsibility on behalf of the other investors who are typically clients of our LaSalle business. We primarily account for these investments at fair value utilizing information provided by investees, however, as further discussed below, we report certain of our investments under the equity method. In addition to our LaSalle investments, we invest, primarily through the JLL Spark Global Venture funds, in property technology funds and early-stage companies to improve our strategic position within the real estate technology landscape. We generally account for these investments at fair value. The fair value of these investments was $ 69.9 million and $ 42.9 million as of December 31, 2020, and 2019, respectively. For limited partnerships in which we are a general partner, the entities are generally well-capitalized and grant the limited partners substantive participating rights, such as the right to replace the general partner without cause, to dissolve or liquidate the partnership, to approve the sale or refinancing of the principal partnership assets, or to approve the acquisition of principal partnership assets. We account for such general partner interests at fair value or under the equity method. For limited partnerships in which we are a limited partner, management has concluded we do not have a controlling interest in these limited partnerships. When we have an asset advisory contract with the limited partnership, the combination of our limited partner interest and the advisory agreement generally provides us with significant influence over the real estate limited partnership venture. Accordingly, we account for such investments at fair value or under the equity method. See "Principles of Consolidation" above for additional discussion of the accounting for our co-investments. For investments in real estate ventures reported at fair value, we maintain an investment account that is increased or decreased each reporting period by the difference between the fair value of the investment and the carrying value as of the balance sheet date. These fair value adjustments are reflected as gains or losses on the Consolidated Statements of Comprehensive Income within Equity earnings. The fair value of these investments as of the balance sheet date is generally determined using NAV per share (or its equivalent), an unobservable input in the fair value hierarchy, provided by the investee. For investments in real estate ventures accounted for under the equity method, we maintain an investment account that is (i) increased by contributions made and by our share of net income earned by the real estate ventures, and (ii) decreased by distributions received and by our share of net losses realized by the real estate ventures. Our share of each real estate venture's net income or loss, including gains and losses from capital transactions, is reflected on the Consolidated Statements of Comprehensive Income as Equity earnings. We evaluate our investments in real estate ventures accounted for under the equity method for other-than-temporary impairment on a quarterly basis, or as events or changes in circumstances warrant such an evaluation. Our evaluations consider the existence of impairment indicators in the underlying real estate assets that compose the majority of our investments. We base such evaluations, in regard to both the investment and the investment’s underlying asset levels, on regular updates to future cash flow models, our share of co-investment cash flows, and factors such as operational performance, market conditions, major tenancy matters, legal and environmental concerns, and our ability and intent to hold each investment. If an investment is considered other-than-temporarily impaired, we record the excess of the carrying value over the estimated fair value as an impairment charge. Impairment charges to write down the carrying value of the real estate assets underlying our investments are generally based on the result of discounted cash flow models that primarily rely upon unobservable inputs to determine fair value. We recognize our proportionate share of such impairment within Equity earnings on the Consolidated Statements of Comprehensive Income. See Note 5, Investments in Real Estate Ventures and Note 9, Fair Value Measurements for additional information on Investments in real estate ventures. 81 Table of Contents Stock-Based Compensation Stock-based compensation in the form of restricted stock units ("RSUs") and performance stock units ("PSUs") is an important element of our compensation programs. We determine the fair value of RSUs, subject only to service requirements, based on the closing market price of our common stock on the grant date. PSUs are subject to service requirements and performance measures. All PSUs contain one or more performance conditions, such as a pre-defined target based on the Company’s cumulative earnings per share over a multi-year period. For certain executives there is an additional performance measure, a market condition, based on total shareholder return ("TSR") against a peer group. The number of shares that will be issued upon vesting of these PSUs can range from 0% to 150% of the target award, depending on the achievement of each performance condition. We determine the fair value of PSUs based on the (i) closing market price of our common stock on the grant date taking, (ii) the achievement probability for each performance condition, and (iii) the market condition valuation, as applicable, based on the output of Monte Carlo simulations. We periodically assess the achievement probability for performance conditions. As of December 31, 2020, less than 3% of unvested shares were subject to a market condition. Employees of a specific age, with a sum of age plus years of service with the Company which meets or exceeds 65 , based on the terms of the Jones Lang LaSalle 2019 Stock Award and Incentive Plan ("SAIP"), are eligible to be considered for receipt of retirement benefits upon departure from the Company. These award provisions require acceleration of compensation expense such that all expense is recognized by the time these employees are considered retirement eligible. We do not estimate forfeitures; instead, we recognize forfeitures in Compensation & benefits expense as they occur. We also have a "noncompensatory" Employee Stock Purchase Plan ("ESPP") for U.S. employees and a Jones Lang LaSalle Savings Related Share Option Plan ("Save As You Earn" or "SAYE") for U.K. employees. The fair value of options granted under the SAYE plan are determined on the grant date and amortized over the associated vesting period. See Note 6, Stock-Based Compensation, for additional information on our stock-based compensation plans. Income Taxes We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. An increase or decrease in a deferred tax asset or liability that results from a change in circumstances, and that causes a change in our judgment about expected future tax consequences of events, would be included in the tax provision when the changes in circumstances and our judgment occurs. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is established if we believe it is more-likely-than-not all or some portion of a deferred tax asset will not be realized. An increase or decrease in a valuation allowance that results from a change in circumstances, and that causes a change in our judgment about the ability to realize the related deferred tax asset, would be included in the tax provision when the changes in circumstances and our judgment occurs. See Note 8, Income Taxes, for additional information on income taxes. Derivatives and Hedging Activities We do not enter into derivative financial instruments for trading or speculative purposes. However, in the normal course of business, we do use derivative financial instruments in the form of foreign currency forward contracts to manage our foreign currency exchange rate risk. We currently do not use hedge accounting for these contracts, which are marked-to-market each period with changes in unrealized gains or losses recognized in earnings and offset by foreign currency gains and losses on associated intercompany loans and other foreign currency balances. Gains and losses from the revaluation of these contracts are recognized as a component of Operating, administrative and other expense and are offset by the gains and losses recognized on the revaluation of intercompany loans and other foreign currency balances such that the impact to net income was not significant for the three years ended December 31, 2020. For presentation and disclosure, we net our exposure by counterparty for all counterparties subject to International Swaps and Derivatives Association Master Agreements. 82 Table of Contents We have considered the counterparty credit risk related to these forward foreign currency exchange contracts and do not deem any counterparty credit risk to be material as of December 31, 2020, in part due to the short-term nature of these contracts. In addition, certain loan commitments and forward sales commitments related to our Warehouse receivables meet the definition of a derivative and are recorded at fair value on the Consolidated Balance Sheets. The estimated fair value of loan commitments includes the fair value of the expected net cash flows associated with servicing of the loan, other net cash flows associated with origination and sale of the loan, and the effects of market interest rate movements. The estimated fair value of forward sale commitments includes the effects of market interest rate movements. Therefore, the effect of market interest rate movements on estimated fair value offset between the loan commitments and the forward sale commitments. Adjustments to fair value related to loan and forward sale commitments are included within Revenue on the Consolidated Statements of Comprehensive Income. See Note 9, Fair Value Measurements, for additional information on derivative financial instruments. Leases Substantially all of our operating leases are related to office space we lease in various buildings for our own use. The terms of these non-cancelable operating leases typically require us to pay rent and a share of operating expenses and real estate taxes, generally with an inflation-based rent increase included. We also lease equipment under both operating and finance lease arrangements. