EX-99.1

We have audited the accompanying consolidated statements of financial condition of BlackRock, Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of

BlackRock, Inc. and subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, 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 28, 2017 expressed an unqualified opinion on the Company’s internal control over financial reporting.

(in millions, except shares and per share data)	December 31, 2016			December 31, 2015
Assets
Cash and cash equivalents	$	6,091		$	6,083
Accounts receivable		2,350			2,237
Investments		1,595			1,578
Assets of consolidated variable interest entities:
Cash and cash equivalents		84			148
Investments		1,008			1,030
Other assets		63			67
Separate account assets		149,089			150,851
Separate account collateral held under securities lending agreements		27,792			31,336
Property and equipment (net of accumulated depreciation of $601 and $570 at December 31, 2016 and 2015, respectively)		559			581
Intangible assets (net of accumulated amortization of $832 and $745 at December 31, 2016 and 2015, respectively)		17,363			17,372
Goodwill		13,118			13,123
Other assets		1,065			855
Total assets	$	220,177		$	225,261
Liabilities
Accrued compensation and benefits	$	1,880		$	1,971
Accounts payable and accrued liabilities		1,094			1,068
Liabilities of consolidated variable interest entities		216			177
Borrowings		4,915			4,930
Separate account liabilities		149,089			150,851
Separate account collateral liabilities under securities lending agreements		27,792			31,336
Deferred income tax liabilities		4,840			4,851
Other liabilities		1,007			1,033
Total liabilities		190,833			196,217
Commitments and contingencies (Note 13)
Temporary equity
Redeemable noncontrolling interests		194			464
Permanent Equity
BlackRock, Inc. stockholders’ equity
Common stock, $ 0.01 par value;		2			2
Shares authorized: 500,000,000 at December 31, 2016 and 2015; Shares issued: 171,252,185 at December 31, 2016 and 2015; Shares outstanding: 161,534,443 and 163,461,064 at December 31, 2016 and 2015, respectively;
Series B nonvoting participating preferred stock, $0.01 par value;		—			—
Shares authorized: 150,000,000 at December 31, 2016 and 2015; Shares issued and outstanding: 823,188 at December 31, 2016 and 2015;
Series C nonvoting participating preferred stock, $0.01 par value;		—			—
Shares authorized: 6,000,000 at December 31, 2016 and 2015; Shares issued and outstanding: 763,660 at December 31, 2016 and 1,311,887 at December 31, 2015
Additional paid-in capital		19,337			19,405
Retained earnings		13,660			12,033
Accumulated other comprehensive loss		(716	)		(448	)
Treasury stock, common, at cost (9,717,742 and 7,791,121 shares held at December 31, 2016 and 2015, respectively)		(3,185	)		(2,489	)
Total BlackRock, Inc. stockholders’ equity		29,098			28,503
Nonredeemable noncontrolling interests		52			77
Total permanent equity		29,150			28,580
Total liabilities, temporary equity and permanent equity	$	220,177		$	225,261

(in millions, except shares and per share data)	2016			2015			2014
Revenue
Investment advisory, administration fees and securities lending revenue:
Related parties	$	6,836		$	6,875		$	6,738
Other third parties		3,044			2,965			2,851
Total investment advisory, administration fees and securities lending revenue		9,880			9,840			9,589
Investment advisory performance fees		295			621			550
BlackRock Solutions and advisory		714			646			635
Distribution fees		41			55			70
Other revenue		225			239			237
Total revenue		11,155			11,401			11,081
Expense
Employee compensation and benefits		3,880			4,005			3,829
Distribution and servicing costs		429			409			364
Amortization of deferred sales commissions		34			48			56
Direct fund expense		766			767			748
General and administration		1,301			1,380			1,453
Restructuring charge		76			—			—
Amortization of intangible assets		99			128			157
Total expense		6,585			6,737			6,607
Operating income		4,570			4,664			4,474
Nonoperating income (expense)
Net gain (loss) on investments		55			116			124
Interest and dividend income		40			26			29
Interest expense		(205	)		(204	)		(232	)
Total nonoperating income (expense)		(110	)		(62	)		(79	)
Income before income taxes		4,460			4,602			4,395
Income tax expense		1,290			1,250			1,131
Net income		3,170			3,352			3,264
Less:
Net income (loss) attributable to noncontrolling interests		(2	)		7			(30	)
Net income attributable to BlackRock, Inc.	$	3,172		$	3,345		$	3,294
Earnings per share attributable to BlackRock, Inc. common stockholders:
Basic	$	19.29		$	20.10		$	19.58
Diluted	$	19.04		$	19.79		$	19.25
Cash dividends declared and paid per share	$	9.16		$	8.72		$	7.72
Weighted-average common shares outstanding:
Basic		164,425,858			166,390,009			168,225,154
Diluted		166,579,752			169,038,571			171,112,261

(in millions)	Additional Paid-in Capital⁽¹⁾			Retained Earnings			Appropriated Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Common			Total BlackRock Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total Permanent Equity			Redeemable Noncontrolling Interests / Temporary Equity
December 31, 2013	$	19,475		$	8,208		$	22		$	(35	)	$	(1,210	)	$	26,460		$	156		$	26,616		$	54
Net income		—			3,294			—			—			—			3,294			(32	)		3,262			2
Allocation of gains (losses) of consolidated collateralized loan obligations		—			—			(41	)		—			—			(41	)		41			—			—
Dividends paid		—			(1,338	)		—			—			—			(1,338	)		—			(1,338	)		—
Stock-based compensation		453			—			—			—			—			453			—			453			—
Issuance of common shares related to employee stock transactions		(646	)		—			—			—			660			14			—			14			—
Employee tax withholdings related to employee stock transactions		—			—			—			—			(344	)		(344	)		—			(344	)		—
Shares repurchased		—			—			—			—			(1,000	)		(1,000	)		—			(1,000	)		—
Net tax benefit (shortfall) from stock-based compensation		106			—			—			—			—			106			—			106			—
Subscriptions (redemptions/distributions) — noncontrolling interest holders		—			—			—			—			—			—			(46	)		(46	)		248
Net consolidations (deconsolidations) of sponsored investment funds		—			—			—			—			—			—			—			—			(269	)
Other comprehensive income (loss)		—			—			—			(238	)		—			(238	)		—			(238	)		—
December 31, 2014	$	19,388		$	10,164		$	(19	)	$	(273	)	$	(1,894	)	$	27,366		$	119		$	27,485		$	35
Net income		—			3,345			—			—			—			3,345			6			3,351			1
Net consolidation (deconsolidation) of VIEs due to adoption of new accounting pronouncement		—			—			19			—			—			19			(8	)		11			194
Dividends paid		—			(1,476	)		—			—			—			(1,476	)		—			(1,476	)		—
Stock-based compensation		514			—			—			—			—			514			—			514			—
Issuance of common shares related to employee stock transactions		(600	)		—			—			—			736			136			—			136			—
Employee tax withholdings related to employee stock transactions		—			—			—			—			(231	)		(231	)		—			(231	)		—
Shares repurchased		—			—			—			—			(1,100	)		(1,100	)		—			(1,100	)		—
Net tax benefit (shortfall) from stock-based compensation		105			—			—			—			—			105			—			105			—
Subscriptions (redemptions/distributions) — noncontrolling interest holders		—			—			—			—			—			—			(34	)		(34	)		518
Net consolidations (deconsolidations) of sponsored investment funds		—			—			—			—			—			—			(6	)		(6	)		(284	)
Other comprehensive income (loss)		—			—			—			(175	)		—			(175	)		—			(175	)		—
December 31, 2015	$	19,407		$	12,033		$	—		$	(448	)	$	(2,489	)	$	28,503		$	77		$	28,580		$	464

(in millions)	Additional Paid-in Capital⁽¹⁾			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock Common			Total BlackRock Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total Permanent Equity			Redeemable Noncontrolling Interests / Temporary Equity
December 31, 2015	$	19,407		$	12,033		$	(448	)	$	(2,489	)	$	28,503		$	77		$	28,580		$	464
Net income		—			3,172			—			—			3,172			(2	)		3,170			—
Dividends paid		—			(1,545	)		—			—			(1,545	)		—			(1,545	)		—
Stock-based compensation		521			—			—			—			521			—			521			—
PNC preferred stock capital contribution		172			—			—			—			172			—			172			—
Retirement of preferred stock		(172	)		—			—			—			(172	)		—			(172	)		—
Issuance of common shares related to employee stock transactions		(667	)		—			—			703			36			—			36			—
Employee tax withholdings related to employee stock transactions		—			—			—			(274	)		(274	)		—			(274	)		—
Shares repurchased		—			—			—			(1,125	)		(1,125	)		—			(1,125	)		—
Net tax benefit (shortfall) from stock-based compensation		78			—			—			—			78			—			78			—
Subscriptions (redemptions/distributions) — noncontrolling interest holders		—			—			—			—			—			(23	)		(23	)		1,169
Net consolidations (deconsolidations) of sponsored investment funds		—			—			—			—			—			—			—			(1,439	)
Other comprehensive income (loss)		—			—			(268	)		—			(268	)		—			(268	)		—
December 31, 2016	$	19,339		$	13,660		$	(716	)	$	(3,185	)	$	29,098		$	52		$	29,150		$	194

(in millions)	2016			2015			2014
Cash flows from operating activities
Net income	$	3,170		$	3,352		$	3,264
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		229			247			278
Amortization of deferred sales commissions		34			48			56
Stock-based compensation		521			514			453
Deferred income tax expense (benefit)		(14	)		(156	)		(104	)
Other gains		—			(40	)		—
Net (gains) losses on nontrading investments		—			12			(37	)
Purchases of investments within consolidated sponsored investment funds		—			(1	)		(160	)
Proceeds from sales and maturities of investments within consolidated sponsored investment funds		—			2			137
Assets and liabilities of consolidated VIEs:
Change in cash and cash equivalents		(119	)		(98	)		168
Net (gains) losses within consolidated VIEs		(16	)		(58	)		41
Net (purchases) proceeds within consolidated VIEs		(816	)		(227	)		(599	)
(Earnings) losses from equity method investees		(113	)		(91	)		(158	)
Distributions of earnings from equity method investees		31			41			57
Other adjustments		—			1			5
Changes in operating assets and liabilities:
Accounts receivable		(86	)		(154	)		78
Investments, trading		(449	)		(584	)		(416	)
Other assets		(130	)		(123	)		5
Accrued compensation and benefits		(86	)		98			101
Accounts payable and accrued liabilities		51			14			(69	)
Other liabilities		(53	)		207			(13	)
Cash flows from operating activities		2,154			3,004			3,087
Cash flows from investing activities
Purchases of investments		(377	)		(330	)		(369	)
Proceeds from sales and maturities of investments		378			456			654
Distributions of capital from equity method investees		34			66			143
Net consolidations (deconsolidations) of sponsored investment funds		(74	)		(163	)		(123	)
Acquisitions, net of cash acquired		(30	)		(273	)		—
Purchases of property and equipment		(119	)		(221	)		(66	)
Cash flows from investing activities		(188	)		(465	)		239
Cash flows from financing activities
Repayments of long-term borrowings		—			(750	)		(1,000	)
Proceeds from long-term borrowings		—			787			997
Cash dividends paid		(1,545	)		(1,476	)		(1,338	)
Proceeds from stock options exercised		26			126			4
Repurchases of common stock		(1,399	)		(1,331	)		(1,344	)
Net proceeds from (repayments of) borrowings by consolidated VIEs		—			—			512
Net (redemptions/distributions paid)/subscriptions received from noncontrolling interest holders		1,146			484			202
Excess tax benefit from stock-based compensation		82			105			106
Other financing activities		5			(9	)		—
Cash flows from financing activities		(1,685	)		(2,064	)		(1,861	)
Effect of exchange rate changes on cash and cash equivalents		(273	)		(115	)		(132	)
Net increase (decrease) in cash and cash equivalents		8			360			1,333
Cash and cash equivalents, beginning of year		6,083			5,723			4,390
Cash and cash equivalents, end of year	$	6,091		$	6,083		$	5,723
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	198		$	194		$	216
Interest on borrowings of consolidated VIEs	$	—		$	—		$	142
Income taxes (net of refunds)	$	1,365		$	1,276		$	1,227
Supplemental schedule of noncash investing and financing transactions:
Issuance of common stock	$	667		$	600		$	646
PNC preferred stock capital contribution	$	172		$	—		$	—
Increase (decrease) in noncontrolling interests due to net consolidation (deconsolidation) of sponsored investment funds	$	(1,439	)	$	(104	)	$	(269	)
Increase (decrease) in borrowings due to consolidation/deconsolidation of VIEs	$	—		$	(3,389	)	$	585

Business. BlackRock, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “BlackRock” or the “Company”) is a leading publicly traded investment management firm providing a broad range of investment and risk management services to institutional and retail clients worldwide.

