Moody’s Annual Report 2021

Plain-text annual report

ANNUAL REPORT 2021 Raymond W. McDaniel, Jr. Letter from the Chairman of the Board Throughout 2021, the global pandemic continued to impact Moody’s employees, customers, stockholders and communities. Despite this challenge, Moody’s again achieved considerable success, and I am impressed with the ways in which the Company has sustained and, in many areas, enhanced its contribution to ﬁnancial market efﬁciency, transparency and fairness. As the pandemic has highlighted the demand for understanding of the complex and interconnected risks facing markets, businesses and economies, Moody’s has stepped up to the challenge through its strategy of offering an integrated and holistic perspective on risk for customers. Important elements of this strategy in 2021 were the many investments made in new and evolving risk segments, including: cyber risk, Know Your Customer (KYC); Commercial Real Estate; Environmental, Social and Governance (ESG), and other high-growth adjacencies. Product development work and acquisitions complemented and enhanced investments in Moody’s core credit ratings and research offerings, data and analytic capabilities, and will help ensure the continued relevance and value of these offerings to customers. The acquisition of RMS established Moody’s as a leader in insurance and data analytics and brought valuable new expertise in modeling extreme weather and climate risk, as well as other catastrophes. These capabilities are already helping customers better identify, measure and manage a wider range of risks leading to better outcomes. As the pace of digitization and automation continues, so has the prevalence of cyber risk. Managing this risk is critical to informing key strategic decisions – from security initiatives to capital allocation – given that its reach extends across supply chains. To help address the emerging cyber risk segment, in 2021 Moody’s invested and partnered with BitSight, a pioneer in cybersecurity ratings and analytics. In the expanding area of sustainability, COP26 highlighted the importance of stakeholder requests for transparent corporate disclosures that capture both the short- and long-term impacts of physical risk and energy transition risk across industries and business operations. Governments and others are increasingly using climate analytics to better inform climate mitigation and adaptation measures, and stakeholders are seeking ways to better understand the progress and impact of corporate 1 MOODY’S 2021 ANNUAL REPORT de-carbonization commitments. In this spirit, Moody’s accelerated its own net-zero commitments to 2040, advanced its science-based targets, and published its inaugural Stakeholder Sustainability Report. Moody’s has continued to strengthen the ﬁrm’s culture of inclusion, built on respect, diversity and openness. The Company is proud to have met its Supplier Diversity Initiative pledge to increase the representation of women- owned businesses in its supply chain, and of the commitment made in 2021 to materially increase the population of women, and U.S. Black and Hispanic / Latino leaders across the company by 2025. Moody’s continues to garner recognition for its diversity, equity and inclusion achievements, including from the Human Rights Campaign Foundation, Bloomberg Gender Equality Index and Working Mother. I would like to acknowledge the many contributions of my fellow board members, and welcome Zig Seraﬁn, CEO of Qualtrics, to the Moody’s board. Zig brings a wealth of experience to the board, strengthening the Company’s focus on innovation and enhancing operational and technological skillsets. I am grateful to Rob Fauber for his leadership since becoming President and Chief Executive Ofﬁcer of Moody’s Corporation in January 2021. Rob’s deep knowledge of the business and customers’ needs has been invaluable in navigating through the rapidly changing global landscape. I am conﬁdent that Moody’s ongoing evolution as a global integrated risk assessment business will continue to position the Company at the forefront of helping customers to operate with speed and sophistication in an increasingly complex and interconnected world. This, combined with Moody’s experienced leadership and its talented and diverse workforce, will enable continued generation of enduring value for stockholders and other important stakeholders. Raymond W. McDaniel, Jr. Chairman of the Board Robert Fauber Letter from the President & Chief Executive Ofﬁcer Looking back on my ﬁrst year as CEO, I am enormously proud of the tremendous dedication and resilience of our employees as we delivered for our stakeholders through yet another year of the pandemic. As I observed last year, our customers seek solutions to help them identify, measure and manage a wider range of interconnected risks. To address these risks, they need to go beyond data into context—and beyond context into meaning. Moody’s seeks to be a compass for our customers by leveraging our rich history and diverse expertise to provide a holistic view of risk and opportunity. In 2021, we set out three strategic priorities that are critical to meeting this need: sharpening our understanding of our customers’ needs, investing with intent to grow and scale, and collaborating, modernizing and innovating. Over the course of the year, we have executed on those priorities, investing in capabilities to better serve a broader range of customers and accelerating our ambition to be the leading global provider of integrated perspectives on risk. ACCELERATING OUR STRATEGY Once again, our employees powered through the pandemic, working together to support each other and our customers with passion and commitment. This translated into strong ﬁnancial performance and returns for our stockholders. While 2021 was a year of challenges, it was also full of opportunities to invest and deliver for our customers. The markets looked to Moody’s for our expertise and insights in navigating evolving credit conditions, and many organizations sought our help in making better, more informed decisions in ﬁnancing, screening, lending, insuring and investing. We invested approximately $150 million organically in technology, data, and product development in addition to pursuing acquisitions that enhance our capabilities and will accelerate our speed to market in areas ranging from environmental, social and governance (ESG) and climate risk to ﬁnancial crime, commercial real estate (CRE) and supply chain risk. In 2021, we rated over $6 trillion of issuance and served more than 1,100 issuers who accessed the markets for the ﬁrst time. We held over 13,000 customer engagement meetings, a 12% increase over 2020. In addition to serving international credit markets, we expanded our support for domestic markets and began offering local credit ratings in Brazil as part of the ongoing expansion of our Moody’s Local business across 3 MOODY’S 2021 ANNUAL REPORT Latin America. I am very proud that our expertise and focus on supporting credit markets was recognized by Institutional Investor as Best Credit Rating Agency for the tenth consecutive year. We also signiﬁcantly expanded the ways we are helping markets better understand ESG issues, including the risks and opportunities around climate change. We assigned nearly 1,800 ESG Credit Impact Scores to help investors understand the impact of ESG factors on credit risk, as well as new Carbon Transition Assessments for nearly 400 issuers across the most exposed sectors. We launched Moody’s ESG Score Predictor, which provides ESG estimates, carbon emissions footprint, and transition and physical risk factors for over 140 million companies, supporting customers’ needs around sustainable sourcing and supply chains. Ahead of COP26, we launched the Moody’s on Climate Campaign which generated close to 10 million content impressions, illustrating the market’s strong interest in Moody’s ESG insights. In September, we closed on our acquisition of RMS, a leading risk analytics business serving the global insurance industry. This enables us both to provide a more comprehensive suite of offerings to our life, property and casualty (P&C) and reinsurance customers and to leverage RMS’ world-class models and expertise in weather, climate and disaster risk in providing risk solutions beyond insurance. We advanced our screening and onboarding offerings, aided by several key acquisitions. We are helping our customers digitize and automate the Know Your Customer (KYC) process, providing a streamlined workﬂow with proprietary company, ownership, and people data. We also launched the next generation of Supply Chain Catalyst, offering our customers an enterprise-wide view of critical supply chain relationships, including factors such as ﬁnancial health, sustainability and reputational risk. In response to intense need for interconnected CRE data and analytics to support lending and investing workﬂows, we accelerated the development of our SaaS workﬂow solution for CRE lenders and our portfolio monitoring solution for CRE investors. We also advanced the transition of our banking and insurance solutions to SaaS, deepening and streamlining the ways we support many mid-sized ﬁnancial institutions. And, as our customers increasingly seek to understand and quantify the risk of a cyber attack in their organizations and across their supply chains, we made a $250 million investment in BitSight, a leading provider of cyber security risk ratings. All of these initiatives translated into impressive ﬁnancial performance and continued strong returns for our stockholders. Moody’s surpassed $6 billion in revenue for the ﬁrst time and garnered recognition as a Fortune 500 company. We achieved revenue growth of 16% and adjusted diluted EPS growth of 21%, our second consecutive year of over 20% growth amidst the pandemic. Moody’s Investors Service (MIS) revenue grew 16% on the strength of buoyant issuance markets and our comprehensive coverage of global debt markets. Moody’s Analytics (MA) revenue grew 16%, supported by 9% organic revenue growth, as well as several acquisitions. These impressive results are the product of the many investments we have made in our people and our offerings and speak to the value that customers place on our expertise and solutions. COMMITMENT TO SUSTAINABILITY At Moody’s, we believe we play an important role in supporting a sustainable future, and that means we must support our people, our communities and our environment. In 2021, we published our inaugural Sustainability Report (available at about.moodys.io/sustainability-reports) highlighting our commitments, initiatives, and achievements. Our greatest asset is our people. We continue to advance our commitment to a diverse and inclusive work environment because we believe that a workforce with an array of backgrounds and experiences greatly contributes to the quality of our opinions, products and services. In 2021, we published multi-year goals for the diversity of our workforce, supported by a range of initiatives and programs that foster inclusion. This includes our Business Resource Groups, which count more than half of our employees as members, and our work to empower our leaders, managers and individual employees in reinforcing an inclusive culture. We are proud that Moody’s continues