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments (e.g. rent) over the lease term beginning at the commencement date. The Operating lease right-of-use assets are adjusted for lease incentives, deferred rent, and initial direct costs, if incurred. Our leases generally do not include an implicit rate; therefore, we use an incremental borrowing rate based on information available at the lease commencement date in determining the present value of future minimum lease payments. The related lease expense is recognized on a straight-line basis over the lease term. Finance leases are included in Property and equipment, net of accumulated depreciation, Short-term borrowings, and Other liabilities on our Consolidated Balance Sheets. Our finance leases do not represent a significant portion of our leasing activity. See Note 11, Leases, for additional information on leases. Foreign Currency Translation We prepare the financial statements of our subsidiaries located outside the U.S. using local currency as the functional currency. The assets and liabilities of these subsidiaries are translated to U.S. dollars at the rates of exchange as of the balance sheet date with the resulting translation adjustments included as a separate component of equity on the Consolidated Balance Sheets (Accumulated other comprehensive loss) and on the Consolidated Statements of Comprehensive Income (Other comprehensive income-foreign currency translation adjustments). See Note 15, Accumulated Other Comprehensive Income (Loss), for additional information on the components of Accumulated other comprehensive loss. Income and expenses are translated at the average monthly rates of exchange. We include gains and losses from foreign currency transactions in net earnings as a component of Operating, administrative and other expense. For the years ended December 31, 2020, 2019 and 2018 we had net foreign currency transaction losses of $ 4.6 million, $ 2.4 million, and $ 4.1 million, respectively. The effect of foreign currency exchange rate changes on Cash, cash equivalents and restricted cash is presented as a separate caption in the Consolidated Statements of Cash Flows. Cash Held for Others We manage significant amounts of cash and cash equivalents in our role as agent for certain of our investment, facility management and property management clients. We do not include such amounts on the Consolidated Balance Sheets. 83 Table of Contents Taxes Collected from Clients and Remitted to Governmental Authorities We account for tax assessed by a governmental authority that is based on a revenue or transaction value (i.e., sales, use and value-added taxes) on a net basis, excluded from revenue, and recorded as current liabilities until paid. Other Commitments and Contingencies We are subject to various claims and contingencies related to disputes, lawsuits and taxes as well as commitments under contractual obligations. Many of these claims are covered under our current insurance programs, subject to deductibles. Our current insurance programs include professional, auto and general liability. For professional indemnity coverage, the level of risk retained by our captive insurance company is limited per claim, inclusive of the deductible. We contract third-party insurance companies to provide coverage of risk in excess of the policy limits. We recognize the liability associated with a loss contingency when a loss is probable and estimable. See Note 13, Commitments and Contingencies, for additional information on our captive insurance company as well as our commitments and contingencies. Earnings Per Share; Net Income Available to Common Shareholders The difference between basic weighted average shares outstanding and diluted weighted average shares outstanding represents the dilutive impact of our common stock equivalents. Common stock equivalents consist of shares to be issued under employee stock-based compensation programs. Anti-dilutive shares were de minimus for all periods presented. See Note 6, Stock-Based Compensation, for additional information on our stock-based compensation plans. New Accounting Standards Recently adopted accounting guidance In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (ASC Topic 326) , which created a new framework to evaluate financial instruments, such as trade receivables, for expected credit losses. This new framework replaced the existing incurred loss approach and is expected to result in more timely recognition of credit losses. On January 1, 2020, we adopted ASU No. 2016-13 using a modified-retrospective approach, as required by the ASU. The adoption impacted our methodology of reserving for (i) Trade receivables, (ii) other receivable-related financial assets, specifically contract assets, and (iii) off-balance sheet credit exposures within the scope of this ASU. Specifically, we evaluated our historical reserve balances for Trade receivables and the related write-off activity and developed a forward-looking process for adoption. We also evaluated our loss-sharing guarantee obligation for certain mortgage loans we originate, sell and retain the servicing rights. The following table details the cumulative impact to Retained earnings upon adoption of ASC Topic 326. Published Adjustment due to Reported Under ASC Topic 326 (in millions) December 31, 2019 adoption of ASC Topic 326 on January 1, 2020 Assets Allowance for trade receivables $ ( 68.1 ) ( 3.6 ) $ ( 71.7 ) Deferred tax assets, net 245.4 5.5 250.9 Allowance for contract assets (1) — ( 1.7 ) ( 1.7 ) Liabilities and equity Loan loss guarantee reserve (2) $ — 15.1 $ 15.1 Retained earnings 3,588.3 ( 14.9 ) 3,573.4 (1) The portion of the allowance for long-term contract assets is included within Other assets on the Consolidated Balance Sheets. (2) Included within Other liabilities on the Consolidated Balance Sheets 84 Table of Contents In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which increased 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. On January 1, 2019, we adopted this, on a modified retrospective basis under the optional transition method. Therefore, the application of the provisions of this ASU are effective January 1, 2019, and any prior periods are presented in accordance with ASC Topic 840. Additionally, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward (i) our historical lease classification and assessments for expired and existing leases, and (ii) our historical accounting for initial direct costs for existing leases. We elected not to record on the Consolidated Balance Sheets any lease whose term is 12 months or less and does not include a purchase option that we are reasonably certain to exercise. We also elected to account for the non-lease components within our leases as part of the single lease component to which they are related. The most significant impact of the adoption of this ASU was an increase to the Consolidated Balance Sheets to reflect operating lease right-of-use assets and lease liabilities, which are primarily associated with our office leases around the world. Our accounting for finance leases was not materially impacted. 3. BUSINESS SEGMENTS We manage and report our operations as four business segments: The three geographic regions of RES including: (1) Americas, (2) Europe, Middle East and Africa ("EMEA"), and (3) Asia Pacific; and (4) LaSalle. Each geographic region offers our full range of real estate services, including agency leasing and tenant representation, capital markets, property and facility management, project and development management, energy management and sustainability, construction management, and advisory, consulting and valuation services. LaSalle provides investment management services on a global basis to institutional investors and high-net-worth individuals. We allocate all indirect expenses to our segments, other than interest and income taxes, as nearly all expenses incurred benefit one or more of the segments. Allocated expenses primarily consist of corporate global overhead, which we allocate to the business segments based on the budgeted operating expenses of each segment. Segment income does not include (i) restructuring and acquisition charges, (ii) interest expense, net of interest income, (iii) other income, and (iv) provision for income tax, which are otherwise included in Net income on the Consolidated Statements of Comprehensive Income. The Chief Operating Decision Maker ("CODM") of JLL measures and evaluates the segment results based on Segment income for purposes of making decisions about allocating resources and assessing performance. Our CODM is not provided with total asset information by segment and, accordingly, does not measure performance or allocate resources based on total asset information. Therefore, we have not disclosed asset information by segment. As of December 31, 2020, we define the CODM collectively as our Global Executive Board, which comprises the following: • Chief Executive Officer and President • Chief Executive Officers of each of our four business segments • Chief Financial Officer • Chief Executive Officer of Corporate Solutions • Chief Human Resources Officer • Chief Executive Officer of Capital Markets • Co-Chief Executive Officers of JLL Technologies 85 Table of Contents Summarized financial information by business segment is as follows. Year Ended December 31, (in millions) 2020 2019 2018 Americas - Real Estate Services Leasing $ 1,451.2 1,960.5 1,754.1 Capital Markets 952.0 914.2 500.3 Property & Facility Management 5,878.2 5,607.9 5,142.2 Project & Development Services 1,333.5 1,689.6 1,301.7 Advisory, Consulting and Other 390.3 406.7 342.7 Revenue $ 10,005.2 10,578.9 9,041.0 Depreciation and amortization $ 151.4 126.5 109.1 Equity earnings $ 19.0 1.7 0.8 Segment income $ 554.9 613.1 422.7 EMEA - Real Estate Services Leasing $ 245.6 302.7 333.0 Capital Markets 330.7 411.9 464.1 Property & Facility Management 1,456.6 1,551.6 