Item 1. Financial Statements

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Item 1. Financial Statements

MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in millions, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue	$	1,381	$	1,553	$	2,903	$	3,153
Expenses
Operating	393		365		810		758
Selling, general and administrative	368		327		739		620
Depreciation and amortization	81		60		159		119
Restructuring	31		—		31		2


Total expenses	873		752		1,739		1,499
Operating income	508		801		1,164		1,654
Non-operating (expense) income, net
Interest expense, net	(55)		(49)		(108)		(56)
Other non-operating (expense) income, net	(10)		6		(4)		22
Total non-operating (expense) income, net	(65)		(43)		(112)		(34)
Income before provision for income taxes	443		758		1,052		1,620
Provision for income taxes	116		181		227		307


Net income attributable to Moody's	$	327	$	577	$	825	$	1,313
Earnings per share attributable to Moody's common shareholders
Basic	$	1.78	$	3.09	$	4.47	$	7.02
Diluted	$	1.77	$	3.07	$	4.45	$	6.98
Weighted average number of shares outstanding
Basic	184.1		186.7		184.6		187.0
Diluted	184.9		187.9		185.4		188.2

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in millions)


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021

	Pre-tax amounts		Tax amounts		After-tax amounts		Pre-tax amounts		Tax amounts		After-tax amounts
Net Income					$	327					$	577
Other Comprehensive Income (Loss):
Foreign Currency Adjustments:
Foreign currency translation adjustments, net	$	(340)	$	3	(337)		$	37	$	(2)	35
Foreign currency translation adjustments - reclassification of losses included in net income	20		—		20		—		—		—
Net gains (losses) on net investment hedges	241		(60)		181		(41)		12		(29)
Net investment hedges - reclassification of gains included in net income	—		—		—		(1)		1		—



Pension and Other Retirement Benefits:
Amortization of actuarial losses/prior service costs and settlement charge included in net income	1		—		1		10		(2)		8
Net actuarial gains and prior service costs	6		(2)		4		—		—		—
Total other comprehensive (loss) income	$	(72)	$	(59)	$	(131)	$	5	$	9	$	14
Comprehensive income					196						591
Less: comprehensive (loss) income attributable to noncontrolling interests					(3)						(1)
Comprehensive Income Attributable to Moody's					$	199					$	592


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021

	Pre-tax amounts		Tax amounts		After-tax amounts		Pre-tax amounts		Tax amounts		After-tax amounts
Net Income					$	825					$	1,313
Other Comprehensive Income (Loss):
Foreign Currency Adjustments:
Foreign currency translation adjustments, net	$	(448)	$	4	(444)		$	(110)	$	4	(106)
Foreign currency translation adjustments - reclassification of losses included in net income	20		—		20		—		—		—
Net gains on net investment hedges	305		(77)		228		134		(30)		104
Net investment hedges - reclassification of gains included in net income	—		—		—		(2)		1		(1)
Cash Flow Hedges:

Reclassification of losses included in net income	1		—		1		1		—		1
Pension and Other Retirement Benefits:
Amortization of actuarial losses/prior service costs and settlement charge included in net income	1		—		1		13		(3)		10
Net actuarial gains and prior service costs	3		(1)		2		—		—		—
Total other comprehensive (loss) income	$	(118)	$	(74)	$	(192)	$	36	$	(28)	$	8
Comprehensive income					633						1,321
Less: comprehensive (loss) income attributable to noncontrolling interests					(3)						1
Comprehensive Income Attributable to Moody's					$	636					$	1,320

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in millions, except share and per share data)


	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,617	$	1,811
Short-term investments	86		91
Accounts receivable, net of allowance for credit losses of $46 in 2022 and $32 in 2021	1,602		1,720
Other current assets	515		389

Total current assets	3,820		4,011
Property and equipment, net of accumulated depreciation of $1,058 in 2022 and $1,010 in 2021	433		347
Operating lease right-of-use assets	413		438
Goodwill	5,841		5,999
Intangible assets, net	2,300		2,467
Deferred tax assets, net	341		384
Other assets	1,167		1,034
Total assets	$	14,315	$	14,680
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	866	$	1,142
Current portion of operating lease liabilities	105		105

Current portion of long-term debt	499		—
Deferred revenue	1,285		1,249

Total current liabilities	2,755		2,496
Non-current portion of deferred revenue	81		86
Long-term debt	7,158		7,413
Deferred tax liabilities, net	572		488
Uncertain tax positions	336		388
Operating lease liabilities	421		455
Other liabilities	513		438
Total liabilities	11,836		11,764
Contingencies (Note 17)
Shareholders' equity:
Preferred stock, par value $0.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Series common stock, par value $0.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 342,902,272 shares issued at June 30, 2022 and December 31, 2021, respectively.	3		3
Capital surplus	965		885
Retained earnings	13,328		12,762
Treasury stock, at cost; 159,355,829 and 157,262,484 shares of common stock at June 30, 2022 and December 31, 2021	(11,403)		(10,513)
Accumulated other comprehensive loss	(599)		(410)
Total Moody's shareholders' equity	2,294		2,727
Noncontrolling interests	185		189
Total shareholders' equity	2,479		2,916
Total liabilities, noncontrolling interests and shareholders' equity	$	14,315	$	14,680

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in millions)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities
Net income	$	825	$	1,313
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	159		119
Stock-based compensation	84		86
Deferred income taxes	65		59



FX translation losses reclassified to net income	20		—
Changes in assets and liabilities:
Accounts receivable	63		(29)
Other current assets	(172)		17

Other assets	(12)		(23)
Lease obligations	(7)		(7)

Accounts payable and accrued liabilities	(276)		(175)
Deferred revenue	92		49
Unrecognized tax benefits and other non-current tax liabilities	(44)		(75)
Other liabilities	(36)		(64)
Net cash provided by operating activities	761		1,270
Cash flows from investing activities
Capital additions	(133)		(44)
Purchases of investments	(182)		(109)
Sales and maturities of investments	99		85
Cash paid for acquisitions, net of cash acquired	(92)		(138)
Receipts from settlements of net investment hedges	136		2
Payments for settlements of net investment hedges	—		(47)
Net cash used in investing activities	(172)		(251)
Cash flows from financing activities
Issuance of notes	491		—



Proceeds from stock-based compensation plans	16		23
Repurchase of shares related to stock-based compensation	(83)		(79)
Treasury shares	(871)		(503)

Dividends	(259)		(232)
Debt issuance costs and related fees	(5)		—
Dividends to noncontrolling interest	(1)		(1)


Net cash used in financing activities	(712)		(792)

Effect of exchange rate changes on cash and cash equivalents	(71)		(15)
(Decrease) increase in cash and cash equivalents	(194)		212
Cash and cash equivalents, beginning of period	1,811		2,597
Cash and cash equivalents, end of period	$	1,617	$	2,809

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY’S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at March 31, 2021	342.9	$	3	$	739		$	11,632		(155.7)	$	(9,904)	$	(440)	$	2,030	$	195	$	2,225
Net income							577								577		—		577
Dividends ($0.62 per share)							(115)								(115)		—		(115)
Stock-based compensation				41											41				41
Shares issued for stock-based compensation plans at average cost, net				4						0.1	5				9				9

Treasury shares repurchased										(1.1)	(371)				(371)				(371)
Currency translation adjustment, net of net investment hedge activity (net of tax of $11 million)													7		7		(1)		6

Amortization of prior service costs/actuarial losses and settlement charge (net of tax of $2 million)													8		8				8

Balance at June 30, 2021	342.9	$	3	$	784		$	12,094		(156.7)	$	(10,270)	$	(425)	$	2,186	$	194	$	2,380

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at December 31, 2020	342.9	$	3	$	735		$	11,011		(155.8)	$	(9,748)	$	(432)	$	1,569	$	194	$	1,763
Net income							1,313								1,313		—		1,313
Dividends ($1.24 per share)							(230)								(230)		(1)		(231)
Stock-based compensation				86											86				86
Shares issued for stock-based compensation plans at average cost, net				(37)						0.7	(19)				(56)				(56)


Treasury shares repurchased										(1.6)	(503)				(503)				(503)

Currency translation adjustment, net of net investment hedge activity (net of tax of $25 million)													(4)		(4)		1		(3)

Amortization of prior service costs/actuarial losses and settlement charge (net of tax of $3 million)													10		10				10
Net realized and unrealized gain on cash flow hedges													1		1				1
Balance at June 30, 2021	342.9	$	3	$	784		$	12,094		(156.7)	$	(10,270)	$	(425)	$	2,186	$	194	$	2,380

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at March 31, 2022	342.9	$	3	$	826		$	13,132		(158.4)	$	(11,096)	$	(471)	$	2,394	$	188	$	2,582
Net income							327								327		—		327
Dividends ($0.70 per share)							(131)								(131)		—		(131)
Stock-based compensation				38											38				38
Shares issued for stock-based compensation plans at average cost, net				6						—	1				7				7


Treasury shares repurchased				95						(1.0)	(308)				(213)				(213)
Currency translation adjustment, net of net investment hedge activity (net of tax of $57 million)													(133)		(133)		(3)		(136)
Net actuarial gains and prior service costs (net of tax of $2 million)													4		4				4
Amortization of prior service costs and actuarial losses													1		1				1

Balance at June 30, 2022	342.9	$	3	$	965		$	13,328		(159.4)	$	(11,403)	$	(599)	$	2,294	$	185	$	2,479