to be recognized for our leadership in this area, including a perfect score on the Human Rights Campaign Foundation’s Corporate Equality Index for the eleventh year in a row, our third consecutive year in the Bloomberg Gender-Equality Index, inclusion in the prestigious Civic 50 honor roll, and being named one of America’s Most Loved Workplaces by Newsweek. We see our role as a corporate citizen to help build a world where more people have access to opportunity and where everyone has the resources to grow and thrive. In 2021, we contributed to this goal through our many Corporate Social Responsibility (CSR) initiatives, the work of the Moody’s Foundation, and by encouraging employee volunteerism. Highlights of our 2021 CSR program include the introduction of paid time off for employees to volunteer and meaningful support in the form of a $16 million contribution to the Moody’s Foundation. Our commitment to environmental sustainability includes accelerating our net zero emissions target by ten years, from 2050 to 2040, consistently engaging in the ongoing global dialogue around ESG and climate disclosures, and executing on our public decarbonization plan. We are proud that our efforts led to recognition as a 2021 Global Compact LEAD company and an ‘A List’ score from CDP, recognizing Moody’s as one of a small number of high-performing companies that are leading actions to cut emissions, mitigate climate risks and develop the low-carbon economy. INTO THE FUTURE I am excited about our future and the many ways we will meet our customers’ evolving needs as we help them to decode risk and unlock opportunity. By investing in our business and acquiring new capabilities, we are enhancing the ways we serve our customers and our ability to reach new markets. We are focused on providing a world-class experience for our customers, anchored around their sense of value, to help expand our relationships with them as we meet their needs. I am conﬁdent that we will realize the beneﬁts of our investments as we provide differentiated integrated solutions that accelerate our growth. And, we will ensure that Moody’s is a place where the best talent wants to come and stay through investments in our people and our culture. Above all, we are inspired to help uncover meaning amid uncertainty so individuals and organizations can thrive, which drives our ambition to be the leading provider of global integrated perspectives on risk. I offer my sincere thanks to our employees, stockholders and customers for their support, and I look forward to a prosperous and successful year ahead. Robert Fauber President & Chief Executive Ofﬁcer MOODY’S 2021 ANNUAL REPORT 4 Moody’s Corporation DIRECTORS Raymond W. McDaniel, Jr.(4*) Chairman of the Board of Directors Moody’s Corporation Jorge A. Bermudez(1,2,3) Retired Chief Risk Ofﬁcer Citigroup, Inc. Thérèse Esperdy(1,2,3) Retired Global Chairman of Financial Institutions Group JPMorgan Chase & Co. Robert Fauber(4) President & Chief Executive Ofﬁff cer Moody’s Corporation Vincent A. Forlenza(1,2*,3,4 ) Lead Independent Director Moody’s Corporation Retired Chief Executive Ofﬁff cer Becton Dickinson Kathryn M. Hill(1,2,3*,4 ) Retired Senior Vice President Cisco Systems Inc. Lloyd Howell Jr.(1,2,3) Executive Vice President, Chief Financial Ofﬁcer and Treasurer Booz Allen Hamilton Leslie F. Seidman(1*,2,3,4) Former Chairman Financial Accounting Standards Board Zig Seraﬁn(1,2,3) Chief Executive Ofﬁff cer Qualtrics International Inc. Bruce Van Saun(1,2,3) Chairman & Chief Executive Ofﬁcer Citizens Financial Group, Inc. 5 MOODY’S 2021 ANNUAL REPORT Caroline Sullivan Senior Vice President & Corporate Controller Christine Elliott Head of Global Corporate Affairs Tameka Alsop Chief of Staff David Hogan Vice President, Treasurer Scott Kapusta Vice President, Global Tax Helene Gurian Chief Compliance Ofﬁcer Shivani Kak Head of Investor Relations SENIOR MANAGEMENT Robert Fauber President & Chief Executive Ofﬁcer Mark Kaye Chief Financial Ofﬁcer Stephen Tulenko President, Moody’s Analytics Michael West President, Moody’s Investors Service John J. Goggins Executive Vice President & General Counsel Mona Breed Senior Vice President, Chief Information Ofﬁcer Maral Kazanjian Chief People Ofﬁcer Scott Kenney Senior Vice President, Risk Management & Chief Audit Executive David Platt Senior Vice President, Chief Strategy Ofﬁcer BOARD COMMITTEES 1 Audit 2 Governance & Nominating 3 Compensation & Human Resources 4 Executive * Committee Chairman Corporate Secretary Elizabeth M. McCarroll Stockholders and other stakeholders may communicate with the Board, or with a speciﬁc director or directors, by writing to: c/o Corporate Secretary Moody’s Corporation 7 World Trade Center 250 Greenwich Street New York, NY 10007 UNITED STATTT ES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARKMM ONE) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 1-14037 MOODY’S CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware (STATTT E OF INCORPORATAA ION) 13-3998945 (I.R.S. EMPLOYER IDENTIFICATION AA NO.) 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 (ADDRESS OF PRINCIPALPP EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 553-0300. SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS TRADING SYMBOL(S) NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, par value $0.01 per share 1.75% Senior Notes Due 2027 0.950% Senior Notes Due 2030 MCO MCO 27 MCO 30 New York Stock Exchange New York Stock Exchange New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or forff to such filing requirements for the past 90 days. Yes ☑ No ☐ such shorter period that the registrant was required to file such reports), and (2) has been subject b Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesYY ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☑ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ of its internal ff Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ The aggregate market value of Moody’s Corporation Common Stock held by nonaffiliates* the New York Stock Exchange on such date) was approximately $68 billion. ff on June 30, 2021 (based upon its closing transaction price on As of January 31, 2022, 185.2 million shares of Common Stock of Moody’s Corporation were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s definitive proxy statement for use in connection with its annual meeting of stockholders scheduled to be held on April 26, 2022, are incorporated by reference into Part III of this Form 10-K. The Index to Exhibits is included as Part IV, Item 15(3) of this Form 10-K. * Calculated by excluding all shares held by executive officers ff and directors of the Registrant without conceding that all such persons are “affiliates” ff of the Registrant for purposes of federal securities laws. * Auditor Name: KPMG LLP Auditor Location: New York, NY Auditor Firm ID: 185 MOODY'S 2021 10-K 1 MOODY’S CORPORATION INDEX TO FORM 10-K AA Glossary of Terms and Abbreviations PART I. Item 1. BUSINESS Background The Company Human Capital Climate Moody’s Strategy Prospects for Growth Competition Regulation Intellectual Property Available Information Executive Officers ff of the Registrant Item 1A. RISK FACTORS Item 1B. UNRESOLVED STAFF COMMENTS Item 2. Item 3. Item 4. Item 5. PROPERTIES LEGAL PROCEEDINGS MINE SAFETY DISCLOSURES MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES PART II. Moody’s Purchases of Equity Securities Common Stock Information Equity Compensation Plan Information Performance Graph Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company Critical Accounting Estimates Reportable Segments Results of Operations Market Risk Liquidity and Capital Resources Recently Issued Accounting Pronouncements Contingencies Forward-Looking Statements Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Item 8. Item 9. FINANCIAL STATEMENTS CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Page(s) 4-10 11 11 11-14 14-18 18 19-20 21-23 23 23-24 24-25 25 25-26 27-37 38 38 38 38 39 39 39 39 40 41 41 41-46 46 46-59 60-61 61-66 66 66 66-67 67 68-129 130 2 MOODY'S 2021 10-K Item 9A. CONTROLS AND PROCEDURES Item 9B. OTHER INFORMATION Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS PART III. Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Item 11. EXECUTIVE COMPENSATION Item 12. Item 13. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES PART IV. INDEX TO EXHIBITS Item 16. FORM 10-K SUMMARY SIGNATURES Page(s) 130 130 130 131 131 131 131 131 132 132-135 135 136 MOODY'S 2021 10-K 3 The following terms, abbreviations and acronyms are used to identify frequently used terms in this report: TERM DEFINITION GLOSSARY OF TERMS AND ABBREVIATIONS Acquire Media (AM) An aggregator and distributor of curated real-time news, multimedia, data, and alerts; acquired by the Company on October 21, 2020 Acquisition-Related Amortization Amortization of definite-lived intangible assets acquired by the Company from all business combination transactions Acquisition-Related Expenses Consists of expenses incurred over a multi-year period to complete and integrate the acquisition of Bureau van Dijk Adjusted Diluted EPS Diluted EPS excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures” Adjusted Net Income Net Income excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures” Adjusted Operating Income Operating income excluding the impact of certain items as detailed in the section entitled "Non-GAAP Financial Measures" Adjusted Operating Margin Adjusted Operating Income divided by revenue Americas AML AOCI(L) ASC Represents countries within North and South America, excluding the U.S. Anti-money laundering Accumulated other comprehensive income (loss); a separate component of shareholders’ equity The FASB Accounting Standards Codification; the sole source of authoritative GAAP as of July 1, 2009 except for rules and interpretive releases of the SEC, which are also sources of authoritative GAAP for SEC registrants Asia-Pacific Represents Australia and countries in Asia including but not limited to: China, India, Indonesia, Japan, Korea, Malaysia, Singapore, Sri Lanka and Thailand ASR ASU B&H Board BPS Brexit Accelerated Share Repurchase The FASB Accounting Standards Update to the ASC. It also provides background information for accounting guidance and the bases for conclusions on the changes in the ASC. ASUs are not considered authoritative until codified into the ASC Barrie & Hibbert Limited, an acquisition completed in December 2011; part of the MA segment, a leading provider of risk management modeling tools for insurance companies worldwide The board of directors of the Company Basis points The withdrawal of the United Kingdom from the European Union Bureau van Dijk Bureau van Dijk Electronic Publishing, B.V.; a global provider of business intelligence and company information; acquired by the Company on August 10, 2017 via the acquisition of Yellow Maple I B.V., an indirect parent of Bureau van Dijk; part of the RD&A LOB A provider of cybersecurity ratings, analytics, and performance management tools; Moody's acquired a minority investment in BitSight in 2021 A provider of commercial real estate (CRE) solutions for brokers; acquired by the Company on December 30, 2020 China Cheng Xin International Credit Rating Co. Ltd.; China’s first and largest domestic credit rating agency