1,482.2 Project & Development Services 785.6 904.3 920.3 Advisory, Consulting and Other 274.3 300.2 295.4 Revenue $ 3,092.8 3,470.7 3,495.0 Depreciation and amortization $ 40.0 43.1 50.8 Equity losses $ — ( 1.0 ) — Segment (loss) income $ ( 16.0 ) 46.0 77.0 Asia Pacific - Real Estate Services Leasing $ 187.4 260.8 285.0 Capital Markets 124.7 216.1 181.0 Property & Facility Management 2,150.6 2,205.2 2,158.4 Project & Development Services 411.0 527.6 447.0 Advisory, Consulting and Other 196.4 197.8 177.1 Revenue $ 3,070.1 3,407.5 3,248.5 Depreciation and amortization $ 27.8 26.4 23.2 Equity earnings $ 1.4 2.3 2.0 Segment income $ 116.4 129.6 115.1 LaSalle Advisory fees $ 336.4 326.4 276.7 Transaction fees & other 43.9 61.3 41.4 Incentive fees 41.5 138.4 215.8 Revenue $ 421.8 526.1 533.9 Depreciation and amortization $ 7.2 6.4 3.0 Equity (losses) earnings $ ( 12.4 ) 33.3 30.0 Segment income $ 54.2 147.4 163.7 86 Table of Contents Year Ended December 31, (in millions) 2020 2019 2018 Segment income - Americas $ 554.9 613.1 422.7 Segment (loss) income - EMEA ( 16.0 ) 46.0 77.0 Segment income - Asia Pacific 116.4 129.6 115.1 Segment income - LaSalle 54.2 147.4 163.7 Less: Equity earnings ( 8.0 ) ( 36.3 ) ( 32.8 ) Add: Restructuring and acquisition charges ( 142.4 ) ( 184.4 ) ( 38.8 ) Operating income $ 559.1 715.4 706.9 The following table sets forth the revenue from our most significant currencies. TOTAL REVENUE Year Ended December 31, (in millions) 2020 2019 2018 United States dollar $ 9,457.8 10,054.9 8,523.8 Euro 1,350.6 1,507.7 1,527.1 British pound 1,341.1 1,514.8 1,526.3 Australian dollar 876.1 924.5 916.7 Indian rupee 524.5 651.8 580.4 Hong Kong dollar 512.2 533.8 487.2 Chinese yuan 473.1 505.9 505.5 Canadian dollar 432.6 435.5 390.5 Japanese yen 257.9 349.4 285.2 Singapore dollar 246.6 309.2 458.7 Other currencies 1,117.4 1,195.7 1,117.0 $ 16,589.9 17,983.2 16,318.4 4. BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS 2020 Business Combinations Activity During 2020, we completed no new strategic acquisitions and paid $ 67.7 million for deferred business acquisition and earn-out obligations for acquisitions completed in prior years. 2019 Business Combinations Activity During the year ended December 31, 2019, we completed four new strategic acquisitions, all located in the Americas. Acquisition of HFF, Inc. ("HFF") On July 1, 2019, we completed the acquisition of HFF, a public commercial real estate financial intermediary providing real estate and capital markets services. The acquisition of HFF, regarded as one of the premier capital markets advisors in the industry, greatly enhanced our existing capital markets services, significantly expanded our client reach and aligned with our strategy to grow the capital markets business line. The following table details the total consideration transferred. (in millions) Amount Cash consideration (1) $ 1,029.5 Share consideration (2) 809.2 JLL RSUs issued to replace unvested HFF RSUs (3) 32.0 Total consideration $ 1,870.7 (1) Exclusive of $ 262.8 million cash and $ 5.8 million of restricted cash acquired. (2) Represents the fair value of JLL common stock issued to then-HFF stockholders. (3) Represents the allocation of expense to the pre-combination period; included within APIC. 87 Table of Contents The cash and share consideration transferred were used to purchase all outstanding shares of HFF Class A common stock. We financed the cash portion of the purchase price with cash on hand and borrowings under our existing $ 2.75 billion unsecured revolving credit facility (the "Facility"). For acquisition related costs refer to Note 12, Restructuring and Acquisition Charges. The successor to HFF in the merger acquisition is operating as a wholly-owned subsidiary of JLL and conducts business as JLL. As of December 31, 2020 our analysis to assign fair values to all tangible and intangible assets and liabilities acquired and assumed for the acquisition of HFF was final. There were no significant adjustments to the purchase price allocation recorded during the year ended December 31, 2020. The allocation of the purchase consideration resulted in identified intangibles of $ 349.9 million, tangible assets of $ 1,227.8 million and liabilities of $ 1,104.7 million. The excess purchase price over the estimated fair value of net assets acquired of $ 1,397.7 million has been recorded to goodwill. The goodwill relating to this acquisition is primarily attributable to assembled workforce and synergies. Other 2019 Business Combinations Activity Aggregate terms of these acquisitions, other than HFF, included (i) cash paid at closing of $ 40.4 million (net of $ 3.8 million in cash acquired), (ii) guaranteed deferred consideration of $ 17.0 million and (iii) contingent earn-out consideration of $ 5.0 million recorded at their respective acquisition date fair value, which we will pay upon satisfaction of certain performance conditions. As of December 31, 2019, a preliminary allocation of this purchase consideration for these other acquisitions resulted in goodwill of $ 62.8 million, identifiable intangibles of $ 12.7 million, and other net liabilities (assumed liabilities less acquired assets) of $ 4.7 million, and redeemable noncontrolling interest of $ 8.4 million. As of December 31, 2020, the purchase price allocations for our 2019 acquisitions was final. There were no significant adjustments to the purchase price allocation recorded during the year ended December 31, 2020. During the year ended December 31, 2019, we also paid $ 104.7 million for deferred business acquisition and earn-out obligations for acquisitions completed in prior years. Of the $ 1,460.5 million of total additions to goodwill in 2019, we expected to amortize and deduct $ 25.4 million for tax purposes as of December 31, 2019, subject to statutory amortization periods. Earn-Out Payments ($ in millions) December 31, 2020 December 31, 2019 Number of acquisitions with earn-out payments subject to the achievement of certain performance criteria 35 44 Maximum earn-out payments (undiscounted) $ 199.2 268.9 Short-term earn-out liabilities (fair value) (1) 77.2 53.9 Long-term earn-out liabilities (fair value) (1) 8.5 94.5 (1) Included in Short-term and Long-term acquisition obligations on the Consolidated Balance Sheets Assuming the achievement of the applicable performance criteria, we anticipate making these earn-out payments over the next five years. Refer to Note 9, Fair Value Measurements, and Note 14, Restructuring and Acquisition Charges, for additional discussion of our earn-out liabilities. Goodwill and Other Intangible Assets Goodwill and unamortized intangibles as of December 31, 2020 consisted of (i) goodwill of $ 4,224.7 million, (ii) identifiable intangibles of $ 625.8 million amortized over their remaining finite useful lives and (iii) $ 54.0 million of identifiable intangibles with indefinite useful lives that are not amortized. Significant portions of our goodwill and unamortized intangibles are denominated in currencies other than the U.S. dollar, which means a portion of the movements in the reported book value of these balances is attributable to movements in foreign currency exchange rates. 88 Table of Contents The following table details, by reporting segment, the annual movements in goodwill. (in millions) Americas EMEA Asia Pacific LaSalle Consolidated Balance as of December 31, 2018 $ 1,452.0 906.8 316.8 22.2 $ 2,697.8 Additions, net of adjustments 1,424.4 1.6 — 35.5 1,461.5 Dispositions — ( 4.4 ) — — ( 4.4 ) Impact of exchange rate movements 1.2 11.9 0.8 ( 0.6 ) 13.3 Balance as of December 31, 2019 2,877.6 915.9 317.6 57.1 4,168.2 Dispositions — ( 0.7 ) — — ( 0.7 ) Impact of exchange rate movements 0.4 44.5 11.6 0.7 57.2 Balance as of December 31, 2020 $ 2,878.0 959.7 329.2 57.8 $ 4,224.7 The following table details, by reporting segment, the annual movements in the gross carrying amount and accumulated amortization of our identifiable intangibles. MSR Other Intangibles (in millions) Americas Americas EMEA Asia Pacific LaSalle Consolidated Gross Carrying Amount Balance as of December 31, 2018 $ 266.2 90.0 83.1 23.5 43.9 $ 506.7 Additions, net of adjustments (1) 247.6 196.7 0.1 — 9.6 454.0 Adjustment for fully amortized intangibles ( 33.4 ) ( 0.6 ) ( 28.1 ) ( 2.0 ) — ( 64.1 ) Impairments — ( 0.5 ) — — — ( 0.5 ) Impact of exchange rate movements — 0.1 0.8 ( 0.1 ) 0.5 1.3 Balance as of December 31, 2019 480.4 285.7 55.9 21.4 54.0 897.4 Additions, net of adjustments (1) 139.0 — — 0.5 — 139.5 Adjustment for fully amortized intangibles ( 47.3 ) ( 19.9 ) ( 1.9 ) ( 0.1 ) — ( 69.2 ) Impact of exchange rate movements — — 1.7 1.8 3.9 7.4 Balance as of December 31, 2020 $ 572.1 265.8 55.7 23.6 57.9 $ 975.1 Accumulated Amortization Balance as of December 31, 2018 $ ( 72.4 ) ( 38.8 ) ( 51.8 ) ( 6.8 ) — $ ( 169.8 ) Amortization expense, net (2) ( 65.0 ) ( 30.7 ) ( 9.5 ) ( 1.9 ) ( 2.7 ) ( 109.8 ) Adjustment for fully amortized intangibles 33.4 0.6 28.1 2.0 — 64.1 Impairments — 0.5 — — — 0.5 Impact of exchange rate movements — 0.1 0.1 — — 0.2 Balance as of December 31, 2019 ( 104.0 ) ( 68.3 ) ( 33.1 ) ( 6.7 ) ( 2.7 ) ( 214.8 ) Amortization expense, net (2) ( 91.1 ) ( 46.0 ) ( 7.1 ) ( 1.4 ) ( 2.6 ) ( 148.2 ) Adjustment for fully amortized intangibles 47.3 19.9 1.9 0.1 — 69.2 Impact of exchange rate movements — 0.3 ( 1.2 ) ( 0.6 ) — ( 1.5 ) Balance as of December 31, 2020 $ ( 147.8 ) ( 94.1 ) ( 39.5 ) ( 8.6 ) ( 5.3 ) $ ( 295.3 ) Net book value as of December 31, 2020 $ 424.3 171.7 16.2 15.0 52.6 $ 679.8 (1) Included in this amount for MSRs was (i) $ 23.7 million and $ 16.6 million for 2020 and 2019, respectively, relating to prepayments/write-offs due to prepayments of the underlying obligation for which we assumed, acquired, or retained the servicing rights and (ii) $ 0.1 million relating to a net impairment valuation allowance. (2) Amortization of MSRs is included in Revenue within the Consolidated Statements of Comprehensive Income. 