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MOODY'S CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in millions, except per share data)


Shareholders of Moody's Corporation
	Common Stock			Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss		Total Moody's Shareholders' Equity		Non- Controlling Interests		Total Shareholders' Equity
	Shares	Amount				Shares			Amount
Balance at December 31, 2021	342.9	$	3	$	885		$	12,762		(157.3)	$	(10,513)	$	(410)	$	2,727	$	189	$	2,916
Net income							825								825		—		825
Dividends ($1.40 per share)							(259)								(259)		(1)		(260)

Stock-based compensation				84											84				84
Shares issued for stock-based compensation plans at average cost, net				(36)						0.5	(31)				(67)				(67)
Shares issued as consideration to acquire kompany(1)				35						0.1	9				44				44


Treasury shares repurchased				(3)						(2.7)	(868)				(871)				(871)

Currency translation adjustment, net of net investment hedge activity (net of tax of $73 million)													(193)		(193)		(3)		(196)
Net actuarial gains and prior service costs (net of tax of $1 million)													2		2				2
Amortization of prior service costs and actuarial losses													1		1				1
Net realized and unrealized gain on cash flow hedges													1		1				1
Balance at June 30, 2022	342.9	$	3	$	965		$	13,328		(159.4)	$	(11,403)	$	(599)	$	2,294	$	185	$	2,479

The accompanying notes are an integral part of the condensed consolidated financial statements.

(1) Represents a non-cash investing activity relating to the issuance of common stock to fund a portion of the purchase price for kompany.

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MOODY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(tabular dollar and share amounts in millions, except per share data)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Moody’s is a global integrated risk assessment firm that empowers organizations and investors to make better decisions. Moody’s reports in two reportable segments: MIS and MA.

MIS publishes credit ratings and provides assessment services on a wide range of debt obligations, programs and facilities, and the entities that issue such obligations in markets worldwide, including various corporate, financial institution and governmental obligations, and structured finance securities.

MA is a global provider of: i) data and information; ii) research and insights; and iii) decision solutions, which help companies make better and faster decisions. MA leverages its industry expertise across multiple risks such as credit, market, financial crime, supply chain, catastrophe and climate to deliver integrated risk assessment solutions that enable business leaders to identify, measure and manage the implications of interrelated risks and opportunities.

These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and related notes in the Company’s 2021 annual report on Form 10-K filed with the SEC on February 22, 2022. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

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

Adoption of New Accounting Standards

On January 1, 2022, the Company adopted ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" ("ASU No. 2021-08"). This ASU requires companies to apply the definition of a performance obligation under ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. The adoption of this ASU will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. Accordingly, upon adoption, the Company will no longer be required to adjust acquired deferred revenue to fair value in business combination transactions. The amendments in ASU No. 2021-08 are applied prospectively and has been applied to all business combination transactions completed subsequent to January 1, 2022.

COVID-19

The COVID-19 pandemic has not had a material adverse impact on the Company's reported results to date and is currently not expected to have a material adverse impact on its near-term outlook. However, Moody's is unable to predict the longer-term impact that the pandemic may have on its business, future results of operations, financial position or cash flows due to numerous uncertainties.

Russia/Ukraine Conflict

The Company is closely monitoring the impact of the ongoing Russia/Ukraine conflict on all aspects of its business. In response to the conflict, the Company is no longer conducting commercial operations in Russia for both MIS and MA and is complying with all applicable regulatory restrictions set forth by the jurisdictions in which Moody's operates. Furthermore, the Company also has withdrawn MIS credit ratings on Russian entities.

While Moody's Russian operations and net assets are not material, broader global market volatility relating to uncertainties surrounding the conflict has contributed to an adverse impact on rated issuance volumes in 2022. The Company is unable to predict either the near-term or longer-term impact that the conflict may have on its financial position and operating results due to numerous uncertainties regarding the severity and duration of the conflict and its broader potential macroeconomic impact.

Reclassification of Previously Reported Revenue by LOB

In the first quarter of 2022, the Company realigned its revenue by LOB reporting structure for the MA operating segment to enhance insight and transparency into this business. As of January 1, 2022, the MA LOBs have been realigned from RD&A and ERS to:

–Decision Solutions (DS) - provides software and workflow tools for specific use cases (banking, insurance, KYC/KYS, CRE and structured finance solutions). This LOB utilizes components from the Data & Information and Research & Insights LOBs to provide integrated risk solutions;

–Research & Insights (R&I) - provides models, scores, expert insights and commentary. This LOB includes: credit research; credit models and analytics; and economics data and models; and

–Data & Information (D&I) - provides vast data sets on companies and securities via data feeds and data applications products.

Prior year revenue by LOB disclosures have been reclassified to conform to the new LOB reporting structure, which is presented in Note 2.

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NOTE 2. REVENUES

Revenue by Category

The following table presents the Company’s revenues disaggregated by LOB:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
MIS:
Corporate Finance (CFG)
Investment-grade	$	68	$	102	$	182	$	236
High-yield	31		124		70		265
Bank loans	72		157		185		337
Other accounts (1)	151		167		302		317
Total CFG	322		550		739		1,155
Structured Finance (SFG)
Asset-backed securities	31		33		63		59
RMBS	28		31		63		58
CMBS	27		23		65		47
Structured credit	36		53		75		91
Other accounts	1		—		1		1
Total SFG	123		140		267		256
Financial Institutions (FIG)
Banking	93		101		182		210
Insurance	24		33		58		76
Managed investments	8		13		13		21
Other accounts	3		3		6		5
Total FIG	128		150		259		312
Public, Project and Infrastructure Finance (PPIF)
Public finance / sovereign	55		63		113		130
Project and infrastructure	67		67		132		143
Total PPIF	122		130		245		273
Total ratings revenue	695		970		1,510		1,996
MIS Other	11		10		23		20
Total external revenue	706		980		1,533		2,016
Intersegment revenue	43		42		86		82
Total MIS	749		1,022		1,619		2,098
MA:
Decision Solutions	312		222		646		447
Research and Insights	185		175		368		346
Data and Information	178		176		356		344
Total external revenue	675		573		1,370		1,137
Intersegment revenue	1		2		3		4
Total MA	676		575		1,373		1,141
Eliminations	(44)		(44)		(89)		(86)
Total MCO	$	1,381	$	1,553	$	2,903	$	3,153

(1) Other includes: recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations as well as fees from programs such as commercial paper, medium term notes, and ICRA corporate finance revenue.

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The following table presents the Company’s revenues disaggregated by LOB and geographic area:


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	U.S.		Non-U.S		Total		U.S.		Non-U.S		Total
MIS:
Corporate Finance	$	210	$	112	$	322	$	345	$	205	$	550
Structured Finance	83		40		123		88		52		140
Financial Institutions	53		75		128		69		81		150
Public, Project and Infrastructure Finance	78		44		122		79		51		130
Total ratings revenue	424		271		695		581		389		970
MIS Other	2		9		11		1		9		10
Total MIS	426		280		706		582		398		980
MA:
Decision Solutions	133		179		312		96		126		222
Research and Insights	102		83		185		96		79		175
Data and Information	62		116		178		57		119		176
Total MA	297		378		675		249		324		573
Total MCO	$	723	$	658	$	1,381	$	831	$	722	$	1,553


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	U.S.		Non-U.S		Total		U.S.		Non-U.S		Total
MIS:
Corporate Finance	$	485	$	254	$	739	$	759	$	396	$	1,155
Structured Finance	180		87		267		156		100		256
Financial Institutions	118		141		259		155		157		312
Public, Project and Infrastructure Finance	153		92		245		157		116		273
Total ratings revenue	936		574		1,510		1,227		769		1,996
MIS Other	3		20		23		2		18		20
Total MIS	939		594		1,533		1,229		787		2,016
MA:
Decision Solutions	282		364		646		187		260		447
Research and Insights	203		165		368		188		158		346
Data and Information	122		234		356		112		232		344
Total MA	607		763		1,370		487		650		1,137
Total MCO	$	1,546	$	1,357	$	2,903	$	1,716	$	1,437	$	3,153

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The following table presents the Company’s reportable segment revenues disaggregated by segment and geographic region:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
MIS:
U.S.	$	426	$	582	$	939	$	1,229
Non-U.S.:
EMEA	165		248		358		496
Asia-Pacific	80		100		154		197
Americas	35		50		82		94
Total Non-U.S.	280		398		594		787
Total MIS	706		980		1,533		2,016
MA:
U.S.	297		249		607		487
Non-U.S.:
EMEA	257		233		520		463
Asia-Pacific	71		55		139		114
Americas	50		36		104		73
Total Non-U.S.	378		324		763		650
Total MA	675		573		1,370		1,137
Total MCO	$	1,381	$	1,553	$	2,903	$	3,153

The following tables summarize the split between transaction and recurring revenue. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while recurring revenue represents the recurring monitoring fees 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. In MIS Other, transaction revenue represents revenue from professional services and recurring revenue represents subscription-based revenues. In the MA segment, recurring revenue represents subscription-based revenues and software maintenance revenue. Transaction revenue in MA represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, and training and certification services.