approved by the People’s Bank of China; the Company acquired a 49% interest in 2006; currently Moody’s owns 30% of CCXI A not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts BitSight Catylist CCXI CDP 4 MOODY'S 2021 10-K TERM CFG CLO CMBS COLI DEFINITION Corporate finance group; an LOB of MIS Collateralized loan obligation Commercial mortgage-backed securities; an asset class within SFG Corporate-Owned Life Insurance Commission European Commission Common Stock The Company’s common stock Company Content Cortera COVID-19 CP CP Notes CP Program CRAs CRE DBPPs Moody’s Corporation and its subsidiaries; MCO; Moody’s Prior to the second quarter of 2021, was a reporting unit within the MA segment that offered subscription-based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts ff A provider of North American credit data and workflow solutions; acquired by the Company in March 2021 An outbreak of a novel strain of coronavirus resulting in an international public health crisis and a global pandemic Commercial Paper Unsecured commercial paper issued under the CP Program A program entered into on August 3, 2016 allowing the Company to privately place CP up to a maximum of $1 billion for which the maturity may not exceed 397 days from the date of issue, and which is backstopped by the 2021 Facility. Credit rating agencies Commercial Real Estate Defined benefit pension plans Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act EBITDA EEO-1 Earnings before interest, taxes, depreciation and amortization Data filing required by the U.S. Equal Employment Opportunity Commission that requires all private sector employers with 100 or more employees, and federal contractors with 50 or more employees meeting certain criteria, to submit demographic workforce data, including data by race/ethnicity, sex and job categories EMEA Represents countries within Europe, the Middle East and Africa EPS ERS ESA ESG ESMA ESPP ETR EU EUR EURIBOR Eurozone Earnings per share Enterprise Risk Solutions; an LOB within MA, which offers well as related risk management advisory engagements services ff risk management software solutions as Economics and Structured Analytics; part of the RD&A line of business within MA Environmental, Social and Governance European Securities and Markets Authority Employee stock purchase plan Effective ff tax rate European Union Euros The Euro Interbank Offered ff Rate Monetary union of the EU member states which have adopted the euro as their common currency MOODY'S 2021 10-K 5 TERM DEFINITION Excess Tax Benefits The difference ff share and the tax benefit recorded at the time the option or restricted share is expensed under GAAP between the tax benefit realized at exercise of an option or delivery of a restricted Exchange Act The Securities Exchange Act of 1934, as amended External Revenue Revenue excluding any intersegment amounts FASB Fermat FIG Financial Accounting Standards Board Fermat International; an acquisition completed in October 2008; part of the MA segment; a provider of risk and performance management software to the global banking industry Financial institutions group; an LOB of MIS Four Twenty Seven A provider of data, intelligence, and analysis related to physical climate risks; acquired by the Company in July 2019 Free Cash Flow Net cash provided by operating activities less cash paid for capital additions FTSE FX GAAP GBP GDP GDPR ICRA INR IRS KIS Financial Times Stock Exchange Foreign exchange U.S. Generally Accepted Accounting Principles British pounds Gross domestic product European Union’s General Data Protection Regulation ICRA Limited; a provider of credit ratings and research in India. Indian National Rupee Internal Revenue Service Korea Investors Service, Inc.; a Korean rating agency and consolidated subsidiary of the Company KIS Pricing KIS Research Korea Investors Service Pricing, Inc.; a Korean provider of fixed income securities pricing and consolidated subsidiary of the Company Korea Investors Service Research; a Korean provider of financial research and consolidated subsidiary of the Company Korea KYC LIBOR LOB MA Republic of South Korea Know-your-customer London Interbank Offered ff Rate Line of business Moody’s Analytics—a reportable segment of MCO; a global provider of: i) data and information; ii) research and insights; and iii) decision solutions, which help companies make better and faster decisions; consists of two LOBs—RD&A and ERS Make Whole Amount The prepayment penalty amount relating to certain Senior Notes, which is a premium based on the excess, if any, of the discounted value of the remaining scheduled payments over the prepaid principal MAKS MALS Moody’s Analytics Knowledge Services; formerly known as Copal Amba; provided offshore and analytic services to the global financial and corporate sectors; business was divested in the fourth quarter of 2019 and was formerly part of the PS LOB and a reporting unit within the MA reportable segment. ff research Moody’s Analytics Learning Solutions; prior to the second quarter of 2021, was a reporting unit within the MA segment that offered and certification services on-line and classroom-based training services as well as credentialing ff MCO Moody’s; Moody’s Corporation and its subsidiaries; the Company 6 MOODY'S 2021 10-K TERM MD&A MIS MIS Other DEFINITION Management’s Discussion and Analysis of Financial Condition and Results of Operations Moody’s Investors Service—a reportable segment of MCO; consists of five LOBs—SFG, CFG, FIG, PPIF and MIS Other Consists of non-ratings revenue from ICRA, KIS Pricing and KIS Research revenue as well as revenue from providing ESG research, data and assessments. These businesses are components of MIS; MIS Other is an LOB of MIS Moody’s Moody’s Corporation and its subsidiaries; MCO; the Company Moody's Local A ratings platform focused on providing credit rating services in local capital markets MSS AA NAV Net Income New Credit Losses Accounting Standard Moody's Shared Services; primarily consists of information technology and support staff sff uch as finance, human resources and legal that support both MIS and MA. N et asset value Net income attributable to Moody’s Corporation, which excludes net income from consolidated noncontrolling interests belonging to the minority interest holder Updates to the ASC pursuant to ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This new accounting guidance requires the use of an “expected credit loss” impairment model for most financial assets reported at amortized cost, which requires entities to estimate expected credit losses over the lifetime of the instrument. TT New Lease Accounting Standard Updates to the ASC pursuant to ASU No. 2016-02, “Leases (ASC Topic 842)”. This new accounting guidance requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses and cash flows depend on classification as either a finance or operating lease NM Non-GAAP NRSRO OCI Operating segment Percentage change is not meaningful A financial measure not in accordance with GAAP; these measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s performance, facilitate comparisons to competitors’ operating results and to provide greater transparency to investors of supplemental information used by management in its financial and operational decision making Nationally Recognized Statistical Rating Organization, which is a credit rating agency registered with the SEC. Other comprehensive income (loss); includes gains and losses on cash flow and net investment hedges, certain gains and losses relating to pension and other retirement benefit obligations and foreign currency translation adjustments Term defined in the ASC relating to segment reporting; the ASC defines an operating segment as a component of a business entity that has each of the three following characteristics: i) the component engages in business activities from which it may recognize revenue and incur expenses; ii) the operating results of the component are regularly reviewed by the entity’s chief operating decision maker; and iii) discrete financial information about the component is available. Other Retirement Plans The U.S. retirement healthcare and U.S. retirement life insurance plans PassFort PCS PPIF A U.K. SaaS-based workflow platform for identity verification, customer onboarding, and risk analysis; acquired by the Company on November 30, 2021. Post-Contract Customer Support Public, project and infrastructure finance; an LOB of MIS Profit Participation Plan Defined contribution profit participation plan that covers substantially all U.S. employees of the Company MOODY'S 2021 10-K 7 TERM PS RealXData RD&A DEFINITION ff ff LOB within MA which consisted of MAKS and MALS that provided analytical and research services as well as learning solutions and certification programs. Professional Services, a former offshore Subsequent to the divestiture of MAKS in 2019, revenue from the MALS reporting unit, which previous to 2020 was reported in the PS LOB, is now reported as part of the RD&A LOB. Prior periods have not been reclassified as the amounts were not material. A provider of CRE lease-level portfolio management with benchmarking and rent forecasting capabilities; acquired by the Company in September 2021 Research, Data and Analytics; an LOB within MA that offers: analytical products, including credit ratings produced by MIS; credit research; quantitative credit scores and other analytical tools; economic research and forecasts; business intelligence and company information products; commercial real estate data and analytical tools; and on-line and classroom-based training services as well as credentialing and certification services subscription based research, data and ff Recurring Revenue For MIS, represents 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. For MIS Other represents subscription-based revenue. For MA, represents subscription-based revenue and software maintenance revenue Reform Act Credit Rating Agency Reform Act of 2006 Regulatory Data Corporation (RDC) A provider of anti-money laundering (AML) and know-your-customer (KYC) data and due diligence services; the Company acquired RDC in February 2020 REIT Real Estate Investment Trust Reis, Inc. (Reis) A provider of U.S. commercial real estate (CRE) data; acquired by the Company in October 2018; part of the RD&A LOB and prior to the second quarter of 2021 a reporting unit within the MA reportable segment. Reporting unit The level at which Moody’s evaluates its goodwill for impairment under U.S. GAAP; defined as an operating segment or one level below an operating segment Retirement Plans Moody’s funded and unfunded pension plans, the healthcare plans and life insurance plans Revenue Accounting Standard Updates to the ASC pursuant to ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606)”. This accounting guidance significantly changed the accounting framework under U.S. GAAP relating to revenue recognition and to the accounting for the deferral of incremental costs of obtaining or fulfilling a contract with a customer RMBS RMS ROU Asset SaaS SEC Residential mortgage-backed securities; an asset class within SFG A global provider of climate and natural disaster risk modeling and analytics; acquired by the Company in September 2021 Assets recorded pursuant to the New Lease Accounting