BlackRock’s diverse platform of active (alpha) and index (beta) investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. Products are offered directly and through intermediaries in a variety of vehicles, including open-end and closed-end mutual funds, iShares^® exchange-traded funds (“ETFs”), separate accounts, collective investment funds and other pooled investment vehicles. BlackRock also offers the BlackRock Solutions^® (“BRS”) investment and risk management technology platform, Aladdin^®, risk analytics, advisory and technology services and solutions to a broad base of institutional and wealth management investors.

At December 31, 2016, The PNC Financial Services Group, Inc. (“PNC”) held 21.3% of the Company’s voting common stock and 22.0% of the Company’s capital stock, which includes outstanding common and nonvoting preferred stock.

Basis of Presentation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its controlled subsidiaries. Noncontrolling interests on the consolidated statements of financial condition represents the portion of consolidated sponsored investment funds in which the Company does not have direct equity ownership. Accounts and transactions between consolidated entities have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.

Certain items previously reported have been reclassified to conform to the current year presentation.

Cash and Cash Equivalents. Cash and cash equivalents primarily consists of cash, money market funds and short-term, highly liquid investments with original maturities of three months or less in which the Company is exposed to market and credit risk. Cash and cash equivalent balances that are legally restricted from use by the Company are recorded in other assets on the consolidated statements of financial condition. Cash balances maintained by consolidated voting rights entities (“VREs”) are not considered legally restricted and are included in cash and cash equivalents on the consolidated statements of financial condition. Cash balances maintained by consolidated variable interest entities (“VIEs”) are included in assets of consolidated variable interest entities on the consolidated statements of financial condition.

Investments. Investments in Debt and Marketable Equity Securities. BlackRock classifies debt and marketable equity investments as trading, available-for-sale, or held-to-maturity based on the Company’s intent to sell the security or, for a debt security, the Company’s intent and ability to hold the debt security to maturity.

Trading securities are those investments that are purchased principally for the purpose of selling them in the near term. Trading securities are carried at fair value on the consolidated statements of financial condition with changes in fair value recorded in nonoperating income (expense) on the consolidated statements of income in the period of the change.

Held-to-maturity debt securities are purchased with the positive intent and ability to be held to maturity and are recorded at amortized cost on the consolidated statements of financial condition.

Available-for-sale securities are those securities that are not classified as trading or held-to-maturity. Available-for-sale securities are carried at fair value on the consolidated statements of financial condition with changes in fair value recorded in the accumulated other comprehensive income (loss) component of stockholders’ equity in the period of the change. Upon the disposition of an available-for-sale security, the Company reclassifies the gain or loss on the security from accumulated other comprehensive income (loss) to nonoperating income (expense) on the consolidated statements of income.

Equity Method. For equity investments where BlackRock does not control the investee, and where it is not the primary beneficiary (“PB”) of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. BlackRock’s share of the investee’s underlying net income or loss is recorded as net gain (loss) on investments within nonoperating income (expense) and as other revenue for certain strategic investments since such companies are considered to be an extension of BlackRock’s core business. BlackRock’s share of net income of the investee is recorded based upon the most current information available at the time, which may precede the date of the consolidated statement of financial condition. Distributions received from the investment reduce the Company’s carrying value of the investee and the cost basis if deemed to be a return of capital.

Cost Method. For nonmarketable equity investments where BlackRock neither controls nor has significant influence over the investee, the investments are accounted for using the cost method of accounting. Dividends received from the investment are recorded as dividend income within nonoperating income (expense).

Impairments of Investments. Management periodically assesses equity method, available-for-sale, held-to-maturity and cost investments for other-than-temporary impairment (“OTTI”). If an OTTI exists, an impairment charge is recorded in nonoperating income (expense) on the consolidated statements of the income.

For equity method, held-to-maturity and cost method investments, if circumstances indicate that an OTTI may exist, the investments are evaluated using market values, where available, or the expected future cash flows of the investment. If the Company determines an OTTI exists, an impairment charge is recognized for the excess of the carrying amount of the investment over its estimated fair value.

For available-for-sale securities, when the fair value is lower than cost, the Company considers, among other factors, the length of time the security has been in a loss position, the extent to which the security’s fair value is less than cost, the financial condition and near-term prospects of the security’s issuer and the Company’s ability and intent to hold the security for a length of time sufficient to allow for recovery of such unrealized losses. For equity securities, if the impairment is considered other-than-temporary, an impairment charge is recognized for the excess of the carrying amount of the investment over its fair value. For debt securities, the Company considers whether: (1) it has the intent to sell the security; (2) it is more likely than not that it will be required to sell the security before recovery; or (3) it expects to recover the entire amortized cost basis of the security. If the Company intends to sell the security or it is more likely than not that it will be required to sell the security, the entire difference between the amortized cost and fair value must be recognized in earnings. If the Company does not intend to sell a security and it is not more likely than not that it will be required to sell the security but the security has suffered an impairment related to credit, the credit loss will be bifurcated from the total decline in value and recorded in earnings with the remaining portion recorded in accumulated other comprehensive income.

For the Company’s investments in collateralized loan obligations (“CLOs”), the Company reviews cash flow estimates over the life of each CLO investment. On a quarterly basis, if the present value of the estimated future cash flows is lower than the carrying value of the investment and there is an adverse change in estimated cash flows, an impairment is considered to be other-than-temporary. An impairment charge is recognized for the excess of the carrying amount of the investment over its estimated fair value.

Consolidation. As of January 1, 2015, the Company applies the consolidation guidance in accordance with ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis, (“ASU 2015-02”). The Company performs an analysis for investment products to determine if the product is a VIE or a VRE. Assessing whether an entity is a VIE or a VRE involves judgment and analysis. Factors considered in this assessment include the entity’s legal organization, the entity’s capital structure and equity ownership, and any related party or de facto agent implications of the Company’s involvement with the entity. Investments that are determined to be VIEs are consolidated if the Company is the PB of the entity. VREs are typically consolidated if the Company holds the majority voting interest. Upon the occurrence of certain events (such as contributions and redemptions, either by the Company, or third parties, or amendments to the governing documents of the Company’s investment products), management reviews and reconsiders its previous conclusion regarding the status of an entity as a VIE or a VRE. Additionally, management continually reconsiders whether the Company is deemed to be a VIE’s PB that consolidates such entity.

Consolidation of Variable Interest Entities. Certain investment products for which a controlling financial interest is achieved through arrangements that do not involve or are not directly linked to voting interests are deemed VIEs. BlackRock reviews factors, including whether or not i) the entity has equity that is sufficient to permit the entity to finance its activities without additional subordinated support from other parties and ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns, and the right to direct the activities of the entity that most significantly impact the entity’s economic performance, to determine if the investment product is a VIE. BlackRock re-evaluates such factors as facts and circumstances change.

All VIEs are evaluated for consolidation under a single method. The PB of a VIE is defined as the variable interest holder that has a controlling financial interest in the VIE. A controlling financial interest is defined as (i) the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that potentially could be significant to the VIE. The Company generally consolidates VIEs in which it holds an equity ownership interest of 10% or greater and deconsolidates such VIEs once equity ownership falls below 10%.

Consolidation of Voting Rights Entities. BlackRock is required to consolidate an investee to the extent that BlackRock can exert control over the financial and operating policies of the investee, which generally exists if there is a greater than 50% voting equity interest.

Retention of Specialized Investment Company Accounting Principles. Upon consolidation of sponsored investment funds, the Company retains the specialized investment company accounting principles of the underlying funds. All of the underlying investments held by such consolidated sponsored investment funds are carried at fair value with corresponding changes in the investments’ fair values reflected in nonoperating income (expense) on the consolidated statements of income. When the Company no longer controls these funds due to reduced ownership percentage or other reasons, the funds are deconsolidated and accounted for as an equity method investment, available-for-sale security or trading investment if the Company still maintains an investment.

Money Market Fee Waivers. The Company is currently voluntarily waiving a portion of its management fees on certain money market funds to ensure that they maintain a targeted level of daily net investment income (the “Yield Support waivers”). During 2016 and 2015, these waivers resulted in a reduction of management fees of approximately $56 million and $137 million, respectively. Approximately 35% and 50% of Yield Support waivers for 2016 and 2015, respectively, were offset by a reduction of BlackRock’s distribution and servicing costs paid to a financial intermediary. BlackRock has provided Yield Support waivers in prior periods and may increase or decrease the level of fee waivers in future periods.

Separate Account Assets and Liabilities. Separate account assets are maintained by BlackRock Life Limited, a wholly owned subsidiary of the Company, which is a registered life insurance company in the United Kingdom, and represent segregated assets held for purposes of funding individual and group pension contracts. The life insurance company does not underwrite any insurance contracts that involve any insurance risk transfer from the insured to the life insurance company. The separate account assets primarily include equity securities, debt securities, money market funds and derivatives. The separate account assets are not subject to general claims of the creditors of BlackRock. These separate account assets and the related equal and offsetting liabilities are recorded as separate account assets and separate account liabilities on the consolidated statements of financial condition.

The net investment income attributable to separate account assets supporting individual and group pension contracts accrues directly to the contract owner and is not reported on the consolidated statements of income. While BlackRock has no economic interest in these separate account assets and liabilities, BlackRock earns policy administration and management fees associated with these products, which are included in investment advisory, administration fees and securities lending revenue on the consolidated statements of income.

Separate Account Collateral Assets Held and Liabilities Under Securities Lending Agreements. The Company facilitates securities lending arrangements whereby securities held by separate accounts maintained by BlackRock Life Limited are lent to third parties under global master securities lending agreements. In exchange, the Company receives legal title to the collateral with minimum values generally ranging from approximately 102% to 112% of the value of the securities lent in order to reduce counterparty risk. The required collateral value is calculated on a daily basis. The global master securities lending agreements provide the Company the right to request additional collateral or, in the event of borrower default, the right to liquidate collateral. The securities lending transactions entered into by the Company are accompanied by an agreement that entitles the Company to request the borrower to return the securities at any time; therefore, these transactions are not reported as sales.

The Company records on the consolidated statements of financial condition the cash and noncash collateral received under these BlackRock Life Limited securities lending arrangements as its own asset in addition to an equal and offsetting collateral liability for the obligation to return the collateral. The securities lending revenue earned from lending securities held by the separate accounts is included in investment advisory, administration fees and securities lending revenue on the consolidated statements of income. During 2016 and 2015, the Company had not resold or repledged any of the collateral received under these arrangements. At December 31, 2016 and 2015, the fair value of loaned securities held by separate accounts was approximately $25.7 billion and $28.8 billion, respectively, and the fair value of the collateral held under these securities lending agreements was approximately $27.8 billion and $31.3 billion, respectively.

Property and Equipment. Property and equipment are recorded at cost less accumulated depreciation. Depreciation is generally determined by cost less any estimated residual value using the straight-line method over the estimated useful lives of the various classes of property and equipment. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the remaining lease term.

BlackRock develops a variety of risk management, investment analytic and investment system services for internal use, utilizing proprietary software that is hosted and maintained by BlackRock. The Company capitalizes certain costs incurred in connection with developing or obtaining software for internal use. Capitalized software costs are included within property and equipment on the consolidated statements of financial condition and are amortized, beginning when the software project is ready for its intended use, over the estimated useful life of the software of approximately three years.

Goodwill and Intangible Assets. Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. The Company has determined that it has one reporting unit for goodwill impairment testing purposes, the consolidated BlackRock single operating segment, which is consistent with internal management reporting and management's oversight of operations. In its assessment of goodwill for impairment, the Company considers such factors as the book value and market capitalization of the Company.

On a quarterly basis, the Company considers if triggering events have occurred that may indicate a potential goodwill impairment. If a triggering event has occurred, the Company performs assessments, which may include reviews of significant valuation assumptions, to determine if goodwill may be impaired. The Company performs an impairment assessment of its goodwill at least annually as of July 31^st.

Intangible assets are comprised of indefinite-lived intangible assets and finite-lived intangible assets acquired in a business acquisition. The value of contracts to manage assets in proprietary open-end funds and collective trust funds and certain other commingled products without a specified termination date is generally classified as indefinite-lived intangible assets. The assignment of indefinite lives to such contracts primarily is based upon the following: (i) the assumption that there is no foreseeable limit on the contract period to manage these products; (ii) the Company expects to, and has the ability to, continue to operate these products indefinitely; (iii) the products have multiple investors and are not reliant on a single investor or small group of investors for their continued operation; (iv) current competitive factors and economic conditions do not indicate a finite life; and (v) there is a high likelihood of continued renewal based on historical experience. In addition, trade names/trademarks are considered indefinite-lived intangible assets when they are expected to generate cash flows indefinitely.

Indefinite-lived intangible assets and goodwill are not amortized. Finite-lived management contracts, which relate to acquired separate accounts and funds with a specified termination date, are amortized over their remaining useful lives.