89 Table of Contents The remaining weighted average amortization period of MSRs and other finite-lived identifiable intangible assets is 4.4 years and 3.2 years, respectively, and the remaining estimated future amortization expense by year, as of December 31, 2020, is presented in the following table. (in millions) MSRs Other Intangibles Total 2021 $ 71.7 48.9 $ 120.6 2022 65.6 43.1 108.7 2023 59.8 40.6 100.4 2024 52.1 36.3 88.4 2025 44.1 19.1 63.2 Thereafter 131.0 13.5 144.5 Total $ 424.3 201.5 $ 625.8 5. INVESTMENTS IN REAL ESTATE VENTURES As of December 31, 2020 and 2019, we had Investments in real estate ventures of $ 430.8 million and $ 404.2 million, respectively. Approximately 90% of our investments, as of December 31, 2020, are in 50 separate property or commingled funds, where we co-invest alongside our clients and for which we also have an advisory agreement. These also include investments by JLL Spark in property technology funds and early-stage companies. The remaining 10% o f our Investments in real estate ventures, as of December 31, 2020, were attributable to investment vehicles that use our capital and outside capital generally provided by institutional investors to invest, primarily, in certain real estate ventures that own and operate real estate. Of our investments attributable to investment vehicles, the majority was invested in LaSalle Investment Company II ("LIC II"), in which we held an effective ownership interest of 48.78 %. We have maximum potential unfunded commitments to direct investments or investment vehicles of $ 320.7 million as of December 31, 2020. Of this amount, while we remain contractually obligated, we do not expect a call on the $ 60.4 million relating to our investment in LIC II as its fund life terminated in January 2020. Our investments in real estate ventures include investments in entities classified as VIEs, which we analyze for potential consolidation. We had equity method investments, either directly or indirectly, of $ 76.4 million and $ 65.5 million as of December 31, 2020 and 2019, respectively, in entities classified as VIEs. We have determined that we are the primary beneficiary of certain VIEs and accordingly, we have consolidated such entities. The assets of the consolidated VIEs are available only for the settlement of the obligations of the respective entities and the mortgage loans of the consolidated VIEs are non-recourse to JLL. Summarized financial information for our consolidated VIEs is presented in the following tables. December 31, (in millions) 2020 2019 Property and equipment, net $ 117.4 126.3 Investments in real estate ventures 9.0 13.2 Other assets 21.0 14.3 Total assets $ 147.4 153.8 Other current liabilities $ 1.9 3.2 Mortgage indebtedness (included in Other liabilities) 60.3 69.7 Total liabilities 62.2 72.9 Members' equity (included in Noncontrolling interest) 85.2 80.9 Total liabilities and members' equity $ 147.4 153.8 90 Table of Contents Year Ended December 31, (in millions) 2020 2019 2018 Revenue $ 13.9 7.6 5.8 Operating and other expenses ( 15.6 ) ( 8.6 ) ( 5.1 ) Net gains on sale of investments (1) 22.1 — 2.0 Net income (loss) $ 20.4 ( 1.0 ) 2.7 (1) $12.3 million of the 2020 year-to-date gain is included in Equity earnings; the remaining $9.8 million is included in Other income. The 2018 year-to-date gain is included in Other income. We allocate the members' equity and net income of the consolidated VIEs to the noncontrolling interest holders as Noncontrolling interest on the Consolidated Balance Sheets and as Net income attributable to noncontrolling interest in the Consolidated Statements of Comprehensive Income, respectively. The following tables summarize the combined financial information for our unconsolidated real estate ventures accounted for under equity method or at fair value. December 31, (in millions) 2020 2019 Balance Sheets: Investments in real estate, net of depreciation $ 24,320.4 22,006.6 Total assets 28,129.3 24,784.8 Mortgage indebtedness 7,980.2 7,345.1 Other borrowings 1,332.9 1,118.2 Total liabilities 10,720.5 9,853.9 Total equity 17,408.8 14,930.9 Year Ended December 31, (in millions) 2020 2019 2018 Statements of Operations: Revenue $ 1,702.3 1,247.6 1,199.5 Net income 241.5 831.2 1,046.3 Impairment There were no significant other-than-temporary impairment charges on Investments in real estate ventures for each of the years in the three-year period ended December 31, 2020. Fair Value We report a majority of our investments in real estate ventures at fair value. For such investments, we increase or decrease our investment each reporting period by the change in the fair value and we report these fair value adjustments in our Consolidated Statements of Comprehensive Income within Equity earnings. The table below shows the movement in our investments in real estate ventures reported at fair value. Year Ended December 31, (in millions) 2020 2019 2018 Fair value investments as of January 1, $ 328.6 247.3 242.3 Investments 51.7 144.9 55.2 Distributions ( 46.8 ) ( 101.7 ) ( 63.8 ) Change in fair value ( 1.0 ) 35.3 13.9 Foreign currency translation adjustments, net 7.8 2.8 ( 0.3 ) Fair value investments as of December 31, $ 340.3 328.6 247.3 See Note 9, Fair Value Measurements, for further discussion of our investments in real estate ventures reported at fair value. 91 Table of Contents 6. STOCK-BASED COMPENSATION The SAIP provides for the granting of various stock awards to eligible employees of JLL. Such awards have historically been RSUs and generally vested in three years. In 2018, we issued PSUs for the first time to certain employees, including our GEB members, under the SAIP. PSU awards generally vest in three years, subject to performance and, for certain awards, market conditions. There were approximately 1.0 million shares available for grant under the SAIP as of December 31, 2020. We also have a stock-based compensation plan for our UK-based employees, the SAYE plan, that allows for the purchase of stock at a 15 % discount from the market price at the beginning of the plan's vesting periods. While there have been no options granted under the SAYE plan since 2017, approximately 281 thousand shares remain available for grant as of December 31, 2020. Stock-based compensation expense, excluding expense related to HFF retention awards issued in conjunction with the HFF acquisition, is included within Compensation and benefits expense on the Consolidated Statements of Comprehensive Income. The expense related to HFF retention awards issued in conjunction with the HFF acquisition is included within Restructuring and acquisition charges. Stock-based compensation expense by award type is presented below. Year Ended December 31, (in millions) 2020 2019 2018 Restricted stock unit awards $ 41.8 61.6 22.4 Performance stock unit awards 5.5 13.6 3.2 SAYE 0.2 1.2 1.3 Total $ 47.5 76.4 26.9 Restricted Stock Units and Performance Stock Units RSU Shares (in 000's) PSU Shares (in 000's) Total Shares (in 000's) Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (in years) Unvested as of December 31, 2017 727.7 — 727.7 $ 118.96 1.24 Granted 176.6 100.6 277.2 156.13 Vested ( 292.5 ) — ( 292.5 ) 125.01 Forfeited ( 52.2 ) ( 7.5 ) ( 59.7 ) 131.84 Unvested as of December 31, 2018 559.6 93.1 652.7 131.32 2.02 Granted 1,298.0 196.5 1,494.5 141.06 Vested ( 287.7 ) — ( 287.7 ) 116.32 Forfeited ( 37.6 ) ( 2.8 ) ( 40.4 ) 137.49 Unvested as of December 31, 2019 1,532.3 286.8 1,819.1 141.51 2.39 Granted 173.1 276.4 449.5 124.98 Vested ( 571.1 ) — ( 571.1 ) 137.99 Forfeited ( 38.1 ) ( 31.7 ) ( 69.8 ) 136.00 Unvested as of December 31, 2020 1,096.2 531.5 1,627.7 $ 137.42 1.69 As of December 31, 2020, we had $ 66.4 million of unamortized deferred compensation related to unvested RSUs and PSUs, which we anticipate to be recognized over varying periods into 2023; $ 32.3 million relates to the awards issued in conjunction with the HFF acquisition. Shares vested during the years ended December 31, 2020, 2019 and 2018, had grant date fair values of $ 78.8 million, $ 33.5 million, and $ 43.3 million, respectively. Shares granted during the years ended December 31, 2020, 2019 and 2018 had grant date fair values of $ 56.2 million, $ 210.8 million and $ 36.5 million, respectively. During the year ended December 31, 2019, we granted 1,111.3 thousand shares of RSU awards to HFF employees in conjunction with the HFF acquisition. 92 Table of Contents 7. RETIREMENT PLANS Defined Contribution Plans We have a qualified profit sharing plan subject to United States Internal Revenue Code Section 401(k) for eligible U.S. employees. We make employer contributions under this qualified profit sharing plan that are reflected in Compensation and benefits in the accompanying Consolidated Statements of Comprehensive Income. Based on the impact from the COVID-19 pandemic, the employer contributions were suspended between May and December of 2020. The related trust assets of this plan are managed by trustees and are excluded from the accompanying Consolidated Financial Statements. In addition, we maintain several defined contribution retirement plans for eligible non-U.S. employees. The table below provides detail of employer contributions for these plans. Year Ended December 31, (in millions) 2020 2019 2018 Employer contributions (US employees) $ 14.6 37.1 28.8 Employer contributions (non-US employees) 37.9 35.2 30.7 Defined Benefit Plans We maintain five defined benefit pension plans across Europe. It is our policy to fund at least the minimum annual contributions as actuarially determined and as required by applicable laws and regulations. Our contributions to these plans are invested by the plan trustee and, if the investment performance is not sufficient, we may be required to provide additional contributions to cover any pension underfunding. Our largest plan has been closed to new entrants since 2013. The following table provides the projected benefit obligation and plan assets, the net of which represents our funded status, as well as the accumulated benefit obligations of our defined benefit pension plans. Year Ended December 31, (in millions) 2020 2019 Projected benefit obligation $ 486.6 421.6 Fair value of plan assets 497.7 432.3 Funded status and net amount recognized 11.1 10.7 Accumulated benefit obligation $ 486.2 421.2 Defined benefit pension plan amounts recorded in the Consolidated Balance Sheets are presented in the below table. December 31, (in millions) 2020 2019 Pension assets (included in Other assets) $ 26.2 23.2 Pension liabilities (included in Other liabilities) ( 15.1 ) ( 12.5 ) Net asset recognized $ 11.1 10.7 Accumulated other comprehensive loss $ 116.2 103.8 Net periodic pension cost (benefit) was not material for the years ended December 31, 2020, 2019, and 2018. 