Standard which represent the Company’s right to use an underlying asset for the term of a lease Software-as-a-Service U.S. Securities and Exchange Commission Securities Act Securities Act of 1933, as amended Structured finance group; an LOB of MIS Selling, general and administrative expenses Secured Overnight Financing Rate Standalone selling price Time-and-Material The “TaxTT Cuts and Jobs Act” enacted into U.S. law on December 22, 2017, which significantly amends the tax code in the U.S. Task Force on Climate-Related Financial Disclosures SFG SG&A SOFR SSP T&M Tax Act TCFD 8 MOODY'S 2021 10-K TERM Total Debt Transaction Revenue DEFINITION All indebtedness of the Company as reflected on the consolidated balance sheets For MIS, represents the initial rating of a new debt issuance as well as other one-time fees. For MIS Other, represents revenue from professional services as well as data services, research and analytical engagements. For MA, represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, training and certification services, and research and analytical engagements U.K. U.S. USD UTPs United Kingdom United States U.S. dollar Uncertain tax positions Vigeo Eiris (VE) A provider of ESG research, data and assessments; acquired by the Company in April 2019 VisibleRisk A cyber risk ratings joint venture created by Moody’s and Team8, a global venture group WACC Weighted Average Cost of Capital ZM Financial Systems (ZMFS) A provider of risk and financial management software for the U.S. banking sector; acquired by the Company in December 2020 2018 Restructuring Program Restructuring program approved by the chief executive officer of Moody’s on October 26, 2018. This program included relocation of certain functions from high-cost to lower-cost jurisdictions, a reduction including from acquisitions and pursuant to a review of the business criticality of certain of staff,ff positions, and the rationalization and exit of certain real estate leases due to consolidation of various business activities. ff 2020 MA Strategic Reorganization Restructuring Program Restructuring program approved by the chief executive officer relating to a strategic reorganization in the MA reportable segment. ff of Moody’s on December 22, 2020, 2020 Real Estate Rationalization Restructuring Program Restructuring program approved by the chief executive officer of Moody’s on July 29, 2020, primarily in response to the COVID-19 pandemic which revolves around the rationalization and exit of certain real estate leases. ff 2012 Senior Notes Due 2022 Principal amount of $500 million, 4.50% senior unsecured notes due in September 2022, but early repaid by the Company in 2021 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 Facility 2018 Senior Notes Due 2029 2018 Senior Notes Due 2048 2019 Senior Notes Due 2030 Principal amount of $500 million, 4.875% senior unsecured notes due in February 2024 Principal amount of $600 million, 5.25% senior unsecured notes due in July 2044 Principal amount of €500 million, 1.75% senior unsecured notes due in March 2027 Principal amount of $500 million, 2.625% senior unsecured notes due January 15, 2023 Principal amount of $500 million, 3.25% senior unsecured notes due January 15, 2028 Five-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; backstops CP issued under the CP Program. The 2021 Facility replaces the Company's $1 billion 2018 Credit Facility. Principal amount of $400 million, 4.25% senior unsecured notes due February 1, 2029 Principal amount of $400 million, 4.875% senior unsecured notes due December 17, 2048 Principal amount of €750 million, 0.950% senior unsecured notes due February 25, 2030 MOODY'S 2021 10-K 9 TERM DEFINITION 2020 Senior Notes Due 2025 2020 Senior Notes Due 2050 2020 Senior Notes Due 2060 2021 Facility 2021 Senior Notes Due 2031 2021 Senior Notes Due 2041 2021 Senior Notes Due 2061 Principal amount of $700 million, 3.75% senior unsecured notes due March 24, 2025 Principal amount of $300 million, 3.25% senior unsecured notes due May 20, 2050 Principal amount of $500 million, 2.55% senior unsecured notes due August 18, 2060 Five-year unsecured revolving credit facility, with capacity to borrow up to $1.25 billion; backstops CP issued under the CP Program. Principal amount of $600 million, 2.00% senior unsecured notes due August 19, 2031 Principal amount of $600 million, 2.75% senior unsecured notes due August 19, 2041 Principal amount of $500 million, 3.10% senior unsecured notes due November 15, 2061 7WTC The Company’s corporate headquarters located at 7 World Trade Center in New York, NY 10 MOODY'S 2021 10-K PART I ITEM 1. BUSINESS BACKGROUND As used in this report, except where the context indicates otherwise, the terms “Moody’s” or the “Company” refer to Moody’s Corporation, a Delaware corporation, and its subsidiaries. The Company’s executive offices at 250 Greenwich Street, New York, NY 10007 and its telephone number is (212) 553-0300. are located at 7 World Trade Center ff THE COMPANY Company Overview integrated risk assessment firm that empowers organizations and investors to make better decisions. Moody’s is a global Moody’s reports in two segments: MIS and MA. Financial information and operating results of these segments, including revenue, expenses and Adjusted Operating Income, are included in Part II, Item 8. Financial Statements of this annual report and are herein incorporated by reference. Independent provider of credit rating opinions and related information for over 100 years Global integrated risk assessment firm providing credit rating opinions, analytical solutions and insights that empower organizations to make better, faster decisions Provider of financial intelligence and analytical tools supporting customers’ growth, efficiency and risk management objectives ff Moody's has evolved over the last 15 years as our customers' needs have changed and we expanded our capabilities 2007 - 2016 Expanded beyond ratings agency • • • Established Moody’s Analytics Built the ERS business (e.g., Fermat, B&H) Expanded ratings to China (i.e., CCXI) 2017 - 2021 Built out substantial data and analytics capabilities • • • Complemented ERS business with private company information (i.e., BvD) Accelerated capability expansion (e.g., company database, CRE data, ESG data) Invested in insurance data and analytics capabilities, including weather and disaster modeling (i.e., RMS) 2022 and Beyond Positioned to serve a wide range of risk assessment markets • • Competitive differentiator: integration of data and analytics combined with expertise and technology enablement Further investment in data and analytics capabilities such as private company, CRE and ESG to serve high growth risk assessment use cases (e.g., KYC and compliance) Moody's Investors Service Overview Moody's Investors Service (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. A rating from MIS enables issuers to create timely, go- to-market debt strategies with the ability to capture wider investor focus and deeper liquidity options. MOODY'S 2021 10-K 11 The Benefits of a Moody's Rating Investors seek Moody's opinions and particularly ll value the knowledge of its analysts and the depth of Moody's research Access to capital Transparency, credit comparison and market stability • Moody’s opinions on credit are used by institutional investors throughout the world, making an issuer’s debt potentially more attractive to a wide range of buyers. • Signals a willingness by issuers to be transparent and provides issuers with an independent assessment against which to compare creditworthiness. • A Moody’s rating may • Moody’s ratings and facilitate access to both domestic and international debt capital. research reports may help to maintain investor confidence, especially during periods of market stress. Planning and budgeting Analytical capabilities • May help issuers when formulating internal capital plans and funding strategies. • Among ratings advisors, Moody’s has a strong position and is well- recognized for the depth and breadth of its analytical capabilities. Ratings revenue is derived from the originators and issuers of such transactions who use MIS ratings to support the distribution of their debt issues to investors. Ratings are disseminated via press releases to the public primarily through a variety of electronic media, including the internet and real-time information systems widely used by securities traders and investors. 35,000+ Rated Organizations and Structured Deals MIS by the Numbers 5,300+ Rated Non-Financial Corporates 3,500+ Rated Financial Institutions 15,500+ Rated Public Finance Issuers 445 Rated Sub-Sovereigns 1,000+ Rated Infrastructure & Project Finance Issuers 49 Rated Supranational Institutions $73 trillion Total rated debt outstanding 9,000+ Rated Structured Finance Deals 145 Rated Sovereigns 190 Rating Methodologies MIS also earns revenue from certain non-ratings-related operations, which primarily consist of financial instruments pricing services in the Asia-Pacific region, revenue from ESG research, data and assessments and revenue from ICRA's non-ratings operations. The revenue from these operations is included in the MIS Other LOB and is not material to the results of the MIS segment. 12 MOODY'S 2021 10-K Moody's Analytics Overview Moody's Analytics (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. MA’sAA proprietary data, research and analytics combined with cloud-based software tools deliver solutions to meet customer needs as they arise. MA’sAA subscription businesses provide a significant base of recurring revenue to mitigate cyclical changes in debt issuance volumes that may result in volatility in MIS’s revenues. Curated Data Combined with Analytics are the Foundation of MA's Integrated Risk Assessment Strategy Domain Expertise Curated Data Best in Class Analytics Proprietary data assets allow companies to inform and perform many critical business activities with trust and confidence Transparency Efficiency ff Convenience 14,900 + Total MA customers ç Better Decisions è MA Customers by the Numbers MA's approach to deepening available data sets and ability to combine with research, analytic tools and software is driving a more integrated understanding of risks and opportunities Benchmarks Analytics Insights 1,800+ Asset Managers 2,300+ Commercial Banks 3,600+ Corporations 900+ Insurance Companies 165 Countries where MA customers operate 5,300+ Government & Other Entities 29,000+ Customer users accessed the Moody's research website in 2021 200+ Securities Dealers and Investment Banks 800+ Real Estate Entities 244,000+ Individuals accessed the Moody's research website MOODY'S 2021 10-K 13 Sustainability Moody’s manages its business with the goal of delivering value to all of its stakeholders, including its customers, employees, Moody’s advances sustainability by considering business partners, local communities and stockholders. As part of this effort, environmental, social, and governance (“ESG”) factors throughout its operations and products and services. The Company uses its expertise and assets to make a positive difference through technology tools, research and analytical services that help other organizations and the investor community better understand the links between sustainability considerations and the global