The Company performs assessments to determine if any intangible assets are potentially impaired and whether the indefinite-lived and finite-lived classifications are still appropriate. The carrying value of finite-lived management contracts and their remaining useful lives are reviewed at least annually to determine if circumstances exist which may indicate a potential impairment or revisions to the amortization period. The Company performs impairment assessments of all of its intangible assets at least annually, as of July 31^st.

In evaluating whether it is more likely than not that the fair value of indefinite-lived intangibles is less than its carrying value, BlackRock assesses various significant qualitative factors, including assets under management (“AUM”), revenue basis points, projected AUM growth rates, operating margins, tax rates and discount rates. In addition, the Company considers other factors, including (i) macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (ii) industry and market considerations such as a deterioration in the environment in which the entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics, a change in the market for an entity’s services, or regulatory, legal or political developments; and (iii) entity-specific events, such as a change in management or key personnel, overall financial performance and litigation that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset. If an indefinite-lived intangible is determined to be more likely than not impaired, then the fair value of the asset is compared with its carrying value and any excess of the carrying value over the fair value would be recognized as an expense in the period in which the impairment occurs.

For finite-lived intangible assets, if potential impairment circumstances are considered to exist, the Company will perform a recoverability test using an undiscounted cash flow analysis. Actual results could differ from these cash flow estimates, which could materially impact the impairment conclusion. If the carrying value of the asset is determined not to be recoverable based on the undiscounted cash flow test, the difference between the carrying value of the asset and its current fair value would be recognized as an expense in the period in which the impairment occurs.

Noncontrolling Interests. The Company reports noncontrolling interests as equity, separate from the parent’s equity, on the consolidated statements of financial condition. In addition, the Company’s consolidated net income on the consolidated statements of income includes the income (loss) attributable to noncontrolling interest holders of the Company’s consolidated investment products. Income (loss) attributable to noncontrolling interests is not adjusted for income taxes for consolidated investment products that are treated as pass-through entities for tax purposes.

Classification and Measurement of Redeemable Securities. The Company includes redeemable noncontrolling interests related to certain consolidated investment products in temporary equity on the consolidated statements of financial condition.

Treasury Stock. The Company records common stock purchased for treasury at cost. At the date of subsequent reissuance, the treasury stock account is reduced by the cost of such stock using the average cost method.

Investment Advisory, Administration Fees and Securities Lending Revenue. Investment advisory and administration fees are recognized as the services are performed. Such fees are primarily based on pre-determined percentages of the market value of AUM or committed capital. Investment advisory and administration fees are affected by changes in AUM, including market appreciation or depreciation, foreign exchange translation and net inflows or outflows. Investment advisory and administration fees for investment funds are shown net of fees waived pursuant to contractual expense limitations of the funds or voluntary waivers.

The Company contracts with third parties and related parties for various mutual fund distribution and shareholder servicing to be performed on behalf of certain funds the Company manages. Such arrangements generally are priced as a portion of the management fee paid by the fund. In certain cases, the fund (primarily international funds) takes on the primary responsibility for payment for services such that the Company bears no credit risk to the third-party. The Company records its management fees net of retrocessions. Retrocessions for 2016, 2015 and 2014 were $804 million, $870 million and $891 million, respectively, and were reflected net in investment advisory, administration fees and securities lending revenue on the consolidated statements of income.

The Company also earns revenue by lending securities as an agent on behalf of clients, primarily to brokerage institutions. Revenue is accounted for on an accrual basis. The revenue earned is shared between the Company and the funds or other third-party accounts managed by the Company from which the securities are borrowed.

Investment Advisory Performance Fees / Carried Interest. The Company receives investment advisory performance fees or incentive allocations from certain actively managed investment funds and certain separately managed accounts. These performance fees are dependent upon exceeding specified relative or absolute investment return thresholds. Such fees are recorded upon completion of the measurement period, which varies by product or account, and could be monthly, quarterly, annually or longer.

In addition, the Company is allocated carried interest from certain alternative investment products upon exceeding performance thresholds. BlackRock may be required to reverse/return all, or part, of such carried interest allocations depending upon future performance of these funds. Therefore, BlackRock records carried interest subject to such clawback provisions in total investments or cash/cash of consolidated VIEs to the extent that it is distributed, on its consolidated statements of financial condition. Carried interest is recorded as performance fee revenue upon the earlier of the termination of the investment fund or when the likelihood of clawback is considered mathematically improbable.

The Company records a deferred carried interest liability to the extent it receives cash or capital allocations related to carried interest prior to meeting the revenue recognition criteria. At December 31, 2016 and 2015, the Company had $152 million and $143 million, respectively, of deferred carried interest recorded in other liabilities/other liabilities of consolidated VIEs on the consolidated statements of financial condition. A portion of the deferred carried interest liability will be paid to certain employees. The ultimate timing of the recognition of performance fee revenue, if any, for these products is unknown.

BlackRock Solutions and Advisory. BlackRock provides a variety of risk management, investment analytic, enterprise investment system, financial markets advisory and wealth management technology services to financial institutions, pension funds, asset managers, foundations, consultants, mutual fund sponsors, real estate investment trusts, government agencies and retail intermediaries. These services are provided under the brand name BlackRock Solutions and include a wide array of risk management services, valuation of illiquid securities, disposition and workout assignments (including long-term portfolio liquidation assignments), strategic planning and execution, and enterprise investment system outsourcing to clients. Fees earned for BlackRock Solutions and advisory services are recorded as services are performed and are determined using some, or all, of the following methods: (i) percentages of various attributes of advisory AUM or value of positions on the Aladdin platform, (ii) fixed-rate fees and (iii) fees billed on a time and materials basis. The fees earned for BlackRock Solutions and advisory services are recorded in BlackRock Solutions and advisory on the consolidated statements of income.

Other Revenue. The Company earns fees for transition management services comprised of commissions from acting as an introducing broker-dealer in buying and selling securities on behalf of the Company’s customers. Commissions related to transition management services are recorded on a trade-date basis as securities transactions occur and are reflected in other revenue on the consolidated statements of income.

Other revenue also includes equity method investment earnings related to certain strategic investments.

Stock-based Compensation. Entities are required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The compensation cost is recognized over the period during which an employee is required to provide service (usually the vesting period) in exchange for the stock-based award.

The Company measures the grant-date fair value of restricted stock units (“RSUs”) using the Company’s share price on the date of grant. For employee share options and instruments with market conditions, the Company uses pricing models. If an equity award is modified after the grant-date, incremental compensation cost is recognized for an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. Awards under the Company’s stock-based compensation plans vest over various periods. Compensation cost is recorded by the Company on a straight-line basis over the requisite service period for each separate vesting portion of the award as if the award is, in-substance, multiple awards. Compensation cost was reduced by the number of awards expected to be forfeited prior to vesting. Forfeiture estimates generally were derived using historical forfeiture information, where available, and were reviewed for reasonableness at least quarterly.

The Company amortizes the grant-date fair value of stock-based compensation awards made to retirement-eligible employees over the requisite service period. Upon notification of retirement, the Company accelerates the unamortized portion of the award over the contractually required retirement notification period.

Distribution and Servicing Costs. Distribution and servicing costs include payments to third parties, primarily associated with distribution and servicing of client investments in certain BlackRock products. Distribution and servicing costs are expensed when incurred.

Amortization of Deferred Sales Commissions. The Company holds the rights to receive certain cash flows from sponsored mutual funds sold without a front-end sales charge (“back-end load shares”). The carrying value of these deferred mutual fund commissions is recorded within other assets on the consolidated statements of financial condition and is being amortized over periods between one and six years. The Company receives distribution fees from these funds and contingent deferred sales commissions (“CDSCs”) upon shareholder redemption of certain back-end load shares that are recorded within distribution fees on the consolidated statements of income. Upon receipt of CDSCs, the Company records revenue and the remaining unamortized deferred sales commission is expensed.

Direct Fund Expense. Direct fund expense, which is expensed as incurred, primarily consist of third-party nonadvisory expense incurred by BlackRock related to certain funds for the use of certain index trademarks, reference data for certain indices, custodial services, fund administration, fund accounting, transfer agent services, shareholder reporting services, audit and tax services as well as other fund-related expense directly attributable to the nonadvisory operations of the fund.

Leases. The Company accounts for its office facilities leases as operating leases, which may include escalation clauses. The Company expenses the lease payments associated with operating leases evenly during the lease term (including rent-free periods) commencing when the Company obtains the right to control the use of the leased property.

Foreign Exchange. Foreign currency transactions are recorded at the exchange rates prevailing on the dates of the transactions. Monetary assets and liabilities that are denominated in foreign currencies are subsequently remeasured into the functional currencies of the Company's subsidiaries at the rates prevailing at each balance sheet date. Gains and losses arising on remeasurement are included in general and administration expense on the consolidated statements of income. Revenue and expenses are translated at average exchange rates during the period. Gains or losses resulting from translating foreign currency financial statements into U.S. dollars are included in accumulated other comprehensive income, a separate component of stockholders’ equity, on the consolidated statements of financial condition.

Income Taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using currently enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred income tax assets and liabilities is recognized on the consolidated statements of income in the period that includes the enactment date.

Management periodically assesses the recoverability of its deferred income tax assets based upon expected future earnings, taxable income in prior carryback years, future deductibility of the asset, changes in applicable tax laws and other factors. If management determines that it is not more likely than not that the deferred tax asset will be fully recoverable in the future, a valuation allowance will be established for the difference between the asset balance and the amount expected to be recoverable in the future. This allowance will result in additional income tax expense. Further, the Company records its income taxes receivable and payable based upon its estimated income tax position.

Excess tax benefits related to stock-based compensation were recognized as additional paid-in capital and are reflected as financing cash flows on the consolidated statements of cash flows.

Earnings per Share (“EPS”). Basic EPS is calculated by dividing net income applicable to common shareholders by the weighted-average number of shares outstanding during the period. Diluted EPS includes the determinants of basic EPS and common stock equivalents outstanding during the period. Diluted EPS is computed using the treasury stock method.

Due to the similarities in terms between BlackRock’s nonvoting participating preferred stock and the Company’s common stock, the Company considers its nonvoting participating preferred stock to be a common stock equivalent for purposes of EPS calculations. As such, the Company has included the outstanding nonvoting participating preferred stock in the calculation of average basic and diluted shares outstanding.

Business Segments. The Company’s management directs BlackRock’s operations as one business, the asset management business. The Company utilizes a consolidated approach to assess performance and allocate resources. As such, the Company operates in one business segment as defined in ASC 280-10, Segment Reporting (“ASC 280-10”).

Hierarchy of Fair Value Inputs. The Company uses a fair value hierarchy that prioritizes inputs to valuation approaches used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date.

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; quotes from pricing services or brokers for which the Company can determine that orderly transactions took place at the quoted price or that the inputs used to arrive at the price are observable; and inputs other than quoted prices that are observable, such as models or other valuation methodologies.

Unobservable inputs for the valuation of the asset or liability, which may include nonbinding broker quotes. Level 3 assets include investments for which there is little, if any, market activity. These inputs require significant management judgment or estimation.

Significance of Inputs. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

Valuation Approaches. The fair values of certain Level 3 assets and liabilities were determined using various valuation approaches as appropriate, including third-party pricing vendors, broker quotes and market and income approaches. Such quotes and modeled prices are evaluated for reasonableness through various procedures, including due diligence reviews of third-party pricing vendors, variance analyses, consideration of the current market environment and other analytical procedures.

A significant number of inputs used to value equity, debt securities and investments in CLOs is sourced from third-party pricing vendors. Generally, prices obtained from pricing vendors are categorized as Level 1 inputs for identical securities traded in active markets and as Level 2 for other similar securities if the vendor uses observable inputs in determining the price. Annually, BlackRock’s internal valuation committee or other designated groups review both the valuation approaches, including the general assumptions and methods used to value various asset classes, and operational processes with these vendors. On a quarterly basis, meetings are held with key vendors to identify any significant changes to the vendors’ processes.

In addition, quotes obtained from brokers generally are nonbinding and categorized as Level 3 inputs. However, if the Company is able to determine that market participants have transacted for the asset in an orderly manner near the quoted price or if the Company can determine that the inputs used by the broker are observable, the quote is classified as a Level 2 input.

Investments Measured at Net Asset Values. As a practical expedient, the Company uses net asset value (“NAV”) as the fair value for certain investments. The inputs to value these investments may include BlackRock capital accounts for its partnership interests in various alternative investments, including hedge funds, real assets and private equity funds, which may be adjusted by using the returns of certain market indices. The various partnerships generally are investment companies, which record their underlying investments at fair value based on fair value policies established by management of the underlying fund. Fair value policies at the underlying fund generally require the fund to utilize pricing/valuation information from third-party sources, including independent appraisals. However, in some instances, current valuation information for illiquid securities or securities in markets that are not active may not be available from any third-party source or fund management may conclude that the valuations that are available from third-party sources are not reliable. In these instances, fund management may perform model-based analytical valuations that could be used as an input to value these investments.