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	Three Months Ended June 30,
	2022										2021
	Transaction				Recurring			Total			Transaction			Recurring			Total
Corporate Finance	$	199			$	123		$	322		$	427		$	123		$	550
	62		%		38		%	100		%	78		%	22		%	100		%
Structured Finance	$	73			$	50		$	123		$	92		$	48		$	140
	59		%		41		%	100		%	66		%	34		%	100		%
Financial Institutions	$	57			$	71		$	128		$	79		$	71		$	150
	45		%		55		%	100		%	53		%	47		%	100		%
Public, Project and Infrastructure Finance	$	82			$	40		$	122		$	88		$	42		$	130
	67		%		33		%	100		%	68		%	32		%	100		%
MIS Other	$	1			$	10		$	11		$	—		$	10		$	10
	9		%		91		%	100		%	—		%	100		%	100		%
Total MIS	$	412			$	294		$	706		$	686		$	294		$	980
	58		%		42		%	100		%	70		%	30		%	100		%
Decision Solutions	$	40			$	272		$	312		$	36		$	186		$	222
	13		%		87		%	100		%	16		%	84		%	100		%
Research and Insights	$	2			$	183		$	185		$	3		$	172		$	175
	1		%		99		%	100		%	2		%	98		%	100		%
Data and Information	$	—			$	178		$	178		$	1		$	175		$	176
	—		%		100		%	100		%	1		%	99		%	100		%
Total MA	$	42		(1)	$	633		$	675		$	40		$	533		$	573
	6		%		94		%	100		%	7		%	93		%	100		%
Total Moody's Corporation	$	454			$	927		$	1,381		$	726		$	827		$	1,553
	33		%		67		%	100		%	47		%	53		%	100		%


	Six Months Ended June 30,
	2022										2021
	Transaction				Recurring			Total			Transaction			Recurring			Total
Corporate Finance	$	492			$	247		$	739		$	914		$	241		$	1,155
	67		%		33		%	100		%	79		%	21		%	100		%
Structured Finance	$	166			$	101		$	267		$	158		$	98		$	256
	62		%		38		%	100		%	62		%	38		%	100		%
Financial Institutions	$	118			$	141		$	259		$	169		$	143		$	312
	46		%		54		%	100		%	54		%	46		%	100		%
Public, Project and Infrastructure Finance	$	161			$	84		$	245		$	188		$	85		$	273
	66		%		34		%	100		%	69		%	31		%	100		%
MIS Other	$	2			$	21		$	23		$	2		$	18		$	20
	9		%		91		%	100		%	10		%	90		%	100		%
Total MIS	$	939			$	594		$	1,533		$	1,431		$	585		$	2,016
	61		%		39		%	100		%	71		%	29		%	100		%
Decision Solutions	$	83			$	563		$	646		$	77		$	370		$	447
	13		%		87		%	100		%	17		%	83		%	100		%
Research and Insights	$	3			$	365		$	368		$	4		$	342		$	346
	1		%		99		%	100		%	1		%	99		%	100		%
Data and Information	$	—			$	356		$	356		$	2		$	342		$	344
	—		%		100		%	100		%	1		%	99		%	100		%
Total MA	$	86		(1)	$	1,284		$	1,370		$	83		$	1,054		$	1,137
	6		%		94		%	100		%	7		%	93		%	100		%
Total Moody's Corporation	$	1,025			$	1,878		$	2,903		$	1,514		$	1,639		$	3,153
	35		%		65		%	100		%	48		%	52		%	100		%

(1) Revenue from software implementation services and risk management advisory projects, while classified by management as transactional revenue, is recognized over time under the Revenue Accounting Standard (please also refer to the following table).

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The following table presents the timing of revenue recognition:


	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
	MIS		MA		Total		MIS		MA		Total
Revenue recognized at a point in time	$	412	$	16	$	428	$	939	$	57	$	996
Revenue recognized over time	294		659		953		594		1,313		1,907
Total	$	706	$	675	$	1,381	$	1,533	$	1,370	$	2,903



	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	MIS		MA		Total		MIS		MA		Total
Revenue recognized at a point in time	$	686	$	20	$	706	$	1,431	$	49	$	1,480
Revenue recognized over time	294		553		847		585		1,088		1,673
Total	$	980	$	573	$	1,553	$	2,016	$	1,137	$	3,153

Unbilled receivables, deferred revenue and remaining performance obligations

Unbilled receivables

Certain MIS arrangements contain contractual terms whereby the customers are billed in arrears for annual monitoring services, requiring revenue to be accrued as an unbilled receivable as such services are provided. In addition, for certain MA arrangements, the timing of when the Company has the unconditional right to consideration and recognizes revenue occurs prior to invoicing the customer.

The following table presents the Company's unbilled receivables, which are included within accounts receivable, net, at June 30, 2022 and December 31, 2021:


	As at June 30, 2022				As at December 31, 2021
	MIS		MA		MIS		MA
Unbilled Receivables	$	397	$	167	$	386	$	152

Deferred revenue

The Company recognizes deferred revenue when a contract requires a customer to pay consideration to the Company in advance of when revenue related to that contract is recognized. This deferred revenue is relieved when the Company satisfies the related performance obligation and revenue is recognized.

Significant changes in the deferred revenue balances during the three and six months ended June 30, 2022 and 2021 are as follows:


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	MIS		MA		Total		MIS		MA		Total
Balance at March 31,	$	377	$	1,234	$	1,611	$	388	$	940	$	1,328
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(117)		(391)		(508)		(119)		(338)		(457)
Increases due to amounts billable excluding amounts recognized as revenue during the period	94		213		307		98		262		360

Effect of exchange rate changes	(7)		(37)		(44)		1		3		4
Total changes in deferred revenue	(30)		(215)		(245)		(20)		(73)		(93)
Balance at June 30,	$	347	$	1,019	$	1,366	$	368	$	867	$	1,235

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	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	MIS		MA		Total		MIS		MA		Total
Balance at December 31,	$	296	$	1,039	$	1,335	$	313	$	874	$	1,187
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(155)		(654)		(809)		(162)		(565)		(727)
Increases due to amounts billable excluding amounts recognized as revenue during the period	215		680		895		219		555		774
Increases due to acquisitions during the period	—		1		1		—		4		4
Effect of exchange rate changes	(9)		(47)		(56)		(2)		(1)		(3)
Total changes in deferred revenue	51		(20)		31		55		(7)		48
Balance at June 30,	$	347	$	1,019	$	1,366	$	368	$	867	$	1,235
Deferred revenue - current	$	268	$	1,017	$	1,285	$	279	$	863	$	1,142
Deferred revenue - non-current	$	79	$	2	$	81	$	89	$	4	$	93

For the MIS segment, the changes in the deferred revenue balance during the three and six months ended June 30, 2022 were primarily related to the significant portion of contract renewals that occurred during the first quarter of 2022 and are generally recognized over a one year period.

For the MA segment, the decrease in deferred revenue for the three months ended June 30, 2022 was primarily due to the recognition of annual subscription and maintenance billings from December 2021 and January 2022. For the six months ended June 30, 2022, the slight decrease in the deferred revenue balance is attributable to recognition of revenues related to the aforementioned December 2021 billings and unfavorable changes in FX translation rates being mostly offset by the impact of the high concentration of billings in the first quarter of 2022.

Remaining performance obligations

Remaining performance obligations in the MIS segment largely reflect deferred revenue related to monitoring fees for certain structured finance products, primarily CMBS, where the issuers can elect to pay the monitoring fees for the life of the security in advance. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $105 million. The Company expects to recognize into revenue approximately 20% of this balance within one year, approximately 50% of this balance between one to five years and the remaining amount thereafter. With respect to the remaining performance obligations for the MIS segment, the Company has applied a practical expedient set forth in ASC Topic 606 permitting the omission from the amounts stated above relating to unsatisfied performance obligations for contracts with an original expected length of one year or less.

Remaining performance obligations in the MA segment include both amounts recorded as deferred revenue on the balance sheet as of June 30, 2022 as well as amounts not yet invoiced to customers as of June 30, 2022, largely reflecting future revenue related to signed multi-year arrangements for hosted and installed subscription-based products. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $3.0 billion. The Company expects to recognize into revenue approximately 60% of this balance within one year, approximately 25% of this balance between one to two years and the remaining amount thereafter.

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NOTE 3. STOCK-BASED COMPENSATION

Presented below is a summary of the stock-based compensation cost and associated tax benefit included in the accompanying consolidated statements of operations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock-based compensation cost	$	38	$	41	$	84	$	86
Tax benefit	$	9	$	10	$	20	$	21

During the first six months of 2022, the Company granted 0.1 million employee stock options, which had a weighted average grant date fair value of $84.15 per share. The Company also granted 0.5 million shares of restricted stock in the first six months of 2022, which had a weighted average grant date fair value of $326.32 per share. Both the employee stock options and restricted stock generally vest ratably over four years. Additionally, the Company granted 0.1 million shares of performance-based awards whereby the number of shares that ultimately vest are based on the achievement of certain non-market-based performance metrics of the Company over three years. The weighted average grant date fair value of these awards was $317.21 per share.

The following weighted average assumptions were used in determining the fair value using the Black-Scholes option-pricing model for options granted in 2022:


Expected dividend yield	0.86	%
Expected stock volatility	27	%
Risk-free interest rate	1.88	%
Expected holding period	5.6 years

Unrecognized stock-based compensation expense at June 30, 2022 was $22 million and $293 million for stock options and unvested restricted stock, respectively, which is expected to be recognized over a weighted average period of 2.2 years and 2.7 years, respectively. Additionally, there was $41 million of unrecognized stock-based compensation expense relating to the aforementioned non-market-based performance-based awards, which is expected to be recognized over a weighted average period of 1.9 years.