markets. Moody’s efforts to promote sustainability-related thought leadership, assessments and data to market participants include adhering to the policies of recognized sustainability organizations that develop standards or frameworks and/or evaluate and assess performance, including: the Global Reporting Initiative; Sustainability Accounting Standards Board; and the World Economic Forum’s Stakeholder Capitalism metrics. Moody's also issues an annual report on Stakeholder Sustainability and on how the Company has implemented the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations. Moody’s sustainability-related achievements in 2021 included the following: ff ff ff – – Established three goals to increase representation of women and employees of racial and ethnic underrepresented groups; published our EEO-1 data; Accelerated our net-zero commitment to 2040, a decade earlier than the Paris Agreement goal; – Received an ‘A’ sAA core from CDP on climate action for the second consecutive year; and – Became a founding ff for Net Zero (GFANZ) FF member of the Net Zero Financial Services Provider Alliance, part of the Glasgow Financial Alliance and joined the Taskforce on Nature-related Financial Disclosures (TNFD). The Board oversees sustainability matters, with assistance from the Audit, Governance & Nominating and Compensation & Human Resources Committees, as part of its oversight of management and the Company’s overall strategy. The Board also oversees Moody’s policies for assessing and managing our exposure to risk, including climate-related risks such as business continuity disruption or reputational and credibility concerns stemming from incorporation of climate-related risks into the credit methodologies and credit ratings of MIS. Three Pillars of Moody's Sustainability Strategy Better Business Better Lives Better solutions For Moody's operations and value chain Strive to embed responsible, sustainable decision-making in everything Moody's does. For Moody's people and communities For market transformation Aim to create a forward-thinking, inclusive culture across Moody's people and communities. Build/develop products to help our customers identify risks and opportunities and provide meaningful performance measurements and insights CAPITAL Moody’s purpose is to bring clarity, knowledge and fairness to an interconnected world. The Company’s success in achieving its purpose is only possible through the collective contributions of its global employee population whose members possess the unique combination of skills, professional experience and diversity of backgrounds needed to advance the Company’s business and contribute to the communities in which it operates. Moody’s believes that it is essential to: i) create a workplace where its employees feel valued and inspired; ii) provide an environment that fosters a culture of independence, inclusion and intellectual leadership; and iii) support peer collaboration and professional growth. As a global integrated risk assessment firm, attracting, supporting and retaining skilled talent is essential to the Company’s success. Moody’s addresses these goals by: – – – – – championing diversity, equity and inclusion among employees; seeking to provide market-competitive compensation and benefits and rewarding employees for their contributions to the Company’s strategic and operational goals; offering wellness programs; supporting employee learning, development and skills enhancement; and advancing employee engagement. 14 MOODY'S 2021 10-K Diversity, Equity and Inclusion Moody's believes it is imperative to be visible champions of diversity, equity and inclusion because differing perspectives help to enrich the Company’s offerings to its many stakeholders and improve performance. The key objectives for which the Company focuses with respect to these items include: thoughts and ff – – incorporating diversity, equity and inclusion into Moody’s business strategy; establishing leadership accountability with respect to diversity, including through executive compensation programs; – working to increase diverse representation (e.g., women and ethnic groups); – – – – – continuing to advance women and ethnically diverse employees in leadership roles; enhancing employee training in diversity, equity and inclusion matters; promoting equal employment opportunities in all aspects of employment; designing the Company’s compensation practices to provide equal pay for equal work; and incorporating market standards, role, experience and performance into compensation decisions. The executive leadership team’s focus ff on these items is vital to attract, support and retain its skilled talent. Moody’s has numerous diversity programs and eight active business resource groups (“BRGs”) including: – EnAble BRG: advocates for an inclusive, accessible and stigma-free workplace in which employees with disabilities are valued for their talents and have the opportunity to advance and thrive professionally – Generational BRG: seeks to leverage the insights and experiences of our multi-generational workforce in order to cultivate an inclusive work environment that fosters greater connectedness, supports the development of all generational groups and delivers business value to the firm – Inclusion BRG: supports all areas of diversity and inclusion combining Moody's BRG chapters. Inclusion creates opportunities for all employees regardless of officeff size to engage with a BRG – Minds BRG: seeks to foster a culture at Moody’s where all employees are empowered to discuss and manage their mental health – Multicultural BRG: seeks to leverage diverse talent by promoting recruitment, professional development and networking opportunities for all ethnically diverse employees at Moody's – – Pride BRG: advocates for a work environment that respects, welcomes and supports lesbian, gay, bisexual and transgender professionals, enabling them to perform to their fullest potential and contribute to the greater goals of the Company Veterans BRG: recognizes and supports veterans, active-duty military personnel and military families both at Moody's and in our communities – Women's BRG: seeks to enhance the recruitment, retention, and professional development of female professionals by implementing programs that foster greater interaction among peers as well as the broader community, while acting as a collective voice for raising women's issues to senior management and enhancing the employment brand The BRGs represent 44 chapters and more than 6,600 memberships globally as of December 31, 2021. An employee can hold membership in multiple BRGs in a single region. The Company’s diversity programs include its TIDE program (Talent Planning and Exposure & Expansion), which is a high potential employee diversity initiative aimed at elevating women and ethnically diverse employees into leadership positions. Aspirations & Alignment, Insights, Development & Career TT The Company provides and periodically updates information on its BRGs and other diversity, inclusion and equity programs in its various sustainability and stakeholder reports and on its Diversity & Inclusion microsite. See moodys.com/sustainability and moodys.com/diversity for these items. The content of those websites is not incorporated by reference herein. MOODY'S 2021 10-K 15 The charts below present additional information regarding the diversity of the Company's workforce as of December 31, 2021. The percentage for people of color ("POC") includes those who identified as Asian, Hispanic, Black, American Indian/Alaskan Native, Hawaiian/Other Pacific Island or two or more races. Officers ff executives, senior managers, mid-level managers, and first-level managers. The following data is based on Company records and may involve estimates or assumptions. and Managers are calculated using the job categories: Total Workforce: Gender U.S. Workforce: Ethnicity 41% 59% 6% 45% 49% Male Female White POC Not Disclosed Total Officers and Managers: Gender (1) U.S. Officers and Managers: Ethnicity 36% 64% 4% 43% 53% Male Female White POC Not Disclosed (1) Total officers companies for which this data was not available) ff and managers by gender represents approximately 90% of employees (excludes certain non-wholly-owned subsidiaries and newly acquired Compensation Moody’s compensation programs are designed to foster and maintain a strong, capable, experienced and motivated global workforce. An important element of the Company’s compensation philosophy is aligning compensation to local market standards so that Moody's can attract and retain the highly-skilled talent needed to thrive. The Company’s compensation packages include market-competitive salaries, annual bonuses and equity grants for certain employees. Benefits and Wellness Programs ff resources for physical and mental health that promote preventive care, awareness and support a healthy lifestyle. With respect to benefits, the Company views investments in benefits as an investment in its people. Moody’s is committed to providing competitive benefits programs designed to care for all employees and their families. The Company’s comprehensive programs offer The Company also promotes financial wellness and provides for flexible work arrangements, which support the Company’s to create a work atmosphere in which people feel valued and inspired to give their best. Beyond delivering health, welfare, efforts retirement benefits, and paid vacation and sick days, Moody’s extends other benefits to support its employees and their families. To provide competitive benefits, the Company periodically adjusts the nature and extent of benefits, such as parental leave, workplace flexibility and educational support. ff 16 MOODY'S 2021 10-K Employee Population As of December 31, 2021 and 2020, the number of Moody’s employees was as follows: Global Headcount 2021 2020 December 31, Change % MIS MA MSS U.S. Non-U.S. Total U.S. Non-U.S. Total U.S. Non-U.S. Total Total MCO U.S. Non-U.S. Total 1,459 3,836 5,295 2,647 3,882 6,529 728 908 1,636 4,834 8,626 13,460 1,518 3,533 5,051 2,012 2,996 5,008 704 724 1,428 4,234 7,253 11,487 (4)% 9 % 5 % 32 % 30 % 30 % 3 % 25 % 15 % 14 % 19 % 17 % The MIS employee population primarily consists of credit analysts, data and operations analysts, credit strategy and methodology professionals, software engineers, sales and sales operations, and international strategy teams. MA’sAA employee population primarily consists of software engineers, data and operation analysts, advisory and implementation teams and economists, as well as sales and sales support professionals. The MSS employee population primarily consists of information technology professionals and other professional support staffff such as finance, human resources and legal that support both MIS and MA. Management monitors employee turnover rates as presented in the chart below: Voluntary Turnover Involuntary Turnover 16% 14% 13% 10% 8% 7% 7% 7% 11% 3% 2% 2% 4% 4% 4% 3% MIS MA MSS Total MCO MIS MA MSS Total MCO 2021 2020 2021 2020 The increase in the Company's voluntary turnover rates in 2021 compared to 2020 are likely due to the effects of COVID-19 on the labor market. Additionally, MSS involuntary turnover figures in 2020 in the chart above includes employees who separated functions. A majority of these