Derivative Instruments and Hedging Activities. The Company does not use derivative financial instruments for trading or speculative purposes. The Company uses derivative financial instruments primarily for purposes of hedging exposures to fluctuations in foreign currency exchange rates of certain assets and liabilities, and market exposures for certain seed investments. However, certain consolidated sponsored investment funds may also utilize derivatives as a part of their investment strategy.

Changes in the fair value of the Company’s derivative financial instruments are recognized in earnings and, where applicable, are offset by the corresponding gain or loss on the related foreign-denominated assets or liabilities or hedged investments, on the consolidated statements of income.

The Company may also use financial instruments designated as net investment hedges for accounting purposes to hedge net investments in international subsidiaries whose functional currency is different from U.S. dollars. The gain or loss from revaluing accounting hedges of net

investments in foreign operations at the spot rate is deferred and reported within accumulated other comprehensive income on the consolidated statements of financial condition. The Company reassesses the effectiveness of its net investment hedge on a quarterly basis.

Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance also changes the accounting for certain contract costs and revises the criteria for determining if an entity is acting as a principal or agent in certain arrangements. The Company continues to evaluate the impact of ASU 2014-09 on the presentation and recognition of its revenue and certain contract costs. The most significant change currently identified to date relates to certain distribution costs currently presented net against revenues (contra-revenue) that may need to be presented as an expense on a gross basis. The Company will adopt ASU 2014-09 upon its effective date of January 1, 2018, together with all amending ASUs, and is currently evaluating which transition method it will apply.

Recognition and Measurement of Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 amends guidance on the classification and measurement of financial instruments, including significant revisions in accounting related to the classification and measurement of investments in equity securities and presentation of certain fair value changes for financial liabilities when the fair value option is elected. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. The Company is currently evaluating the impact of

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize assets and liabilities arising from most operating leases on the consolidated statements of financial condition. The Company is currently evaluating the impact of adopting ASU 2016-02, which is effective for the Company on January 1, 2019.

Accounting for Share-Based Payments. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the consolidated statement of cash flows. The Company adopted ASU 2016-09 as of January 1, 2017. ASU 2016-09 requires all excess tax benefits and deficiencies to be recognized in income tax expense on the consolidated statements of income. Accordingly, the Company expects to record a discrete income tax benefit of approximately $80 million during the first quarter of 2017 for vested restricted stock units where the grant date stock price was lower than the vesting date stock price. The new guidance could increase the volatility of income tax expense as a result of fluctuations in the Company’s stock price. Also, upon adoption, the Company elected to account for forfeitures as they occur, which is not expected to have a material impact on the consolidated financial statements.

Accounting for Credit Losses. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the guidance for evaluating the impairment of financial instruments. The new guidance adds an impairment model that is based on expected losses rather than incurred losses. The Company is currently evaluating the impact of adopting ASU 2016-13, which is effective for the Company on January 1, 2020 with early adoption permitted on January 1, 2019.

Cash Flow Classification. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which amends and clarifies the current guidance to reduce diversity in practice of the classification of certain cash receipts and payments in the statement of cash flows. The Company is currently evaluating the impact of adopting ASU 2016-15, which is effective for the Company on January 1, 2018 with early adoption permitted. The Company must apply the guidance retrospectively to all periods presented.

A summary of the cost and carrying value of investments classified as available-for-sale investments is as follows:

At December 31, 2016 and 2015, available-for-sale investments primarily included investments in CLOs and seed investments in BlackRock sponsored mutual funds.

A summary of sale activity of available-for-sale securities during 2016, 2015 and 2014 is shown below.

The carrying value of held-to-maturity investments was $51 million and $108 million at December 31, 2016 and 2015, respectively. Held-to-maturity investments included foreign government debt held primarily for regulatory purposes and certain investments in CLOs. The amortized cost (carrying value) of these investments approximated fair value. At December 31, 2016, $10 million of these investments mature between five years to ten years and $41 million mature after 10 years.

At December 31, 2016, trading investments included $246 million of debt securities and $219 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $59 million of certain deferred compensation plan mutual fund investments and $101 million of other equity and debt securities.

At December 31, 2015, trading investments included $437 million of debt securities and $263 million of equity securities held by consolidated sponsored investment funds accounted for as VREs, $65 million of certain deferred compensation plan mutual fund investments and $20 million of other equity and debt securities.

Equity method investments primarily include BlackRock’s direct investments in certain BlackRock sponsored investment funds. See Note 11, Other Assets, for more information on the Company’s investment in PennyMac Financial Services, Inc. (“PennyMac”), which is included in other assets on the consolidated statements of financial condition.

Cost method investments include nonmarketable securities, primarily FRB stock, which is held for regulatory purposes and is restricted from sale. At December 31, 2016 and 2015, there were no indicators of impairment on these investments.

Carried interest represents allocations to BlackRock’s general partner capital accounts from certain funds. These balances are subject to change upon cash distributions, additional allocations or reallocations back to limited partners within the respective funds.

The Company consolidates certain sponsored investment funds accounted for as VREs because it is deemed to control such funds. The investments owned by these consolidated VREs are classified as trading investments. The following table presents the balances related to these consolidated VREs that were recorded on the consolidated statements of financial condition, including BlackRock’s net interest in these funds:

BlackRock’s total exposure to consolidated VREs represents the value of its economic ownership interest in these sponsored investment funds. Valuation changes associated with investments held at fair value by these consolidated VREs are reflected in nonoperating income (expense) and partially offset in net income (loss) attributable to noncontrolling interests for the portion not attributable to BlackRock.

The Company cannot readily access cash and cash equivalents held by consolidated VREs to use in its operating activities.

In the normal course of business, the Company is the manager of various types of sponsored investment vehicles, which may be considered VIEs. The Company may from time to time own equity or debt securities or enter into derivatives with the vehicles, each of which are considered variable interests. The Company’s involvement in financing the operations of the VIEs is generally limited to its investments in the entity. The Company consolidates entities when it is determined to be the PB. See Note 2, Significant Accounting Policies, for further information on the Company’s accounting policy on consolidation.

Consolidated VIEs. The Company’s consolidated VIEs as of December 31, 2016 include certain sponsored investment funds in which BlackRock has an investment and as the investment manager, is deemed to have both the power to direct the most significant activities of the funds and the right to receive benefits (or the obligation to absorb losses) that could potentially be significant to these sponsored investment funds. The assets of these VIEs are not available to creditors of the Company. In addition, the investors in these VIEs have no recourse to the credit of the Company.

Consolidated VIE assets and liabilities are presented after intercompany eliminations at December 31, 2016 and 2015 in the following table:

The Company recorded a $16 million nonoperating net gain for 2016 related to consolidated VIEs. Net loss attributable to noncontrolling interests related to consolidated VIEs for 2016 was $2 million.

The Company recorded a $58 million nonoperating net gain for 2015 related to consolidated VIEs. Net income attributable to noncontrolling interests related to consolidated VIEs for 2015 was $6 million.

The Company recorded $41 million of nonoperating expense and an equal and offsetting loss attributable to noncontrolling interests related to consolidated VIEs for 2014.

Non-Consolidated VIEs. At December 31, 2016 and 2015, the Company’s carrying value of assets and liabilities included on the consolidated statements of financial condition pertaining to nonconsolidated VIEs and its maximum risk of loss related to VIEs for which it held a variable interest, but for which it was not the PB, was as follows:

The net assets of sponsored investment products that are nonconsolidated VIEs approximated $4 billion and $3 billion at December 31, 2016 and December 31, 2015, respectively.

Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

December 31, 2016 (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Investments Measured at NAV⁽¹⁾		Other Assets Not Held at Fair Value⁽²⁾		December 31, 2016
Assets:
Investments
Available-for-sale	$	7	$	49	$	24	$	—	$	—	$	80
Held-to-maturity debt securities		—		—		—		—		51		51
Trading:
Deferred compensation plan mutual funds		59		—		—		—		—		59
Equity securities / Multi-asset mutual funds		308		—		—		—		—		308
Debt securities / fixed income mutual funds		1		250		7		—		—		258
Total trading		368		250		7		—		—		625
Other investments:
Equity method:
Equity and fixed income mutual funds		323		—		—		5		—		328
Other		—		—		—		394		8		402
Total equity method		323		—		—		399		8		730
Cost method investments		—		—		—		—		91		91
Carried interest		—		—		—		—		18		18
Total investments		698		299		31		399		168		1,595
Separate account assets		109,663		38,542		—		—		884		149,089
Separate account collateral held under securities lending agreements:
Equity securities		22,173		—		—		—		—		22,173
Debt securities		—		5,619		—		—		—		5,619
Total separate account collateral held under securities lending agreements		22,173		5,619		—		—		—		27,792
Investments of consolidated VIEs:
Private / public equity⁽³⁾		3	2			112		89		79		285
Equity securities		278		—		—		—		—		278
Debt securities		—		274		—		—		—		274
Other		—		—		—		63		—		63
Carried interest		—		—		—		—		108		108
Total investments of consolidated VIEs		281		276		112		152		187		1,008
Total	$	132,815	$	44,736	$	143	$	551	$	1,239	$	179,484
Liabilities:
Separate account collateral liabilities under securities lending agreements	$	22,173	$	5,619	$	—	$	—	$	—	$	27,792
Other liabilities⁽⁴⁾		—		7		115		—		—		122
Total	$	22,173	$	5,626	$	115	$	—	$	—	$	27,914

Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

December 31, 2015 (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Investments Measured at NAV⁽¹⁾		Other Assets Not Held at Fair Value⁽²⁾		December 31, 2015
Assets:
Investments
Available-for-sale	$	19	$	2	$	23	$	—	$	—	$	44
Held-to-maturity debt securities		—		—		—		—		108		108
Trading:
Deferred compensation plan mutual funds		65		—		—		—		—		65
Equity securities / Multi-asset mutual funds		278		—		—		—		—		278
Debt securities / fixed income mutual funds		2		438		2		—		—		442
Total trading		345		438		2		—		—		785
Other investments:
Equity method:
Equity and fixed income mutual funds		73		—		—		30		—		103
Other		—		—		—		414		10		424
Total equity method		73		—		—		444		10		527
Cost method investments		—		—		—		—		95		95
Carried interest		—		—		—		—		19		19
Total investments		437		440		25		444		232		1,578
Separate account assets		109,761		40,152		—		—		938		150,851
Separate account collateral held under securities lending agreements:
Equity securities		26,062		—		—		—		—		26,062
Debt securities		—		5,274		—		—		—		5,274
Total separate account collateral held under securities lending agreements		26,062		5,274		—		—		—		31,336
Investments of consolidated VIEs:
Private / public equity⁽³⁾		6	4			196		145		—		351
Equity securities		298		—		—		—		—		298
Debt securities		—		242		—		—		—		242
Other		—		—		—		58		—		58
Carried interest		—		—		—		—		81		81
Total investments of consolidated VIEs		304		246		196		203		81		1,030
Total	$	136,564	$	46,112	$	221	$	647	$	1,251	$	184,795
Liabilities:
Separate account collateral liabilities under securities lending agreements	$	26,062	$	5,274	$	—	$	—	$	—	$	31,336
Other liabilities⁽⁴⁾		—		6		48		—		—		54
Total	$	26,062	$	5,280	$	48	$	—	$	—	$	31,390

Level 3 Assets. Level 3 investments of consolidated VIEs of $112 million and $196 million at December 31, 2016 and 2015, respectively, related to direct investments in private equity companies held by consolidated private equity funds. Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof, and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third-party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition, among other factors. The fair value derived from the methods used is evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. Under the income approach, fair value may be determined by discounting the expected cash flows to a single present value amount using current expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. For investments utilizing the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability in isolation could result in a significantly lower (higher) fair value measurement. For investments utilizing the market comparable companies valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation could result in a significantly higher (lower) fair value measurement.

Level 3 assets may include investments in CLOs and bonds valued based on single-broker nonbinding quotes, and direct private equity investments valued using the market approach or the income approach as described above.