93 Table of Contents 8. INCOME TAXES Our provision for income taxes consisted of the following: Year Ended December 31, (in millions) 2020 2019 2018 U.S. federal: Current $ 16.4 38.2 39.8 Noncurrent — 0.7 35.7 Deferred 3.8 ( 12.9 ) ( 20.1 ) $ 20.2 26.0 55.4 State and Local: Current $ 12.5 15.1 12.5 Noncurrent — — 7.5 Deferred 0.2 ( 7.0 ) ( 5.0 ) $ 12.7 8.1 15.0 International: Current $ 103.7 156.9 145.3 Deferred ( 29.7 ) ( 31.3 ) ( 1.4 ) $ 74.0 125.6 143.9 Total $ 106.9 159.7 214.3 Our income taxes in 2018 and 2019 were impacted by tax legislation enacted in the United States in December 2017, commonly known as the Tax Cuts and Jobs Act ("the Act"), and by interpretive regulatory guidance afterward. The Act brought significant changes to the U.S. corporate income tax system, including a transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system, including a "transition tax" payable over an eight year period for those foreign earnings not previously taxed in the U.S. In 2018, we recorded $ 47.0 million of additional expense due to regulatory interpretation of the Act and for an adjustment to the deferred tax consequences of the enactment. In 2019, we recorded $ 4.3 million of adjustments to lower our prior provision, due to further regulatory interpretation and state income tax interpretation of the Act. With respect to the Base Erosion Anti-Abuse Tax and Global Intangible Low-Taxed Income Tax, we treat any associated income tax as a period cost such that we will record an expense provision for any year we are subject to the taxes. Accordingly, the estimated impact of these taxes was included in our Provision for income taxes in 2020, 2019 and 2018. In 2020, 2019, and 2018 our current tax expense increased by $ 2.9 million, $ 0.3 million and $ 22.2 million, respectively, and our deferred tax expense reduced by a corresponding amount, due to the generation of net operating loss carryovers. 94 Table of Contents Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 21 % to earnings before provision for income taxes as a result of the following: Year Ended December 31, ($ in millions) 2020 2019 2018 Income tax expense at statutory rates $ 111.2 21.0 % $ 146.5 21.0 % $ 148.3 21.0 % Increase (reduction) in income taxes from: State and local income taxes, net of federal income tax benefit 9.4 1.8 8.9 1.3 2.8 0.4 Amortization of goodwill and other intangibles ( 3.3 ) ( 0.6 ) ( 3.7 ) ( 0.5 ) ( 3.4 ) ( 0.5 ) Nondeductible expenses 11.2 2.1 18.9 2.7 14.6 2.1 International earnings taxed at various rates ( 20.5 ) ( 3.9 ) ( 8.7 ) ( 1.3 ) ( 21.1 ) ( 3.0 ) Valuation allowances 4.3 0.8 7.2 1.0 12.4 1.8 Transition tax and deferred tax due to the Act — — ( 4.3 ) ( 0.6 ) 47.0 6.7 Other, net ( 5.4 ) ( 1.0 ) ( 5.1 ) ( 0.7 ) 13.7 1.9 Total $ 106.9 20.2 % $ 159.7 22.9 % $ 214.3 30.4 % With respect to international earnings taxed at varying rates, we have operations which constitute a taxable income presence in 92 countries or other taxable jurisdictions outside of the U.S. which are treated as such by the U.S. Internal Revenue Code. Of those countries or other taxable jurisdictions, 66 had income tax rates lower than the combined U.S. federal and state income tax rate in 2020. In defining "very low tax rate jurisdictions", we consider effective tax rates which applied in 2020 based upon income levels and including national and municipal, state or provincial taxes also based upon income levels, which may cause those effective rates to differ from the maximum national statutory rates for the jurisdictions. We consider jurisdictions with a tax rate of 25 % or lower to be very low tax rate jurisdictions, based upon our historical practice. Effective January 1, 2018, the U.S. federal income tax rate was reduced to 21%. However, factoring in the impact of state income taxes, we do not consider the U.S. to be a very low tax rate jurisdiction. With respect to very low tax rate jurisdictions in which we operate, income from Hong Kong ( 16.5 %), Singapore ( 17 %), the United Kingdom ( 19 %) and Saudi Arabia ( 20 %) represent the most significant components of the international earnings line item in the effective tax rate reconciliation above. In the aggregate, these very low rate jurisdictions were the primary driver of the difference between the actual income tax provision for international earnings and the equivalent provision at the U.S. federal and state statutory rate in 2020. Our income before taxes from domestic (U.S.) and international sources is presented in the following table. Year Ended December 31, (in millions) 2020 2019 2018 Domestic $ 165.2 145.9 101.3 International 364.4 551.7 604.7 Total $ 529.6 697.6 706.0 95 Table of Contents The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below. December 31, (in millions) 2020 2019 Deferred tax assets attributable to: Accrued expenses $ 344.3 268.3 U.S. federal and state loss and credit carryovers 17.9 26.5 Allowances for uncollectible accounts 21.1 20.2 International loss carryovers 163.4 141.5 Pension liabilities 25.0 20.3 Other 13.1 15.6 Deferred tax assets 584.8 492.4 Less: valuation allowances ( 71.4 ) ( 70.4 ) Net deferred tax assets $ 513.4 422.0 Deferred tax liabilities attributable to: Property and equipment $ 14.8 11.5 Intangible assets 296.8 244.8 Income deferred for tax purposes 10.1 12.9 Investment in real estate ventures 14.1 3.9 Other 1.1 9.5 Deferred tax liabilities $ 336.9 282.6 Net deferred taxes $ 176.5 139.4 We have not provided a deferred tax liability on the unremitted foreign earnings of international subsidiaries because it is our intent to permanently reinvest such earnings outside of the U.S. If repatriation of all such earnings were to occur, we would incur withholding taxes, dividend distribution taxes, and potentially an amount of gain taxation which is not presently determinable. As of December 31, 2020, we had an available U.S. federal net operating loss carryover of $ 4.1 million from an acquired company, for which we have established a full valuation allowance due to significant statutory limitations on its usage, and which began to expire in 2020. We have U.S. state net operating loss carryovers with a tax effect of $ 17.1 million, which expire at various dates through 2040, and international net operating loss carryovers of $ 750.5 million, which generally do not have expiration dates. The change in deferred tax balances for net operating loss carryovers from 2019 to 2020 included increases from current year losses and decreases from current year estimated utilization. As of December 31, 2020, we believe it is more-likely-than-not the net deferred tax assets of $ 176.5 million will be realized based upon our estimates of future income and the consideration of net operating losses, earnings trends and tax planning strategies. Valuation allowances have been provided with regard to the tax benefit of certain international net operating loss carryovers, for which we have concluded recognition is not yet appropriate. In 2020, we reduced valuation allowances by $ 10.5 million on some jurisdictions' net operating losses due to the utilization or expiration of those losses, and we increased valuation allowances by $ 7.4 million for other jurisdictions based upon circumstances that caused us to establish or continue to provide valuation allowances on current or prior year losses in addition to those provided in prior years. The balance of the movement in valuation allowances comparing December 31, 2020 to December 31, 2019 was attributable to the effect of changes in foreign currency exchange rates. As of December 31, 2020, our net current receivable for income tax was $ 20.6 million, consisting of a current receivable of $ 221.5 million and current payable of $ 200.9 million, and our net noncurrent liability was $ 163.6 million, entirely a noncurrent payable. As of December 31, 2019, our net current receivable for income tax was $ 4.4 million, consisting of a current receivable of $ 235.3 million and a current payable of $ 230.9 million, and our net noncurrent liability was $ 152.2 million, entirely a noncurrent payable. 96 Table of Contents We file income tax returns in the U.S. (including 46 states, 25 cities, the District of Columbia and Puerto Rico), the United Kingdom (including England, Scotland and Wales), Australia, Germany, The People's Republic of China (including Hong Kong and Macau), France, Japan, Singapore, India, the Netherlands, Spain and 78 other countries. Generally, the Company's open tax years include those from 2016 to the present, although reviews of taxing authorities for more recent years have been completed or are in process in a number of jurisdictions. As of December 31, 2020, we were under examination in Germany, Nigeria, Turkey, China, India, Indonesia, Malaysia, the Philippines and Thailand; in the U.S., we were under examination in the states of Colorado, Massachusetts and Minnesota, and in New York City. A reconciliation of the beginning and ending amount of unrecognized tax benefits is presented in the following table. (in millions) 2020 2019 Balance as of January 1 $ 78.2 62.7 Additions based on tax positions related to the current year 2.8 1.4 (Decrease) increase related to tax positions of prior years ( 5.0 ) 24.3 Settlements with taxing authorities ( 0.7 ) ( 10.2 ) Balance as of December 31 $ 75.3 78.2 We believe it is reasonably possible that matters for which we have recorded $ 18.7 million of unrecognized tax benefits as of December 31, 2020, will be resolved during 2021. The recognition of tax benefits, and other changes to the amounts of our unrecognized tax benefits, may occur as the result of ongoing operations, the outcomes of audits or other examinations by tax authorities, or the passing of statutes of limitations. We do not expect changes to our unrecognized tax benefits to have a significant impact on net income, the financial position, or the cash flows of JLL. We do not believe we have material tax positions for which the ultimate deductibility is highly certain, but there is uncertainty about the timing of such deductibility. We recognize interest accrued and penalties, if any, related to income taxes as a component of income tax expense. During the year ended December 31, 2020, we recognized no interest expense or penalties and during the years 2019 and 2018, we recognized $ 0.1 million and $ 1.6 million, respectively, in interest expense and no penalties. We had approximately $ 0.6 million and $ 1.8 million of accrued interest related to income taxes as of December 31, 2020 and 2019, respectively. 