The following table summarizes information relating to stock option exercises and restricted stock vesting:


	Six Months Ended June 30,
	2022		2021
Exercise of stock options:
Proceeds from stock option exercises	$	4	$	16
Aggregate intrinsic value	$	5	$	35
Tax benefit realized upon exercise	$	1	$	8
Number of shares exercised (1)	—		0.2
Vesting of restricted stock:
Fair value of shares vested	$	170	$	187
Tax benefit realized upon vesting	$	40	$	43
Number of shares vested	0.5		0.7
Vesting of performance-based restricted stock:
Fair value of shares vested	$	50	$	28
Tax benefit realized upon vesting	$	12	$	7
Number of shares vested	0.2		0.1

(1) The number of options exercised in 2022 was approximately 27 thousand.

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NOTE 4. INCOME TAXES

Moody’s effective tax rate was 26.2% and 23.9% for the three months ended June 30, 2022 and 2021, and 21.6% and 19% for the six months periods ended June 30, 2022 and 2021, respectively. The 2.3% and 2.6% increase in the ETR for the three and six months ended June 30, 2022 and 2021, respectively, was primarily due to non-recurring tax benefits including the resolution of uncertain tax positions in the first half of 2021, along with a non-deductible foreign currency translation loss recognized resulting from the Company no longer conducting commercial operations in Russia. The Company’s year-to-date 2022 income tax expense differs from the tax computed by applying its estimated annual effective tax rate to the pre-tax earnings primarily due to the following items recognized in 2022: i) Excess Tax Benefits from stock-based compensation of $19 million; and ii) net reductions in UTPs of $20 million related to the resolution of uncertain tax positions.

The Company classifies interest related to UTPs in interest expense, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating (expense) income, net. The Company had a decrease in its UTPs of $32 million ($26 million, net of federal tax) during the second quarter of 2022 and a decrease in its UTPs of $52 million ($47 million net of federal tax) during the first six months of 2022, which primarily related to the aforementioned resolution of uncertain tax positions.

Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various state, local and foreign jurisdictions. The Company’s U.S. federal income tax returns for 2017 through 2019 are currently under examination and 2020 remains open to examination. The Company’s New York State tax returns for 2017 through 2018 and New York City tax returns for 2015 through 2018 are currently under examination. The Company’s U.K. tax returns for 2012 through 2020 remain open to examination.

For ongoing audits, it is possible the balance of UTPs could decrease in the next twelve months as a result of the settlement of these audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues might be raised by tax authorities which could necessitate increases to the balance of UTPs. As the Company is unable to predict the timing or outcome of these audits, it is therefore unable to estimate the amount of changes to the balance of UTPs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years by tax jurisdiction in accordance with the applicable provisions of Topic 740 of the ASC regarding UTPs.

The following table shows the amount the Company paid for income taxes:


	Six Months Ended June 30,
	2022		2021
Income taxes paid	$	326	$	327

NOTE 5. RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING

Below is a reconciliation of basic to diluted shares outstanding:


	Three Months Ended June 30,		Six Months Ended June 30,

	2022	2021	2022	2021
Basic	184.1	186.7	184.6	187.0
Dilutive effect of shares issuable under stock-based compensation plans	0.8	1.2	0.8	1.2
Diluted	184.9	187.9	185.4	188.2
Anti-dilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above	0.8	0.2	0.4	0.3

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 June 30, 2022 and 2021.

NOTE 6. ACCELERATED SHARE REPURCHASE PROGRAM

On March 1, 2022, the Company entered into an ASR agreement with a financial institution counterparty to repurchase $500 million of its outstanding common stock. The Company paid $500 million to the counterparty and received an initial delivery of 1.2 million shares of its common stock. Final settlement of the ASR agreement was completed in April 2022 and the Company received delivery of an additional 0.3 million shares of the Company’s common stock.

In total, the Company repurchased 1.5 million shares of the Company’s common stock during the term of the ASR Agreement, based on the volume-weighted average price (net of discount) of $324.20 per share over the duration of the program. The initial share repurchase and final share settlement were recorded as a reduction to shareholders’ equity.

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NOTE 7. CASH EQUIVALENTS AND INVESTMENTS

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


	As of June 30, 2022
							Balance sheet location
	Cost		Gains/(Losses)		Fair Value		Cash and cash equivalents		Short-term investments		Other assets
Certificates of deposit and money market deposit accounts (1)	$	777	$	—	$	777	$	669	$	86	$	22
Mutual funds	$	59	$	—	$	59	$	—	$	—	$	59


	As of December 31, 2021
							Balance sheet location
	Cost		Gains/(Losses)		Fair Value		Cash and cash equivalents		Short-term investments		Other assets

Certificates of deposit and money market deposit accounts (1)	$	691	$	—	$	691	$	584	$	91	$	16
Mutual funds	$	65	$	8	$	73	$	—	$	—	$	73

(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 both June 30, 2022 and December 31, 2021. The remaining contractual maturities for the certificates of deposits classified in other assets are 13 months to 35 months at June 30, 2022 and 13 months to 29 months at December 31, 2021. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents.

In addition, the Company invests in Corporate-Owned Life Insurance (COLI). As of June 30, 2022 and December 31, 2021, the contract value of the COLI was $40 million and $37 million, respectively.

NOTE 8. ACQUISITIONS

The material business combination described below is accounted for using the acquisition method of accounting whereby assets acquired and liabilities assumed were recognized at fair value or other values set forth in U.S. GAAP on the date of the transaction. Any excess of the purchase price over the fair value of the assets acquired and liabilities assumed was recorded to goodwill. Goodwill typically results through expected synergies from combining operations of an acquiree and an acquirer, anticipated new customer acquisition and products, as well as from intangible assets that do not qualify for separate recognition.

RMS

On September 15, 2021, the Company acquired 100% of RMS, a global provider of climate and natural disaster risk modeling and analytics. The cash payment was funded with new debt financing and a combination of U.S. and offshore cash on hand. The acquisition will expand Moody’s insurance data and analytics business and accelerate the development of the Company’s global integrated risk capabilities to address the next generation of risk assessment.

The table below details the total consideration relating to the acquisition:


Cash paid at closing	$	1,922




Replacement equity compensation awards	5
Total consideration	$	1,927

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Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition:


Cash			$	60
Accounts receivable			38
Other current assets			11
Property and equipment, net			13
Operating lease right-of-use assets			64
Intangible assets:
Customer relationships (23 year useful life)	$	518
Product technology (7 year useful life)	212
Trade name (9 year useful life)	49
Total intangible assets (18 year weighted average useful life)			779
Goodwill			1,376
Deferred tax assets, net			48
Other assets			99
Liabilities:
Accounts payable and accrued liabilities	$	(92)
Deferred revenue	(89)
Operating lease liabilities	(68)
Deferred tax liabilities, net	(214)
Uncertain tax positions	(96)
Other liabilities	(2)
Total liabilities			(561)
Net assets acquired			$	1,927

The Company has performed a preliminary valuation analysis of the fair market value of assets and liabilities of the RMS business. The final purchase price allocation will be determined when the Company has completed and fully reviewed all information necessary to finalize the fair value of the acquired assets and liabilities, including deferred revenue. The final allocation could differ materially from the preliminary allocation. The final allocation may include changes in allocations to acquired intangible assets (including estimated useful lives of these assets) as well as goodwill and other changes to assets and liabilities including reserves for UTPs and deferred tax liabilities.

Goodwill

The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary product portfolios of Moody's and RMS, which is expected to extend the Company's reach into new market segments. The goodwill also includes the combined company's ability to accelerate technology innovations into new product adjacencies (leveraging RMS's team of data scientists, modelers and software engineers) as well as combining RMS's products with Moody’s core data and analytics offerings to provide holistic integrated risk solutions.

Goodwill, of which $1,286 million and $90 million has been assigned to the MA and MIS segments, respectively, is not deductible for tax purposes. The amount of goodwill allocated to the MIS segment relates to the integration of certain of RMS's models/processes into the Company's ESG solutions offerings.

Other assets in the table above includes an indemnification asset of $95 million related to uncertain tax positions assumed in the transaction, for which the Company expects to be indemnified by the sellers in the event of an unfavorable outcome.

Transaction costs

Transaction costs incurred in the year ended December 31, 2021 directly related to the RMS acquisition were $22 million and were recorded in SG&A expenses in the statement of operations.

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Supplementary Unaudited Pro Forma Information

Supplemental information on an unaudited pro forma basis is presented below for the three and six months ended June 30, 2021 as if the acquisition of RMS occurred on January 1, 2020. The pro forma financial information is presented for comparative purposes only and is based on certain estimates and assumptions, which the Company believes to be reasonable but not necessarily indicative of future results of operations or the results that would have been reported if the acquisition had been completed at January 1, 2020. The unaudited pro forma information includes amortization of acquired intangible assets, based on the preliminary purchase price allocation and an estimate of useful lives reflected above, and incremental financing costs resulting from the acquisition, net of income tax, which was estimated using the weighted average statutory tax rates in effect in the jurisdiction for which the pro forma adjustment relates.


