MOODYS CORP /DE/, 10-K filed on 2/25/2016
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data in Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Jan. 31, 2016
Jun. 30, 2015
Document Information [Line Items]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2015 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
MCO 
 
 
Entity Registrant Name
MOODYS CORP /DE/ 
 
 
Entity Central Index Key
0001059556 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
194.9 
 
Entity Public Float
 
 
$ 21.3 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Revenue
$ 3,484.5 
$ 3,334.3 
$ 2,972.5 
Expenses
 
 
 
Operating
976.3 
930.3 
822.4 
Selling, general and administrative
921.3 
869.3 
822.1 
Depreciation and amortization
113.5 
95.6 
93.4 
Total expenses
2,011.1 
1,895.2 
1,737.9 
Operating income
1,473.4 
1,439.1 
1,234.6 
Non-operating (expense) income, net
 
 
 
Interest expense, net
(115.1)
(116.8)
(91.8)
Other non-operating income, net
21.3 
35.9 
26.5 
ICRA Gain
 
102.8 
 
Non-operating income (expense), net
(93.8)
21.9 
(65.3)
Income before provision for income taxes
1,379.6 
1,461.0 
1,169.3 
Provision for income taxes
430.0 
455.0 
353.4 
Net income
949.6 
1,006.0 
815.9 
Less: Net income attributable to noncontrolling interests
8.3 
17.3 
11.4 
Net income attributable to Moody's
$ 941.3 
$ 988.7 
$ 804.5 
Earnings per share
 
 
 
Basic
$ 4.7 
$ 4.69 
$ 3.67 
Diluted
$ 4.63 
$ 4.61 
$ 3.6 
Weighted average shares outstanding
 
 
 
Basic
200.1 
210.7 
219.4 
Diluted
203.4 
214.7 
223.5 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Net income
$ 949.6 
$ 1,006.0 
$ 815.9 
Foreign currency adjustments:
 
 
 
Foreign currency translation adjustment - Pre Tax
(110.5)
(123.0)
(9.5)
Foreign currency translation adjustment - Tax
(14.7)
(10.7)
(2.0)
Foreign currency translation adjustments - Net of Tax
(125.2)
(133.7)
(11.5)
Foreign currency translation adjustments - reclassification of losses included in net income - Pre Tax
(0.1)
4.4 
1.4 
Foreign currency translation adjustments - reclassification of losses included in net income - Tax
   
 
 
Foreign currency translation adjustments - reclassification of losses included in net income - Net of Tax
(0.1)
4.4 
1.4 
Cash flow hedges:
 
 
 
Net realized loss on cash flow hedges - Pre Tax
(1.1)
 
 
Net realized loss on cash flow hedges - Tax
   
 
 
Net realized loss on cash flow hedges - Net of Tax
(1.1)
 
 
Reclassification of losses included in net income - Pre Tax
 
 
1.2 
Reclassification of losses included in net income - Tax
 
 
(0.5)
Reclassification of losses included in net income - Net of Tax
 
 
0.7 
Available for sale securities:
 
 
 
Net unrealized gains on available for sale securities - Pre Tax
3.3 
1.0 
 
Net unrealized gains on available for sale securities - Tax
   
 
 
Net unrealized gains on available for sale securities - Net of Tax
3.3 
1.0 
 
Reclassification of gains included in net income - Pre Tax
(0.9)
(0.1)
 
Reclassification of gains included in net income - Tax
   
 
 
Reclassification of gains included in net income - Net of Tax
(0.9)
(0.1)
 
Pension and Other Retirement Benefits:
 
 
 
Amortization of actuarial losses and prior service costs included in net income - Pre Tax
13.5 
7.3 
11.9 
Amortization of actuarial losses and prior service costs included in net income - Tax
(5.2)
(2.8)
(4.9)
Amortization of actuarial losses and prior service costs included in net income - Net of Tax
8.3 
4.5 
7.0 
Net actuarial gain (loss) arising during period
18.5 
(93.8)
50.9 
Net actuarial losses and prior service costs - Tax
(7.1)
37.1 
(21.0)
Net actuarial losses and prior service costs - Net of Tax
11.4 
(56.7)
29.9 
Total other comprehensive income (loss) - Pre Tax
(77.3)
(204.2)
55.9 
Total other comprehensive income (loss) - Tax
(27.0)
23.6 
(28.4)
Total other comprehensive income (loss) - Net of Tax
(104.3)
(180.6)
27.5 
Comprehensive income (loss)
845.3 
825.4 
843.4 
Less: comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest
8.3 
17.3 
11.4 
Comprehensive income attributable to Moody's
$ 837.0 
$ 808.1 
$ 832.0 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash equivalents
$ 1,757.4 
$ 1,219.5 
Short-term investments
474.8 
458.1 
Accounts receivable, net of allowances of $27.5 in 2015 and $29.4 in 2014
802.0 
792.4 
Deferred tax assets, net
29.3 
43.9 
Other current assets
179.6 
172.5 
Total current assets
3,243.1 
2,686.4 
Property and equipment, net
306.4 
302.3 
Goodwill
976.3 
1,021.1 
Intangible assets, net
299.1 
345.5 
Deferred tax assets, net
137.7 
167.8 
Other assets
160.8 
145.9 
Total assets
5,123.4 
4,669.0 
Current liabilities:
 
 
Accounts payable and accrued liabilities
566.6 
557.6 
Deferred tax liabilities net
16.7 
17.5 
Deferred revenue
635.2 
624.6 
Total current liabilities
1,218.5 
1,199.7 
Non-current portion of deferred revenue
132.5 
132.2 
Long-term debt
3,401.0 
2,547.3 
Deferred tax liabilities, net
83.8 
95.7 
Unrecognized tax benefits
203.4 
220.3 
Other liabilities
417.2 
430.9 
Total liabilities
5,456.4 
4,626.1 
Contingencies (Note 18)
   
   
Shareholders' (deficit) equity:
 
 
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding
   
   
Capital surplus
451.3 
383.9 
Retained earnings
6,709.0 
6,044.3 
Treasury stock, at cost; 146,826,744 and 138,539,128 shares of common stock at December 31, 2015 and December 31, 2014, respectively
(7,389.2)
(6,384.2)
Accumulated other comprehensive loss
(339.5)
(235.2)
Total Moody's shareholders' (deficit)
(565.0)
(187.8)
Noncontrolling interests
232.0 
230.7 
Total shareholders' (deficit) equity
(333.0)
42.9 
Total liabilities, noncontrolling interest and shareholders' (deficit) equity
5,123.4 
4,669.0 
Series common stock
 
 
Shareholders' (deficit) equity:
 
 
Common stock
   
   
Common Stock
 
 
Shareholders' (deficit) equity:
 
 
Common stock
$ 3.4 
$ 3.4 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Accounts receivable, allowances
$ (27.5)
$ (29.4)
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, shares authorized
1,000,000,000 
 
Treasury stock, shares
146,826,744 
138,539,128 
Series common stock
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
10,000,000 
10,000,000 
Common Stock
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
1,000,000,000 
1,000,000,000 
Common stock, shares issued
342,902,272 
342,902,272 
Common stock, shares outstanding
10,000,000.0 
10,000,000.0 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Cash flows from operating activities
 
 
 
Net income
$ 949.6 
$ 1,006.0 
$ 815.9 
Reconciliation of net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
113.5 
95.6 
93.4 
Stock-based compensation expense
87.2 
80.4 
67.1 
Deferred income taxes
18.1 
29.9 
(27.2)
Excess tax benefits from settlement of stock-based compensation awards
(44.5)
(58.7)
(38.8)
ICRA Gain
 
(102.8)
 
Legacy Tax Matters
(6.4)
(6.4)
(19.2)
Changes in assets and liabilities:
 
 
 
Accounts receivable
(25.4)
(98.3)
(67.0)
Other current assets
(28.9)
(41.0)
(21.7)
Other assets
(13.1)
(1.7)
(0.7)
Accounts payable and accrued liabilities
51.4 
59.2 
(2.9)
Deferred revenue
31.6 
38.4 
66.1 
Unrecognized tax benefits
(10.9)
30.6 
30.9 
Other liabilities
31.4 
(12.6)
30.9 
Net cash provided by operating activities
1,153.6 
1,018.6 
926.8 
Cash flows from investing activities
 
 
 
Capital additions
(89.0)
(74.6)
(42.3)
Purchases of investments
(688.2)
(406.3)
(225.9)
Sales and maturities of investments
653.1 
134.0 
57.0 
Cash paid for acquisitions and investment in affiliates, net of cash acquired
(7.6)
(239.7)
(50.7)
Payments for settlements of net investment hedges
39.7 
21.7 
 
Net cash used in investing activities
(92.0)
(564.9)
(261.9)
Cash flows from financing activities
 
 
 
Issuance of notes
852.8 
747.7 
497.2 
Repayment of notes
 
(300.0)
(63.8)
Proceeds from stock-based compensation plans
89.2 
149.4 
166.9 
Repurchase of shares related to stock-based compensation
(59.5)
(51.4)
(30.9)
Excess tax benefits from settlement of stock-based compensation awards
44.5 
58.7 
38.8 
Treasury shares
(1,098.1)
(1,220.5)
(893.1)
Dividends
(272.1)
(236.0)
(197.3)
Dividends to noncontrolling interests
(6.8)
(11.8)
(12.2)
Payment to noncontrolling interest
 
(183.8)
 
Contingent consideration
(1.5)
(10.3)
(0.3)
Debt issuance costs and related fees
(9.5)
(6.5)
(4.1)
Net cash used in financing activities
(461.0)
(1,064.5)
(498.8)
Effect of exchange rate changes on cash and cash equivalents
(62.7)
(89.2)
(2.0)
Increase (decrease) in cash and cash equivalents
537.9 
(700.0)
164.1 
Cash and cash equivalents, beginning of period
1,219.5 
1,919.5 
1,755.4 
Cash and cash equivalents, end of period
$ 1,757.4 
$ 1,219.5 
$ 1,919.5 
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (USD $)
In Millions
Total
Common Stock
Capital Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Total Moody's Shareholders' Equity (Deficit)
Non-Controlling Interests
Beginning Balance at Dec. 31, 2012
$ 396.6 
$ 3.4 
$ 365.1 
$ 4,713.3 
$ (4,614.5)
$ (82.1)
$ 385.2 
$ 11.4 
Beginning Balance (in shares) at Dec. 31, 2012
 
342.9 
 
 
(119.7)
 
 
 
Net income
810.2 
 
 
804.5 
 
 
804.5 
5.7 
Dividends
(221.9)
 
 
(215.7)
 
 
(215.7)
(6.2)
Stock-based compensation
67.2 
 
67.2 
 
 
 
67.2 
 
Shares issued for stock-based compensation plans, net
136.0 
 
(51.9)
 
187.9 
 
136.0 
 
Shares issued for stock-based compensation plans, net (in shares)
 
 
 
 
5.0 
 
 
 
Net excess tax benefit upon settlement of stock-based compensation awards
33.3 
 
33.3 
 
 
 
33.3 
 
Adjustment to redemption value of redeemable noncontrolling interest
(7.9)
 
(7.9)
 
 
 
(7.9)
 
Treasury shares repurchased, shares
 
 
 
 
(14.2)
 
 
 
Treasury shares repurchased
(893.1)
 
 
 
(893.1)
 
(893.1)
 
Currency translation adjustment
(10.1)
 
 
 
 
(10.1)
(10.1)
 
Net actuarial losses and prior service costs - Net of Tax
29.9 
 
 
 
 
29.9 
29.9 
 
Amortization of actuarial losses and prior service costs included in net income - Net of Tax
7.0 
 
 
 
 
7.0 
7.0 
 
Net unrealized gain on cash flow hedges
0.7 
 
 
 
 
0.7 
0.7 
 
Ending Balance at Dec. 31, 2013
347.9 
3.4 
405.8 
5,302.1 
(5,319.7)
(54.6)
337.0 
10.9 
Ending Balance (in shares) at Dec. 31, 2013
 