97 Table of Contents 9. FAIR VALUE MEASUREMENTS We measure certain assets and liabilities in accordance with ASC 820, Fair Value Measurements and Disclosures , which defines fair value as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants on the measurement date. In addition, it establishes a framework for measuring fair value according to the following three-tier fair value hierarchy: • Level 1 - Quoted prices for identical assets or liabilities in active markets accessible as of the measurement date; • Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and • Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Financial Instruments Our financial instruments include Cash and cash equivalents, Trade receivables, Notes and other receivables, Reimbursable receivables, Warehouse receivables, restricted cash, contract assets, Accounts payable, Reimbursable payables, Short-term borrowings, contract liabilities, Warehouse facilities, Credit facility, Long-term debt and foreign currency forward contracts. The carrying amounts of Cash and cash equivalents, Trade receivables, Notes and other receivables, Reimbursable receivables, restricted cash, contract assets, Accounts payable, Reimbursable payables, contract liabilities and the Warehouse facilities approximate their estimated fair values due to the short-term nature of these instruments. The carrying values of our Credit facility and Short-term borrowings approximate their estimated fair values given the variable interest rate terms and market spreads. We estimated the fair value of our Long-term debt as $ 723.7 million and $ 685.9 million as of December 31, 2020 and 2019, respectively, using dealer quotes that are Level 2 inputs in the fair value hierarchy. The carrying value of our Long-term debt was $ 702.0 million and $ 664.6 million as of December 31, 2020 and 2019, respectively, which included debt issuance costs of $ 2.5 million and $ 3.1 million, respectively. Investments in Real Estate Ventures at Fair Value - Net Asset Value ("NAV") For the majority of our investments reported at fair value, we estimate the fair value using the NAV per share (or its equivalent) our investees provide. Critical inputs to NAV estimates included valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates, and asset-specific market borrowing rates. In instances where the reported NAV per share did not fully incorporate the COVID-19 pandemic’s impact on the fair value of underlying investments, we recognized an adjustment to decrease the reported NAV. As of December 31, 2020, such adjustments totaled $22.8 million. We did not consider any other adjustments to NAV estimates provided by investees, including adjustments for any restrictions to the transferability of ownership interests embedded within investment agreements to which we are a party, to be necessary based upon (i) our understanding of the methodology utilized and inputs incorporated to estimate NAV at the investee level, (ii) consideration of market demand for the specific types of real estate assets held by each venture and (iii) contemplation of real estate and capital markets conditions in the localities in which these ventures operate. As of December 31, 2020 and 2019, investments in real estate ventures at fair value using NAV were $ 203.8 million and $ 224.8 million, respectively. As these investments are not required to be classified in the fair value hierarchy, they have been excluded from the following table. 98 Table of Contents Recurring Fair Value Measurements The following table categorizes by level in the fair value hierarchy the estimated fair value of our assets and liabilities measured at fair value on a recurring basis. December 31, 2020 2019 (in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Investments in real estate ventures - fair value $ 77.2 — 59.3 69.4 — 34.4 Foreign currency forward contracts receivable — 13.1 — — 10.5 — Warehouse receivables — 1,529.2 — — 527.1 — Deferred compensation plan assets — 446.3 — — 349.9 — Mortgage banking derivative assets — — 87.1 — — 36.1 Total assets at fair value $ 77.2 1,988.6 146.4 69.4 887.5 70.5 Liabilities Foreign currency forward contracts payable $ — 3.4 — — 4.4 — Deferred compensation plan liabilities — 427.6 — — 346.1 — Earn-out liabilities — — 85.7 — — 148.5 Mortgage banking derivative liabilities — — 73.4 — — 25.9 Total liabilities at fair value $ — 431.0 159.1 — 350.5 174.4 Investments in Real Estate Ventures We classify one investment as Level 1 in the fair value hierarchy as a quoted price is readily available. We increase or decrease our investment each reporting period by the change in the fair value of the investment. We report these fair value adjustments in the Consolidated Statements of Comprehensive Income within Equity earnings. Investments classified as Level 3 in the fair value hierarchy represent investments in early-stage non-public entities where we elected the fair value option. The carrying value is generally deemed to approximate the fair value of these investments due to the proximity of the investment date to the balance sheet date as well as investee-level performance updates. To the extent there are changes in fair value, a result of pricing in subsequent funding rounds or changes in business strategy, for example, we recognize such changes through Equity earnings. Foreign Currency Forward Contracts We regularly use foreign currency forward contracts to manage our currency exchange rate risk related to intercompany lending and cash management practices. These contracts are on the Consolidated Balance Sheets as current assets and current liabilities. We determine the fair values of these contracts based on current market rates. The inputs for these valuations are Level 2 in the fair value hierarchy. As of December 31, 2020 and 2019, these contracts had a gross notional value of $ 2.34 billion ($ 1.42 billion on a net basis) and $ 2.30 billion ($ 1.05 billion on a net basis), respectively. We record the asset and liability positions for our foreign currency forward contracts based on the net payable or net receivable position with the financial institutions from which we purchase these contracts. The $ 13.1 million asset as of December 31, 2020 was composed of gross contracts with receivable positions of $ 13.5 million and payable positions of $ 0.4 million. The $ 3.4 million liability position as of December 31, 2020 was composed of gross contracts with receivable positions of $ 2.7 million and payable positions of $ 6.1 million. As of December 31, 2019, the $ 10.5 million asset was composed of gross contracts with receivable positions of $ 10.6 million and payable positions of $ 0.1 million. The $ 4.4 million liability position as of December 31, 2019, was composed of gross contracts with receivable positions of $ 0.8 million and payable positions of $ 5.2 million. 99 Table of Contents Warehouse Receivables The fair value of the Warehouse receivables is based on already locked-in security-buy prices. As of December 31, 2020 and 2019, all of our Warehouse receivables included in the Consolidated Balance Sheets were under commitment to be purchased by government-sponsored enterprises ("GSEs") or by a qualifying investor as part of a U.S. government or GSE mortgage-backed security program. The Warehouse receivables are classified as Level 2 in the fair value hierarchy as all significant inputs are readily observable. Deferred Compensation Plan We maintain a deferred compensation plan for certain of our U.S. employees that allows them to defer portions of their compensation. We invest directly in insurance contracts which yield returns to fund these deferred compensation obligations. We recognize an asset for the amount that could be realized under these insurance contracts as of the balance sheet date, and we adjust the deferred compensation obligation to reflect the changes in the fair value of the amount owed to the employees. The inputs for this valuation are Level 2 in the fair value hierarchy. We recorded this plan on the Consolidated Balance Sheets as of December 31, 2020 as Deferred compensation plan assets of $ 446.3 million, long-term deferred compensation plan liabilities of $ 427.6 million, included in Deferred compensation, and as a reduction of equity, Shares held in trust, of $ 5.6 million. We recorded this plan on the Consolidated Balance Sheets as of December 31, 2019 as Deferred compensation plan assets of $ 349.9 million, long-term deferred compensation plan liabilities of $ 346.1 million, included in Deferred compensation, and as a reduction of equity, Shares held in trust, of $ 5.7 million. Earn-Out Liabilities We classify our Earn-out liabilities within Level 3 in the fair value hierarchy because the inputs we use to develop the estimated fair value include unobservable inputs. We base the fair value of our Earn-out liabilities on the present value of probability-weighted future cash flows related to the earn-out performance criteria on each reporting date. We determine the probabilities of achievement we assign to the performance criteria based on the due diligence we performed at the time of acquisition as well as actual performance achieved subsequent to acquisition. An increase to a probability of achievement would result in a higher fair value measurement. See Note 4, Business Combinations, Goodwill and Other Intangible Assets, for additional