	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Pro forma Revenue	$	1,633	$	3,313
Pro forma Net Income attributable to Moody's	$	572	$	1,301

The unaudited pro forma results do not include any anticipated cost savings or other effects of the planned integration of RMS. Accordingly, the pro forma results above are not necessarily indicative of the results that would have been reported if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future. The RMS results included in the above have been converted to U.S. GAAP from IFRS as issued by the IASB and have been translated to USD at rates in effect for the periods presented.

NOTE 9. 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:

Fair Value Hedges

Interest Rate Swaps

The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the 3-month LIBOR, 6-month LIBOR, and SOFR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the long-term debt, 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 debt. The changes in the fair value of the swaps 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 statements of operations.

The following table summarizes the Company’s interest rate swaps designated as fair value hedges:


		Notional Amount
Hedged Item	Nature of Swap	As of June 30, 2022		As of December 31, 2021		Floating Interest Rate
2017 Senior Notes due 2023	Pay Floating/Receive Fixed	$	—	$	250	3-month USD LIBOR
2017 Senior Notes due 2028	Pay Floating/Receive Fixed	$	500	$	500	3-month USD LIBOR
2020 Senior Notes due 2025	Pay Floating/Receive Fixed	$	300	$	300	6-month USD LIBOR
2014 Senior Notes due 2044	Pay Floating/Receive Fixed	$	300	$	300	3-month USD LIBOR
2018 Senior Notes due 2048	Pay Floating/Receive Fixed	$	300	$	300	3-month USD LIBOR
2018 Senior Notes due 2029 (1)	Pay Floating/Receive Fixed	$	400	$	—	SOFR
2022 Senior Notes due 2052 (2)	Pay Floating/Receive Fixed	$	500	$	—	SOFR
Total		$	2,300	$	1,650

(1) Executed in the first quarter of 2022.

(2) Executed in the second quarter of 2022.

Refer to Note 15 for information on the cumulative amount of fair value hedging adjustments included in the carrying amount of the above hedged items.

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


Total amounts of financial statement line item presented in the statements of operations in which the effects of fair value hedges are recorded				Amount of income/(loss) recognized in the consolidated statements of operations
	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2021			2022			2021
Interest expense, net				$	(55)		$	(49)		$	(108)	$	(56)

Descriptions		Location on Consolidated Statements of Operations
Net interest settlements and accruals on interest rate swaps		Interest expense, net		$	3		$	6		$	9	$	11
Fair value changes on interest rate swaps		Interest expense, net		$	(47)		$	—		$	(132)	$	(24)
Fair value changes on hedged debt		Interest expense, net		$	47		$	—		$	132	$	24

Net investment hedges

Debt designated as net investment hedges

The Company has designated €500 million of the 2015 Senior Notes Due 2027 and €750 million of the 2019 Senior Notes due 2030 as net investment hedges to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. These hedges are designated as accounting hedges under the applicable sections of ASC Topic 815 and will end upon the repayment of the notes in 2027 and 2030, respectively, unless terminated early at the discretion of the Company.

Cross currency swaps designated as net investment hedges

The Company enters into cross-currency swaps to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. The following table provides information on the cross-currency swaps designated as net investment hedges under ASC Topic 815:


June 30, 2022
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	765	3.67%	$	800	5.25%
Pay Floating/Receive Floating	958		Based on 3-month EURIBOR	1,100		Based on 3-month USD LIBOR
Pay Floating/Receive Floating	854		Based on ESTR	900		Based on SOFR
Total	€	2,577		$	2,800


December 31, 2021
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	909	2.16%	$	1,050	4.45%
Pay Floating/Receive Floating	1,179		Based on 3-month EURIBOR	1,350		Based on 3-month USD LIBOR
Total	€	2,088		$	2,400

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As of June 30, 2022 these hedges will expire and the notional amounts will be settled as follows unless terminated early at the discretion of the Company:


Years Ending December 31,

2026	€	450
2027	€	285
2028	€	507
2029	€	373
2031	€	481
2032	€	481
Total	€	2,577

Cash Flow Hedges

Interest Rate Forward Contracts

In January 2020, the Company entered into $300 million notional amount treasury rate locks with an average locked-in U.S. 30-year Treasury rate of 2.0103%, which were designated as cash flow hedges and used to manage the Company’s interest rate risk during the period prior to an anticipated issuance of 30-year debt. The treasury lock interest rate forward contracts matured on April 30, 2020, resulting in a cumulative loss of $68 million, which was recognized in AOCL. The loss on the Treasury rate lock will be reclassified from AOCL to earnings in the same period that the hedged transaction (i.e. interest payments on the 3.25% 2020 Senior Notes, due 2050) impacts earnings.

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


Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships		Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of Tax					Amount of Gain/(Loss) Reclassified from AOCL into Income, net of Tax					Gain/(Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Three Months Ended June 30,					Three Months Ended June 30,					Three Months Ended June 30,
		2022		2021			2022		2021			2022		2021

Cross currency swaps		$	118	$	(18)		$	—	$	—		$	11	$	9
Long-term debt		63		(10)			—		—			—		—
Total net investment hedges		$	181	$	(28)		$	—	$	—		$	11	$	9


Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships		Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of Tax					Amount of Gain/(Loss) Reclassified from AOCL into Income, net of Tax					Gain/(Loss) Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Six Months Ended June 30,					Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2022		2021			2022		2021
FX forward contracts		$	—	$	16		$	—	$	1		$	—	$	—
Cross currency swaps		142		54			—		—			21		19
Long-term debt		86		35			—		—			—		—
Total net investment hedges		$	228	$	105		$	—	$	1		$	21	$	19
Derivatives in Cash Flow Hedging Relationships

Interest rate contracts		$	—	$	—		$	(1)	$	(1)		$	—	$	—

Total cash flow hedges		$	—	$	—		$	(1)	$	(1)		$	—	$	—
Total		$	228	$	105		$	(1)	$	—		$	21	$	19

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The cumulative amount of net investment hedge and cash flow hedge gains (losses) remaining in AOCL is as follows:


	Cumulative Gains/(Losses), net of tax
	June 30, 2022		December 31, 2021
Net investment hedges
Cross currency swaps	$	161	$	19
FX forwards	29		29
Long-term debt	59		(27)
Total net investment hedges	$	249	$	21
Cash flow hedges
Interest rate contracts	$	(48)	$	(49)
Cross currency swaps	2		2
Total cash flow hedges	(46)		(47)
Total net gain (loss) in AOCL	$	203	$	(26)

Derivatives not designated as accounting hedges:

Foreign exchange forwards

The Company also enters into foreign exchange forward contracts 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 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 August 2022.

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


	June 30, 2022				December 31, 2021
Notional amount of currency pair:	Sell		Buy		Sell		Buy
Contracts to sell USD for GBP	$	135	£	104	$	126	£	92
Contracts to sell USD for Japanese yen	$	20	¥	2,500	$	22	¥	2,500
Contracts to sell USD for Canadian dollars	$	134	C$	171	$	120	C$	150
Contracts to sell USD for Singapore dollars	$	73	S$	100	$	67	S$	90
Contracts to sell USD for euros	$	365	€	338	$	364	€	315
Contracts to sell USD for Russian ruble	$	—	₽	—	$	16	₽	1,200
Contracts to sell USD for Indian rupee	$	23	₹	1,800	$	7	₹	500
Contracts to sell GBP for USD	£	—	$	—	£	172	$	231

NOTE: € = euro, £ = British pound, $ = U.S. dollar, ¥ = Japanese yen, C$ = Canadian dollar, S$= Singapore dollars, ₽= Russian ruble, ₹= Indian rupee

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


Derivatives not designated as accounting hedges	Location on Consolidated Statements of Operations		Three Months Ended June 30,					Six Months Ended June 30,
		2022	2021				2022	2021
FX forwards	Other non-operating income, net		$	(38)	$	(1)		$	(57)	$	(7)

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The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of the derivative instrument as well as the carrying value of its non-derivative debt instruments designated and qualifying as net investment hedges:


	Derivative and Non-Derivative Instruments
	Balance Sheet Location	June 30, 2022		December 31, 2021
Assets:
Derivatives designated as accounting hedges:

Cross-currency swaps designated as net investment hedges	Other assets	$	112	$	53

Interest rate swaps designated as fair value hedges	Other assets	—		13
Total derivatives designated as accounting hedges		112		66

Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Other current assets	—		1
Total assets		$	112	$	67
Liabilities:
Derivatives designated as accounting hedges:


Cross-currency swaps designated as net investment hedges	Other liabilities	$	22	$	17
Interest rate swaps designated as fair value hedges	Other liabilities	142		23
Total derivatives designated as accounting hedges		164		40
Non-derivatives designated as accounting hedges:
Long-term debt designated as net investment hedge	Long-term debt	1,307		1,421
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Accounts payable and accrued liabilities	25		12
Total liabilities		$	1,496	$	1,473

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NOTE 10. GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS

The following table summarizes the activity in goodwill for the periods indicated:


	Six Months Ended June 30, 2022
	MIS						MA						Consolidated
	Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill
Balance at beginning of year	$	396	$	—	$	396	$	5,615	$	(12)	$	5,603	$	6,011	$	(12)	$	5,999
Additions/ adjustments (1)	3		—		3		107		—		107		110		—		110
Foreign currency translation adjustments	(9)		—		(9)		(259)		—		(259)		(268)		—		(268)

Ending balance	$	390	$	—	$	390	$	5,463	$	(12)	$	5,451	$	5,853	$	(12)	$	5,841


	Year Ended December 31, 2021
	MIS						MA						Consolidated
	Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill		Gross goodwill		Accumulated impairment charge		Net goodwill
Balance at beginning of year	$	311	$	—	$	311	$	4,257	$	(12)	$	4,245	$	4,568	$	(12)	$	4,556
Additions/ adjustments (2)	90		—		90		1,525		—		1,525		1,615		—		1,615
Foreign currency translation adjustments	(5)		—		(5)		(167)		—		(167)		(172)		—		(172)

Ending balance	$	396	$	—	$	396	$	5,615	$	(12)	$	5,603	$	6,011	$	(12)	$	5,999

(1) The 2022 additions/adjustments for the MA segment in the table above primarily relate to the acquisition of kompany in the first quarter of 2022.