employees were pursuant to a third-party outsourcing arrangement relating to certain back-officeff hired by the third-party outsourcing provider. ff MOODY'S 2021 10-K 17 Employee Engagement, Learning and Development As a result of the COVID-19 pandemic, the Company enhanced its digital communications with its employees beginning in 2020. These enhanced communications have allowed senior management to continue to interact with employees regarding evolving priorities and its focus on the health, safety and well-being of Moody’s employees during this challenging time. Learning & Development is one element of Moody’s talent management framework, which includes talent acquisition, performance management, total rewards, succession planning and leadership development. Each of these areas supports the Company’s business strategy and Moody’s culture as a diverse, equitable and inclusive place to work. Moody's views learning and education as an investment in its people that aligns their professional goals and interests with the success of the Company, and helps to retain talent over the longer-term. A number of training programs are available, including leadership development, professional skills development, technical skills, as well as compliance training. CLIMATE CHANGE Climate change is a defining issue of our time, and while Moody’s operations have a limited direct environmental impact and we are not considered a major emitter of greenhouse gas (GHG) emissions, we do nonetheless have an important role to play in demonstrating proactive corporate responsibility, setting industry standards and demonstrating best practices when it comes to climate change mitigation. As such, the Company is taking steps to advance climate action by publishing its TCFD report on an annual basis, issuing its decarbonization plan with science-based targets and a comprehensive roadmap and accelerating its commitment to achieve net-zero emissions across its operations and value chain by 2040. Moody’s Decarbonization Plan outlines tangible strategies for realizing its climate ambitions, including the procurement of 100% of renewable electricity in the Company’s office spaces and optimizing efficiencies in its operations through a “Workplace of the Future” program. The Decarbonization Plan was subject to a vote at Moody’s 2021 Annual Meeting of Stockholders with 93% of votes in favor of the proposal, which underscored that climate considerations and action are now an integral part of the Company’s business strategy, governance, and corporate performance. The costs associated with the implementation of the Decarbonization Plan are not expected to be material. ff Furthermore, Moody’s has invested in acquisitions that expand its climate capabilities further, including RMS, Four Twenty Seven and Vigeo Eiris. To integrate these capabilities into our existing offerings, Moody’s is enhancing its technology infrastructure to ff provide our analysts and researchers with streamlined access to consistent and high-quality ESG and climate insights. These enhancements will allow Moody’s to seamlessly integrate climate considerations into our products and solutions for the benefit of our customers and the capital markets at large. 18 MOODY'S 2021 10-K MOODY’S STRATEGY Moody’s corporate mission is to provide trusted insights and standards that help decision-makers act with confidence. Moody’s will continue to invest with intent to defend and enhance its core businesses and expand into strategic adjacencies and new geographies. Vision Objective Growth Strategy To promote progress through better decisions Deliver global integrated risk assessment platform and solutions Invest with intent to grow and scale Invest with intent to grow and strengthen our core business with a foundation of credibility, transparency, technology, data and analytics ff Invest in integrated solutions to allow customers to manage multiple risks, bringing the best of Moody's capabilities Invest to successfully scale in priority growth markets with highly differentiated ff products and services Execution Priorities How we will get it done Investment in high growth markets Sharpen focus on customers Develop our people and culture Collaborate, modernize and innovate Moody’s invests in initiatives to implement the Company’s strategy, including internally led organic development and targeted acquisitions. Illustrative examples include: Enhancements to ratings quality and product extensions Investments that extend ownership and participation in joint ventures and strategic alliances Expansion in emerging markets New products, services, content and technology capabilities to meet customer demands Selective bolt-on acquisitions that accelerate the ability to scale and grow Moody’s businesses MOODY'S 2021 10-K 19 During 2021, Moody’s continued to invest in and acquire complementary businesses as further described below: Date Business Company Stake Strategic Commentary November 2021 KYC PassFort 100% A U.K. SaaS-based workflow platform for identity verification, customer onboarding, and risk analysis. The integration of PassFort’s platform into Moody’s suite of KYC and compliance offerings workflow solution, allowing customers to incorporate Moody’s data, including credit, cyber, ESG, and climate analytics, directly into their proprietary processes. will create a more holistic ff November 2021 KYC Bogard AB 100% A provider of data and information on politically exposed October 2021 Cyber BitSight persons (PEPs) in the Nordic region. The acquisition advances Moody’s ability to help customers perform KYC screening and research to address financial crime. Minority A provider of cybersecurity ratings, analytics, and performance management tools. In 2021, BitSight acquired VisibleRisk, a cyber risk ratings joint venture created by Moody’s and Team8, a global venture group. The investment enhances BitSight’s offerings and capabilities, to create a comprehensive, integrated, industry-leading cybersecurity risk platform. Moody’s will leverage BitSight’s extensive cyber risk data and research across its growing suite of integrated risk assessment product offerings. ff September 2021 Insurance Risk Management Solutions (RMS) 100% A global provider of climate and natural disaster risk modeling and analytics. The acquisition expands Moody’s insurance data and analytics business and accelerates the development of the Company’s global integrated risk capabilities to address the next generation of risk assessment. September 2021 Commercial Real RealXData 100% A provider of CRE lease-level portfolio management with Estate benchmarking and rent forecasting capabilities. The acquisition advances Moody's ability to help customers manage their real estate portfolio, analyze performance, and define a strategy in one platform. March 2021 KYC Cortera 100% A provider of North American credit data and workflow solutions. The acquisition enhances Moody’s integrated risk assessment capabilities and significantly extends its coverage in the small and medium enterprise segment. Cortera augments Moody’s extensive Orbis database of private company information and enhances its know- your-customer, commercial lending, and supply chain solutions. 20 MOODY'S 2021 10-K PROSPECTS FOR GROWTH Moody’s believes that the overall long-term outlook remains favorable for continued growth of the global fixed-income market and related financial information market, which includes information such as credit opinions, research, data, analytics, risk management tools and related services. Moody’s growth is influenced by a number of trends that impact financial information markets including: Health of the world’s major economies Debt capital markets activity Disintermediation of credit markets Fiscal and monetary policy of governments Expansion of market for integrated data and analytics solutions Business investment spending, including mergers and acquisitions In an environment of increasing financial complexity and heightened attention to credit analysis and risk management, Moody’s is well positioned to benefit from continued growth in global fixed-income market activity and more widespread use of credit ratings, research and related analytical products. Moody’s expects that these developments will support continued long-term demand for high quality, independent credit opinions, research, data, analytics, risk management tools and related services. Moreover, pricing opportunities aligned with customer value creation and advances in information technology present growth opportunities for Moody’s. Moody’s operations are subject to various risks, as more fully described in Part I, Item 1A “Risk Factors,” inherent in conducting business on a global basis. Such risks include currency fluctuations and possible nationalization, expropriation, exchange and price controls, changes in the availability of data from public sector sources, limits on providing information across borders and other restrictive governmental actions. Environmental, Social and Governance Data and Solutions ESG data and solutions are expected to play an increasingly important role across both MIS and MA as market participants seek trusted insights and standards to make better decisions. ESG Integrated Across All Platforms Credit Impact Risk Quantification ESG Domain ESG Classification ESG Credit Impact Scores Real Estate Solutions Risk Analytics & Reporting ESG Measures Climate Solutions Index Solutions Credit Ratings & Research Heat Maps Lending Solutions and Tools Catastrophe Models SME Solutions Sustainable Finance MOODY'S 2021 10-K 21 Impact of Technology The pace of change in technology and communication over the past two decades makes information about investment alternatives and risk management solutions widely available. This increase in the availability of information and solutions promotes the ongoing integration and expansion of financial markets worldwide, giving market participants access to a wider range of both established and newer capital markets as well as data and solutions to manage risk. As technology provides broader access to worldwide markets, it also results in a greater need for credible, globally comparable opinions about credit risk, data, analytics and related services and solutions. MIS Prospects for Growth Strong secular trends should continue to provide long-term growth opportunities in MIS. Key growth drivers include: • • • • • Debt market issuance driven by global GDP growth; Continued onboarding of first time rating mandates; Developing a comprehensive sustainable finance offering, assessment of net zero and sustainable growth, which is supported by data and research offerings evolving needs; including credit impact scores, second party opinions, ff ff to meet the market’s Growth in domestic capital markets through investments in Moody’s Local and affiliates ff in key markets; and Bank disintermediation and the expansion of private credit. In addition to the factors noted above, growth in global fixed income markets in a given year is dependent on many macroeconomic and capital market factors including: Interest rates Business investment spending Corporate refinancing needs Merger and acquisition activity Issuer financial health Consumer borrowing levels Securitization activity Expansion of