discussion of our Earn-out liabilities. Mortgage Banking Derivatives In the normal course of business, we enter into simultaneous contractual commitments to originate and sell multi-family mortgage loans at fixed prices with fixed expiration dates. Commitments to borrowers become effective when the borrowers "lock-in" a specified interest rate and maximum principal balance for an established time frame (hereinafter referred to as an interest rate lock commitment or "IRLC"). All mortgagors are evaluated for creditworthiness prior to execution of an IRLC. We are exposed to market interest risk (the risk of movement in market interest rates following the execution of an IRLC) until a loan is funded and onwards through delivery. To mitigate the effect of the interest rate risk inherent in providing IRLCs to borrowers, we simultaneously enter into a forward commitment to sell the eventual loan associated with the IRLC to a GSE or other investor. Similar to the IRLC, the forward sale commitment locks in an interest rate, maximum principal balance, and price for the sale of the loan. Ultimately, the terms of the forward sale commitment and the IRLC are matched in substantially all respects, with the objective of eliminating market interest rate and other balance sheet risk to the extent practical. As an additional element of protection, forward sale commitments extend for a longer period of time as compared to IRLCs to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan in accordance with the terms of the sale commitment. The fair value of our IRLCs to prospective borrowers and the related inputs primarily include, as applicable, the expected net cash flows associated with servicing the loan and the effects of interest rate movements between the date of the IRLC and the balance sheet date based on applicable published U.S. Treasury rates. The fair value of our forward sales contracts to prospective investors considers the market price movement of a similar security between the trade date and the balance sheet date. The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value. 100 Table of Contents Both the rate lock commitments to prospective borrowers and the forward sale contracts to prospective investors are undesignated derivatives and considered Level 3 valuations due to significant unobservable inputs related to counterparty credit risk. An increase in counterparty credit risk assumptions would result in a lower fair value measurement. The fair valuation is determined using discounted cash flow techniques, and the derivatives are marked to fair value through Revenue in the Consolidated Statements on Comprehensive Income. The tables below present a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). (in millions) Balance as of December 31, 2019 Net change in fair value Foreign CTA (1) Purchases / Additions Settlements Balance as of December 31, 2020 Investments in real estate ventures $ 34.4 6.8 — 18.1 — $ 59.3 Mortgage banking derivative assets and liabilities, net 10.2 ( 94.1 ) — 197.1 ( 99.5 ) 13.7 Earn-out liabilities 148.5 ( 14.8 ) 1.1 — ( 49.1 ) 85.7 (in millions) Balance as of December 31, 2018 Net change in fair value Foreign CTA (1) Purchases / Additions Settlements Balance as of December 31, 2019 Investments in real estate ventures $ 11.5 0.8 — 22.9 ( 0.8 ) $ 34.4 Mortgage banking derivative assets and liabilities, net 6.3 ( 28.8 ) — 92.6 ( 59.9 ) 10.2 Earn-out liabilities 192.0 27.2 ( 1.5 ) 4.9 ( 74.1 ) 148.5 (1) CTA: Currency translation adjustments Net change in fair value, included in the tables above, is reported in Net income as follows. Category of Assets/Liabilities using Unobservable Inputs Consolidated Statements of Comprehensive Income Account Caption Earn-out liabilities (short-term and long-term) Restructuring and acquisition charges Investments in real estate ventures Equity earnings Other current assets - Mortgage banking derivative assets Revenue before reimbursements Other current liabilities - Mortgage banking derivative liabilities Revenue before reimbursements Non-Recurring Fair Value Measurements We review our investments in real estate ventures, except those investments otherwise reported at fair value, on a quarterly basis, or as otherwise deemed necessary, for indications of whether we may be unable to recover the carrying value of our investments and whether such investments are other than temporarily impaired. When the carrying amount of the investment is in excess of the estimated future undiscounted cash flows, we use a discounted cash flow approach or other acceptable method to determine the fair value of the investment in computing the amount of the impairment. Our determination of fair value primarily relies on Level 3 inputs. We did not recognize any significant investment-level impairment losses during the three-year period ended December 31, 2020. See Note 5, Investments in Real Estate Ventures, for additional information, including information related to impairment charges recorded at the investee level. 101 Table of Contents 10. DEBT Short-term borrowings and long-term debt obligations are composed of the following. December 31, ($ in millions) 2020 2019 Short-term borrowings: Local overdraft facilities $ 12.0 44.8 Other short-term borrowings 50.0 75.3 Total short-term borrowings $ 62.0 120.1 Credit facility, net of debt issuance costs of $8.7 and $12.3 ( 8.7 ) 512.7 Long-term senior notes, 4.4%, face amount of $275.0, due November 2022, net of debt issuance costs of $0.8 and $1.2 274.2 273.8 Long-term senior notes, 1.96%, face amount of €175.0, due June 2027, net of debt issuance costs of $0.8 and $0.9 213.9 195.4 Long-term senior notes, 2.21%, face amount of €175.0, due June 2029, net of debt issuance costs of $0.9 and $1.0 213.9 195.4 Total debt $ 755.3 1,297.4 Credit Facility Our $ 2.75 billion unsecured revolving credit facility (the "Facility") matures on May 17, 2023. Pricing on the Facility ranges from three-month LIBOR plus 0.875% to 1.35% , with pricing as of December 31, 2020, at LIBOR plus 0.95 %. In addition to outstanding borrowings under the Facility presented in the above table, we had outstanding letters of credit under the Facility of $ 0.7 million and $ 0.8 million as of December 31, 2020 and 2019, respectively. The following table provides additional information on our Facility. Year Ended December 31, ($ in millions) 2020 2019 Average outstanding borrowings under the Facility $ 865.1 851.6 Effective interest rate on the Facility 1.6 % 3.0 % We will continue to use the Facility for, but not limited to, business acquisitions, working capital needs (including payment of accrued incentive compensation), co-investment activities, share repurchases and capital expenditures. Short-Term Borrowings and Long-Term Debt In addition to our Facility, we have the capacity to borrow up to an additional $ 64.7 million under local overdraft facilities. Amounts outstanding are presented in the debt table presented above. As of December 31, 2020, our issuer and senior unsecured ratings are investment grade: Baa1 from Moody’s Investors Service, Inc. and BBB+ from Standard & Poor’s Ratings Services. Covenants Our Facility and senior notes are subject to customary financial and other covenants, including cash interest coverage ratios and leverage ratios, as well as event of default conditions. We remained in compliance with all covenants as of December 31, 2020. 102 Table of Contents Warehouse Facilities December 31, 2020 December 31, 2019 ($ in millions) Outstanding Balance Maximum Capacity Outstanding Balance Maximum Capacity Warehouse facilities: LIBOR plus 1.40%, September 20, 2021 (1) $ 144.4 400.0 104.4 375.0 LIBOR plus 1.40%, expires September 18, 2021 (2) 768.9 1,600.0 184.8 775.0 LIBOR plus 1.40%, expires August 27, 2021 (3) 195.9 900.0 11.4 100.0 Fannie Mae ASAP (4) program, LIBOR plus 1.15% 128.8 n/a 53.6 n/a LIBOR plus 1.50% 261.6 300.0 151.6 1,000.0 LIBOR plus 1.25% — — 11.0 175.0 Gross warehouse facilities 1,499.6 3,200.0 516.8 2,425.0 Debt issuance costs ( 1.2 ) n/a ( 0.9 ) n/a Total warehouse facilities $ 1,498.4 3,200.0 515.9 2,425.0 (1) In 2020, JLL extended the Warehouse facility with an increase to the interest rate and maximum capacity; previously, the facility had a maturity date of September 21, 2020, a maximum capacity of $375.0 million and an interest rate of LIBOR plus 1.15%. (2) In 2020, JLL extended the Warehouse facility with an increase to the interest rate and maximum capacity; previously, the facility had a maturity date of September 19, 2020,a maximum capacity of $775.0 million and an interest rate of LIBOR plus 1.15%. (3) In 2020, JLL extended the Warehouse facility with an increase to the interest rate and maximum capacity; previously, the facility had a maturity date of August 31, 2020, a maximum capacity of $100.0 million and an interest rate of LIBOR plus 1.15%. (4) As Soon As Pooled ("ASAP") funding program. We have lines of credit established for the sole purpose of funding our Warehouse receivables. These lines of credit exist with financial institutions and are secured by the related warehouse receivables. Pursuant to these warehouse facilities, we are required to comply with certain financial covenants regarding (i) minimum net worth, (ii) minimum servicing-related loans and (iii) minimum adjusted leverage ratios. We remained in compliance with all covenants under our Warehouse facilities as of December 31, 2020. As a supplement to our lines of credit, we have an uncommitted facility with Fannie Mae under its As Soon As Pooled ("ASAP") funding program. After origination, we sell certain warehouse receivables to Fannie Mae; the proceeds are used to repay the original lines of credit used to fund the loan. The ASAP funding program requires us to repurchase these loans, generally within 45 days, followed by an immediate, ultimate, sale back to Fannie Mae. The difference between the price paid upon the original sale to Fannie Mae and the ultimate sale reflects borrowing costs. 