(2) The 2021 additions/adjustments for the MA segment in the table above relate to the acquisitions of Cortera, RMS, RealXData, Bogard, and PassFort. The 2021 additions/adjustments for the MIS segment relate to certain revenue synergies from the RMS acquisition that are expected to benefit the ESG solutions group within the MIS Other LOB.

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Acquired intangible assets and related amortization consisted of:


	June 30, 2022		December 31, 2021
Customer relationships	$	2,016	$	2,101
Accumulated amortization	(407)		(381)
Net customer relationships	1,609		1,720
Software/product technology	656		663
Accumulated amortization	(243)		(219)
Net software/product technology	413		444
Database	177		179
Accumulated amortization	(54)		(46)
Net database	123		133
Trade names	199		207
Accumulated amortization	(53)		(47)
Net trade names	146		160
Other (1)	53		54
Accumulated amortization	(44)		(44)
Net other	9		10
Total acquired intangible assets, net	$	2,300	$	2,467

(1) Other intangible assets primarily consist of trade secrets, covenants not to compete, and acquired ratings methodologies and models.

Amortization expense relating to acquired intangible assets is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Amortization expense	$	51	$	36	$	102	$	71

Estimated future amortization expense for acquired intangible assets subject to amortization is as follows:


Year Ending December 31,
2022 (After June 30,)	$	100
2023	190
2024	185
2025	181
2026	176
Thereafter	1,468
Total estimated future amortization	$	2,300

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NOTE 11. RESTRUCTURING

On June 30, 2022, the chief executive officer of Moody’s approved a restructuring program (the “2022 - 2023 Geolocation Restructuring Program”) that the Company estimates will result in annualized savings of $40 million to $60 million per year. This program relates to the Company's post-COVID-19 geolocation strategy and includes the rationalization and exit of certain real estate leases and a reduction in staff, including the relocation of certain job functions from their current locations. The exit from certain leased office spaces is expected to begin late in 2022 or early 2023 and is expected to result in $25 million to $35 million of pre-tax charges to either terminate or sublease the affected real estate leases. The program also includes $30 million to $40 million of pre-tax personnel-related restructuring charges, an amount that includes severance and related costs primarily determined under the Company’s existing severance plans. The savings generated from the 2022 - 2023 Geolocation Restructuring Program will primarily be redeployed towards strategic investments including the Company's Workplace of the Future program and employee retention initiatives. The 2022 - 2023 Geolocation Restructuring Program is expected to be substantially complete in the first half of 2023. Cash outlays associated with this program are expected to be $30 million to $40 million, which are expected to be paid through 2024.

On December 22, 2020, the chief executive officer of Moody’s approved a restructuring program (the “2020 MA Strategic Reorganization Restructuring Program”) that the Company estimates will result in annualized savings of $20 million per year. This program relates to a strategic reorganization in the MA reportable segment consisting of severance and related costs primarily determined under the Company’s existing severance plans. The 2020 MA Strategic Reorganization Restructuring Program resulted in a total of $19 million in pre-tax charges and was substantially completed in the first half of 2021. Cash outlays associated with this program are expected to be $20 million, which will be paid through 2022.

Total expense included in the accompanying consolidated statements of operations relating to the aforementioned restructuring program is below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021


2020 MA Strategic Reorganization Restructuring Program	$	(1)	$	—	$	(1)	$	2
2022 - 2023 Geolocation Restructuring Program	32		—		32		—
Total Restructuring	$	31	$	—	$	31	$	2

Changes to the restructuring liability for the aforementioned restructuring programs during the first six months of 2022 were as follows:


	Employee Termination Costs
Balance as of December 31, 2021	$	4






2020 MA Strategic Reorganization Restructuring Program:
Cost incurred and adjustments	(1)
Cash payments and adjustments	(2)
2022 - 2023 Geolocation Restructuring Program:
Cost incurred and adjustments	32
Cash payments and adjustments	(1)
Balance as of June 30, 2022	$	32

Cumulative expense incurred to date


2020 MA Strategic Reorganization Restructuring Program	$	19
2022 - 2023 Geolocation Restructuring Program	$	32

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NOTE 12. FAIR VALUE

The table below presents information about items that are carried at fair value at June 30, 2022 and December 31, 2021:


	Fair value Measurement as of June 30, 2022
Description	Balance		Level 1		Level 2
Assets:
Derivatives (1)	$	112	$	—	$	112
Mutual funds	59		59		—
Total	$	171	$	59	$	112
Liabilities:
Derivatives (1)	$	189	$	—	$	189
Total	$	189	$	—	$	189


	Fair value Measurement as of December 31, 2021
Description	Balance		Level 1		Level 2
Assets:
Derivatives (1)	$	67	$	—	$	67

Mutual funds	73		73		—
Total	$	140	$	73	$	67
Liabilities:
Derivatives (1)	$	52	$	—	$	52
Total	$	52	$	—	$	52

(1) Represents FX forward contracts, interest rate swaps and cross-currency swaps as more fully described in Note 9 to the condensed consolidated financial statements.

The following are descriptions of the methodologies utilized by the Company to estimate the fair value of its derivative contracts, mutual funds and money market mutual funds:

Derivatives:

In determining the fair value of the derivative contracts in the table above, the Company utilizes industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using spot rates, forward points, currency volatilities, interest rates as well as the risk of non-performance of the Company and the counterparties with whom it has derivative contracts. The Company established strict counterparty credit guidelines and only enters into transactions with financial institutions that adhere to these guidelines. Accordingly, the risk of counterparty default is deemed to be minimal.

Mutual funds:

The mutual funds in the table above are deemed to be equity securities with readily determinable fair values with changes in the fair value recognized through net income under ASC Topic 321. The fair value of these instruments is determined using Level 1 inputs as defined in the ASC Topic 820.

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NOTE 13. OTHER BALANCE SHEET AND STATEMENTS OF OPERATIONS INFORMATION

The following tables contain additional detail related to certain balance sheet captions:


	June 30, 2022		December 31, 2021
Other current assets:
Prepaid taxes	$	258	$	112
Prepaid expenses	98		99
Capitalized costs to obtain and fulfill sales contracts	91		103


Other	68		75
Total other current assets	$	515	$	389

Other assets:
Investments in non-consolidated affiliates	$	514	$	443
Deposits for real-estate leases	14		14
Indemnification assets related to acquisitions	108		106
Mutual funds and fixed deposits	81		89
Company owned life insurance (at contract value)	40		37
Costs to obtain sales contracts	145		138
Derivative instruments designated as accounting hedges	112		66
Pension and other retirement employee benefits	73		77
Other	80		64
Total other assets	$	1,167	$	1,034

Accounts payable and accrued liabilities:
Salaries and benefits	$	156	$	211
Incentive compensation	110		324
Customer credits, advanced payments and advanced billings	102		100

Dividends	5		6
Professional service fees	68		75
Interest accrued on debt	82		85
Accounts payable	31		47
Income taxes	130		115
Pension and other retirement employee benefits	7		7
Accrued royalties	17		36
Foreign exchange forwards on certain assets and liabilities	25		12
Restructuring liability	28		4


Other	105		120
Total accounts payable and accrued liabilities	$	866	$	1,142






































Other liabilities:
Pension and other retirement employee benefits	$	213	$	235

Interest accrued on UTPs	40		59
MAKS indemnification provisions	22		33
Income tax liability - non-current portion	23		23
Derivative instruments designated as accounting hedges	164		40
Restructuring liability	4		—
Other	47		48
Total other liabilities	$	513	$	438

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Allowance for credit losses:

During the six months ended June 30, 2022, the Company increased its allowance for credit losses by $14 million. This increase was primarily due to reserves recorded for the Company's Russian-domiciled customers pursuant to the impacts of the Russia/Ukraine conflict, which is more fully described in Note 1.

Investments in non-consolidated affiliates:

The following table provides additional detail regarding Moody's investments in non-consolidated affiliates, as included in other assets in the consolidated balance sheets:


	June 30, 2022		December 31, 2021
Equity method investments(1)	$	189	$	121
Investments measured using the measurement alternative(2)	320		318
Other	5		4
Total investments in non-consolidated affiliates	$	514	$	443
(1) Equity securities in which the Company has significant influence over the investee but does not have a controlling financial interest in accordance with ASC Topic 323
(2) Equity securities without readily determinable fair value for which the Company has elected to apply the measurement alternative in accordance with ASC Topic 321

Moody's holds various investments accounted for under the equity method, the most significant of which is the Company's minority investment in CCXI. Moody's also holds various investments measured using the measurement alternative, the most significant of which is the Company's minority interest in BitSight.