Level 3 Liabilities. Level 3 other liabilities primarily include recorded contingent liabilities related to certain acquisitions, which were valued based upon discounted cash flow analyses using unobservable market data inputs.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2016

(in millions)	December 31, 2015		Realized and Unrealized Gains (Losses) in Earnings and OCI		Purchases		Sales and Maturities			Issuances and Other Settlements⁽¹⁾		Transfers into Level 3		Transfers out of Level 3⁽²⁾			December 31, 2016		Total Net Unrealized Gains (Losses) Included in Earnings⁽³⁾
Assets:
Investments:
Available-for-sale securities⁽⁴⁾	$	23	$	—	$	47	$	—		$	—	$	—	$	(46	)	$	24	$	—
Trading		2		—		8		—			—		—		(3	)		7		—
Total investments		25		—		55		—			—		—		(49	)		31		—
Assets of consolidated VIEs - Private equity		196		3		6		(15	)		—		—		(78	)		112	$	3
Total Level 3 assets	$	221	$	3	$	61	$	(15	)	$	—	$	—	$	(127	)	$	143	$	3
Liabilities:
Other liabilities⁽⁵⁾	$	48	$	3	$	—	$	—		$	70	$	—	$	—			115	$	3

(3) Earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at the reporting date.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2015

(in millions)	December 31, 2014		Realized and Unrealized Gains (Losses) in Earnings and OCI		Purchases		Sales and Maturities		Issuances and Other Settlements⁽¹⁾⁽²⁾			Transfers into Level 3		Transfers out of Level 3		December 31, 2015		Total Net Unrealized Gains (Losses) Included in Earnings⁽³⁾
Assets:
Investments:
Available-for-sale securities⁽⁴⁾	$	—	$	—	$	23	$	—	$	—		$	—	$	—	$	23	$	—
Trading		—		—		2		—		—			—		—		2		—
Consolidated sponsored investment funds- Private equity		80		—		—		—		(80	)		—		—		—		—
Total investments		80		—		25		—		(80	)		—		—		25		—
Assets of consolidated VIEs:
Private equity		—		37		79		—		80			—		—		196	$	37
Bank loans		302		—		—		—		(302	)		—		—		—		—
Bonds		18		—		—		—		(18	)		—		—		—		—
Total assets of consolidated VIEs		320		37		79		—		(240	)		—		—		196		37
Total Level 3 assets	$	400	$	37	$	104	$	—	$	(320	)	$	—	$	—	$	221	$	37
Liabilities:
Borrowings of consolidated VIEs	$	3,389	$	—	$	—	$	—	$	(3,389	)	$	—	$	—	$	—	$	—
Other liabilities		39		3		—		—		12			—		—		48		3
Total liabilities	$	3,428	$	3	$	—	$	—	$	(3,377	)	$	—	$	—	$	48	$	3

Realized and Unrealized Gains (Losses) for Level 3 Assets and Liabilities. Realized and unrealized gains (losses) recorded for Level 3 assets and liabilities are reported in nonoperating income (expense) on the consolidated statements of income. A portion of net income (loss) for consolidated sponsored investment funds are allocated to noncontrolling interests to reflect net income (loss) not attributable to the Company.

Transfers in and/or out of Levels. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable, or when the carrying value of certain equity method investments no longer represents fair value as determined under valuation methodologies.

Disclosures of Fair Value for Financial Instruments Not Held at Fair Value. At December 31, 2016 and 2015, the fair value of the Company’s financial instruments not held at fair value are categorized in the table below.

As a practical expedient to value certain investments that do not have a readily determinable fair value and have attributes of an investment company, the Company uses NAV as the fair value. The following tables list information regarding all investments that use a fair value measurement to account for both their financial assets and financial liabilities in their calculation of a NAV per share (or equivalent).

(c)This category includes several real assets funds that invest directly in real estate, real estate related assets and infrastructure. The fair values of the investments have been estimated using capital accounts representing the Company’s ownership interest in the funds. A majority of the Company’s investments are not subject to redemption or are not currently redeemable and are normally returned through distributions as a result of the liquidation of the underlying assets of the funds. It is estimated that the investments in these funds not subject to redemptions will be liquidated over a weighted-average period of approximately seven years and six years at December 31, 2016 and 2015, respectively.

(d) This category includes deferred compensation plan investments. The investments are not subject to redemption; however, distributions as a result of the liquidation of the underlying assets will be used to settle certain deferred compensation liabilities over time. In addition, this category for 2015 also includes a multi-asset fund that is redeemable. The fair values of the investments have been estimated using capital accounts representing the Company’s ownership interest in partners’ capital.

The Company maintains a program to enter into swaps to hedge against market price and interest rate exposures with respect to certain seed investments in sponsored investment products. At December 31, 2016, the Company had outstanding total return swaps and interest rate swaps with aggregate notional values of approximately $572 million and $42 million, respectively. At December 31, 2015, the Company had outstanding total return swaps and interest rate swaps with aggregate notional values of approximately $360 million and $46 million, respectively.

Gains (losses) on total return swaps are recorded in nonoperating income (expense) and were $(31) million, $11 million and $(26) million for 2016, 2015 and 2014, respectively.

Gains (losses) on the interest rate swaps are recorded in nonoperating income (expense) and were $(21) million for 2014. Gains (losses) were not material for 2016 and 2015.

The Company has entered into a derivative, providing credit protection to a counterparty of approximately $17 million, representing the Company’s maximum risk of loss with respect to the provision of credit protection. The Company carries the derivative at fair value based on the expected discounted future cash outflows under the arrangement.

The Company executes forward foreign currency exchange contracts to mitigate the risk of certain foreign exchange movements. At December 31, 2016 and 2015, the Company had outstanding forward foreign currency exchange contracts with aggregate notional values of approximately $107 million and $169 million, respectively.

Gains (losses) on the forward foreign currency exchange contracts are recorded in other general and administration expense and were not material to the consolidated statements of income for 2016, 2015 and 2014.

The Company consolidates certain sponsored investment funds, which may utilize derivative instruments as a part of the funds’ investment strategies. The change in fair value of such derivatives, which is recorded in nonoperating income (expense), was not material for 2016, 2015 and 2014.

The fair value of the outstanding derivatives mentioned above were not material to the consolidated statements of financial condition at December 31, 2016 and 2015.

See Note 12, Borrowings, for more information on the Company’s net investment hedge.

Qualifying software costs of approximately $50 million, $48 million and $45 million have been capitalized within equipment and computer software during 2016, 2015 and 2014, respectively, and are being amortized over an estimated useful life of three years.

Depreciation and amortization expense was $124 million, $115 million and $117 million for 2016, 2015 and 2014, respectively.

BlackRock assessed its goodwill for impairment as of July 31, 2016, 2015 and 2014 and considered such factors as the book value and the market capitalization of the Company. The impairment assessment indicated no impairment charges were required. The Company continues to monitor its book value per share compared with closing prices of its common stock for potential indicators of impairment. At December 31, 2016, the Company’s common stock closed at a market price of $380.54, which exceeded its book value of approximately $178.38 per share.

(in millions)	Remaining Weighted- Average Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At December 31, 2016
Indefinite-lived intangible assets:
Management contracts	N/A		$	15,769	$	—	$	15,769
Trade names / trademarks	N/A			1,403		—		1,403
License	N/A			6		—		6
Total indefinite-lived intangible assets				17,178		—		17,178
Finite-lived intangible assets:
Management contracts		3.9		1,011		827		184
Intellectual property		1.6		6		5		1
Total finite-lived intangible assets		3.8		1,017		832		185
Total intangible assets			$	18,195	$	832	$	17,363
At December 31, 2015
Indefinite-lived intangible assets:
Management contracts	N/A		$	15,699	$	—	$	15,699
Trade names / trademarks	N/A			1,403		—		1,403
License	N/A			6		—		6
Total indefinite-lived intangible assets				17,108		—		17,108
Finite-lived intangible assets:
Management contracts		3.7		1,003		741		262
Intellectual property		2.6		6		4		2
Total finite-lived intangible assets		3.7		1,009		745		264
Total intangible assets			$	18,117	$	745	$	17,372

The impairment tests performed for intangible assets as of July 31, 2016, 2015 and 2014 indicated no impairment charges were required.

Estimated amortization expense for finite-lived intangible assets for each of the five succeeding years is as follows:

In April 2016, in connection with the BofA Global Capital Management transaction, the Company acquired $70 million of indefinite-lived management contracts and $20 million of finite-lived management contracts with a weighted-average estimated life of approximately 10 years.

The Company accounts for its interest in PennyMac as an equity method investment, which is included in other assets on the consolidated statements of financial condition. The carrying value and fair value of the Company’s interest (approximately 20% or 16 million shares and units) was approximately $301 million and $259 million, respectively, at December 31, 2016 and approximately $222 million and $239 million, respectively, at December 31, 2015. The fair value of the Company’s interest reflected the PennyMac stock price at December 31, 2016 and 2015, respectively (a Level 1 input). The Company performed an other-than-temporary impairment analysis as of December 31, 2016 and determined the decline in fair value below the carrying value to be temporary.

2016 Revolving Credit Facility. The Company’s credit facility has an aggregate commitment amount of $4.0 billion and was amended in April 2016 to extend the maturity date to March 2021 (the “2016 credit facility”). The 2016 credit facility permits the Company to request up to an additional $1.0 billion of borrowing capacity, subject to lender credit approval, increasing the overall size of the 2016 credit facility to an aggregate principal amount not to exceed $5.0 billion. Interest on borrowings outstanding accrues at a rate based on the applicable London Interbank Offered Rate plus a spread. The 2016 credit facility requires the Company not to exceed a maximum leverage ratio (ratio of net debt to earnings before interest, taxes, depreciation and amortization, where net debt equals total debt less unrestricted cash) of 3 to 1, which was satisfied with a ratio of less than 1 to 1 at December 31, 2016. The 2016 credit facility provides back-up liquidity to fund ongoing working capital for general corporate purposes and various investment opportunities. At December 31, 2016, the Company had no amount outstanding under the 2016 credit facility.

Commercial Paper Program. The Company can issue unsecured commercial paper notes (the “CP Notes”) on a private-placement basis up to a maximum aggregate amount outstanding at any time of $4.0 billion. The commercial paper program is currently supported by the 2016 credit facility. At December 31, 2016, BlackRock had no CP Notes outstanding.

The carrying value and fair value of long-term borrowings estimated using market prices and foreign exchange rates at December 31, 2016 included the following:

Long-term borrowings at December 31, 2015 had a carrying value of $4.9 billion and a fair value of $5.2 billion determined using market prices at the end of December 2015.

2025 Notes. In May 2015, the Company issued €700 million of 1.25% senior unsecured notes maturing on May 6, 2025 (the “2025 Notes”). The notes are listed on the New York Stock Exchange. The net proceeds of the 2025 Notes were used for general corporate purposes, including refinancing of outstanding indebtedness. Interest of approximately $9 million per year based on current exchange rates is payable annually on May 6 of each year. The 2025 Notes may be redeemed in whole or in part prior to maturity at any time at the option of the Company at a “make-whole” redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2025 Notes.

Upon conversion to U.S. dollars the Company designated the €700 million debt offering as a net investment hedge to offset its currency exposure relating to its net investment in certain euro functional currency operations. Gains of $14 million (net of tax of $8 million) and $19 million (net of tax of $11 million) were recognized in other comprehensive income for 2016 and 2015, respectively. No hedge ineffectiveness was recognized during 2016.

2024 Notes. In March 2014, the Company issued $1.0 billion in aggregate principal amount of 3.50% senior unsecured and unsubordinated notes maturing on March 18, 2024 (the “2024 Notes”). The net proceeds of the 2024 Notes were used to refinance certain indebtedness which matured in the fourth quarter of 2014. Interest is payable semi-annually in arrears on March 18 and September 18 of each year, or approximately $35 million per year. The 2024 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2024 Notes.

2022 Notes. In May 2012, the Company issued $1.5 billion in aggregate principal amount of unsecured unsubordinated obligations. These notes were issued as two separate series of senior debt securities, including $750 million of 1.375% notes, which were repaid in June 2015 at maturity, and $750 million of 3.375% notes maturing in June 2022 (the “2022 Notes”). Net proceeds were used to fund the repurchase of BlackRock’s common stock and Series B Preferred from Barclays and affiliates and for general corporate purposes. Interest on the 2022 Notes of approximately $25 million per year is payable semi-annually on June 1 and December 1 of each year, which commenced December 1, 2012. The 2022 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price. The “make-whole” redemption price represents a price, subject to the specific terms of the 2022 Notes and related indenture, that is the greater of (a) par value and (b) the present value of future payments that will not be paid because of an early redemption, which is discounted at a fixed spread over a comparable Treasury security. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2022 Notes.

2021 Notes. In May 2011, the Company issued $1.5 billion in aggregate principal amount of unsecured unsubordinated obligations. These notes were issued as two separate series of senior debt securities, including $750 million of 4.25% notes maturing in May 2021 and $750 million of floating rate notes, which were repaid in May 2013 at maturity. Net proceeds of this offering were used to fund the repurchase of BlackRock’s Series B Preferred from affiliates of Merrill Lynch & Co., Inc. Interest on the 4.25% notes due in 2021 (“2021 Notes”) is payable semi-annually on May 24 and November 24 of each year, which commenced November 24, 2011, and is approximately $32 million per year. The 2021 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2021 Notes.