342.9 
 
 
(128.9)
 
 
 
Net income
996.6 
 
 
988.7 
 
 
988.7 
7.9 
Dividends
(253.4)
 
 
(246.5)
 
 
(246.5)
(6.9)
Stock-based compensation
80.6 
 
80.6 
 
 
 
80.6 
 
Shares issued for stock-based compensation plans, net
98.0 
 
(58.0)
 
156.0 
 
98.0 
 
Shares issued for stock-based compensation plans, net (in shares)
 
 
 
 
4.2 
 
 
 
Net excess tax benefit upon settlement of stock-based compensation awards
54.7 
 
54.7 
 
 
 
54.7 
 
Adjustment to redemption value of redeemable noncontrolling interest
(99.2)
 
(99.2)
 
 
 
(99.2)
 
Treasury shares repurchased, shares
 
 
 
 
(13.8)
 
 
 
Treasury shares repurchased
(1,220.5)
 
 
 
(1,220.5)
 
(1,220.5)
 
Currency translation adjustment
(129.3)
 
 
 
 
(129.3)
(129.3)
 
Net actuarial losses and prior service costs - Net of Tax
(56.7)
 
 
 
 
(56.7)
(56.7)
 
Amortization of actuarial losses and prior service costs included in net income - Net of Tax
4.5 
 
 
 
 
4.5 
4.5 
 
Unrealized Gains On Available For Sale Securities
0.9 
 
 
 
 
0.9 
0.9 
 
ICRA noncontrolling interest
218.8 
 
 
 
 
 
 
218.8 
Ending Balance at Dec. 31, 2014
42.9 
3.4 
383.9 
6,044.3 
(6,384.2)
(235.2)
(187.8)
230.7 
Ending Balance (in shares) at Dec. 31, 2014
 
342.9 
 
 
(138.5)
 
 
 
Net income
949.6 
 
 
941.3 
 
 
941.3 
8.3 
Dividends
(283.6)
 
 
(276.6)
 
 
(276.6)
(7.0)
Stock-based compensation
87.5 
 
87.5 
 
 
 
87.5 
 
Shares issued for stock-based compensation plans, net
29.6 
 
(63.5)
 
93.1 
 
29.6 
 
Shares issued for stock-based compensation plans, net (in shares)
 
 
 
 
2.6 
 
 
 
Net excess tax benefit upon settlement of stock-based compensation awards
43.4 
 
43.4 
 
 
 
43.4 
 
Treasury shares repurchased, shares
 
 
 
 
(10.9)
 
 
 
Treasury shares repurchased
(1,098.1)
 
 
 
(1,098.1)
 
(1,098.1)
 
Currency translation adjustment
(125.3)
 
 
 
 
(125.3)
(125.3)
 
Net actuarial losses and prior service costs - Net of Tax
11.4 
 
 
 
 
11.4 
11.4 
 
Amortization of actuarial losses and prior service costs included in net income - Net of Tax
8.3 
 
 
 
 
8.3 
8.3 
 
Unrealized Gains On Available For Sale Securities
2.4 
 
 
 
 
2.4 
2.4 
 
Net unrealized gain on cash flow hedges
(1.1)
 
 
 
 
(1.1)
(1.1)
 
Ending Balance at Dec. 31, 2015
$ (333.0)
$ 3.4 
$ 451.3 
$ 6,709.0 
$ (7,389.2)
$ (235.2)
$ (565.0)
$ 230.7 
Ending Balance (in shares) at Dec. 31, 2015
 
342.9 
 
 
(146.8)
 
 
 
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Currency translation adjustment, tax
$ 2.8 
$ 0.6 
$ 0.2 
Net actuarial losses and prior service costs - Tax
7.1 
(37.1)
21.0 
Amortization of actuarial losses and prior service costs included in net income - Tax
5.2 
2.8 
4.9 
Net unrealized gain on cash flow hedges, tax
$ 10.7 
$ 12.9 
$ 3.1 
GLOSSARY OF TERMS AND ABBREVIATIONS
GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:
TERMDEFINITION
Adjusted Operating IncomeOperating income excluding restructuring, depreciation and amortization and a goodwill impairment charge
Adjusted Operating MarginAdjusted Operating Income divided by revenue
AmbaAmba Investment Services; a provider of investment research and quantitative analytics for global financial institutions; a subsidiary of the Company acquired 100% of Amba in December 2013.
Americas  Represents countries within North and South America, excluding the U.S.
AOCI  Accumulated other comprehensive income (loss); a separate component of shareholders’ equity (deficit); includes accumulated gains & losses on cash flow and net investment hedges, certain gains and losses relating to pension and other retirement benefits obligations and foreign currency translation adjustments.
ASC  The FASB Accounting Standards Codification; the sole source of authoritative
GAAP as of July 1, 2009 except for rules and interpretive releases of the SEC, which are also sources of authoritative GAAP for SEC registrants
Asia-Pacific  Represents countries in Asia also including but not limited to: Australia and its proximate islands, China, India, Indonesia, Japan, Korea, Malaysia, Singapore and Thailand
ASUThe FASB Accounting Standards Updates to the ASC. It also provides background information for accounting guidance and the bases for conclusions on the changes in the ASC. ASUs are not considered authoritative until codified into the ASC
Basel II  Capital adequacy framework published in June 2004 by the Basel Committee on Banking Supervision
Basel IIIA new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. Basel III was developed in a response to the deficiencies in financial regulation revealed by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage.
Board  The board of directors of the Company
BPS  Basis points
Canary Wharf Lease  Operating lease agreement entered into on February 6, 2008 for office space in London, England, occupied by the Company in the second half of 2009
CFG  Corporate finance group; an LOB of MIS
CLO  Collateralized loan obligation
CMBSCommercial mortgage-backed securities; part of CREF
Commission  European Commission
Common Stock  The Company’s common stock
  
CompanyMoody’s Corporation and its subsidiaries; MCO; Moody’s
CopalCopal Partners; an acquisition completed in November 2011; part of the MA segment; leading provider of outsourced research and analytical services to institutional investors
Copal AmbaOperating segment created in January 2014 that consists of all operations from Copal as well as the operations of Amba. The Copal Amba operating segment provides outsourced research and analytical services to the global financial and corporate sectors
Council  Council of the European Union
COSOCommittee of Sponsoring Organizations of the Treadway Commission
CP  Commercial paper
CRAs  Credit rating agencies
CRA1Regulation (EC) No 1060/2009 of the European Parliament and of the Council, establishing an oversight regime for the CRA industry in the EU
CRA2Regulation (EC) No 513/2011 of the European Parliament and of the Council, which transferred direct supervisory responsibility of the registered CRA industry in the EU to ESMA
CRA3Regulation (EC) No 462/2013 of the European Parliament and of the Council, which updated the regulatory regimes imposing additional procedural requirements on CRAs
CREF  Commercial real estate finance which includes REITs, commercial real estate collateralized debt obligations and CMBS; part of SFG
CSI  CSI Global Education, Inc.; an acquisition completed in November 2010; part of the MA segment; a provider of financial learning, credentials, and certification in Canada
D&A  Depreciation & amortization
D&B BusinessOld D&B’s Dun & Bradstreet operating company
DBPPs  Defined benefit pension plans
DCF  Discounted cash flow; a fair value calculation methodology whereby future projected cash flows are discounted back to their present value
Debt/EBITDA  Ratio of Total Debt to EBITDA
Directors’ Plan  The 1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan
Distribution DateSeptember 30, 2000; the date which Old D&B separated into two publicly traded companies – Moody’s Corporation and New D&B
EBITDAEarnings before interest, taxes, depreciation and amortization
ECB  European Central Bank
  
EMEARepresents countries within Europe, the Middle East and Africa
EPS  Earnings per share
ERSThe enterprise risk solutions LOB within MA; offers risk management software products as well as software implementation services and related risk management advisory engagements
ESMAEuropean Securities and Market Authority
ESPEstimated Selling Price; estimate of selling price, as defined in the ASC, at which the vendor would transact if the deliverable were sold by the vendor regularly on a stand-alone basis
ESPP  The 1999 Moody’s Corporation Employee Stock Purchase Plan
ETR  Effective tax rate
Equilibrium  A leading provider of credit rating and research services in Peru and Panama; acquired by Moody’s in May 2015
EUEuropean Union
EUREuros
European Ratings PlatformCentral credit ratings website administered by ESMA
Excess Tax Benefit  The difference between the tax benefit realized at exercise of an option or delivery of a restricted share and the tax benefit recorded at the time that the option or restricted share is expensed under GAAP
Exchange Act  The Securities Exchange Act of 1934, as amended
FASB  Financial Accounting Standards Board
  