ratings coverage Expansion into emerging markets Rating fees paid by debt issuers account for most of the revenue of MIS. Therefore, a substantial portion of MIS’s revenue is dependent upon the dollar-equivalent volume and number of ratable debt securities issued in the global capital markets. MIS’s results can also be affected ff by factors such as: • • Performance and prospects for growth of the major world economies; Fiscal and monetary policies pursued by their governments; and • Whether issuers request MIS ratings to aid investors in making their investment decisions. However, annual fee arrangements with frequent debt issuers, annual debt monitoring fees and annual fees from commercial paper and medium-term note programs, bank deposit ratings, insurance company financial strength ratings, mutual fund ratings, and other areas partially mitigate MIS’s dependence on the volume or number of new debt securities issued in the global fixed- income markets. MIS’s global coverage positions it well to serve the needs of the global fixed income markets. While already common in U.S. and Western European markets, an ongoing trend in the world’s capital markets is the disintermediation of financial systems. Issuers increasingly raise capital in the global public capital markets, in addition to, or in substitution for, traditional financial intermediaries. Moreover, financial intermediaries have sold assets in the global public capital markets, in addition to, or instead of, retaining those assets. Moody’s believes that issuer use of global debt capital markets offer advantages in capacity and efficiency compared to traditional banking systems and that the trend of increased disintermediation will continue. Further, disintermediation has continued because of the historically low interest rate environment and bank deleveraging, which has encouraged a number of corporations and other entities to seek alternative funding in the bond markets. ff ff Moody’s also observes disintermediation in key emerging markets where economic growth may outpace internal banking system capacity. Thus, disintermediation is expected to continue over the longer-term, with Moody’s targeting investment and resources to those markets where disintermediation and bond issuance is expected to remain robust. 22 MOODY'S 2021 10-K MA Prospects for Growth As an integrated risk assessment business, MA helps customers build resilience by providing tools to measure the financial implications of risk and capitalize on related opportunities. Growth in MA is likely to be driven by expansion across customer sectors fostered by broadening MA's data and analytics solutions to meet an expanded set of customer use cases. MA’sAA business growth is influenced by a number of factors, including: Growth from data and analytics in adjacent markets, including KYC, CRE and ESG Expansion of data sets and delivery options establishing a gateway that supports multiple stakeholders Alignment of product strategy to develop and deliver integrated risk solutions Enhancement of architecture for engineering and data strategies (e.g., SaaS, API, data infrastructure, operational resilience and IT controls) Geographic expansion of actuarial and asset management solutions and continued investment in predictive analytics franchise Expanded sales capacity to drive new initiatives and continue to deliver on targets Enhancement of customer engagement and innovation through understanding the customers' view on value Moody’s expects that MA products and services that improve efficiencies, provide business insights, and enable compliance with financial regulation, including AML, KYC, and accounting standards, will continue to be in demand from institutions worldwide. To respond to other sources of demand and drive growth, MA is actively investing in new products, enhanced data sets and improved delivery services (e.g., software-as-a-service). These efforts deepen relationships with existing customers and drive new customer acquisition. should support broader distribution of MA’sAA capabilities, ff ff COMPETITION MIS competes with other CRAs and with investment banks and brokerage firms that offer credit opinions and research. Many users of MIS’s ratings also have in-house credit research capabilities. There are also some rating markets, based on industry, geography and/or instrument type, in which Moody’s has made investments and obtained market positions superior to its competitors, while in other markets, the reverse is true. ff MA competes broadly in the financial information industry against various diversified competitors. MA’sAA main competitors within RD&A are providers of fixed income analytics, valuations, economic data and research as well as a host of financial training and education firms. In ERS, MA faces competition from both large software providers and various other vendors as well as in-house solutions. REGULATION ff ff ff by MA and its affiliates and many of the issuers and/or securities that MIS and the affiliates are subject to regulation in a number of countries. MA also derives a significant MIS, certain of the Company's credit rating affiliates subject to extensive regulation in the U.S., EU and in other countries (including by state and local authorities). In addition, some of the services offered amount of its sales from banks and other financial services providers who are subject to regulatory oversight and who are required to pass through certain regulatory requirements to key suppliers such as MA. Existing and proposed laws and regulations can impact the Company’s operations, products and the markets in which the Company operates. Additional laws and regulations have been proposed or are being considered. Each of the existing, adopted, proposed and potential laws and regulations can increase the costs and legal risk associated with the Company’s operations, including the issuance of credit ratings, and may negatively impact the Company’s profitability and ability to compete, or result in changes in the demand for the Company's products and services, in the manner in which the Company's products and services are utilized and in the manner in which the Company operates. rate, are ff The regulatory landscape continues to evolve. In the U.S., CRAs are subject to extensive regulation primarily pursuant to the Reform Act and the Dodd-Frank Act. The Reform Act added Section 15E to the Exchange Act and provided the SEC with the authority to establish a registration and oversight program for CRAs registered as NRSROs. The Dodd-Frank Act added additional provisions to Section 15E. The transitions of the Presidential administration, Congress and SEC, in the U.S., as with any such government transition, could bring potential changes in the laws affecting existing legislation, regulation or directives by government authorities. CRAs and/or the enforcement of any new or ff MOODY'S 2021 10-K 23 In the EU, the CRA industry is registered and supervised through a pan-EU regulatory framework. ESMA has direct supervisory responsibility for registered CRAs throughout the EU. MIS’s EU CRA subsidiaries are registered and are subject to formal regulation and periodic inspection. From time to time, ESMA publishes interpretive guidance, or thematic reports regarding various aspects of the CRA regulation and, annually, sets out its work program for the forthcoming year. In July 2021, the Commission announced further measures in respect of its sustainable finance strategy. These include further assessments in respect of both CRAs and sustainability ratings and research, which might lead to legislative action. On December 31, 2020, the MIS U.K. registered CRA ceased to be registered with and regulated by ESMA and became subject in both the U.K. and to regulation by the U.K. Financial Conduct Authority (FCA). Regulatory arrangements also came into effect the EU to allow credit ratings to be available for regulatory use in both the EU and the U.K. MIS has put arrangements in place to endorse its U.K. credit ratings into the EU and its EU credit ratings into the U.K. The U.K. Government is considering bringing ESG data and ratings firms within the scope of FCA authorization and regulation. ff ff in both the EU and the U.S. (as well as many other countries), periodically In light of the regulations that have gone into effect and as a matter of course pursuant to their enabling legislation, regulatory authorities have, and will continue to, publish reports that describe their oversight activities. In addition, other legislation, regulation and/or interpretation of existing regulation relating to the Company’s operations, including credit rating, ancillary and research services has been or is being considered by local, national and multinational bodies and this type of activity is likely to continue in the future. Finally, in certain countries, governments may provide financial or other support to locally-based CRAs. If enacted, any such legislation and regulation could change the competitive landscape in which the Company operates. The legal status of CRAs has been addressed by courts in various jurisdictions and is likely to be considered and addressed in legal proceedings from time to time in the future. Management of the Company cannot predict whether these or any other proposals will be enacted, the outcome of any pending or possible future legal proceedings, or regulatory or legislative actions, or the ultimate impact of any such matters on the competitive position, financial position or results of operations of the Company. INTELLECTUAL PROPERTY Moody’s and its affiliates ff own and control a variety of intellectual property, including but not limited to: Proprietary information Publications Databases Trademarks Research Software tools and applications Domain names Models and methodologies Other proprietary materials that, in the aggregate, are of material importance to Moody’s business Management of Moody’s believes that each of the trademarks and related corporate names, marks and logos relating to its businesses, including those containing the term “Moody’s”, are of material importance to the Company. The Company, primarily through MA and its subsidiaries, licenses certain of its databases, software applications, credit risk models, training courses in credit risk and capital markets, research and other publications and services that contain intellectual property to its customers. In addition, the Company licenses certain databases, software applications, assessments, research and other publications and services relating to ESG and climate risks that contain intellectual property to its customers. These licenses are provided pursuant to standard agreements containing customary restrictions and intellectual property protections. In addition, Moody’s licenses from third parties certain technology, data and other intellectual property rights. Specifically, Moody’s obtains licenses from third parties to use financial information (such as market and index data, financial statement data, research data, default data, and security identifiers) as well as software development tools and libraries. In addition, certain of the Company’s subsidiaries obtain from third party information providers certain financial, credit risk, compliance, management, ownership, news and/or other data worldwide, which are distributed through certain of Moody's information products. The Company obtains such technology and intellectual property rights from generally available commercial sources. The Company also utilizes generally available open source software and libraries for internal use and subject to appropriately permissive open source licenses, to carry out routine functions in certain of the Company’s software products. Most of such technology and intellectual property is available from a variety of sources. Although certain financial information (particularly security identifiers, certain pricing or index data, and certain company financial data in selected geographic markets) is available from a limited number of sources, Moody’s does not believe it is dependent on any one data source for a material aspect of its business. 