Earnings from non-consolidated affiliates, which are included within other non-operating income, net, are disclosed within the table below.

Other non-operating (expense) Income:

The following table summarizes the components of other non-operating (expense) income:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
FX (loss)/gain (1)	$	(22)	$	2	$	(22)	$	—
Net periodic pension costs - other components	6		(3)		12		1
Income from investments in non-consolidated affiliates	2		1		4		9
Other	4		6		2		12
Total	$	(10)	$	6	$	(4)	$	22
(1) FX loss for the three and six months ended June 30, 2022 includes FX translation losses of $20 million reclassified to earnings resulting from the Company no longer conducting commercial operations in Russia.

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NOTE 14. COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides details about the reclassifications out of AOCL:


	Three Months Ended June 30,				Location in the consolidated statements of operations
Losses on currency translation adjustments	2022		2021
Foreign currency translation adjustments - reclassification of losses included in net income	$	(20)	$	—	Other non-operating income, net
Total losses on currency translation adjustments	(20)		—




Gains (losses) on net investment hedges
FX forwards	—		1		Other non-operating income, net
Income tax effect of item above	—		(1)		Provision for income taxes
Total net gains on net investment hedges	—		—
Pension and other retirement benefits
Amortization of actuarial losses and prior service costs included in net income	(1)		(3)		Other non-operating income, net
Settlement charge	—		(7)		Other non-operating income, net
Total before income taxes	(1)		(10)
Income tax effect of items above	—		2		Provision for income taxes
Total pension and other retirement benefits	(1)		(8)
Total net losses included in Net Income attributable to reclassifications out of AOCL	$	(21)	$	(8)


	Six Months Ended June 30,				Location in the consolidated statements of operations
Losses on currency translation adjustments	2022		2021
Foreign currency translation adjustments - reclassification of losses included in net income	$	(20)	$	—	Other non-operating income, net
Total losses on currency translation adjustments	(20)		—
Losses on cash flow hedges

Interest rate contract	(1)		(1)		Other non-operating income, net
Income tax effect of item above	—		—		Provision for income taxes
Total net losses on cash flow hedges	(1)		(1)
Gains (losses) on net investment hedges
FX forwards	—		2		Other non-operating income, net
Income tax effect of item above	—		(1)		Provision for income taxes
Total net gains on net investment hedges	—		1
Pension and other retirement benefits
Amortization of actuarial losses and prior service costs included in net income	(1)		(6)		Other non-operating income, net
Settlement charge	—		(7)		Other non-operating income, net
Total before income taxes	(1)		(13)
Income tax effect of item above	—		3		Provision for income taxes
Total pension and other retirement benefits	(1)		(10)
Total net losses included in Net Income attributable to reclassifications out of AOCL	$	(22)	$	(10)

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The following tables show changes in AOCL by component (net of tax):



	Three Months Ended June 30,
	2022										2021
Gains/(Losses)	Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total		Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total
Balance at March 31,	$	(51)	$	(46)	$	(442)	$	68	$	(471)	$	(116)	$	(48)	$	(188)	$	(88)	$	(440)
Other comprehensive income/(loss) before reclassifications	4		—		(334)		181		(149)		—		—		36		(29)		7
Amounts reclassified from AOCL	1		—		20		—		21		8		—		—		—		8
Other comprehensive income/(loss)	5		—		(314)		181		(128)		8		—		36		(29)		15
Balance at June 30,	$	(46)	$	(46)	$	(756)	$	249	$	(599)	$	(108)	$	(48)	$	(152)	$	(117)	$	(425)


	Six Months Ended June 30,
	2022										2021
Gains/(Losses)	Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total		Pension and Other Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustments		Net Investment Hedges		Total
Balance at December 31,	$	(49)	$	(47)	$	(335)	$	21	$	(410)	$	(118)	$	(49)	$	(45)	$	(220)	$	(432)
Other comprehensive income/(loss) before reclassifications	2		—		(441)		228		(211)		—		—		(107)		104		(3)
Amounts reclassified from AOCL	1		1		20		—		22		10		1		—		(1)		10

Other comprehensive income/(loss)	3		1		(421)		228		(189)		10		1		(107)		103		7
Balance at June 30,	$	(46)	$	(46)	$	(756)	$	249	$	(599)	$	(108)	$	(48)	$	(152)	$	(117)	$	(425)

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NOTE 15. INDEBTEDNESS

The Company’s debt is recorded at its carrying amount, which represents the issuance amount plus or minus any issuance premium or discount, except for certain debt as depicted in the table below, which is recorded at the carrying amount adjusted for the fair value of an interest rate swap used to hedge the fair value of the note.

The following table summarizes total indebtedness:


June 30, 2022
Notes Payable:	Principal Amount		Fair Value of Interest Rate Swaps (1)		Unamortized (Discount) Premium		Unamortized Debt Issuance Costs		Carrying Value
4.875% 2013 Senior Notes, due 2024	$	500	$	—	$	(1)	$	(1)	$	498
5.25% 2014 Senior Notes, due 2044	600		(32)		3		(5)		566
1.75% 2015 Senior Notes, due 2027	523		—		—		(2)		521
2.625% 2017 Senior Notes, due 2023	500		—		—		(1)		499
3.25% 2017 Senior Notes, due 2028	500		(24)		(3)		(2)		471
4.25% 2018 Senior Notes, due 2029	400		(25)		(2)		(2)		371
4.875% 2018 Senior Notes, due 2048	400		(34)		(6)		(4)		356
0.950% 2019 Senior Notes, due 2030	784		—		(2)		(4)		778
3.75% 2020 Senior Notes, due 2025	700		(22)		(1)		(3)		674
3.25% 2020 Senior Notes, due 2050	300		—		(4)		(3)		293
2.55% 2020 Senior Notes, due 2060	500		—		(4)		(5)		491
2.00% 2021 Senior Notes, due 2031	600		—		(7)		(5)		588
2.75% 2021 Senior Notes, due 2041	600		—		(13)		(5)		582
3.10% 2021 Senior Notes, due 2061	500		—		(7)		(5)		488
3.75% 2022 Senior Notes, due 2052	500		(5)		(9)		(5)		481

Total debt	$	7,907	$	(142)	$	(56)	$	(52)	$	7,657
Current portion									(499)
Total long-term debt									$	7,158


December 31, 2021
Notes Payable:	Principal Amount		Fair Value of Interest Rate Swaps (1)		Unamortized (Discount) Premium		Unamortized Debt Issuance Costs		Carrying Value
4.875% 2013 Senior Notes, due 2024	$	500	$	—	$	(1)	$	(1)	$	498
5.25% 2014 Senior Notes, due 2044	600		(7)		3		(5)		591
1.75% 2015 Senior Notes, due 2027	568		—		—		(2)		566
2.625% 2017 Senior Notes, due 2023	500		5		—		(1)		504
3.25% 2017 Senior Notes, due 2028	500		8		(3)		(2)		503
4.25% 2018 Senior Notes, due 2029	400		—		(2)		(2)		396
4.875% 2018 Senior Notes, due 2048	400		(7)		(6)		(4)		383
0.950% 2019 Senior Notes, due 2030	853		—		(2)		(5)		846
3.75% 2020 Senior Notes, due 2025	700		(9)		(1)		(4)		686
3.25% 2020 Senior Notes, due 2050	300		—		(4)		(3)		293
2.55% 2020 Senior Notes, due 2060	500		—		(4)		(5)		491
2.00% 2021 Senior Notes, due 2031	600		—		(8)		(5)		587
2.75% 2021 Senior Notes, due 2041	600		—		(13)		(6)		581
3.10% 2021 Senior Notes, due 2061	500		—		(7)		(5)		488
Total long-term debt	$	7,521	$	(10)	$	(48)	$	(50)	$	7,413

(1) The fair value of interest rate swaps in the table above represents the cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged debt.

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Notes Payable

In the first quarter of 2022, the Company issued the 2022 Senior Notes, due 2052. The key terms of this debt issuance are set forth in the table above.

At June 30, 2022, the Company was in compliance with all covenants contained within all of the debt agreements. All the debt agreements contain cross default provisions which state that default under one of the aforementioned debt instruments could in turn permit lenders under other debt instruments to declare borrowings outstanding under those instruments to be immediately due and payable. As of June 30, 2022, there were no such cross defaults.

The repayment schedule for the Company’s borrowings is as follows:


Year Ending December 31,	2013 Senior Notes due 2024		2014 Senior Notes due 2044		2015 Senior Notes due 2027		2017 Senior Notes due 2023		2017 Senior Notes due 2028		2018 Senior Notes due 2029		2018 Senior Notes due 2048		2019 Senior Notes due 2030		2020 Senior Notes due 2025		2020 Senior Notes due 2050		2020 Senior Notes due 2060		2021 Senior Notes due 2031		2021 Senior Notes due 2041		2021 Senior Notes due 2061		2022 Senior Notes due 2052		Total
2022 (After June 30,)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2023	—		—		—		500		—		—		—		—		—		—		—		—		—		—		—		500
2024	500		—		—		—		—		—		—		—		—		—		—		—		—		—		—		500
2025	—		—		—		—		—		—		—		—		700		—		—		—		—		—		—		700
2026	—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Thereafter	—		600		523		—		500		400		400		784		—		300		500		600		600		500		500		6,207
Total	$	500	$	600	$	523	$	500	$	500	$	400	$	400	$	784	$	700	$	300	$	500	$	600	$	600	$	500	$	500	$	7,907

Interest expense, net

The following table summarizes the components of interest as presented in the consolidated statements of operations and the cash paid for interest:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Income	$	2	$	1	$	4	$	4
Expense on borrowings	(50)		(41)		(98)		(82)
Income (expense) on UTPs and other tax related liabilities(2)	(3)		(5)		(6)		30
Net periodic pension costs - interest component	(4)		(4)		(8)		(8)
Interest expense, net	$	(55)	$	(49)	$	(108)	$	(56)
Interest paid(1)	$	12	$	13	$	90	$	86

(1) Interest paid includes net settlements on interest rate swaps more fully discussed in Note 9.