FIGFinancial institutions group; an LOB of MIS
Fitch  Fitch Ratings, a part of the Fitch Group
Financial Reform Act  Dodd-Frank Wall Street Reform and Consumer Protection Act
Free Cash FlowNet cash provided by operating activities less cash paid for capital additions
FSTC  Financial Services Training and Certifications; a reporting unit within the MA segment that includes on-line and classroom-based training services and CSI
FXForeign exchange
GAAP  U.S. Generally Accepted Accounting Principles
GBP  British pounds
GDPGross domestic product
ICRAICRA Limited; a leading provider of credit ratings and research in India. The Company previously held 28.5% equity ownership and in June 2014, increased that ownership stake to just over 50% through the acquisition of additional shares
ICRA AcquisitionThe June 2014 purchase of an additional ownership interest in ICRA resulting in a majority ownership and consolidated of ICRAs financial statements; ICRAs results are consolidated into Moody’s financial statements on a three-month lag and accordingly the Company began including the results of operations for ICRA in its consolidated financial statements beginning in the fourth quarter of 2014
ICRA GainGain relating to the step-acquisition of ICRA; U.S. GAAP requires the remeasurement to fair value of the previously held non-controlling shares upon obtaining a controlling interest in a step-acquisition. This remeasurement of the Company’s equity investment in ICRA to fair value resulted in a pre-tax gain of $102.8 million ($78.5 million after tax) in the second quarter of 2014
Intellectual Property  The Company’s intellectual property, including but not limited to proprietary information, trademarks, research, software tools and applications, models and methodologies, databases, domain names, and other proprietary materials
IRSInternal Revenue Service
ITInformation technology
KISKorea Investors Service, Inc.; a leading Korean rating agency and consolidated subsidiary of the Company
KIS PricingKorea Investors Service Pricing, Inc.; a Korean provider of financial instruments pricing and consolidated subsidiary of the Company
KIS ResearchKorea Investors Service Research; a Korean provider of financial research and consolidated subsidiary of the Company
KoreaRepublic of South Korea
Legacy Tax Matter(s)Exposures to certain potential tax liabilities assumed in connection with the 2000 Distribution
LewtanLewtan Technologies; a leading provider of analytical tools and data for the global structured finance market; part of the RD&A LOB within MA; an acquisition completed in October 2014
LIBORLondon Interbank Offered Rate
LOBLine of Business
MAMoody’s Analytics – a reportable segment of MCO formed in January 2008 which provides a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets.
M&AMergers and acquisitions
Make Whole AmountThe prepayment penalty relating to the Series 2007-1 Notes, 2010 Senior Notes, 2012 Senior Notes, 2013 Senior Notes, 2014 Senior Notes (5-year), 2014 Senior Notes (30-year) and the 2015 Senior Notes; a premium based on the excess, if any, of the discounted value of the remaining scheduled payments over the prepaid principal
MCOMoody’s Corporation and its subsidiaries; the Company; Moody’s
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MISMoody’s Investors Service – a reportable segment of MCO; consists of five LOBs – SFG, CFG, FIG, PPIF and MIS Other
MIS OtherConsists of non-ratings revenue from ICRA, KIS Pricing and KIS Research. These businesses are components of MIS; an LOB of MIS
Moody’s Corporation and its subsidiaries; MCO; the Company
Moody’s
Net income attributable to Moody’s Corporation, which excludes net income from consolidated entities belonging to the minority interest holder
Net Income
New D&BThe New D&B Corporation – which comprises the D&B business after September 30, 2000
Non-GAAPA financial measure not in accordance with GAAP; these measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s performance, facilitate comparisons to competitors’ operating results and to provide greater transparency to investors of supplemental information used by management in its financial and operational decision making.
NMPercentage change not meaningful
NRSRONationally Recognized Statistical Rating Organization
OCIOther comprehensive income (loss); includes gains and losses on cash flow and net investment hedges, certain gains and losses relating to pension and other retirement benefit obligations and foreign currency translation adjustments
Old D&BThe former Dun and Bradstreet Company which distributed New D&B shares on September 30, 2000, and was renamed Moody’s Corporation
Other Retirement PlansThe U.S. retirement healthcare and U.S. retirement life insurance plans
PPIFPublic, project and infrastructure finance; an LOB of MIS
Profit Participation PlanDefined contribution profit participation plan that covers substantially all U.S. employees of the Company
PPPProfit Participation Plan
PSProfessional Services; an LOB within MA that provides outsourced research and analytical services as well as financial training and certification programs
RD&AResearch, Data and Analytics; an LOB within MA that produces, sells and distributes research, data and related content. Includes products generated by MIS, such as analyses on major debt issuers, industry studies, and commentary on topical credit events, as well as economic research, data, quantitative risk scores, and other analytical tools that are produced within MA
Redeemable Noncontrolling InterestRepresents minority shareholders’ interest in entities which are controlled but not wholly-owned by Moody’s and for which Moody’s obligation to redeem the minority shareholders’ interest is represented by a put/call relationship
Reform ActCredit Rating Agency Reform Act of 2006
REITsReal estate investment trusts
Relationship RevenueRepresents MIS recurring monitoring of a rated debt obligation and/or entities that issue such obligations, as well as revenue from programs such as commercial paper, medium-term notes and shelf registrations. For MIS Other represents subscription-based revenue. For MA, represents subscription-based revenue and software maintenance revenue.
Retirement PlansMoody’s funded and unfunded pension plans, the healthcare plans and life insurance plans
RMBSResidential mortgage-backed securities; part of SFG
S&PStandard & Poor’s, a division of McGraw-Hill Financial, Inc.
SECSecurities and Exchange Commission
Securities ActSecurities Act of 1933
Series 2005-1 NotesPrincipal amount of $300 million, 4.98% senior unsecured notes; notes were paid in 2014 in advance of their contractual maturity date
Series 2007-1 NotesPrincipal amount of $300 million, 6.06% senior unsecured notes due in September 2017 pursuant to the 2007 Agreement
SFGStructured finance group; an LOB of MIS
SG&ASelling, general and administrative expenses
SIVStructured Investment Vehicle
Solvency IIEU directive 2009/138/EC that codifies the amount of capital that EU insurance companies must hold to reduce insolvency
Stock PlansThe Old D&B’s 1998 Key Employees’ Stock Incentive Plan and the Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan
Total DebtAll indebtedness of the Company as reflected on the consolidated balance sheets
TPEThird party evidence, as defined in the ASC, used to determine selling price based on a vendor’s or any competitor’s largely interchangeable products or services in standalone sales transactions to similarly situated customers
Transaction RevenueFor MIS, represents the initial rating of a new debt issuance as well as other one-time fees. For MIS Other, represents revenue from professional services and outsourcing engagements. For MA, represents software license fees and revenue from risk management advisory projects, training and certification services, and outsourced research and analytical engagements
U.K.United Kingdom
U.S.United States
U.S. Shared National Credit ProgramInteragency program designed to evaluate large and complex syndicated credits. The program is administered by the three federal banking regulatory agencies which include the Federal Reserve System, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC).
USDU.S. dollar
UTBsUnrecognized tax benefits
UTPsUncertain tax positions
VSOEVendor specific objective evidence; evidence, as defined in the ASC, of selling price limited to either of the following: the price charged for a deliverable when it is sold separately, or for a deliverable not yet being sold separately, the price established by management having the relevant authority
WACCWeighted average cost of capital
WebEquityWebEquity Solutions LLC; a leading provider of cloud-based loan origination solutions for financial institutions; part of the ERS LOB within MA; an acquisition completed in July 2014
1998 PlanOld D&B’s 1998 Key Employees’ Stock Incentive Plan
2000 DistributionThe distribution by Old D&B to its shareholders of all of the outstanding shares of New D&B common stock on September 30, 2000
2000 DistributionAgreement governing certain ongoing relationships between the Company and New D&B after the 2000 Distribution including the sharing of any liabilities for the payment of taxes, penalties and interest resulting from unfavorable IRS determinations on certain tax matters and certain other potential tax liabilities
Agreement
2001 PlanThe Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan
2005 AgreementNote purchase agreement dated September 30, 2005 relating to the Series 2005-1 Notes
2007 AgreementNote purchase agreement dated September 7, 2007 relating to the Series 2007-1 Notes
2007 FacilityRevolving credit facility of $1 billion entered into on September 28, 2007, expiring in 2012
2010 IndentureSupplemental indenture and related agreements dated August 19, 2010, relating to the 2010 Senior Notes
2010 Senior NotesPrincipal amount of $500.0 million, 5.50% senior unsecured notes due in September 2020 pursuant to the 2010 Indenture
2012 FacilityRevolving credit facility of $1 billion entered into on April 18, 2012, was replaced with the 2015 Facility
2012 IndentureSupplemental indenture and related agreements dated August 18, 2012, relating to the 2012 Senior Notes
2012 Senior NotesPrincipal amount of $500 million, 4.50% senior unsecured notes due in September 2022 pursuant to the 2012 Indenture
2013 IndentureSupplemental indenture and related agreements dated August 12, 2013, relating to the 2013 Senior Notes
2013 Senior NotesPrincipal amount of $500 million, 4.875% senior unsecured notes due in February 2024 pursuant to the 2013 Indenture
Supplemental indenture and related agreements dated July 16, 2014, relating to the 2014 Senior Notes
2014 Indenture
Principal amount of $450 million, 2.75% senior unsecured notes due in July 2019
2014 Senior Notes (5- Year)
2014 Senior Notes (30-Year)Principal amount of $600 million, 5.25% senior unsecured notes due in July 2044
2015 FacilityFive-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; replaces the 2012 Facility
2015 IndentureSupplemental indenture and related agreements dated March 9, 2015, relating to the 2015 Senior Notes
2015 Senior NotesPrincipal amount €500 million, 1.75% senior unsecured notes issued March 9, 2015 and due in March 2027
7WTCThe Company’s corporate headquarters located at 7 World Trade Center
7WTC LeaseOperating lease agreement entered into on October 20, 2006
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

NOTE 1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Moody’s is a provider of (i) credit ratings, (ii) credit, capital markets and economic research, data and analytical tools, (iii) software solutions and related risk management services, (iv) quantitative credit risk measures, financial services training and certification services and (v) outsourced research and analytical services. Moody’s has two reportable segments: MIS and MA.

MIS, the credit rating agency, publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide. Revenue is primarily derived from the originators and issuers of such transactions who use MIS ratings in the distribution of their debt issues to investors. Additionally, MIS earns revenue from certain non-ratings-related operations which consist primarily of the distribution of research and financial instrument pricing services in the Asia-Pacific region and outsourced services. The revenue from these operations is included in the MIS Other LOB and is not material to the results of the MIS segment.

The MA segment develops a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets. Within its RD&A business, MA distributes research and data developed by MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies and commentary on topical credit-related events. The RD&A business also produces economic research as well as data and analytical tools such as quantitative credit risk scores. Within its ERS business, MA provides software solutions as well as related risk management services. The PS business provides outsourced research and analytical services along with financial training and certification programs.

Certain reclassifications have been made to prior period amounts to conform to the current presentation.

Description of Business and Basis of Presentation - Additional Information (Detail)
12 Months Ended
Dec. 31, 2015
Segment Reporting Information [Line Items]
 
Number of reportable segments
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include those of Moody’s Corporation and its majority- and wholly-owned subsidiaries. The effects of all intercompany transactions have been eliminated. Investments in companies for which the Company has significant influence over operating and financial policies but not a controlling interest are accounted for on an equity basis whereby the Company records its proportional share of the investment’s net income or loss as part of other non-operating income (expense), net and any dividends received reduce the carrying amount of the investment.  The Company applies the guidelines set forth in Topic 810 of the ASC in assessing its interests in variable interest entities to decide whether to consolidate that entity. The Company has reviewed the potential variable interest entities and determined that there are no consolidation requirements under Topic 810 of the ASC. The Company consolidates its ICRA subsidiaries on a three month lag.

Cash and Cash Equivalents

Cash equivalents principally consist of investments in money market mutual funds and money market deposit accounts as well as high-grade commercial paper and certificates of deposit with maturities of three months or less when purchased.

Short-term Investments

Short-term investments are securities with maturities greater than 90 days at the time of purchase that are available for operations in the next 12 months. The Company’s short-term investments primarily consist of certificates of deposit and their cost approximates fair value due to the short-term nature of the instruments. Interest and dividends on these investments are recorded into income when earned.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives. Expenditures for maintenance and repairs that do not extend the economic useful life of the related assets are charged to expense as incurred.

Research and Development Costs

All research and development costs are expensed as incurred. These costs primarily reflect the development of credit processing software and quantitative credit risk assessment products sold by the MA segment.

Research and development costs were $ 29.1 million, $37.9 million, and $22.8 million for the years ended December 31, 2015, 2014 and 2013, respectively, and are included in operating expenses within the Company’s consolidated statements of operations. These costs generally consist of professional services provided by third parties and compensation costs of employees.

Costs for internally developed computer software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established. These costs primarily relate to the development or enhancement of products in the ERS business and generally consist of professional services provided by third parties and compensation costs of employees that develop the software. Judgment is required in determining when technological feasibility of a product is established and the Company believes that technological feasibility for its software products is reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to customers. Accordingly, costs for internally developed computer software that will be sold, leased or otherwise marketed that were eligible for capitalization under Topic 985 of the ASC as well as the related amortization expense related to such costs were immaterial for the years ended December 31, 2015, 2014 and 2013.

Computer Software Developed or Obtained for Internal Use

The Company capitalizes costs related to software developed or obtained for internal use. These assets, included in property and equipment in the consolidated balance sheets, relate to the Company’s accounting, product delivery and other systems. Such costs generally consist of direct costs for third-party license fees, professional services provided by third parties and employee compensation, in each case incurred either during the application development stage or in connection with upgrades and enhancements that increase functionality. Such costs are depreciated over their estimated useful lives on a straight-line basis. Costs incurred during the preliminary project stage of development as well as maintenance costs are expensed as incurred.

Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets

Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment or one level below an operating segment, annually as of July 31 or more frequently if impairment indicators arise in accordance with ASC Topic 350.

The Company evaluates the recoverability of goodwill using a three-step impairment test approach at the reporting unit level. In the first step, the Company assesses various qualitative factors to determine whether the fair value of a reporting unit may be less than its carrying amount. If a determination is made that, based on the qualitative factors, an impairment does not exist, the Company is not required to perform further testing. If the aforementioned qualitative assessment results in the Company concluding that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount, the fair value of the reporting unit will be determined and compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and the Company is not required to perform further testing. If the fair value of the reporting unit is less than the carrying value, the Company must perform a third step of the impairment test to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of the goodwill is determined based on the difference between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities of the reporting unit. If the implied fair value of the goodwill is less than its carrying value, the difference is recognized as an impairment charge. For the reporting units where the Company is consistently able to conclude that an impairment does not exist using only a qualitative approach, the Company’s accounting policy is to perform the second step of the aforementioned goodwill impairment assessment at least once every three years. Goodwill is assigned to a reporting unit at the date when an acquisition is integrated into one of the established reporting units, and is based on which reporting unit is expected to benefit from the synergies of the acquisition.