103 Table of Contents 11. LEASES For the years ended December 31, 2020 and 2019, operating lease expense was $ 187.3 million and $ 170.5 million, respectively, and variable and short-term lease expense was $ 36.0 million and $ 33.3 million, respectively. In addition, $ 94.3 million and $ 310.7 million of Operating lease right-of-use assets were obtained in exchange for lease obligations during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, our total commitments related to finance leases was $ 13.7 million. Leases in which we sublet also do not represent a significant portion of our leasing activity. Minimum future lease payments due in each of the next five years and thereafter, as of December 31, 2020, are presented in the table below. (in millions) 2021 $ 191.6 2022 156.4 2023 127.9 2024 107.7 2025 85.7 Thereafter 293.7 Total future minimum lease payments $ 963.0 Less imputed interest 113.4 Total $ 849.6 Other information related to operating leases was as follows. December 31, 2020 Weighted average remaining lease term 7.1 years Weighted average discount rate 3.5 % Total rent expense, including office space and other rentals was $ 195.3 million for the year ended December 31, 2018, in accordance with ASC Topic 840. 12. TRANSACTIONS WITH AFFILIATES As part of our co-investment strategy, we have equity interests in real estate ventures, some of which have certain of our officers as trustees or board of director members, and from which we earn advisory and management fees. Included in the accompanying Consolidated Financial Statements is revenue of $ 516.4 million, $ 490.0 million, and $ 447.8 million for 2020, 2019 and 2018, respectively, as well as receivables of $ 102.2 million and $ 75.9 million as of December 31, 2020 and 2019, respectively, related to transactions with affiliates. These amounts primarily relate to transactions with the real estate ventures in which we have equity interests. The outstanding balance of loans to employees are presented in the following table. Such amounts are included in Notes and other receivables and Long-term receivables on our Consolidated Balance Sheets. December 31, (in millions) 2020 2019 Loans related to co-investments (1) $ 16.4 14.1 Advances, travel and other (2) 233.7 255.6 Total $ 250.1 269.7 (1) These nonrecourse loans have been made to allow employees the ability to participate in investment fund opportunities. (2) Consists primarily of commissions and other compensation advances to employees that are amortized to Compensation and benefits based on performance over required service periods. The Company does not extend credit or provide personal loans to any director or executive officer of JLL. 104 Table of Contents 13. COMMITMENTS AND CONTINGENCIES We are a defendant in various litigation matters arising in the ordinary course of business, some of which involve claims for damages that are substantial in amount. Many of these litigation matters are covered by insurance (including insurance provided through a consolidated captive insurance company as further discussed below), but they may nevertheless be subject to large deductibles and the amounts being claimed may exceed the available insurance. Although we cannot determine the ultimate liability for these matters, based upon information currently available, we believe the ultimate resolution of such claims and litigation will not have a material adverse effect on our financial position, results of operations or liquidity. Professional Indemnity Insurance In order to better manage our global insurance program and support our risk management efforts, we supplement our traditional insurance coverage for certain types of claims by using a wholly-owned captive insurance company. The level of risk retained by our captive insurance company, with respect to professional indemnity claims, is up to $ 2.5 million per claim, inclusive of the deductible. We contract third-party insurance companies to provide coverage of risk in excess of this amount. When a potential loss event occurs, we estimate the ultimate cost of the claim and accrue the amount in Other current and long-term liabilities on the Consolidated Balance Sheets when probable and estimable. In addition, we have established receivables from third-party insurance providers for claim amounts in excess of the risk retained by our captive insurance company. In total, these receivables were $ 44.0 million and $ 37.7 million as of December 31, 2020 and 2019, respectively, and are included in Notes and other receivables and Long-term receivables on the Consolidated Balance Sheets. The following table shows the professional indemnity accrual activity and related payments. (in millions) December 31, 2017 $ 26.7 New claims 3.5 Prior year claims adjustments (including foreign currency changes) 20.5 Claims paid ( 7.6 ) December 31, 2018 43.1 New claims 0.1 Prior year claims adjustments (including foreign currency changes) ( 2.9 ) Claims paid ( 2.2 ) December 31, 2019 38.1 New claims 6.7 Prior year claims adjustments (including foreign currency changes) 3.8 Claims paid ( 0.4 ) December 31, 2020 $ 48.2 DUS Program Loan Loss-Sharing As a participant in the DUS program, we retain a portion of the risk of loss for loans that are originated and sold under the DUS program. Net losses on defaulted loans are shared with Fannie Mae based upon established loss-sharing ratios. Generally, we share approximately one-third of incurred losses, subject to a cap of 20% of the principal balance of the mortgage at origination. As of December 31, 2020 and 2019, we had loans, funded and sold, subject to loss-sharing arrangements with an aggregate unpaid principal balance of $ 12.2 billion and $ 9.7 billion, respectively. There were no loan losses incurred for the years ended December 31, 2020, 2019 and 2018. See "Financial Guarantees" section of Note 2, Summary of Significant Accounting Policies for additional information. 105 Table of Contents 14. RESTRUCTURING AND ACQUISITION CHARGES Restructuring and acquisition charges include cash and non-cash expenses. Cash-based charges primarily consist of (1) severance and employment-related charges, including those related to external service providers, incurred in conjunction with a structural business shift, which can be represented by a notable change in headcount, change in leadership, or transformation of business processes, (2) acquisition, transaction and integration-related charges, and (3) other restructuring including lease exit charges. Non-cash charges include (1) stock-based compensation expense for retention awards issued in conjunction with the HFF acquisition and (2) fair value adjustments to earn-out liabilities relating to prior-period acquisition activity. Restructuring and acquisition charges are presented in table below. Year Ended December 31, (in millions) 2020 2019 2018 Severance and other employment-related charges $ 69.0 31.1 25.5 Restructuring, pre-acquisition and post-acquisition charges 51.5 96.9 5.9 Stock-based compensation expense for HFF retention awards 36.7 28.0 — Fair value adjustments to earn-out liabilities ( 14.8 ) 28.4 7.4 Restructuring and acquisition charges $ 142.4 184.4 38.8 The following tables show the accrual activity and payments relating to cash-based Restructuring and acquisition charges. (in millions) Severance & Employment-Related Lease Exit Other Restructuring and Acquisition Costs Total December 31, 2017 $ 14.2 5.7 1.4 $ 21.3 Accruals 25.5 0.7 5.2 31.4 Payments made ( 25.7 ) ( 5.8 ) ( 6.1 ) ( 37.6 ) December 31, 2018 14.0 0.6 0.5 15.1 Accruals 31.1 11.1 85.8 128.0 Payments made ( 20.8 ) ( 3.3 ) ( 82.5 ) ( 106.6 ) December 31, 2019 24.3 8.4 3.8 36.5 Accruals 69.0 25.0 26.5 120.5 Payments made ( 52.0 ) ( 30.9 ) ( 29.1 ) ( 112.0 ) December 31, 2020 $ 41.3 2.5 1.2 $ 45.0 We expect the majority of accrued severance and employment-related charges and other accrued acquisition costs as of December 31, 2020 will be paid during the next twelve months. Lease exit payments depend on the terms of various leases, which extend as far out as 2026. HFF Acquisition Included in Restructuring and acquisition charges were $ 75.9 million for the year ended December 31, 2020 compared to $ 115.1 million for the year ended December 31, 2019 of charges relating to the acquisition and integration of HFF (including transaction/deal costs, retention and severance expense, early lease termination costs, and other integration expenses). During the integration of HFF, we expect to incur significant charges over the two years following the acquisition in an effort to maximize the value of the combined organization. We expect to recognize approximately $ 100 million of expense over this two-year window relating to retention awards which have already been paid or granted (in the case of RSUs). In addition, we may incur other costs in connection with the integration including, but not limited to, lease termination charges and other employee-related costs, but are unable to estimate these amounts at this time. We anticipate that other than RSU retention awards granted, substantially all of these cumulative charges will result in cash expenditures. 106 Table of Contents 15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The table below presents the changes in Accumulated other comprehensive income (loss) by component. (in millions) Pension and postretirement benefit Cumulative foreign currency translation adjustment Total Balance as of December 31, 2018 $ ( 57.4 ) ( 398.8 ) $ ( 456.2 ) Other comprehensive loss before reclassification ( 18.0 ) 43.0 25.0 Amounts reclassified from AOCI after tax expense of $0.7, $- and $0.7 3.4 — 3.4 Other comprehensive income after tax benefit of $4.5, $- and $4.5 ( 14.6 ) 43.0 28.4 Balance as of December 31, 2019 ( 72.0 ) ( 355.8 ) ( 427.8 ) Other comprehensive income before reclassification ( 12.3 ) 59.8 47.5 Amounts reclassified from AOCI after tax expense of $0.7, $- and $0.7 3.1 — 3.1 Other comprehensive income after tax benefit of $3.2, $- and $3.2 ( 9.2 ) 59.8 50.6 Balance as of December 31, 2020 $ ( 81.2 ) ( 296.0 ) $ ( 377.2 ) For pension and postretirement benefits, we report amounts reclassified from Accumulated other comprehensive income (loss) in Other income within the Consolidated Statements of Comprehensive Income. 107 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.