2019 Notes. In December 2009, the Company issued $2.5 billion in aggregate principal amount of unsecured and unsubordinated obligations. These notes were issued as three separate series of senior debt securities including $0.5 billion of 2.25% notes, which were repaid in December 2012, $1.0 billion of 3.50% notes, which were repaid in December 2014 at maturity, and $1.0 billion of 5.0% notes maturing in December 2019 (the “2019 Notes”). Net proceeds of this offering were used to repay borrowings under the CP Program, which was used to finance a portion of the acquisition of Barclays Global Investors from Barclays on December 1, 2009, and for general corporate purposes. Interest on the 2019 Notes of approximately $50 million per year is payable semi-annually in arrears on June 10 and December 10 of each year. These notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2019 Notes.

2017 Notes. In September 2007, the Company issued $700 million in aggregate principal amount of 6.25% senior unsecured and unsubordinated notes maturing on September 15, 2017 (the “2017 Notes”). A portion of the net proceeds of the 2017 Notes was used to fund the initial cash payment for the acquisition of the fund-of-funds business of Quellos and the remainder was used for general corporate purposes. Interest is payable semi-annually in arrears on March 15 and September 15 of each year, or approximately $44 million per year. The 2017 Notes may be redeemed prior to maturity at any time in whole or in part at the option of the Company at a “make-whole” redemption price. The unamortized discount and debt issuance costs are being amortized over the remaining term of the 2017 Notes.

The Company leases its primary office spaces under agreements that expire through 2035. Future minimum commitments under these operating leases are as follows:

Rent expense and certain office equipment expense under lease agreements amounted to $134 million, $136 million and $132 million in 2016, 2015 and 2014, respectively.

Investment Commitments. At December 31, 2016, the Company had $192 million of various capital commitments to fund sponsored investment funds, including consolidated VIEs. These funds include private equity funds, real assets funds, and opportunistic funds. This amount excludes additional commitments made by consolidated funds of funds to underlying third-party funds as third-party noncontrolling interest holders have the legal obligation to fund the respective commitments of such funds of funds. In addition to the capital commitments of $192 million, the Company had approximately $12 million of contingent commitments for certain funds which have investment periods that have expired. Generally, the timing of the funding of these commitments is unknown and the commitments are callable on demand at any time prior to the expiration of the commitment. These unfunded commitments are not recorded on the consolidated statements of financial condition. These commitments do not include potential future commitments approved by the Company that are not yet legally binding. The Company intends to make additional capital commitments from time to time to fund additional investment products for, and with, its clients.

Contingent Payments Related to Business Acquisitions. In connection with certain acquisitions, BlackRock is required to make contingent payments, subject to achieving specified performance targets, which may include revenue related to acquired contracts or new capital commitments for certain products. The fair value of the remaining aggregate contingent payments at December 31, 2016 totaled $115 million and is included in other liabilities on the consolidated statement of financial condition.

Other Contingent Payments. The Company acts as the portfolio manager in a series of derivative transactions and has a maximum potential exposure of $17 million between the Company and counterparty. See Note 7, Derivatives and Hedging, for further discussion.

Legal Proceedings. From time to time, BlackRock receives subpoenas or other requests for information from various U.S. federal, state governmental and domestic and international regulatory authorities in connection with certain industry-wide or other investigations or proceedings. It is BlackRock’s policy to cooperate fully with such inquiries. The Company and certain of its subsidiaries have been named as defendants in various legal actions, including arbitrations and other litigation arising in connection with BlackRock’s activities. Additionally, BlackRock-advised investment portfolios may be subject to lawsuits, any of which potentially could harm the investment returns of the applicable portfolio or result in the Company being liable to the portfolios for any resulting damages.

On May 27, 2014, certain purported investors in the BlackRock Global Allocation Fund, Inc. and the BlackRock Equity Dividend Fund (collectively, the “Funds”) filed a consolidated complaint (the “Consolidated Complaint”) in the U.S. District Court for the District of New Jersey against BlackRock Advisors, LLC, BlackRock Investment Management, LLC and BlackRock International Limited (collectively, the “Defendants”) under the caption In re BlackRock Mutual Funds Advisory Fee Litigation. The Consolidated Complaint, which purports to be brought derivatively on behalf of the Funds, alleges that the Defendants violated Section 36(b) of the Investment Company Act by receiving allegedly excessive investment advisory fees from the Funds. On February 24, 2015, the same plaintiffs filed another complaint in the same court against BlackRock Investment Management, LLC and BlackRock Advisors, LLC. The allegations and legal claims in both complaints are substantially similar, with the new complaint purporting to challenge fees received by Defendants after the plaintiffs filed their prior complaint. Both complaints seek, among other things, to recover on behalf of the Funds all allegedly excessive advisory fees received by Defendants in the period beginning twelve months preceding the start of each lawsuit and ending on the date of judgment in each case, along with purported lost investment returns on those amounts, plus interest. On March 25, 2015, Defendants’ motion to dismiss the Consolidated Complaint was denied. The Defendants believe the claims in both lawsuits are without merit and intend to vigorously defend the actions.

Between November 12, 2015 and November 16, 2015, BlackRock, Inc., BlackRock Realty Advisors, Inc. (“BRA”) and BlackRock US Core Property Fund, Inc. (formerly known as the BlackRock Granite Property Fund, Inc.) (“Granite Fund”), along with certain other Granite Fund-related entities (collectively, the “BlackRock Parties”) were named as defendants in thirteen lawsuits filed in the Superior Court of the State of California for the County of Alameda arising out of the June 16, 2015 collapse of a balcony at the Library Gardens apartment complex in Berkeley, California (the “Property”). The Property is indirectly owned by the Granite Fund, which is managed by BRA. The plaintiffs also named as defendants in the lawsuits Greystar, which is the property manager of the Property, and certain other entities, including the developer of the Property, building contractors and building materials suppliers. The plaintiffs allege, among other things, that the BlackRock Parties were negligent in their ownership, control and maintenance of the Property’s balcony, and seek monetary, including punitive, damages. Additionally, on March 16, 2016, three former tenants of the Library Gardens apartment unit that experienced the balcony collapse sued the BlackRock Parties. The former tenants, who witnessed (but were not physically injured in) the accident make allegations virtually identical to those in the previously filed actions and claim that, as a result of the collapse, they suffered unspecified emotional damage. Several defendants have also filed cross-complaints alleging a variety of claims, including claims against the BlackRock Parties for contribution, negligence, and declaratory relief. BlackRock believes the claims against the BlackRock Parties are without merit and intends to vigorously defend the actions.

Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect on BlackRock’s results of operations, financial position, or cash flows. However, there is no assurance whether any such pending or threatened matters will have a material effect on BlackRock’s results of operations, financial position or cash flows in any future reporting period. Due to uncertainties surrounding the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.

Indemnifications. In the ordinary course of business or in connection with certain acquisition agreements, BlackRock enters into contracts pursuant to which it may agree to indemnify third parties in certain circumstances. The terms of these indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined or the likelihood of any liability is considered remote. Consequently, no liability has been recorded on the consolidated statements of financial condition.

In connection with securities lending transactions, BlackRock has issued certain indemnifications to certain securities lending clients against potential loss resulting from a borrower’s failure to fulfill its obligations under the securities lending agreement should the value of the collateral pledged by the borrower at the time of default be insufficient to cover the borrower’s obligation under the securities lending agreement. At December 31, 2016, the Company indemnified certain of its clients for their securities lending loan balances of approximately $169.3 billion. The Company held as agent, cash and securities totaling $180.1 billion as collateral for indemnified securities on loan at December 31, 2016. The fair value of these indemnifications was not material at December 31, 2016.

Stock Award and Incentive Plan. Pursuant to the BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan (the “Award Plan”), options to purchase shares of the Company’s common stock at an exercise price not less than the market value of BlackRock’s common stock on the date of grant in the form of stock options, restricted stock or RSUs may be granted to employees and nonemployee directors. A maximum of 34,500,000 shares of common stock were authorized for issuance under the Award Plan. Of this amount, 5,918,096 shares remain available for future awards at December 31, 2016. Upon exercise of employee stock options, the issuance of restricted stock or the vesting of RSUs, the Company issues shares out of treasury to the extent available.

Restricted Stock and RSUs. Pursuant to the Award Plan, restricted stock grants and RSUs may be granted to certain employees. Substantially all restricted stock and RSUs vest over periods ranging from one to three years and are expensed using the straight-line method over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The Company values restricted stock and RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total fair market value of RSUs/restricted stock granted to employees during 2016, 2015 and 2014 was $446 million, $473 million and $472 million, respectively. The total fair market value of RSUs/restricted stock converted to common stock during 2016, 2015 and 2014 was $413 million, $379 million and $534 million, respectively.

At December 31, 2016, the intrinsic value of outstanding RSUs was $1.1 billion, reflecting a closing stock price of $380.54 at December 31, 2016.

RSUs/restricted stock granted in connection with annual incentive compensation under the Award Plan primarily related to the following:

In addition the Company also granted RSUs of 146,574, 120,935 and 166,018 during 2016, 2015 and 2014, respectively with varying vesting periods up to three years.

At December 31, 2016, there was $288 million in total unrecognized stock-based compensation expense related to unvested RSUs. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of less than one year.

Performance-Based RSUs. Pursuant to the Award Plan, performance-based RSUs may be granted to certain employees. Each performance-based award consists of a “base” number of RSUs granted to the employee. The number of shares that an employee ultimately receives at vesting will be equal to the base number of performance-based RSUs granted, multiplied by a predetermined percentage determined in accordance with the level of attainment of Company performance measures during the performance period and could be higher or lower than the original RSU grant. The awards are generally forfeited if the employee leaves the Company before the vesting date. Performance-based RSUs are not considered participating securities as the dividend equivalents are subject to forfeiture prior to vesting of the award.

In the first quarter of 2016 and 2015, the Company granted 375,242 and 262,847, respectively, performance-based RSUs to certain employees that cliff vest 100% on January 31, 2019 and 2018, respectively. These awards are amortized over a service period of three years. The number of shares distributed at vesting could be higher or lower than the original grant based on the level of attainment of predetermined Company performance measures.

At December 31, 2016, total unrecognized stock-based compensation expense related to unvested performance-based awards was $94 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.7 years.

The Company values performance-based RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total grant-date fair market value of performance-based RSUs granted to employees during 2016 was $111 million.

At December 31, 2016, the intrinsic value of outstanding performance-based RSUs was $232 million reflecting a closing stock price of $380.54.

In January 2017, the Company granted 293,385 performance-based RSUs to certain employees that cliff vest 100% on January 31, 2020. These awards are amortized over a service period of three years. The number of shares distributed at vesting could be higher or lower than the original grant based on the level of attainment of predetermined Company performance measures.

Market Performance-based RSUs. Pursuant to the Award Plan, market performance-based RSUs may be granted to certain employees. The market performance-based RSUs require that separate 15%, 25% and 35% share price appreciation targets be achieved during the six-year term of the awards. The awards are split into three tranches and each tranche may vest if the specified target increase in share price is met. Eligible vesting dates for each tranche are January 31 (or, if such date is not a business day, the next following business day) of the year in which the fourth, fifth or sixth anniversaries of the grant-date occurs. Certain awards are forfeited if the employee leaves BlackRock before the vesting date. These awards are amortized over a service period of four years, which is the longer of the explicit service period or the period in which the market target is expected to be met. Market performance-based RSUs are not considered participating securities as the dividend equivalents are subject to forfeiture prior to vesting of the award. During 2016 and 2015 there were no market performance-based awards granted. In 2014, the Company granted 315,961 market performance-based RSUs.

At December 31, 2016, total unrecognized stock-based compensation expense related to unvested market performance-based awards was $14 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of less than one year.

At December 31, 2016, the intrinsic value of outstanding market performance-based awards was $306 million reflecting a closing stock price of $380.54.

The grant-date fair value of the awards was $62 million in 2014. The fair value was calculated using a Monte Carlo simulation with the following assumptions:

The Company’s expected stock volatility assumption was based upon an average of the historical stock price fluctuations of BlackRock’s common stock and an implied volatility at the grant-date. The dividend yield assumption was derived using estimated dividends over the expected term and the stock price at the date of grant. The risk-free interest rate is based on the U.S. Treasury yield at date of grant.

Long-Term Incentive Plans Funded by PNC. Under a share surrender agreement, PNC committed to provide up to 4 million shares of BlackRock stock, held by PNC, to fund certain BlackRock long-term incentive plans (“LTIP”), including performance-based and market performance-based RSUs. The current share surrender agreement commits PNC to provide BlackRock Series C nonvoting participating preferred stock to fund the remaining committed shares. As of December 31, 2016, 3.2 million shares had been surrendered by PNC.