For purposes of assessing the recoverability of goodwill, the Company has six primary reporting units at December 31, 2015: two within the Company’s ratings business (one for the ICRA business and one that encompasses all of Moody’s other ratings operations) and four reporting units within MA: RD&A, ERS, Financial Services Training and Certifications and Copal Amba. The RD&A reporting unit encompasses the distribution of investor-oriented research and data developed by MIS as part of its ratings process, in-depth research on major debt issuers, industry studies, economic research and commentary on topical events and credit analytic tools. The ERS reporting unit consists of credit risk management and compliance software that is sold on a license or subscription basis as well as related advisory services for implementation and maintenance. The FSTC reporting unit consists of the portion of the MA business that offers both credit training as well as other professional development training and certification services. The Copal Amba reporting unit consists of outsourced research and analytical services.

Amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Rent Expense

The Company records rent expense on a straight-line basis over the life of the lease. In cases where there is a free rent period or future fixed rent escalations the Company will record a deferred rent liability. Additionally, the receipt of any lease incentives will be recorded as a deferred rent liability which will be amortized over the lease term as a reduction of rent expense.

Stock-Based Compensation

The Company records compensation expense for all share-based payment award transactions granted to employees based on the fair value of the equity instrument at the time of grant. This includes shares issued under stock option and restricted stock plans. The Company has also established a pool of additional paid-in capital related to the tax effects of employee share-based compensation, which is available to absorb any recognized tax shortfalls.

Derivative Instruments and Hedging Activities

Based on the Company’s risk management policy, from time to time the Company may use derivative financial instruments to reduce exposure to changes in foreign exchange rates and interest rates. The Company does not enter into derivative financial instruments for speculative purposes. All derivative financial instruments are recorded on the balance sheet at their respective fair values. The changes in the value of derivatives that qualify as fair value hedges are recorded with a corresponding adjustment to the carrying value of the item being hedged. Changes in the derivative’s fair value that qualify as cash flow hedges are recorded to other comprehensive income or loss, to the extent the hedge is effective, and such amounts are reclassified from accumulated other comprehensive income or loss to earnings in the same period or periods during which the hedged transaction affects income. Changes in the derivative’s fair value that qualify as net investment hedges are recorded to other comprehensive income or loss, to the extent the hedge is effective. Any changes in the fair value of derivatives that the Company does not designate as hedging instruments under Topic 815 of the ASC are recorded in the consolidated statements of operations in the period in which they occur.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or the services have been provided and accepted by the customer when applicable, fees are determinable and the collection of resulting receivables is considered probable.

Pursuant to ASC Topic 605, when a sales arrangement contains multiple deliverables, the Company allocates revenue to each deliverable based on its relative selling price which is determined based on its vendor specific objective evidence if available, third party evidence if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available.

 The Company’s products and services will generally qualify as separate units of accounting under ASC Topic 605. The Company evaluates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value to the customers and if the arrangement includes a customer refund or return right relative to the delivered item and the delivery and performance of the undelivered item is considered probable and substantially in the Company’s control. In instances where the aforementioned criteria are not met, the deliverable is combined with the undelivered items and revenue recognition is determined as one single unit.

The Company determines whether its selling price in a multi-element transaction meets the VSOE criteria by using the price charged for a deliverable when sold separately or, if the deliverable is not yet being sold separately, the price established by management having the relevant authority to establish such a price. In instances where the Company is not able to establish VSOE for all deliverables in a multiple element arrangement, which may be due to the Company infrequently selling each element separately, not selling products within a reasonably narrow price range, or only having a limited sales history, the Company attempts to establish TPE for deliverables. The Company determines whether TPE exists by evaluating largely similar and interchangeable competitor products or services in standalone sales to similarly situated customers. However, due to the difficulty in obtaining third party pricing, possible differences in its market strategy from that of its peers and the potential that products and services offered by the Company may contain a significant level of differentiation and/or customization such that the comparable pricing of products with similar functionality cannot be obtained, the Company generally is unable to reliably determine TPE. Based on the selling price hierarchy established by ASC Topic 605, when the Company is unable to establish selling price using VSOE or TPE, the Company will establish an ESP. ESP is the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. The Company establishes its best estimate of ESP considering internal factors relevant to is pricing practices such as costs and margin objectives, standalone sales prices of similar products, percentage of the fee charged for a primary product or service relative to a related product or service, and customer segment and geography. Additional consideration is also given to market conditions such as competitor pricing strategies and market trend. The Company reviews its determination of VSOE, TPE and ESP on an annual basis or more frequently as needed.

In the MIS segment, revenue attributed to initial ratings of issued securities is recognized when the rating is issued. Revenue attributed to monitoring of issuers or issued securities is recognized ratably over the period in which the monitoring is performed, generally one year. In the case of commercial mortgage-backed securities, structured credit, international residential mortgage-backed and asset-backed securities, issuers can elect to pay the monitoring fees upfront. These fees are deferred and recognized over the future monitoring periods based on the expected lives of the rated securities, which was approximately 27 years on a weighted average basis at December 31, 2015. At December 31, 2015, 2014 and 2013, deferred revenue related to these securities was approximately $121 million, $107 million, and $97 million.

Multiple element revenue arrangements in the MIS segment are generally comprised of an initial rating and the related monitoring service. In instances where monitoring fees are not charged for the first year monitoring effort, fees are allocated to the initial rating and monitoring services based on the relative selling price of each service to the total arrangement fees. The Company generally uses ESP in determining the selling price for its initial ratings as the Company rarely sells initial ratings separately without providing related monitoring services and thus is unable to establish VSOE or TPE for initial ratings.

MIS estimates revenue for ratings of commercial paper for which, in addition to a fixed annual monitoring fee, issuers are billed quarterly based on amounts outstanding. Revenue is accrued each quarter based on estimated amounts outstanding and is billed when actual data is available. The estimate is determined based on the issuers’ most recent reported quarterly data. At December 31, 2015, 2014 and 2013, accounts receivable included approximately $24 million, $22 million, and $21 million, respectively, related to accrued commercial paper revenue. Historically, MIS has not had material differences between the estimated revenue and the actual billings. Furthermore, for certain annual monitoring services, fees are not invoiced until the end of the annual monitoring period and revenue is accrued ratably over the monitoring period. At December 31, 2015, 2014, and 2013, accounts receivable included approximately $146.4 million, $127.8 million, and $96.7 million, respectively, relating to accrued monitoring service revenue.

In the MA segment, products and services offered by the Company include software licenses and related maintenance, subscriptions, and professional services. Revenue from subscription based products, such as research and data subscriptions and certain software-based credit risk management subscription products, is recognized ratably over the related subscription period, which is principally one year. Revenue from sale of perpetual licenses of credit processing software is generally recognized at the time the product master or first copy is delivered or transferred to and accepted by the customer. If uncertainty exists regarding customer acceptance of the product or service, revenue is not recognized until acceptance occurs. Software maintenance revenue is recognized ratably over the annual maintenance period. Revenue from professional services rendered is generally recognized as the services are performed. A large portion of annual research and data subscriptions and annual software maintenance are invoiced in the months of November, December and January.

Products and services offered within the MA segment are sold either stand-alone or together in various combinations. In instances where a multiple element arrangement includes software and non-software deliverables, revenue is allocated to the non-software deliverables and to the software deliverables, as a group, using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. Revenue is recognized for each element based upon the conditions for revenue recognition noted above.

 If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is allocated to each software deliverable using VSOE. In the instances where the Company is not able to determine VSOE for all of the deliverables of an arrangement, the Company allocates the revenue to the undelivered elements equal to its VSOE and the residual revenue to the delivered elements. If the Company is unable to determine VSOE for an undelivered element, the Company defers all revenue allocated to the software deliverables until the Company has delivered all of the elements or when VSOE has been determined for the undelivered elements. In cases where software implementation services are considered essential and VSOE of fair value exists for post-contract customer support (“PCS”), once the delivery criteria has been met on the standard software, license and service revenue is recognized on a percentage-of-completion basis as implementation services are performed, while PCS is recognized over the coverage period.  If VSOE of fair value does not exist for PCS, once the delivery criteria has been met on the standard software, service revenue is recognized on a zero profit margin basis until essential services are complete, at which point total remaining arrangement revenue is then spread ratably over the remaining PCS coverage period. If VSOE does not exist for PCS at the beginning of an arrangement but is established during implementation, revenue not recognized due to the absence of VSOE will be recognized on a cumulative basis.

Accounts Receivable Allowances

Moody’s records an allowance for estimated future adjustments to customer billings as a reduction of revenue, based on historical experience and current conditions. Such amounts are reflected as additions to the accounts receivable allowance. Additionally, estimates of uncollectible accounts are recorded as bad debt expense and are reflected as additions to the accounts receivable allowance. Actual billing adjustments and uncollectible account write-offs are recorded against the allowance. Moody’s evaluates its accounts receivable allowance by reviewing and assessing historical collection and adjustment experience and the current status of customer accounts. Moody’s also considers the economic environment of the customers, both from an industry and geographic perspective, in evaluating the need for allowances. Based on its analysis, Moody’s adjusts its allowance as considered appropriate in the circumstances.

Contingencies

Moody’s is involved in legal and tax proceedings, governmental investigations and inquiries, claims and litigation that are incidental to the Company’s business, including claims based on ratings assigned by MIS. Moody’s is also subject to ongoing tax audits in the normal course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. Moody’s discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate.

For claims, litigation and proceedings and governmental investigations and inquires not related to income taxes, where it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the consolidated financial statements and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than another amount within the range. In other instances, because of uncertainties related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predicting the outcome of litigation, regulatory, governmental investigations and inquiries, enforcement and similar matters , particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve any pending matters progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the large or indeterminate damages sought in some of them, the absence of similar court rulings on the theories of law asserted and uncertainties regarding apportionment of any potential damages, an estimate of the range of possible losses cannot be made at this time.

The Company’s wholly-owned insurance subsidiary insures the Company against certain risks including but not limited to deductibles for worker’s compensation, employment practices litigation and employee medical claims and terrorism, for which the claims are not material to the Company. In addition, for claim years 2008 and 2009, the insurance subsidiary insured the Company for defense costs related to professional liability claims. For matters insured by the Company’s insurance subsidiary, Moody’s records liabilities based on the estimated total claims expected to be paid and total projected costs to defend a claim through its anticipated conclusion. The Company determines liabilities based on an assessment of management’s best estimate of claims to be paid and legal defense costs as well as actuarially determined estimates. Defense costs for matters not self-insured by the Company’s wholly-owned insurance subsidiary are expensed as services are provided.

For income tax matters, the Company employs the prescribed methodology of  Topic 740 of the ASC which requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

Operating Expenses

Operating expenses include costs associated with the development and production of the Company’s products and services and their delivery to customers. These expenses principally include employee compensation and benefits and travel costs that are incurred in connection with these activities. Operating expenses are charged to income as incurred, except for certain costs related to software implementation services which are deferred until related revenue is recognized.  Additionally, certain costs incurred to develop internal use software are capitalized and depreciated over their estimated useful life.

Selling, General and Administrative Expenses

SG&A expenses include such items as compensation and benefits for corporate officers and staff and compensation and other expenses related to sales of products. They also include items such as office rent, business insurance, professional fees and gains and losses from sales and disposals of assets. SG&A expenses are charged to income as incurred, except for certain expenses incurred to develop internal use software are capitalized and depreciated over their estimated useful life.

