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Segment Reporting
 9 Months Ended
Sep. 30, 2016
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting
Sotheby’s is a global art business whose operations are organized under two segments—the Agency segment and the Finance segment, which does business as and is referred to in this report as Sotheby's Financial Services (or "SFS"). The Agency segment earns commissions by matching buyers and sellers of authenticated fine art, decorative art, jewelry, wine, and collectibles (collectively, "art" or "works of art" or "artwork" or "property") through the auction or private sale process. To a much lesser extent, Agency segment activities also include the sale of artworks that are principally acquired as a consequence of the auction process, as well as the activities of RM Sotheby's, an equity investee that operates as an auction house for investment-quality automobiles. Sotheby's Financial Services earns interest income through art-related financing activities by making loans that are secured by works of art (see Note 5).
On January 11, 2016, Sotheby's acquired certain entities comprising the business of Art Agency, Partners ("AAP"), a firm that provides a range of art-related services to art collectors. The purpose of this acquisition is to grow Sotheby's auction and private sale revenues (which are reflected within the Agency segment) by enhancing its relationships with art collectors and improving its position in the fine art market, particularly in Impressionist, Modern and Contemporary Art. Also, as a result of this acquisition, Sotheby's has added a new revenue stream by integrating AAP's art advisory business, which is classified within All Other for segment reporting purposes. See Note 6 for additional information related to the acquisition of AAP.
The table below presents Sotheby’s revenues and (loss) income before taxes by segment for the three and nine months ended September 30, 2016 and 2015 (in thousands of dollars):
Three Months Ended September 30, 2016
 
Agency
 
SFS
 
All Other
 
Reconciling items (a)
 
Total
Revenues
 
$
74,095

 
$
13,150

 
$
6,259

 
$
(2,012
)
 
$
91,492

Segment (loss) income before taxes
 
$
(77,455
)
(c)
$
7,087

 
$
(1,907
)
(c)
$
(1,220
)
(b)
$
(73,495
)
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
120,752

 
$
16,246

 
$
4,307

 
$
(3,313
)
 
$
137,992

Segment (loss) income before taxes
 
$
(40,988
)
 
$
10,366

 
$
2,667

 
$
(2,827
)
(b)
$
(30,782
)
Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
436,928

 
$
46,182

 
$
19,117

 
$
(5,539
)
 
$
496,688

Segment (loss) income before taxes
 
$
(17,031
)
(c)
$
28,027

 
$
1,318

(c)
$
(1,807
)
(b)
$
10,507

Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
574,844

 
$
48,542

 
$
13,239

 
$
(10,952
)
 
$
625,673

Segment income before taxes
 
$
65,639

 
$
31,356

 
$
8,081

 
$
(19,686
)
(b)
$
85,390


(a)
The reconciling items related to Revenues consist principally of amounts charged by SFS to the Agency segment, including interest and facility fees related to certain loans made to Agency segment clients, as well as fees charged for term loan collateral sold at auction or privately through the Agency segment.
(b)
The reconciling items related to segment income before taxes are detailed in the table below.
(c)
The (loss) income before taxes in the Agency segment for the three and nine months ended September 30, 2016 includes $11.8 million and $14.7 million, respectively, of compensation expense related to the earn-out arrangement with the former principals of AAP. The (loss) income before taxes in the All Other segment for the three and nine months ended September 30, 2016 includes $5.4 million and $6.9 million, respectively, of compensation expense related to the earn-out arrangement with the former principals of AAP. See Note 6.


The table below presents a reconciliation of segment (loss) income before taxes to consolidated (loss) income before taxes for the three and nine months ended September 30, 2016 and 2015 (in thousands of dollars):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Agency
 
$
(77,455
)
 
$
(40,988
)
 
$
(17,031
)
 
$
65,639

SFS
 
7,087

 
10,366

 
28,027

 
31,356

All Other
 
(1,907
)
 
2,667

 
1,318

 
8,081

Segment (loss) income before taxes
 
(72,275
)
 
(27,955
)
 
12,314

 
105,076

Reconciling items:
 
 
 
 
 
 
 
 
CEO separation and transition costs (see Note 18)
 
—

 
—

 
—

 
(4,232
)
Leadership transition severance costs (a)
 
—

 
—

 
—

 
(9,501
)
Equity in earnings of investees (b):
 
 
 
 
 
 
 
 
RM Sotheby's
 
(478
)
 
(2,294
)
 
(528
)
 
(3,989
)
Acquavella Modern Art
 
(742
)
 
(533
)
 
(1,279
)
 
(1,964
)
Total equity in earnings of investees
 
(1,220
)
 
(2,827
)
 
(1,807
)
 
(5,953
)
(Loss) income before taxes
 
$
(73,495
)
 
$
(30,782
)
 
$
10,507

 
$
85,390


(a)
In the second quarter of 2015, in conjunction with its leadership transition, Sotheby's incurred severance costs of $9.5 million associated with the termination of the employment of certain Executive Officers, including its former Chief Operating Officer.    
(b)
For segment reporting purposes, Sotheby's share of earnings related to its equity investees is included as part of segment (loss) income before taxes. However, such earnings are reported separately below (loss) income before taxes in the Condensed Consolidated Statements of Operations. For the periods presented above, Agency segment results include equity earnings related to RM Sotheby's and All Other includes equity earnings related to Acquavella Modern Art.
The table below presents Sotheby's assets by segment, as well as a reconciliation of segment assets to consolidated assets as of September 30, 2016, December 31, 2015, and September 30, 2015 (in thousands of dollars):
 
 
September 30, 2016
 
December 31, 2015
 
September 30, 2015
Agency
 
$
1,608,803

 
$
2,499,441

 
$
1,602,995

SFS
 
683,331

 
721,781

 
790,914

All Other
 
40,903

 
25,178

 
26,189

Total segment assets
 
2,333,037

 
3,246,400

 
2,420,098

Unallocated amounts:
 
 

 
 

 
 
Deferred tax assets and income tax receivable
 
24,644

 
16,913

 
75,954

Consolidated assets
 
$
2,357,681

 
$
3,263,313

 
$
2,496,052


In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, and in August 2015 issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. These standards require unamortized debt issuance costs to be included as a direct deduction from the related debt liability on the balance sheet, but permit companies to continue to record unamortized debt issuance costs related to revolving credit facility arrangements as assets. Under previous guidance, all unamortized debt issuance costs were reported as assets on the balance sheet. Sotheby's adopted and applied ASU 2015-03 on a retrospective basis on its January 1, 2016 effective date. As permitted by ASU 2015-15, Sotheby's will continue to present debt issuance costs related to revolving credit facility arrangements as an asset on its balance sheet, regardless of whether there are any outstanding borrowings under the arrangement. Prior period balances of Agency segment assets presented in the table above, which previously included unamortized debt issuance costs related to long-term debt, have been adjusted to conform to the current period presentation. See Note 1 for additional information on the effects of the retrospective adoption of ASU 2015-03.