(2) Income (expense) on UTPs and other tax related liabilities for the six months ended June 30, 2021 includes a $40 million benefit relating to the reversal of tax-related interest accruals pursuant to the resolution of tax matters.

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The fair value and carrying value of the Company’s debt as of June 30, 2022 and December 31, 2021 are as follows:


	June 30, 2022				December 31, 2021
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
4.875% 2013 Senior Notes, due 2024	$	498	$	510	$	498	$	538
5.25% 2014 Senior Notes, due 2044	566		607		591		805
1.75% 2015 Senior Notes, due 2027	521		503		566		607
2.625% 2017 Senior Notes, due 2023	499		499		504		509
3.25% 2017 Senior Notes, due 2028	471		499		503		539
4.25% 2018 Senior Notes, due 2029	371		398		396		451
4.875% 2018 Senior Notes, due 2048	356		395		383		526
0.950% 2019 Senior Notes, due 2030	778		678		846		866
3.75% 2020 Senior Notes, due 2025	674		699		686		750
3.25% 2020 Senior Notes, due 2050	293		223		293		311
2.55% 2020 Senior Notes, due 2060	491		311		491		432
2.00% 2021 Senior Notes, due 2031	588		491		587		581
2.75% 2021 Senior Notes, due 2041	582		442		581		579
3.10% 2021 Senior Notes, due 2061	488		347		488		488
3.75% 2022 Senior Notes, due 2052	481		409		—		—
Total	$	7,657	$	7,011	$	7,413	$	7,982

The fair value of the Company’s long-term debt is estimated based on quoted market prices for similar instruments. Accordingly, the inputs used to estimate the fair value of the Company’s long-term debt are classified as Level 2 inputs within the fair value hierarchy.

NOTE 16. LEASE COMMITMENTS

The Company has operating leases, substantially all of which relate to the lease of office space. The Company’s leases which are classified as finance leases are not material to the consolidated financial statements. Certain of the Company’s leases include options to renew, with renewal terms that can extend the lease term from one year to 20 years at the Company’s discretion.

The following table presents the components of the Company’s lease cost:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Operating lease cost	$	25	$	23	$	52	$	47
Sublease income	(2)		(1)		(4)		(2)
Variable lease cost	5		5		10		10
Total lease cost	$	28	$	27	$	58	$	55

The following tables present other information related to the Company’s operating leases:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	29	$	28	$	60	$	56
Right-of-use assets obtained in exchange for new operating lease liabilities	$	15	$	2	$	30	$	6

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	June 30, 2022		June 30, 2021
Weighted-average remaining lease term	5.3 years		5.6 years
Weighted-average discount rate applied to operating leases	3.1	%	3.6	%

The following table presents a maturity analysis of the future minimum lease payments included within the Company’s operating lease liabilities at June 30, 2022:


Year Ending December 31,	Operating Leases
2022 (After June 30,)	$	60
2023	119
2024	112
2025	97
2026	79
After 2026	103
Total lease payments (undiscounted)	570
Less: Interest	44
Present value of lease liabilities:	$	526
Lease liabilities - current	$	105
Lease liabilities - noncurrent	$	421

NOTE 17. CONTINGENCIES

Given the nature of the Company's activities, Moody’s and its subsidiaries are subject to legal and tax proceedings, governmental, regulatory and legislative investigations, subpoenas and other inquiries, and claims and litigation by governmental and private parties that are based on ratings assigned by MIS or that are otherwise incidental to the Company’s business. Moody’s and MIS also are subject to periodic reviews, inspections, examinations and investigations by regulators in the U.S. and other jurisdictions, any of which may result in claims, legal proceedings, assessments, fines, penalties or restrictions on business activities. Moody’s also is subject to ongoing tax audits as addressed in Note 4 to the condensed consolidated financial statements.

Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. For claims, litigation and proceedings and governmental investigations and inquiries not related to income taxes, the Company records liabilities in the consolidated financial statements when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated 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 instances when a loss is reasonably possible but uncertainties exist related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if material. As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. Moody’s also discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate.

In view of the inherent difficulty of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative investigations and inquiries, claims and litigation and similar matters and contingencies, particularly when the claimants seek large or indeterminate damages or assert novel legal theories or the matters involve a large number of parties, the Company often cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also may be unable to 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 and to accrue for and disclose such matters as and when required. However, because such matters are inherently unpredictable and unfavorable developments or resolutions can occur, the ultimate outcome of such matters, including the amount of any loss, may differ from those estimates.

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NOTE 18. SEGMENT INFORMATION

The Company is organized into two operating segments: MIS and MA and accordingly, the Company reports in two reportable segments: MIS and MA.

The MIS segment consists of five LOBs. The CFG, FIG, PPIF and SFG LOBs generate revenue principally from fees for the assignment and ongoing monitoring of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide. The MIS Other LOB primarily consists of financial instruments pricing services in the Asia-Pacific region, ICRA non-ratings revenue and revenue from providing ESG research, data and assessments.

The MA segment develops a wide range of products and services that support the risk management activities of institutional participants in global financial markets. The MA segment consists of three LOBs - Decision Solutions, Research and Insights, and Data and Information.

Revenue for MIS and expenses for MA include intersegment fees charged to MA for the rights to use and distribute content, data and products developed by MIS. Additionally, revenue for MA and expenses for MIS include an intersegment fee charged to MIS from MA for certain MA products and services utilized in MIS’s ratings process. These intersegment fees are generally based on the market value of the products and services being transferred between the segments.

Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resources and legal. Such costs and corporate expenses that exclusively benefit one segment are fully charged to that segment.

For overhead costs and corporate expenses that benefit both segments, costs are allocated to each segment based on the segment’s share of full-year 2019 actual revenue which comprises a “Baseline Pool” that will remain fixed over time. In subsequent periods, incremental overhead costs (or reductions thereof) will be allocated to each segment based on the prevailing shares of total revenue represented by each segment.

“Eliminations” in the following table represent intersegment revenue/expense. Moody’s does not report the Company’s assets by reportable segment, as this metric is not used by the chief operating decision maker to allocate resources to the segments. Consequently, it is not practical to show assets by reportable segment.

Financial Information by Segment

The table below shows revenue and Adjusted Operating Income by reportable segment. Adjusted Operating Income is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment. Refer to Note 2 for further details on the components of the Company’s revenue.


	Three Months Ended June 30,
	2022								2021
	MIS		MA		Eliminations		Consolidated		MIS		MA		Eliminations		Consolidated
Total external revenue	$	706	$	675	$	—	$	1,381	$	980	$	573	$	—	$	1,553
Intersegment revenue	43		1		(44)		—		42		2		(44)		—
Revenue	749		676		(44)		1,381		1,022		575		(44)		1,553
Operating, SG&A	334		471		(44)		761		344		392		(44)		692
Adjusted Operating Income	415		205		—		620		678		183		—		861
Add:
Depreciation and amortization	21		60		—		81		18		42		—		60

Restructuring	15		16		—		31		—		—		—		—


Operating Income							$	508							$	801

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	Six Months Ended June 30,
	2022								2021
	MIS		MA		Eliminations		Consolidated		MIS		MA		Eliminations		Consolidated
Total external revenue	$	1,533	$	1,370	$	—	$	2,903	$	2,016	$	1,137	$	—	$	3,153
Intersegment revenue	86		3		(89)		—		82		4		(86)		—
Revenue	$	1,619	$	1,373	$	(89)	$	2,903	$	2,098	$	1,141	$	(86)	$	3,153
Operating, SG&A	694		944		(89)		1,549		692		772		(86)		1,378
Adjusted Operating Income	$	925	$	429	$	—	$	1,354	$	1,406	$	369	$	—	$	1,775
Add:
Depreciation and amortization	39		120		—		159		36		83		—		119
Restructuring	15		16		—		31		—		2		—		2



Operating Income							$	1,164							$	1,654

The cumulative restructuring charge for the MA reportable segment related to the 2020 MA Strategic Reorganization Restructuring Program is $19 million. The cumulative restructuring charge for the MIS and MA reportable segments related to the 2022 - 2023 Geolocation Restructuring Program is $15 million and $17 million, respectively. The restructuring programs are more fully discussed in Note 11.

Consolidated Revenue Information by Geographic Area


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
United States	$	723	$	831	$	1,546	$	1,716
Non-U.S.:
EMEA	422		481		878		959
Asia-Pacific	151		155		293		311
Americas	85		86		186		167
Total Non-U.S.	658		722		1,357		1,437
Total	$	1,381	$	1,553	$	2,903	$	3,153

NOTE 19. SUBSEQUENT EVENT

On July 25, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share of Moody’s common stock, payable on September 9, 2022 to shareholders of record at the close of business on August 19, 2022.

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