Redeemable Noncontrolling Interest

The Company records its redeemable noncontrolling interest at fair value on the date of the related business combination transaction. The redeemable noncontrolling interest represents noncontrolling shareholders’ interest in entities which are controlled but not wholly-owned by Moody’s and for which Moody’s obligation to redeem the minority shareholders’ interest is governed by a put/call relationship. Subsequent to the initial measurement, the redeemable noncontrolling interest is recorded at the greater of its redemption value or its carrying value at the end of each reporting period. If the redeemable noncontrolling interest is carried at its redemption value, the difference between the redemption value and the carrying value would be adjusted through capital surplus at the end of each reporting period. The Company also performs a quarterly assessment to determine if the aforementioned redemption value exceeds the fair value of the redeemable noncontrolling interest. If the redemption value of the redeemable noncontrolling interest were to exceed its fair value, the excess would reduce the net income attributable to Moody’s shareholders. The Company settled its redeemable noncontrolling interest in the fourth quarter of 2014 by exercising its call option to acquire the remaining share of Copal Amba that it did not previously own.

Foreign Currency Translation

For all operations outside the U.S. where the Company has designated the local currency as the functional currency, assets and liabilities are translated into U.S. dollars using end of year exchange rates, and revenue and expenses are translated using average exchange rates for the year. For these foreign operations, currency translation adjustments are accumulated in a separate component of shareholders’ (deficit)/equity.

Comprehensive Income

Comprehensive income represents the change in net assets of a business enterprise during a period due to transactions and other events and circumstances from non-owner sources including foreign currency translation impacts, net actuarial losses and net prior service costs related to pension and other retirement plans, gains and losses on derivative instruments and unrealized gains and losses on securities designated as ‘available-for-sale’ under Topic 320 of the ASC.

Income Taxes

The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740. Therefore, income tax expense is based on reported income before income taxes and deferred income taxes reflect the effect of temporary differences between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.

The Company classifies interest related to unrecognized tax benefits as a component of interest expense in its consolidated statements of operations. Penalties are recognized in other non-operating expenses. For UTPs, the Company first determines whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

For certain of its non-U.S. subsidiaries, the Company has deemed the undistributed earnings relating to these subsidiaries to be indefinitely reinvested within its foreign operations. Accordingly, the Company has not provided deferred income taxes on these indefinitely reinvested earnings. It is not practicable to determine the amount of deferred taxes that might be required to be provided if such earnings were distributed in the future due to complexities in the tax laws and in the hypothetical calculations that would have to be made.

Fair Value of Financial Instruments

The Company’s financial instruments include cash, cash equivalents, trade receivables and payables, all of which are short-term in nature and, accordingly, approximate fair value. Additionally, the Company invests in certain short-term investments consisting primarily of certificates of deposit that are carried at cost, which approximates fair value due to their short-term maturities.

The Company also has certain investments in closed-ended and open-ended mutual funds in India which are designated as ‘available for sale’ under Topic 320 of the ASC. Accordingly, unrealized gains and losses on these investments are recorded to other comprehensive income and are reclassified out of accumulated other comprehensive income to the statement of operations when the investment matures or is sold using a specific identification method.

Also, the Company uses derivative instruments, as further described in Note 5, to manage certain financial exposures that occur in the normal course of business. These derivative instruments are carried at fair value on the Company’s consolidated balance sheets.

The Company also was subject to contingent consideration obligations related to certain of its acquisitions as more fully discussed in Note 9. These obligations were carried at their estimated fair value within the Company’s consolidated balance sheets.

Fair value is defined by the ASC as the price that would be received from selling an asset or paid to transfer a liability (i.e., an exit price) in an orderly transaction between market participants at the measurement date. The determination of this fair value is based on the principal or most advantageous market in which the Company could commence transactions and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance. Also, determination of fair value assumes that market participants will consider the highest and best use of the asset.

The ASC establishes a fair value hierarchy whereby the inputs contained in valuation techniques used to measure fair value are categorized into three broad levels as follows:

Level 1 : quoted market prices in active markets that the reporting entity has the ability to access at the date of the fair value measurement;

Level 2 : inputs other than quoted market prices described in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

Level 3 : unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement of the assets or liabilities.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk principally consist of cash and cash equivalents, short-term investments, trade receivables and derivatives.

The Company manages its credit risk exposure by allocating its cash equivalents among various money market mutual funds, money market deposit accounts, certificates of deposits and high- grade commercial paper. Short-term investments primarily consist of certificates of deposit as of December 31, 2015 and 2014. The Company manages its credit risk exposure on cash equivalents and short-term investments by limiting the amount it can invest with any single entity. No customer accounted for 10% or more of accounts receivable at December 31, 2015 or 2014.

Earnings per Share of Common Stock

Basic shares outstanding is calculated based on the weighted average number of shares of common stock outstanding during the reporting period. Diluted shares outstanding is calculated giving effect to all potentially dilutive common shares, assuming that such shares were outstanding during the reporting period.

Pension and Other Retirement Benefits

Moody’s maintains various noncontributory DBPPs as well as other contributory and noncontributory retirement plans. The expense and assets/liabilities that the Company reports for its pension and other retirement benefits are dependent on many assumptions concerning the outcome of future events and circumstances. These assumptions represent the Company’s best estimates and may vary by plan. The differences between the assumptions for the expected long-term rate of return on plan assets and actual experience is spread over a five-year period to the market related value of plan assets which is used in determining the expected return on assets component of annual pension expense. All other actuarial gains and losses are generally deferred and amortized over the estimated average future working life of active plan participants.

The Company recognizes as an asset or liability in its consolidated balance sheet the funded status of its defined benefit retirement plans, measured on a plan-by-plan basis. Changes in the funded status due to actuarial gains/losses are recorded as part of other comprehensive income during the period the changes occur.

Use of Estimates

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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Estimates are used for, but not limited to, revenue recognition, accounts receivable allowances, income taxes, contingencies, valuation of long-lived and intangible assets, goodwill, pension and other retirement benefits, stock-based compensation, and depreciable lives for property and equipment and computer software.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”. This ASU outlines a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company is currently evaluating its adoption options and the impact that adoption of this update will have on its consolidated financial statements. Currently, the Company believes this ASU will have an impact on: i) the capitalization of certain contract implementation costs; ii) the accounting for certain software license and maintenance revenue in MA; iii) the accounting for certain revenue arrangements where VSOE is not available and iv) the accounting for contract acquisition costs. In August 2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date” which defers the effective date of the ASU for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted up to the original effective date of December 15, 2016.

In April 2015, the FASB issued ASU No. 2015-05 “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”. This ASU provides guidance on accounting for fees paid by a customer in a cloud computing arrangement. In accordance with the ASU, a cloud computing arrangement that contains a software license should be accounted for consistently with the acquisition of other software licenses. If no software license is present in the contract, the entity should account for the arrangement as a service contract. The Company can elect to apply this ASU either retrospectively or prospectively effective for annual and interim reporting periods beginning after December 15, 2015, and early adoption is permitted. The adoption of this ASU in 2016 will not have a material impact on the Company’s financial statements.

In April 2015, the FASB issued ASU No. 2015-03,“Simplifying the Presentation of Debt Issuance Costs”. This ASU simplifies the presentation of debt issuance costs in financial statements and requires a company to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization costs will continue to be reported as interest expense. The ASU is effective retrospectively for annual and interim reporting periods beginning after December 15, 2015, and early adoption is permitted. The adoption of this ASU will impact the presentation of debt issuance costs in the Company’s consolidated balance sheets. Additionally, in August 2015, the FASB issued ASU No. 2015-15 “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This ASU codifies that given the lack of authoritative guidance in ASU 2015-03 regarding line-of-credit arrangements, the SEC staff would not object to a Company deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt costs ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.

In May 2015, the FASB issued ASU No. 2015-07 “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU removes the requirement to include investments in the fair value hierarchy for which fair value is measured using the net asset value per share as a practical expedient. ASU No. 2015-07 is effective retrospectively for fiscal years beginning after December 15, 2015, with early adoption permitted. The adoption of this ASU will only impact the presentation of certain of the Company’s pension assets in the fair value hierarchy disclosures.

In September 2015, the FASB issued ASU No. 2015-16 “Simplifying the Accounting for Measurement-Period Adjustments” in acquisition accounting. This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU No. 2015-16 is applied prospectively for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The Company does not believe the adoption of this ASU will have a material impact on its financial statements.

In November 2015, the FASB issued ASU No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” This ASU simplifies the presentation of deferred income taxes by requiring all deferred income tax assets and liabilities be classified as noncurrent on the balance sheet. This removes the requirement for the entity to determine whether the deferred tax is current or noncurrent for presentation in the balance sheet. ASU No. 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016. The Company has elected to adopt this ASU in the first quarter of 2016 with the adoption affecting the presentation of the Company’s deferred tax assets and liabilities on its balance sheet.

In January 2016, the FASB issued ASU No. 2016-01 “Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10).” The amendments in this ASU update various aspects of recognition, measurement, presentation and disclosures relating to financial instruments. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of this ASU on the Company’s financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

Basis of Consolidation

The consolidated financial statements include those of Moody’s Corporation and its majority- and wholly-owned subsidiaries. The effects of all intercompany transactions have been eliminated. Investments in companies for which the Company has significant influence over operating and financial policies but not a controlling interest are accounted for on an equity basis whereby the Company records its proportional share of the investment’s net income or loss as part of other non-operating income (expense), net and any dividends received reduce the carrying amount of the investment.  The Company applies the guidelines set forth in Topic 810 of the ASC in assessing its interests in variable interest entities to decide whether to consolidate that entity. The Company has reviewed the potential variable interest entities and determined that there are no consolidation requirements under Topic 810 of the ASC. The Company consolidates its ICRA subsidiaries on a three month lag.

Cash and Cash Equivalents

Cash equivalents principally consist of investments in money market mutual funds and money market deposit accounts as well as high-grade commercial paper and certificates of deposit with maturities of three months or less when purchased.

Short-term Investments

Short-term investments are securities with maturities greater than 90 days at the time of purchase that are available for operations in the next 12 months. The Company’s short-term investments primarily consist of certificates of deposit and their cost approximates fair value due to the short-term nature of the instruments. Interest and dividends on these investments are recorded into income when earned.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives. Expenditures for maintenance and repairs that do not extend the economic useful life of the related assets are charged to expense as incurred.

Research and Development Costs

All research and development costs are expensed as incurred. These costs primarily reflect the development of credit processing software and quantitative credit risk assessment products sold by the MA segment.

Research and development costs were $ 29.1 million, $37.9 million, and $22.8 million for the years ended December 31, 2015, 2014 and 2013, respectively, and are included in operating expenses within the Company’s consolidated statements of operations. These costs generally consist of professional services provided by third parties and compensation costs of employees.

Costs for internally developed computer software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established. These costs primarily relate to the development or enhancement of products in the ERS business and generally consist of professional services provided by third parties and compensation costs of employees that develop the software. Judgment is required in determining when technological feasibility of a product is established and the Company believes that technological feasibility for its software products is reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to customers. Accordingly, costs for internally developed computer software that will be sold, leased or otherwise marketed that were eligible for capitalization under Topic 985 of the ASC as well as the related amortization expense related to such costs were immaterial for the years ended December 31, 2015, 2014 and 2013.

Computer Software Developed or Obtained for Internal Use

The Company capitalizes costs related to software developed or obtained for internal use. These assets, included in property and equipment in the consolidated balance sheets, relate to the Company’s accounting, product delivery and other systems. Such costs generally consist of direct costs for third-party license fees, professional services provided by third parties and employee compensation, in each case incurred either during the application development stage or in connection with upgrades and enhancements that increase functionality. Such costs are depreciated over their estimated useful lives on a straight-line basis. Costs incurred during the preliminary project stage of development as well as maintenance costs are expensed as incurred.

Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets

Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment or one level below an operating segment, annually as of July 31 or more frequently if impairment indicators arise in accordance with ASC Topic 350.