At December 31, 2016, the remaining shares committed by PNC of 0.8 million were available to fund certain future long-term incentive awards.

Stock Options. Stock option grants were made to certain employees pursuant to the Award Plan in 1999 through 2007. Options granted had a ten-year life, vested ratably over periods ranging from two to five years and became exercisable upon vesting. The Company has not granted any stock options subsequent to the January 2007 grant, which vested on September 29, 2011. Stock option activity for 2016 is summarized below.

The aggregate intrinsic value of options exercised during 2016, 2015 and 2014 was $30 million, $128 million and $4 million, respectively.

Employee Stock Purchase Plan (“ESPP”). The ESPP allows eligible employees to purchase the Company’s common stock at 95% of the fair market value on the last day of each three-month offering period. The Company does not record compensation expense related to employees purchasing shares under the ESPP.

Voluntary Deferred Compensation Plan. The Company adopted a Voluntary Deferred Compensation Plan (“VDCP”) that allows eligible employees in the United States to elect to defer between 1% and 100% of their annual cash incentive compensation. The participants must specify a deferral period of up to 10 years from the year of deferral and additionally, elect to receive distributions in the form of a lump sum or in up to 10 annual installments. The Company may fund the obligation through the rabbi trust on behalf of the plan’s participants.

The rabbi trust established for the VDCP, with assets totaling $59 million and $65 million at December 31, 2016 and 2015, respectively, is reflected in investments on the consolidated statements of financial condition. Such investments are classified as trading investments. The corresponding liability balance of $83 million and $88 million at December 31, 2016 and 2015, respectively, is reflected on the consolidated statements of financial condition as accrued compensation and benefits. Earnings in the rabbi trust, including unrealized appreciation or depreciation, are reflected as nonoperating income (expense) and changes in the corresponding liability are reflected as employee compensation and benefits expense on the consolidated statements of income.

Other Deferred Compensation Plans. The Company has additional compensation plans for the purpose of providing deferred compensation and retention incentives to certain employees. For these plans, the final value of the deferred amount to be distributed in cash upon vesting is primarily associated with investment returns of certain investment funds. The liabilities for these plans were $223 million and $178 million at December 31, 2016 and 2015, respectively, and are reflected in the consolidated statements of financial condition as accrued compensation and benefits. In January 2017, the Company granted approximately $110 million of additional deferred compensation that will fluctuate with investment returns and will vest ratably over three years from the date of grant.

The Company has several defined contribution plans primarily in the United States and United Kingdom.

Certain of the Company’s U.S. employees participate in a defined contribution plan (“U.S. Plan”). Employee contributions of up to 8% of eligible compensation, as defined by the plan and subject to Internal Revenue Code limitations, are matched by the Company at 50% up to a maximum of $5,000 annually. In addition, the Company makes an annual retirement contribution to eligible participants equal to 3-5% of eligible

compensation. In 2016, 2015 and 2014, the Company’s contribution expense related to the U.S. Plan was $75 million, $72 million and $67 million, respectively.

Certain U.K. wholly owned subsidiaries of the Company contribute to a defined contribution plan for their employees. The contributions range between 6% and 15% of each employee’s eligible compensation. The Company’s contribution expense related to this plan was $30 million in 2016, and $33 million in both 2015 and 2014.

In addition, the contribution expense related to defined contribution plans in other regions was $20 million in 2016 and $18 million in both 2015 and 2014.

Defined Benefit Plans. The Company has several defined benefit pension plans primarily in Japan and Germany. All accrued benefits under the Germany defined benefit plan are currently frozen and the plan is closed to new participants. The participant benefits under the Germany plan will not change with salary increases or additional years of service. At December 31, 2016 and 2015, the plan assets for both these plans were approximately $23 million and $22 million, respectively. The underfunded obligations at December 31, 2016 and 2015 were not material. Benefit payments for the next five years and in aggregate for the five years thereafter are not expected to be material.

PNC. The Company considers PNC, along with its affiliates, to be related parties based on the level of its ownership of BlackRock capital stock. At December 31, 2016, PNC owned approximately 21.3% of the Company’s voting common stock and held approximately 22.0% of the total capital stock.

Registered Investment Companies and Equity Method Investments. The Company considers the registered investment companies that it manages, which include mutual funds and exchange-traded funds, to be related parties as a result of the Company’s advisory relationship. In addition, equity method investments are considered related parties, due to the Company’s influence over the financial and operating policies of the investee.

Revenues for services provided by the Company to these and other related parties are as follows:

The Company provides investment advisory and administration services to its open- and closed-end funds and other commingled or pooled funds and separate accounts in which related parties invest. In addition, the Company provides investment advisory and administration services to PNC and its affiliates for fees based on AUM. Further, the Company provides risk management services to PNC. The Company records its investment advisory and administration fees net of retrocessions.

Aggregate expenses included in the consolidated statements of income for transactions with related parties are as follows:

PNC. On February 27, 2009, BlackRock entered into an amended and restated implementation and stockholder agreement with PNC, and a third amendment to the share surrender agreement with PNC.

Receivables and Payables with Related Parties. Due from related parties, which is included within other assets on the consolidated statements of financial condition was $100 million and $73 million at December 31, 2016 and 2015, respectively, and primarily represented receivables from certain investment products managed by BlackRock. Accounts receivable at December 31, 2016 and 2015 included $688 million and $705 million, respectively, related to receivables from BlackRock mutual funds, including iShares, for investment advisory and administration services.

Due to related parties, which is included within other liabilities on the consolidated statements of financial condition, was $19 million and $18 million at December 31, 2016 and 2015, respectively, and primarily represented payables to certain investment products managed by BlackRock.

The Company is required to maintain net capital in certain regulated subsidiaries within a number of jurisdictions, which is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries of the Company may be restricted in their ability to transfer cash between different jurisdictions and to their parents. Additionally, transfers of cash between international jurisdictions, including repatriation to the United States, may have adverse tax consequences that could discourage such transfers.

Banking Regulatory Requirements. BlackRock Institutional Trust Company, N.A. (“BTC”), a wholly owned subsidiary of the Company, is chartered as a national bank whose powers are limited to trust activities. BTC is subject to regulatory capital requirements administered by the Office of the Comptroller of the Currency. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, BTC must meet specific capital guidelines that invoke quantitative measures of BTC’s assets, liabilities, and certain off-balance sheet items as calculated under the regulatory accounting practices. BTC’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulators to ensure capital adequacy require BTC to maintain a minimum Common Equity Tier 1 capital and Tier 1 leverage ratio, as well as Tier 1 and total risk-based capital ratios. Based on BTC’s calculations as of December 31, 2016 and 2015, it exceeded the applicable capital adequacy requirements.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
(in millions)	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2016
Total capital (to risk weighted assets)	$	1,211		92.5	%	$	105		8.0	%	$	131		10.0	%
Common Equity Tier 1 capital (to risk weighted assets)	$	1,211		92.5	%	$	59		4.5	%	$	85		6.5	%
Tier 1 capital (to risk weighted assets)	$	1,211		92.5	%	$	79		6.0	%	$	105		8.0	%
Tier 1 capital (to average assets)	$	1,211		65.3	%	$	74		4.0	%	$	93		5.0	%
December 31, 2015
Total capital (to risk weighted assets)	$	1,593		88.6	%	$	144		8.0	%	$	180		10.0	%
Common Equity Tier 1 capital (to risk weighted assets)	$	1,593		88.6	%	$	81		4.5	%	$	117		6.5	%
Tier 1 capital (to risk weighted assets)	$	1,593		88.6	%	$	108		6.0	%	$	144		8.0	%
Tier 1 capital (to average assets)	$	1,593		66.7	%	$	96		4.0	%	$	119		5.0	%

Broker-dealers. BlackRock Investments, LLC and BlackRock Execution Services are registered broker-dealers and wholly owned subsidiaries of BlackRock that are subject to the Uniform Net Capital requirements under the Securities Exchange Act of 1934, which requires maintenance of certain minimum net capital levels.

Capital Requirements. At December 31, 2016 and 2015, the Company was required to maintain approximately $1.4 billion and $1.1 billion, respectively, in net capital in certain regulated subsidiaries, including BTC, entities regulated by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom, and the Company’s broker-dealers. The Company was in compliance with all applicable regulatory net capital requirements.

The following table presents changes in accumulated other comprehensive income (loss) (“AOCI”) by component for 2016, 2015 and 2014:

(in millions)	Unrealized Gains (Losses) on Available-for-sale Investments⁽¹⁾			Benefit Plans			Foreign Currency Translation Adjustments⁽²⁾			Total
December 31, 2013	$	7		$	6		$	(48	)	$	(35	)
Other comprehensive income (loss) before reclassifications		3			(2	)		(231	)		(230	)
Amount reclassified from AOCI⁽³⁾		(8	)		—			—			(8	)
Net other comprehensive income (loss) for 2014		(5	)		(2	)		(231	)		(238	)
December 31, 2014	$	2		$	4		$	(279	)	$	(273	)
Other comprehensive income (loss) before reclassifications		(1	)		1			(173	)		(173	)
Amount reclassified from AOCI⁽³⁾		(2	)		—			—			(2	)
Net other comprehensive income (loss) for 2015		(3	)		1			(173	)		(175	)
December 31, 2015	$	(1	)	$	5		$	(452	)	$	(448	)
Other comprehensive income (loss) before reclassifications		—			—			(269	)		(269	)
Amount reclassified from AOCI⁽³⁾		1			—			—			1
Net other comprehensive income (loss) for 2016		1			—			(269	)		(268	)
December 31, 2016	$	—		$	5		$	(721	)	$	(716	)

The Company’s authorized common stock and nonvoting participating preferred stock, $0.01 par value, (“Preferred”) consisted of the following:

PNC Capital Contribution. During 2016, PNC surrendered to BlackRock 548,227 shares of BlackRock Series C Preferred to fund certain LTIP awards.

Cash Dividends for Common and Preferred Shares / RSUs. During 2016, 2015 and 2014, the Company paid cash dividends of $9.16 per share (or $1,545 million), $8.72 per share (or $1,476 million)and $7.72 per share (or $1,338 million), respectively.

Share Repurchases. The Company repurchased 3.3 million common shares in open market-transactions under its share repurchase program for $1.1 billion during 2016. At December 31, 2016, there were 3 million shares still authorized to be repurchased.

The Company’s common and preferred shares issued and outstanding and related activity consist of the following:

	Shares Issued										Shares Outstanding
	Common Shares		Treasury Common Shares			Series B Preferred		Series C Preferred			Common Shares			Series B Preferred		Series C Preferred
December 31, 2013		171,252,185		(4,662,497	)		823,188		1,311,887			166,589,688			823,188		1,311,887
Shares repurchased		—		(3,175,088	)		—		—			(3,175,088	)		—		—
Net issuance of common shares related to employee stock transactions		—		1,372,188			—		—			1,372,188			—		—
December 31, 2014		171,252,185		(6,465,397	)		823,188		1,311,887			164,786,788			823,188		1,311,887
Shares repurchased		—		(3,080,689	)		—		—			(3,080,689	)		—		—
Net issuance of common shares related to employee stock transactions		—		1,754,965			—		—			1,754,965			—		—
December 31, 2015		171,252,185		(7,791,121	)		823,188		1,311,887			163,461,064			823,188		1,311,887
Shares repurchased		—		(3,264,935	)		—		—			(3,264,935	)		—		—
Net issuance of common shares related to employee stock transactions		—		1,338,314			—		—			1,338,314			—		—
PNC LTIP capital contribution		—		—			—		(548,227	)		—			—		(548,227	)
December 31, 2016		171,252,185		(9,717,742	)		823,188		763,660			161,534,443			823,188		763,660

A restructuring charge of $76 million ($53 million after-tax), comprised of $44 million of severance and $32 million of expense related to the accelerated amortization of previously granted deferred cash and equity compensation awards, was recorded in the first quarter of 2016 in connection with a project to streamline and simplify the organization.

The following table presents a rollforward of the Company’s restructuring liability for 2016, which is included within other liabilities on the consolidated statements of financial condition:

Income tax expense has been based on the following components of income before taxes, less net income (loss) attributable to noncontrolling interests:

The foreign income before taxes includes countries that have statutory tax rates that are lower than the U.S. federal statutory tax rate of 35%, such as the United Kingdom, Channel Islands, Ireland and Canada.

A reconciliation of income tax expense with expected federal income tax expense computed at the applicable federal income tax rate of 35% is as follows:

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. These temporary differences result in taxable or deductible amounts in future years.

Deferred income tax assets and liabilities are recorded net when related to the same tax jurisdiction. At December 31, 2016, the Company recorded on the consolidated statement of financial condition deferred income tax assets, within other assets, and deferred income tax liabilities of $20 million and $4,840 million, respectively. At December 31, 2015, the Company recorded on the consolidated statement of financial condition deferred income tax assets, within other assets, and deferred income tax liabilities of $20 million and $4,851 million, respectively.