The Company evaluates the recoverability of goodwill using a three-step impairment test approach at the reporting unit level. In the first step, the Company assesses various qualitative factors to determine whether the fair value of a reporting unit may be less than its carrying amount. If a determination is made that, based on the qualitative factors, an impairment does not exist, the Company is not required to perform further testing. If the aforementioned qualitative assessment results in the Company concluding that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount, the fair value of the reporting unit will be determined and compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and the Company is not required to perform further testing. If the fair value of the reporting unit is less than the carrying value, the Company must perform a third step of the impairment test to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of the goodwill is determined based on the difference between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities of the reporting unit. If the implied fair value of the goodwill is less than its carrying value, the difference is recognized as an impairment charge. For the reporting units where the Company is consistently able to conclude that an impairment does not exist using only a qualitative approach, the Company’s accounting policy is to perform the second step of the aforementioned goodwill impairment assessment at least once every three years. Goodwill is assigned to a reporting unit at the date when an acquisition is integrated into one of the established reporting units, and is based on which reporting unit is expected to benefit from the synergies of the acquisition.

For purposes of assessing the recoverability of goodwill, the Company has six primary reporting units at December 31, 2015: two within the Company’s ratings business (one for the ICRA business and one that encompasses all of Moody’s other ratings operations) and four reporting units within MA: RD&A, ERS, Financial Services Training and Certifications and Copal Amba. The RD&A reporting unit encompasses the distribution of investor-oriented research and data developed by MIS as part of its ratings process, in-depth research on major debt issuers, industry studies, economic research and commentary on topical events and credit analytic tools. The ERS reporting unit consists of credit risk management and compliance software that is sold on a license or subscription basis as well as related advisory services for implementation and maintenance. The FSTC reporting unit consists of the portion of the MA business that offers both credit training as well as other professional development training and certification services. The Copal Amba reporting unit consists of outsourced research and analytical services.

Amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Rent Expense

The Company records rent expense on a straight-line basis over the life of the lease. In cases where there is a free rent period or future fixed rent escalations the Company will record a deferred rent liability. Additionally, the receipt of any lease incentives will be recorded as a deferred rent liability which will be amortized over the lease term as a reduction of rent expense.

Stock-Based Compensation

The Company records compensation expense for all share-based payment award transactions granted to employees based on the fair value of the equity instrument at the time of grant. This includes shares issued under stock option and restricted stock plans. The Company has also established a pool of additional paid-in capital related to the tax effects of employee share-based compensation, which is available to absorb any recognized tax shortfalls.

Derivative Instruments and Hedging Activities

Based on the Company’s risk management policy, from time to time the Company may use derivative financial instruments to reduce exposure to changes in foreign exchange rates and interest rates. The Company does not enter into derivative financial instruments for speculative purposes. All derivative financial instruments are recorded on the balance sheet at their respective fair values. The changes in the value of derivatives that qualify as fair value hedges are recorded with a corresponding adjustment to the carrying value of the item being hedged. Changes in the derivative’s fair value that qualify as cash flow hedges are recorded to other comprehensive income or loss, to the extent the hedge is effective, and such amounts are reclassified from accumulated other comprehensive income or loss to earnings in the same period or periods during which the hedged transaction affects income. Changes in the derivative’s fair value that qualify as net investment hedges are recorded to other comprehensive income or loss, to the extent the hedge is effective. Any changes in the fair value of derivatives that the Company does not designate as hedging instruments under Topic 815 of the ASC are recorded in the consolidated statements of operations in the period in which they occur.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or the services have been provided and accepted by the customer when applicable, fees are determinable and the collection of resulting receivables is considered probable.

Pursuant to ASC Topic 605, when a sales arrangement contains multiple deliverables, the Company allocates revenue to each deliverable based on its relative selling price which is determined based on its vendor specific objective evidence if available, third party evidence if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available.

 The Company’s products and services will generally qualify as separate units of accounting under ASC Topic 605. The Company evaluates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value to the customers and if the arrangement includes a customer refund or return right relative to the delivered item and the delivery and performance of the undelivered item is considered probable and substantially in the Company’s control. In instances where the aforementioned criteria are not met, the deliverable is combined with the undelivered items and revenue recognition is determined as one single unit.

The Company determines whether its selling price in a multi-element transaction meets the VSOE criteria by using the price charged for a deliverable when sold separately or, if the deliverable is not yet being sold separately, the price established by management having the relevant authority to establish such a price. In instances where the Company is not able to establish VSOE for all deliverables in a multiple element arrangement, which may be due to the Company infrequently selling each element separately, not selling products within a reasonably narrow price range, or only having a limited sales history, the Company attempts to establish TPE for deliverables. The Company determines whether TPE exists by evaluating largely similar and interchangeable competitor products or services in standalone sales to similarly situated customers. However, due to the difficulty in obtaining third party pricing, possible differences in its market strategy from that of its peers and the potential that products and services offered by the Company may contain a significant level of differentiation and/or customization such that the comparable pricing of products with similar functionality cannot be obtained, the Company generally is unable to reliably determine TPE. Based on the selling price hierarchy established by ASC Topic 605, when the Company is unable to establish selling price using VSOE or TPE, the Company will establish an ESP. ESP is the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. The Company establishes its best estimate of ESP considering internal factors relevant to is pricing practices such as costs and margin objectives, standalone sales prices of similar products, percentage of the fee charged for a primary product or service relative to a related product or service, and customer segment and geography. Additional consideration is also given to market conditions such as competitor pricing strategies and market trend. The Company reviews its determination of VSOE, TPE and ESP on an annual basis or more frequently as needed.

In the MIS segment, revenue attributed to initial ratings of issued securities is recognized when the rating is issued. Revenue attributed to monitoring of issuers or issued securities is recognized ratably over the period in which the monitoring is performed, generally one year. In the case of commercial mortgage-backed securities, structured credit, international residential mortgage-backed and asset-backed securities, issuers can elect to pay the monitoring fees upfront. These fees are deferred and recognized over the future monitoring periods based on the expected lives of the rated securities, which was approximately 27 years on a weighted average basis at December 31, 2015. At December 31, 2015, 2014 and 2013, deferred revenue related to these securities was approximately $121 million, $107 million, and $97 million.

Multiple element revenue arrangements in the MIS segment are generally comprised of an initial rating and the related monitoring service. In instances where monitoring fees are not charged for the first year monitoring effort, fees are allocated to the initial rating and monitoring services based on the relative selling price of each service to the total arrangement fees. The Company generally uses ESP in determining the selling price for its initial ratings as the Company rarely sells initial ratings separately without providing related monitoring services and thus is unable to establish VSOE or TPE for initial ratings.

MIS estimates revenue for ratings of commercial paper for which, in addition to a fixed annual monitoring fee, issuers are billed quarterly based on amounts outstanding. Revenue is accrued each quarter based on estimated amounts outstanding and is billed when actual data is available. The estimate is determined based on the issuers’ most recent reported quarterly data. At December 31, 2015, 2014 and 2013, accounts receivable included approximately $24 million, $22 million, and $21 million, respectively, related to accrued commercial paper revenue. Historically, MIS has not had material differences between the estimated revenue and the actual billings. Furthermore, for certain annual monitoring services, fees are not invoiced until the end of the annual monitoring period and revenue is accrued ratably over the monitoring period. At December 31, 2015, 2014, and 2013, accounts receivable included approximately $146.4 million, $127.8 million, and $96.7 million, respectively, relating to accrued monitoring service revenue.

In the MA segment, products and services offered by the Company include software licenses and related maintenance, subscriptions, and professional services. Revenue from subscription based products, such as research and data subscriptions and certain software-based credit risk management subscription products, is recognized ratably over the related subscription period, which is principally one year. Revenue from sale of perpetual licenses of credit processing software is generally recognized at the time the product master or first copy is delivered or transferred to and accepted by the customer. If uncertainty exists regarding customer acceptance of the product or service, revenue is not recognized until acceptance occurs. Software maintenance revenue is recognized ratably over the annual maintenance period. Revenue from professional services rendered is generally recognized as the services are performed. A large portion of annual research and data subscriptions and annual software maintenance are invoiced in the months of November, December and January.

Products and services offered within the MA segment are sold either stand-alone or together in various combinations. In instances where a multiple element arrangement includes software and non-software deliverables, revenue is allocated to the non-software deliverables and to the software deliverables, as a group, using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. Revenue is recognized for each element based upon the conditions for revenue recognition noted above.

 If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is allocated to each software deliverable using VSOE. In the instances where the Company is not able to determine VSOE for all of the deliverables of an arrangement, the Company allocates the revenue to the undelivered elements equal to its VSOE and the residual revenue to the delivered elements. If the Company is unable to determine VSOE for an undelivered element, the Company defers all revenue allocated to the software deliverables until the Company has delivered all of the elements or when VSOE has been determined for the undelivered elements. In cases where software implementation services are considered essential and VSOE of fair value exists for post-contract customer support (“PCS”), once the delivery criteria has been met on the standard software, license and service revenue is recognized on a percentage-of-completion basis as implementation services are performed, while PCS is recognized over the coverage period.  If VSOE of fair value does not exist for PCS, once the delivery criteria has been met on the standard software, service revenue is recognized on a zero profit margin basis until essential services are complete, at which point total remaining arrangement revenue is then spread ratably over the remaining PCS coverage period. If VSOE does not exist for PCS at the beginning of an arrangement but is established during implementation, revenue not recognized due to the absence of VSOE will be recognized on a cumulative basis.

Accounts Receivable Allowances

Moody’s records an allowance for estimated future adjustments to customer billings as a reduction of revenue, based on historical experience and current conditions. Such amounts are reflected as additions to the accounts receivable allowance. Additionally, estimates of uncollectible accounts are recorded as bad debt expense and are reflected as additions to the accounts receivable allowance. Actual billing adjustments and uncollectible account write-offs are recorded against the allowance. Moody’s evaluates its accounts receivable allowance by reviewing and assessing historical collection and adjustment experience and the current status of customer accounts. Moody’s also considers the economic environment of the customers, both from an industry and geographic perspective, in evaluating the need for allowances. Based on its analysis, Moody’s adjusts its allowance as considered appropriate in the circumstances.

Contingencies

Moody’s is involved in legal and tax proceedings, governmental investigations and inquiries, claims and litigation that are incidental to the Company’s business, including claims based on ratings assigned by MIS. Moody’s is also subject to ongoing tax audits in the normal course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. Moody’s discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate.

For claims, litigation and proceedings and governmental investigations and inquires not related to income taxes, where it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the consolidated financial statements and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than another amount within the range. In other instances, because of uncertainties related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predicting the outcome of litigation, regulatory, governmental investigations and inquiries, enforcement and similar matters , particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve any pending matters progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the large or indeterminate damages sought in some of them, the absence of similar court rulings on the theories of law asserted and uncertainties regarding apportionment of any potential damages, an estimate of the range of possible losses cannot be made at this time.

The Company’s wholly-owned insurance subsidiary insures the Company against certain risks including but not limited to deductibles for worker’s compensation, employment practices litigation and employee medical claims and terrorism, for which the claims are not material to the Company. In addition, for claim years 2008 and 2009, the insurance subsidiary insured the Company for defense costs related to professional liability claims. For matters insured by the Company’s insurance subsidiary, Moody’s records liabilities based on the estimated total claims expected to be paid and total projected costs to defend a claim through its anticipated conclusion. The Company determines liabilities based on an assessment of management’s best estimate of claims to be paid and legal defense costs as well as actuarially determined estimates. Defense costs for matters not self-insured by the Company’s wholly-owned insurance subsidiary are expensed as services are provided.

For income tax matters, the Company employs the prescribed methodology of  Topic 740 of the ASC which requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority

Operating Expenses

Operating expenses include costs associated with the development and production of the Company’s products and services and their delivery to customers. These expenses principally include employee compensation and benefits and travel costs that are incurred in connection with these activities. Operating expenses are charged to income as incurred, except for certain costs related to software implementation services which are deferred until related revenue is recognized.  Additionally, certain costs incurred to develop internal use software are capitalized and depreciated over their estimated useful life.

Selling, General and Administrative Expenses

SG&A expenses include such items as compensation and benefits for corporate officers and staff and compensation and other expenses related to sales of products. They also include items such as office rent, business insurance, professional fees and gains and losses from sales and disposals of assets. SG&A expenses are charged to income as incurred, except for certain expenses incurred to develop internal use software are capitalized and depreciated over their estimated useful life.

Redeemable Noncontrolling Interest

The Company records its redeemable noncontrolling interest at fair value on the date of the related business combination transaction. The redeemable noncontrolling interest represents noncontrolling shareholders’ interest in entities which are controlled but not wholly-owned by Moody’s and for which Moody’s obligation to redeem the minority shareholders’ interest is governed by a put/call relationship. Subsequent to the initial measurement, the redeemable noncontrolling interest is recorded at the greater of its redemption value or its carrying value at the end of each reporting period. If the redeemable noncontrolling interest is carried at its redemption value, the difference between the redemption value and the carrying value would be adjusted through capital surplus at the end of each reporting period. The Company also performs a quarterly assessment to determine if the aforementioned redemption value exceeds the fair value of the redeemable noncontrolling interest. If the redemption value of the redeemable noncontrolling interest were to exceed its fair value, the excess would reduce the net income attributable to Moody’s shareholders. The Company settled its redeemable noncontrolling interest in the fourth quarter of 2014 by exercising its call option to acquire the remaining share of Copal Amba that it did not previously own.

Foreign Currency Translation

For all operations outside the U.S. where the Company has designated the local currency as the functional currency, assets and liabilities are translated into U.S. dollars using end of year exchange rates, and revenue and expenses are translated using average exchange rates for the year. For these foreign operations, currency translation adjustments are accumulated in a separate component of shareholders’ (deficit)/equity.

Comprehensive Income

Comprehensive income represents the change in net assets of a business enterprise during a period due to transactions and other events and circumstances from non-owner sources including foreign currency translation impacts, net actuarial losses and net prior service costs related to pension and other retirement plans, gains and losses on derivative instruments and unrealized gains and losses on securities designated as ‘available-for-sale’ under Topic 320 of the ASC.

Income Taxes

The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740. Therefore, income tax expense is based on reported income before income taxes and deferred income taxes reflect the effect of temporary differences between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.

The Company classifies interest related to unrecognized tax benefits as a component of interest expense in its consolidated statements of operations. Penalties are recognized in other non-operating expenses. For UTPs, the Company first determines whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

For certain of its non-U.S. subsidiaries, the Company has deemed the undistributed earnings relating to these subsidiaries to be indefinitely reinvested within its foreign operations. Accordingly, the Company has not provided deferred income taxes on these indefinitely reinvested earnings. It is not practicable to determine the amount of deferred taxes that might be required to be provided if such earnings were distributed in the future due to complexities in the tax laws and in the hypothetical calculations that would have to be made.

Fair Value of Financial Instruments

The Company’s financial instruments include cash, cash equivalents, trade receivables and payables, all of which are short-term in nature and, accordingly, approximate fair value. Additionally, the Company invests in certain short-term investments consisting primarily of certificates of deposit that are carried at cost, which approximates fair value due to their short-term maturities.

The Company also has certain investments in closed-ended and open-ended mutual funds in India which are designated as ‘available for sale’ under Topic 320 of the ASC. Accordingly, unrealized gains and losses on these investments are recorded to other comprehensive income and are reclassified out of accumulated other comprehensive income to the statement of operations when the investment matures or is sold using a specific identification method.

Also, the Company uses derivative instruments, as further described in Note 5, to manage certain financial exposures that occur in the normal course of business. These derivative instruments are carried at fair value on the Company’s consolidated balance sheets.

The Company also was subject to contingent consideration obligations related to certain of its acquisitions as more fully discussed in Note 9. These obligations were carried at their estimated fair value within the Company’s consolidated balance sheets.

Fair value is defined by the ASC as the price that would be received from selling an asset or paid to transfer a liability (i.e., an exit price) in an orderly transaction between market participants at the measurement date. The determination of this fair value is based on the principal or most advantageous market in which the Company could commence transactions and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance. Also, determination of fair value assumes that market participants will consider the highest and best use of the asset.

The ASC establishes a fair value hierarchy whereby the inputs contained in valuation techniques used to measure fair value are categorized into three broad levels as follows:

Level 1 : quoted market prices in active markets that the reporting entity has the ability to access at the date of the fair value measurement;

Level 2 : inputs other than quoted market prices described in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

Level 3 : unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement of the assets or liabilities.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk principally consist of cash and cash equivalents, short-term investments, trade receivables and derivatives.

The Company manages its credit risk exposure by allocating its cash equivalents among various money market mutual funds, money market deposit accounts, certificates of deposits and high- grade commercial paper. Short-term investments primarily consist of certificates of deposit as of December 31, 2015 and 2014. The Company manages its credit risk exposure on cash equivalents and short-term investments by limiting the amount it can invest with any single entity. No customer accounted for 10% or more of accounts receivable at December 31, 2015 or 2014.

Earnings per Share of Common Stock

Basic shares outstanding is calculated based on the weighted average number of shares of common stock outstanding during the reporting period. Diluted shares outstanding is calculated giving effect to all potentially dilutive common shares, assuming that such shares were outstanding during the reporting period.

Pension and Other Retirement Benefits

Moody’s maintains various noncontributory DBPPs as well as other contributory and noncontributory retirement plans. The expense and assets/liabilities that the Company reports for its pension and other retirement benefits are dependent on many assumptions concerning the outcome of future events and circumstances. These assumptions represent the Company’s best estimates and may vary by plan. The differences between the assumptions for the expected long-term rate of return on plan assets and actual experience is spread over a five-year period to the market related value of plan assets which is used in determining the expected return on assets component of annual pension expense. All other actuarial gains and losses are generally deferred and amortized over the estimated average future working life of active plan participants.

The Company recognizes as an asset or liability in its consolidated balance sheet the funded status of its defined benefit retirement plans, measured on a plan-by-plan basis. Changes in the funded status due to actuarial gains/losses are recorded as part of other comprehensive income during the period the changes occur.

Use of Estimates

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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Estimates are used for, but not limited to, revenue recognition, accounts receivable allowances, income taxes, contingencies, valuation of long-lived and intangible assets, goodwill, pension and other retirement benefits, stock-based compensation, and depreciable lives for property and equipment and computer software.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”. This ASU outlines a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company is currently evaluating its adoption options and the impact that adoption of this update will have on its consolidated financial statements. Currently, the Company believes this ASU will have an impact on: i) the capitalization of certain contract implementation costs; ii) the accounting for certain software license and maintenance revenue in MA; iii) the accounting for certain revenue arrangements where VSOE is not available and iv) the accounting for contract acquisition costs. In August 2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date” which defers the effective date of the ASU for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted up to the original effective date of December 15, 2016.

In April 2015, the FASB issued ASU No. 2015-05 “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”. This ASU provides guidance on accounting for fees paid by a customer in a cloud computing arrangement. In accordance with the ASU, a cloud computing arrangement that contains a software license should be accounted for consistently with the acquisition of other software licenses. If no software license is present in the contract, the entity should account for the arrangement as a service contract. The Company can elect to apply this ASU either retrospectively or prospectively effective for annual and interim reporting periods beginning after December 15, 2015, and early adoption is permitted. The adoption of this ASU in 2016 will not have a material impact on the Company’s financial statements.

In April 2015, the FASB issued ASU No. 2015-03,“Simplifying the Presentation of Debt Issuance Costs”. This ASU simplifies the presentation of debt issuance costs in financial statements and requires a company to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization costs will continue to be reported as interest expense. The ASU is effective retrospectively for annual and interim reporting periods beginning after December 15, 2015, and early adoption is permitted. The adoption of this ASU will impact the presentation of debt issuance costs in the Company’s consolidated balance sheets. Additionally, in August 2015, the FASB issued ASU No. 2015-15 “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This ASU codifies that given the lack of authoritative guidance in ASU 2015-03 regarding line-of-credit arrangements, the SEC staff would not object to a Company deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt costs ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.

In May 2015, the FASB issued ASU No. 2015-07 “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU removes the requirement to include investments in the fair value hierarchy for which fair value is measured using the net asset value per share as a practical expedient. ASU No. 2015-07 is effective retrospectively for fiscal years beginning after December 15, 2015, with early adoption permitted. The adoption of this ASU will only impact the presentation of certain of the Company’s pension assets in the fair value hierarchy disclosures.

In September 2015, the FASB issued ASU No. 2015-16 “Simplifying the Accounting for Measurement-Period Adjustments” in acquisition accounting. This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU No. 2015-16 is applied prospectively for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The Company does not believe the adoption of this ASU will have a material impact on its financial statements.

In November 2015, the FASB issued ASU No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” This ASU simplifies the presentation of deferred income taxes by requiring all deferred income tax assets and liabilities be classified as noncurrent on the balance sheet. This removes the requirement for the entity to determine whether the deferred tax is current or noncurrent for presentation in the balance sheet. ASU No. 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016. The Company has elected to adopt this ASU in the first quarter of 2016 with the adoption affecting the presentation of the Company’s deferred tax assets and liabilities on its balance sheet.

In January 2016, the FASB issued ASU No. 2016-01 “Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10).” The amendments in this ASU update various aspects of recognition, measurement, presentation and disclosures relating to financial instruments. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of this ASU on the Company’s financial statements.

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Research and development costs
$ 29.1 
$ 37.9 
$ 22.8 
Number of reporting units
 
 
Description of concentration risk, Customer
No customer accounted for 10% or more of accounts receivable at December 31, 2015 or 2014. 
 
 
Ratings Member [Member]
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Number of reporting units
 
 
MIS [Member] |
Ratings Member [Member]
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Weighted average expected lives of the rated securities
27 years 
 
 
Deferred revenue related to rated securities
121.0 
107.0 
97.0 
MIS [Member] |
Ratings Member [Member] |
Commercial Paper [Member]
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Accounts receivable related to accrued commercial paper revenue
$ 24.0 
$ 22.0 
$ 21.0 
MA [Member]
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Number of reporting units
 
 
RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING

NOTE 3 RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING

Below is a reconciliation of basic to diluted shares outstanding:

201520142013
Basic200.1210.7219.4
Dilutive effect of shares issuable under stock-based compensation plans3.34.04.1
Diluted203.4214.7223.5
Antidilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above0.70.74.0

The calculation of diluted EPS requires certain assumptions regarding the use of both cash proceeds and assumed proceeds that would be received upon the exercise of stock options and vesting of restricted stock outstanding as of December 31, 2015, 2014 and 2013. These assumed proceeds include Excess Tax Benefits and any unrecognized compensation on the awards.

The decrease in the diluted shares outstanding primarily reflects treasury share repurchases under the Company’s Board authorized share repurchase program.

RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING (Tables)
Reconciliation of Basic to Diluted Shares Outstanding
201520142013
Basic200.1210.7219.4
Dilutive effect of shares issuable under stock-based compensation plans3.34.04.1
Diluted203.4214.7223.5
Antidilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above0.70.74.0
Reconciliation of Basic to Diluted Shares Outstanding (Detail)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Schedule Of Weighted Average Number Of Diluted Shares Outstanding [Line Items]
 
 
 
Basic
200.1 
210.7 
219.4 
Dilutive effect of shares issuable under stock-based compensation plans
3.3 
4.0 
4.1 
Diluted
203.4 
214.7 
223.5 
Antidilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above
0.7 
0.7 
4.0 
CASH EQUIVALENT AND INVESTMENTS
CASH EQUIVALENT AND INVESTMENT

NOTE 4 CASH EQUIVALENTS AND INVESTMENTS

The table below provides additional information on the Company’s cash equivalents and investments:

As of December 31, 2015
Balance sheet location
CostGross Unrealized GainsFair ValueCash and cash equivalentsShort-term investmentsOther assets
Money market mutual funds$188.3$-$188.3$188.3$-$-
Certificates of deposit and money market deposit accounts (1)$1,307.3$-$1,307.3$809.4$474.8$23.1
Fixed maturity and open ended mutual funds (2)$28.7$3.2$31.9$-$-$31.9
As of December 31, 2014
Balance sheet location
CostGross Unrealized GainsFair ValueCash and cash equivalentsShort-term investmentsOther assets
Money market mutual funds$149.7$-$149.7$149.7$-$-
Certificates of deposit and money market deposit accounts (1)$842.5$-$842.5$380.1$458.1$4.3
Fixed maturity and open ended mutual funds (2)$47.1$0.9$48.0$-$-$48.0
(1) Consists of time deposits and money market deposit accounts. The remaining contractual maturities for the certificates of deposits classified as short-term investments were one month to 12 months at December 31, 2015 and one month to 10 months at December 31, 2014. The remaining contractual maturities for the certificates of deposits classified in other assets are one month to 27 months at December 31, 2015 and one month to 39 months at December 31, 2014. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents.
(2) Consists of investments in fixed maturity mutual funds and open-ended mutual funds. The remaining contractual maturities for the fixed maturity instruments range from eleven months to 31 months and two months to 23 months at December 31, 2015 and 2014, respectively.