During 2016, tax legislation enacted in the United Kingdom and domestic state and local tax changes resulted in a $30 million net noncash benefit related to the revaluation of certain deferred income tax liabilities. During 2015, tax legislation enacted in the United Kingdom and domestic state and local tax changes resulted in a $54 million net noncash benefit related to the revaluation of certain deferred income tax liabilities.

At December 31, 2016 and 2015, the Company had available state net operating loss carryforwards of $1.6 billion and $1.5 billion, respectively, which will begin to expire in 2017. At December 31, 2016 and 2015, the Company had foreign net operating loss carryforwards of $90 million and $135 million, respectively, of which $3 million will begin to expire in 2021 and the balance will carry forward indefinitely. At December 31, 2016, the Company had foreign tax credit carryforwards for income tax purposes of $118 million which will begin to expire in 2023.

At December 31, 2016 and 2015, the Company had $22 million and $20 million of valuation allowances for deferred income tax assets, respectively, recorded on the consolidated statements of financial condition. The year-over-year increase in the valuation allowance primarily related to the tax loss carryforwards.

Goodwill recorded in connection with the Quellos Transaction has been reduced during the period by the amount of tax benefit realized from tax-deductible goodwill. See Note 9, Goodwill, for further discussion.

Current income taxes are recorded net on the consolidated statements of financial condition when related to the same tax jurisdiction. At December 31, 2016, the Company had current income taxes receivable and payable of $247 million and $75 million, respectively, recorded in other assets and accounts payable and accrued liabilities, respectively. At December 31, 2015, the Company had current income taxes receivable and payable of $166 million and $79 million, respectively, recorded in other assets and accounts payable and accrued liabilities, respectively.

The Company does not provide deferred taxes on the excess of the financial reporting over tax basis on its investments in foreign subsidiaries that are essentially permanent in duration. The excess totaled $5,251 million and $4,734 million at December 31, 2016 and 2015, respectively. The determination of the additional deferred income taxes on the excess has not been provided because it is not practicable due to the complexities associated with its hypothetical calculation.

The following tabular reconciliation presents the total amounts of gross unrecognized tax benefits:

Included in the balance of unrecognized tax benefits at December 31, 2016, 2015 and 2014, respectively, are $284 million, $320 million and $283 million of tax benefits that, if recognized, would affect the effective tax rate.

The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued interest and penalties of $3 million during 2016 and in total, as of December 31, 2016, had recognized a liability for interest and penalties of $59 million. The Company accrued interest and penalties of $12 million during 2015 and in total, as of December 31, 2015, had recognized a liability for interest and penalties of $56 million. The Company accrued interest and penalties of $(25) million during 2014 and in total, as of December 31, 2014, had recognized a liability for interest and penalties of $44 million.

BlackRock is subject to U.S. federal income tax, state and local income tax, and foreign income tax in multiple jurisdictions. Tax years after 2009 remain open to U.S. federal income tax examination.

In June 2014, the IRS commenced its examination of BlackRock’s 2010 through 2012 tax years, and while the impact on the consolidated financial statements is undetermined, it is not expected to be material.

The Company is currently under audit in several state and local jurisdictions. The significant state and local income tax examinations are in New York State and New York City for tax years 2009 through 2011, and California for tax years 2013 through 2014. No state and local income tax audits cover years earlier than 2008. No state and local income tax audits are expected to result in an assessment material to BlackRock’s consolidated financial statements.

Her Majesty’s Revenue and Customs’ United Kingdom income tax audit for various U.K. BlackRock subsidiaries is in progress for tax years 2009 and years after. BlackRock does not expect the audit to result in a material impact to the consolidated financial statements.

From time to time, BlackRock may receive or be subject to tax authorities’ assessments and challenges related to income taxes. BlackRock does not currently expect the ultimate resolution of any existing matters to be material to the consolidated financial statements.

At December 31, 2016, it is reasonably possible the total amounts of unrecognized tax benefits will change within the next twelve months due to completion of tax authorities’ exams or the expiration of statues of limitations. Management estimates that the existing liability for uncertain tax positions could decrease by approximately $10 million to $40 million within the next twelve months.

The following table sets forth the computation of basic and diluted EPS for 2016, 2015 and 2014 under the treasury stock method:

There were no anti-dilutive RSUs for 2015. Amounts of anti-dilutive RSUs for 2016 and 2014 were immaterial. In addition, there were no anti-dilutive stock options for 2016, 2015 and 2014.

The Company’s management directs BlackRock’s operations as one business, the asset management business. The Company utilizes a consolidated approach to assess performance and allocate resources. As such, the Company operates in one business segment as defined in ASC 280-10.

The following table illustrates investment advisory, administration fees, securities lending revenue and performance fees by product type, BlackRock Solutions and advisory revenue, distribution fees and other revenue for 2016, 2015 and 2014.

The following table illustrates total revenue for 2016, 2015 and 2014 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the customer resides.

The following table illustrates long-lived assets that consist of goodwill and property and equipment at December 31, 2016 and 2015 by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located.

Americas primarily is comprised of the United States and Canada, while Europe primarily is comprised of the United Kingdom and Luxembourg. Asia-Pacific primarily is comprised of Hong Kong, Australia, Japan and Singapore.

(in millions, except shares and per share data)
2016	1^st Quarter⁽¹⁾⁽²⁾		2^nd Quarter		3^rd Quarter⁽³⁾		4^th Quarter⁽⁴⁾
Revenue	$	2,624	$	2,804	$	2,837	$	2,890
Operating income	$	963	$	1,173	$	1,209	$	1,225
Net income	$	647	$	795	$	877	$	851
Net income attributable to BlackRock	$	657	$	789	$	875	$	851
Earnings per share attributable to BlackRock, Inc. common stockholders:
Basic	$	3.97	$	4.79	$	5.33	$	5.21
Diluted	$	3.92	$	4.73	$	5.26	$	5.13
Weighted-average common shares outstanding:
Basic		165,388,130		164,758,612		164,129,214		163,441,552
Diluted		167,398,938		166,639,290		166,256,598		165,854,167
Dividend declared per share	$	2.29	$	2.29	$	2.29	$	2.29
Common stock price per share:
High	$	342.56	$	367.47	$	376.00	$	398.45
Low	$	289.72	$	319.54	$	335.11	$	338.61
Close	$	340.57	$	342.53	$	362.46	$	380.54

2015
Revenue	$	2,723	$	2,905	$	2,910	$	2,863
Operating income	$	1,067	$	1,238	$	1,222	$	1,137
Net income⁽⁵⁾	$	825	$	826	$	832	$	869
Net income attributable to BlackRock	$	822	$	819	$	843	$	861
Earnings per share attributable to BlackRock, Inc. common stockholders:
Basic	$	4.92	$	4.92	$	5.08	$	5.19
Diluted	$	4.84	$	4.84	$	5.00	$	5.11
Weighted-average common shares outstanding:
Basic		167,089,037		166,616,558		166,045,291		165,826,808
Diluted		169,723,167		169,114,759		168,665,303		168,632,558
Dividend declared per share	$	2.18	$	2.18	$	2.18	$	2.18
Common stock price per share:
High	$	380.33	$	377.85	$	354.54	$	363.72
Low	$	340.51	$	344.54	$	293.52	$	295.92
Close	$	365.84	$	345.98	$	297.47	$	340.52

(3) The third quarter of 2016 included a $26 million net noncash tax benefit, primarily related to the revaluation of certain deferred income tax liabilities as a result of legislation enacted in the United Kingdom, and domestic state and local changes.

In February 2017, the Company announced that it has entered an agreement to acquire the First Reserve Energy Infrastructure business, the equity infrastructure franchise of First Reserve. Consideration for the transaction will include an upfront payment and contingent consideration. The transaction is expected to close in the first half of 2017, subject to customary regulatory approvals and closing conditions. This transaction is not expected to be material to the Company’s consolidated financial condition or results of operations.

In January 2017, the Board of Directors authorized the repurchase of an additional 6 million shares under the Company’s existing share repurchase program for a total of up to 9 million shares of BlackRock common stock.

On January 12, 2017, the Board of Directors approved BlackRock’s quarterly dividend of $2.50 to be paid on March 23, 2017 to stockholders of record at the close of business on March 6, 2017.

The Company conducted a review for additional subsequent events and determined that no subsequent events had occurred that would require accrual or additional disclosures.

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Financial Condition	F-3
Consolidated Statements of Income	F-4
Consolidated Statements of Comprehensive Income	F-5
Consolidated Statements of Changes in Equity	F-6
Consolidated Statements of Cash Flows	F-8
Notes to the Consolidated Financial Statements	F-9

Outstanding at	Restricted Stock and RSUs			Weighted- Average Grant Date Fair Value
December 31, 2015		3,067,737		$	308.42
Granted		1,481,125		$	301.01
Converted		(1,455,072	)	$	283.64
Forfeited		(106,202	)	$	274.18
December 31, 2016⁽¹⁾		2,987,588		$	318.04

	2016		2015		2014
Awards granted that vest ratably over three years from the date of grant		1,030,964		952,329		1,022,295
Awards granted that cliff vest 100% on:
January 31, 2017		—		—		287,963
January 31, 2018		—		303,999		—
January 31, 2019		303,587		—		—
		1,334,551		1,256,328		1,310,258

Outstanding at	Performance- Based RSUs			Weighted- Average Grant Date Fair Value
December 31, 2015		255,868		$	343.86
Granted		375,242		$	296.97
Forfeited		(20,739	)	$	325.65
December 31, 2016		610,371		$	315.65

Outstanding at	Market Performance- Based RSUs			Weighted- Average Grant Date Fair Value
December 31, 2015		1,378,177		$	137.07
Converted		(548,227	)	$	115.03
Forfeited		(26,476	)	$	164.67
December 31, 2016⁽¹⁾		803,474		$	151.20

(in millions)			Gross Unrealized					Carrying
	Cost		Gains		Losses			Value
December 31, 2016	$	79	$	2	$	(1	)	$	80

December 31, 2015	$	45	$	2	$	(3	)	$	44

	Year ended December 31,
(in millions)	2016			2015			2014
Sales proceeds	$	40		$	36		$	155
Net realized gain (loss):
Gross realized gains	$	2		$	3		$	14
Gross realized losses		(1	)		(1	)		(3	)
Net realized gain (loss)	$	1		$	2		$	11

(in millions) At December 31, 2016	Investments		Advisory Fee Receivables		Other Net Assets (Liabilities)			Maximum Risk of Loss⁽¹⁾
Sponsored investment products	$	171	$	9	$	(8	)	$	197
At December 31, 2015
Sponsored investment products	$	64	$	3	$	(7	)	$	84

	Estimated useful		December 31,
(in millions)	life-in years		2016		2015
Property and equipment:
Land	N/A		$	6	$	6
Building		39		33		17
Building improvements		15		29		15
Leasehold improvements	1-15			476		491
Equipment and computer software		3		411		374
Other transportation equipment		10		135		135
Furniture and fixtures		7		65		62
Construction in progress	N/A			5		51
Total				1,160		1,151
Less: accumulated depreciation and amortization				601		570
Property and equipment, net			$	559	$	581

(in millions)	Maturity Amount		Unamortized Discount and Debt Issuance Costs			Carrying Value		Fair Value
6.25% Notes due 2017	$	700	$	—		$	700	$	724
5.00% Notes due 2019		1,000		(3	)		997		1,086
4.25% Notes due 2021		750		(4	)		746		808
3.375% Notes due 2022		750		(4	)		746		775
3.50% Notes due 2024		1,000		(6	)		994		1,030
1.25% Notes due 2025		738		(6	)		732		742
Total Long-term Borrowings	$	4,938	$	(23	)	$	4,915	$	5,165

(in millions)
Year	Amount
2017		142
2018		135
2019		125
2020		120
2021		112
Thereafter		404
Total	$	1,038

Outstanding at	Shares under option			Weighted average exercise price
December 31, 2015		154,094		$	167.76
Exercised		(154,094	)	$	167.76
December 31, 2016		—

	December 31, 2016		December 31, 2015
Common Stock		500,000,000		500,000,000
Nonvoting Participating Preferred Stock
Series A Preferred		20,000,000		20,000,000
Series B Preferred		150,000,000		150,000,000
Series C Preferred		6,000,000		6,000,000
Series D Preferred		20,000,000		20,000,000

(in millions)	2016
Liability as of December 31, 2015	$	—
Additions		76
Cash payments		(44	)
Accelerated amortization expense of equity-based awards		(28	)
Liability as of December 31, 2016	$	4

(in millions)
Long-lived Assets	2016		2015
Americas	$	13,424	$	13,422
Europe		163		186
Asia-Pacific		90		96
Total long-lived assets	$	13,677	$	13,704