The money market mutual funds as well as the fixed maturity and open ended mutual funds in the table above are deemed to be ‘available for sale’ under ASC Topic 320 and the fair value of these instruments is determined using Level 1 inputs

CASH EQUIVALENT AND INVESTMENTS (Tables)
Schedule of Available for sale securities
As of December 31, 2015
Balance sheet location
CostGross Unrealized GainsFair ValueCash and cash equivalentsShort-term investmentsOther assets
Money market mutual funds$188.3$-$188.3$188.3$-$-
Certificates of deposit and money market deposit accounts (1)$1,307.3$-$1,307.3$809.4$474.8$23.1
Fixed maturity and open ended mutual funds (2)$28.7$3.2$31.9$-$-$31.9
As of December 31, 2014
Balance sheet location
CostGross Unrealized GainsFair ValueCash and cash equivalentsShort-term investmentsOther assets
Money market mutual funds$149.7$-$149.7$149.7$-$-
Certificates of deposit and money market deposit accounts (1)$842.5$-$842.5$380.1$458.1$4.3
Fixed maturity and open ended mutual funds (2)$47.1$0.9$48.0$-$-$48.0
(1) Consists of time deposits and money market deposit accounts. The remaining contractual maturities for the certificates of deposits classified as short-term investments were one month to 12 months at December 31, 2015 and one month to 10 months at December 31, 2014. The remaining contractual maturities for the certificates of deposits classified in other assets are one month to 27 months at December 31, 2015 and one month to 39 months at December 31, 2014. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents.
(2) Consists of investments in fixed maturity mutual funds and open-ended mutual funds. The remaining contractual maturities for the fixed maturity instruments range from eleven months to 31 months and two months to 23 months at December 31, 2015 and 2014, respectively.
Cash Equivalent and Investments (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2015
Money Market [Member]
Dec. 31, 2014
Money Market [Member]
Dec. 31, 2015
Certificates of Deposit [Member]
Dec. 31, 2014
Certificates of Deposit [Member]
Dec. 31, 2015
Fixed Maturity and Mutual Funds [Member]
Dec. 31, 2014
Fixed Maturity and Mutual Funds [Member]
Schedule of Available-for-sale Securities [Line Item]
 
 
 
 
 
 
 
 
 
 
Cost
 
 
 
 
$ 188.3 
$ 149.7 
$ 1,307.3 
$ 842.5 
$ 28.7 
$ 47.1 
Gross Unrealized Gain
 
 
 
 
 
 
 
 
3.2 
0.9 
Fair Value
31.9 
48.0 
 
 
188.3 
149.7 
1,307.3 
842.5 
31.9 
48.0 
Cash and Cash Equivalents
1,757.4 
1,219.5 
1,919.5 
1,755.4 
188.3 
149.7 
809.4 
380.1 
 
 
Short Term Investments
474.8 
458.1 
 
 
 
 
474.8 
458.1 
 
 
Other Assets
 
 
 
 
 
 
$ 23.1 
$ 4.3 
$ 31.9 
$ 48.0 
Cash Equivalent and Investments (Parenthetical)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Minimum [Member] |
Certificates of Deposit [Member] |
Short Term Investments [Member]
 
 
Schedule Of Investments [Line Items]
 
 
Securities maturity period
1 month 
1 month 
Minimum [Member] |
Certificates of Deposit [Member] |
Other Assets [Member]
 
 
Schedule Of Investments [Line Items]
 
 
Securities maturity period
1 month 
1 month 
Minimum [Member] |
Fixed Maturity and Mutual Funds [Member]
 
 
Schedule Of Investments [Line Items]
 
 
Securities maturity period
11 months 
2 months 
Maximum [Member] |
Major Types of Debt Securities [Domain] |
Cash and Cash Equivalents [Member]
 
 
Schedule Of Investments [Line Items]
 
 
Securities maturity period
90 days 
 
Maximum [Member] |
Certificates of Deposit [Member] |
Short Term Investments [Member]
 
 
Schedule Of Investments [Line Items]
 
 
Securities maturity period
12 months 
10 months 
Maximum [Member] |
Certificates of Deposit [Member] |
Other Assets [Member]
 
 
Schedule Of Investments [Line Items]
 
 
Securities maturity period
27 months 
39 months 
Maximum [Member] |
Fixed Maturity and Mutual Funds [Member]
 
 
Schedule Of Investments [Line Items]
 
 
Securities maturity period
31 months 
23 months 
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 5 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.

Derivatives and non-derivative instruments designated as accounting hedges:

Interest Rate Swaps

In the second quarter of 2014, the Company entered into interest rate swaps with a total notional amount of $250 million to convert the fixed interest rate on the 2010 Senior Notes to a floating interest rate based on the 3-month LIBOR. In the third quarter of 2014, the Company entered into interest rate swaps with a total notional amount of $250 million to convert the fixed interest rate on the remaining balance of the 2010 Senior Notes to a floating interest rate based on the 3-month LIBOR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the 2010 Senior Notes, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the 2010 Senior Notes. The changes in the fair value of the hedges and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest expense, net in the Company’s consolidated statement of operations.

In the third quarter of 2014, the Company entered into interest rate swaps with a total notional amount of $250 million to convert the fixed interest rate on a portion of the 2014 Senior Notes (5-year) to a floating interest rate based on the 3-month LIBOR. In the first quarter of 2015, the Company entered into interest rate swaps with a total notional amount of $200 million to convert the fixed interest rate on the remaining balance of the 2014 Senior Notes (5-year) to a floating interest rate based on the 3-month LIBOR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the 2014 Senior Notes (5-year), thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the 2014 Senior Notes (5-year). The changes in the fair value of the hedges and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest expense, net in the Company’s consolidated statement of operations.

The following table summarizes the impact to the statement of operations of the Company’s interest rate swaps designated as fair value hedges:

Amount of Income Recognized in the consolidated statements of operations
Year Ended December 31,
201520142013
Derivatives designated as Fair Value accounting hedgesLocation on Consolidated Statement of Operations
Interest rate swaps Interest expense, net$15.2 $11.7 $4.2

In November 2015, the Company entered into and settled a $150 million treasury rate lock agreement to manage the Company’s interest rate risk associated with the anticipated additional issuance of the 2014 Senior Notes (30-year) as further described in Note 15. The Company settled this rate lock for a loss of $1.1 million simultaneous with the additional issuance under the 2014 Senior Notes (30-Year). The loss on this rate lock was recorded in other comprehensive income and will be amortized to interest expense over the term of the 2014 Senior Notes (30-Year).

Net Investment Hedges

The Company enters into foreign currency forward contracts that are designated as net investment hedges and additionally has designated €400 million of the 2015 Senior Notes as a net investment hedge. These hedges are intended to mitigate FX exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. These net investment hedges are designated as accounting hedges under the applicable sections of Topic 815 of the ASC.

Hedge effectiveness is assessed based on the overall changes in the fair value of the hedge. For hedges that meet the effectiveness requirements, any change in the fair value and any realized gains and losses for the hedge are recorded in AOCI in the foreign currency translation account. Any change in the fair value of these hedges that is the result of ineffectiveness is recognized immediately in other non-operating income, net in the Company’s consolidated statement of operations.

The following table summarizes the notional amounts of the Company’s outstanding net investment hedges:

December 31,December 31,
20152014
Notional amount of net investment hedges:
Long-term debt designated as net investment hedge400.0-
Contracts to sell euros for USD-50.0
Contracts to sell GBP for euros£21.2£-
Contracts to sell Japanese yen for USD19,400.019,400.0

The outstanding contracts to sell Japanese yen for USD mature in November 2016. The outstanding contracts to sell GBP for euros mature in March 2016. The hedge relating to the portion of the 2015 Senior Notes that was designated as a net investment hedge will end upon the repayment of the notes in 2027 unless terminated earlier at the discretion of the Company.

The following table provides information on the gains/(losses) on the Company’s net investment and cash flow hedges:

Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion), net of tax
Derivatives and non-derivatives in net investment hedging relationshipsYear Ended December 31,
201520142013
FX forwards$13.419.43.7
Long-term debt4.7--
Total$18.119.43.7
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion), net of tax
Derivatives in cash flow hedging relationshipsYear Ended December 31,
201520142013
Treasury rate lock$(1.1)--
$(1.1)--

The loss on this rate lock will be amortized over the term of the 2014 Senior Notes (30-year). The amount that will be reclassified to earnings in 2016 is immaterial.

The cumulative amount of realized and unrecognized net investment and cash flow hedge gains/(losses) recorded in AOCI is as follows:

Gains (Losses), net of tax
December 31,December 31,
20152014
Net investment hedges
FX forwards$34.3$20.9
Long-term debt 4.7-
Total net investment hedges$39.0$20.9
Cash flow hedges
Treasury rate lock(1.1)-
Total$37.920.9

Derivatives not designated as accounting hedges:

Foreign exchange forwards

The Company also enters into foreign exchange forwards to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. These forward contracts are not designated as accounting hedges under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating (expense) income, net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through March 2016.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:

December 31,December 31,
20152014
Notional amount of currency pair:
Contracts to purchase USD with euros$-$38.5
Contracts to sell USD for euros$70.1$51.1
Contracts to purchase USD with GBP$-$0.2
Contracts to purchase USD with other foreign currencies$-$1.2
Contracts to purchase euros with other foreign currencies35.534.0
Contracts to sell euros for other foreign currencies1.4-
Contracts to purchase euros with GBP-25.0
Contracts to sell euros for GBP23.138.2

Cross-currency swaps

In conjunction with the issuance of the 2015 Senior Notes, the Company entered into a cross-currency swap to exchange €100 million for U.S. dollars on the date of the settlement of the notes.  The purpose of this cross-currency swap is to mitigate FX risk on the remaining principal balance on the 2015 Senior Notes that was not designated as a net investment hedge as more fully discussed above.   The Company has not designated these cross-currency swaps as accounting hedges.  Accordingly, changes in fair value on these swaps is recognized immediately in other non-operating (expense), income, net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the €100 million principal of the 2015 Senior Notes that was not designated as a net investment hedge. Under the terms of the swap, the Company will pay the counterparty interest on the $110.5 million received at 3.945% per annum and the counterparty will pay the Company interest on the €100 million paid at 1.75% per annum.  These interest payments will be settled in March of each year, beginning in 2016, until either the maturity of the cross-currency swap in 2027 or upon early termination at the discretion of the Company.  The principal payments on this cross currency swap will be settled in 2027, concurrent with the repayment of the 2015 Senior Notes at maturity or upon early termination at the discretion of the Company.

The following table summarizes the impact to the consolidated statements of operations relating to the net gain on the Company’s derivatives which are not designated as hedging instruments:

Year Ended
December 31,
Derivatives not designated as accounting hedges