24 MOODY'S 2021 10-K The names of Moody’s products and services referred to herein are trademarks, service marks or registered trademarks or service marks owned by or licensed to Moody’s or one or more of its affiliates. (including granted, allowed and pending patents). None of the Company's intellectual property is subject to a specific expiration date, except to the extent that the patents and the copyright in items that the Company creates (such as credit reports, research, software, and other written opinions) expire pursuant to relevant law. The Company owns seventy-five patents ff The Company considers its intellectual property to be proprietary, and Moody’s relies on a combination of copyright, trademark, trade secret, patent, non-disclosure and other contractual and technological safeguards for protection. Moody’s also pursues instances of third-party infringement of its intellectual property in order to protect the Company’s rights. AVAILABLE INFORMATION Moody’s investor relations internet website is https://ir.moodys.com/. Under the “SEC Filings” tab at this website, the Company makes available free of charge its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after they are filed with, or furnished to, the SEC. The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and other information statements that the Company files electronically with the SEC. The SEC’s internet site is https://www.sec.gov/. INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name, Age, Position and Biographical Data Robert Fauber, 51 President and Chief Executive Officer ff since Mr. Fauber has served as the Company’s President and Chief Executive Officer January 2021. Mr. Fauber joined the Board of Directors in October 2020 and he currently serves on the Executive Committee of the Board of Directors. Prior to serving as CEO, Mr. Fauber served as Chief Operating Officer President of Moody’s Investors Service, Inc. from June 2016 to October 2019, as Senior Vice President—Corporate & Commercial Development of Moody’s Corporation from April 2014 to May 2016, and was Head of the MIS Commercial Group from January 2013 to May 2016. From April 2009 through April 2014, he served as Senior Vice President—Corporate Development of Moody’s Corporation. Mr. Fauber servedr Development from September 2005 to April 2009. Prior to joining Moody’s, Mr. Fauber served in several roles at Citigroup and its investment banking subsidiary. from November 2019 to December 2020, as as Vice President—Corporate ff John J. Goggins, 61 Executive Vice President and General Counsel Mr. Goggins has served as the Company’s Executive Vice President and General Counsel since April 2011 and the Company’s Senior Vice President and General Counsel from October 2000 until April 2011. Mr. Goggins joined Moody’s Investors Service, Inc. in February 1999 as Vice President and Associate General Counsel. Mark Kaye, 42 Executive Vice President and Chief Financial ii Officer Mr. Kaye has served as the Company’s Executive Vice President—Chief Financial Officer since April 2021 and as Senior Vice President—Chief Financial Officer April 2021. Prior to joining the Company, Mr. Kaye was Senior Vice President and Head of Financial Planning and Analysis at Massachusetts Mutual Life Insurance Company (MassMutual) since February 2016, and Chief Financial Officer July 2015. Prior to that, Mr. Kaye served as Chief Financial Officer ff President, Retirement Solutions, at Voya Financial from 2011 to 2015. Mr. Kaye previously held various senior financial and risk reporting positions at ING U.S. and ING Group, and was in the investment banking division of Credit Suisse First Boston. of MassMutual U.S. since and Senior Vice from August 2018 to ff ff ff MOODY'S 2021 10-K 25 Name, Age, Position and Biographical Data Caroline Sullivan, 53 Senior Vice President and Corporate Controller Ms. Sullivan has served as the Company’s Senior Vice President and Corporate Controller since December 2018. Prior to joining the Company, Ms. Sullivan served in several roles at Bank of America from 2011 to 2018, where her last position held was Managing Director and Global Banking Controller. Prior to that role, Ms. Sullivan supported the Global Wealth & Investment Management business from 2015 to 2017 in a variety of positions including Controller. Ms. Sullivan, a CPA, previously held various senior positions at several banks and a major accounting firm, and is a member of the Board of Directors of Financial Executives International. Stephen Tulenko, 54 President, Moody’s Analytics Mr. Tulenko has served as President of Moody’s Analytics since November 2019. Mr. Tulenko served as Executive Director of Enterprise Risk Solutions from 2013 to October 2019 and as Executive Director of Global Sales, Customer Service and Marketing from 2008 to 2013. Prior to the formation of Moody’s Analytics, he held various sales, product development and product strategy roles at Moody’s Investors Service, Inc. Mr. Tulenko joined Moody’s in 1990. Michael West, 53 President, Moody’s Investors Service Mr. West has served as President of Moody’s Investors Service, Inc. since November 2019. Mr. West served as Managing Director—Head of MIS Ratings and Research from June 2016 to October 2019. Previously, Mr. West served as Managing Director—Head of Global Structured Finance from February 2014 to May 2016 and Managing Director—Head of Global Corporate Finance from January 2010 to January 2014. Earlier in his career, he was also responsible for the research strategy for the ratings businesses and before that led Corporate Finance for the EMEA Region, European Corporates and the EMEA leveraged finance business. Prior to joining Moody’s in 1998, Mr. West worked at Bank of America and HSBC in various credit roles. 26 MOODY'S 2021 10-K ITEM 1A. RISK FACTORS Please carefully consider the following discussion of significant factors, events and uncertainties that make an investment in the Company’s securities risky and provide important information for the understanding of the “forward-looking” statements discussed in Item 7 of this Form 10-K and elsewhere. These risk factors should be read in conjunction with the other information in this annual report on Form 10-K. The events and consequences discussed in these risk factors could, in circumstances the Company may not be able to accurately predict, recognize, or control, have a material adverse effect results (including components of the Company’s financial results such as sales and profits), cash flows and stock price. These risk factors do not identify all risks that Moody’s faces. The Company could also be affected by factors, events, or uncertainties that are not presently known to the Company or that the Company currently does not consider to present significant risks. In addition to the effects Item 7 of this Form 10-K and in the risk factors below, additional or unforeseen effects global economic climate may give rise to or amplify many of these risks discussed below. of the COVID-19 pandemic and resulting global disruptions on our business and operations discussed in on Moody’s business, financial condition, operating from the COVID-19 pandemic and the ff ff ff ff A. Legal and Regulatory Risks g g y Moody’s Faces Risks Related to U.S. Laws and Regulations Affecting the Credit Rating Industry and Moody’s Customers. Moody’s operates in a highly regulated industry and is subject to extensive regulation by federal, state and local authorities in the U.S., including the Reform Act and the Dodd-Frank Act. These regulations are complex, continually evolving and have tended to become more stringent over time. Additionally, potential changes in Congress may increase the uncertainty with regard to potential changes in these laws and regulations and the enforcement of any new or existing legislation or directives by government authorities. See “Regulation” in Part I, Item 1 of this annual report on Form 10-K for more information. The current laws and regulations: – seek to encourage, and may result in, increased competition among CRAs and in the credit rating business; – may result in alternatives to credit ratings or changes in the pricing of credit ratings; – – – – restrict the use of information in the development or maintenance of credit ratings; increase regulatory oversight of the credit markets and CRA operations; provide the SEC with direct jurisdiction over CRAs that seek NRSRO status, and grant authority to the SEC to inspect the operations of CRAs; and provide for enhanced oversight standards and specialized pleading standards, which may result in increases in the number of legal proceedings claiming liability for losses suffered defense costs. by investors on rated securities and aggregate legal ff If these laws and regulations, and any future rulemaking or court rulings, reduce demand for credit ratings or increase costs, Moody’s may be unable to pass such costs through to customers. In addition, there may be uncertainty over the scope, interpretation and administration of such laws and regulations. The Company’s compliance and efforts fines, penalties or other sanctions can result in significant expenses. Legal proceedings that are increasingly lengthy can result in uncertainty over and exposure to liability. to mitigate the risk of ff to accurately assess the future impact of legislative and regulatory requirements on Moody’s business and its It is difficult ff MIS’s communications with issuers as part of the customers’ businesses. For example, new laws and regulations may affect rating assignment process, alter the manner in which MIS’s credit ratings are developed, assigned and communicated, affect the manner in which MIS or its customers or users of credit ratings operate, impact the demand for MIS’s credit ratings and alter the economics of the credit ratings business, including by restricting or mandating business models for CRAs. Further, speculation concerning the impact of legislative and regulatory initiatives and the increased uncertainty over potential liability and adverse Moody’s stock price. Although these legislative and regulatory initiatives legal or judicial determinations may negatively affect apply to CRAs and credit markets generally, they may affect increases the costs and legal risk associated with the issuance of credit ratings and can have a material adverse effect Moody’s operations, profitability and competitiveness, the demand for credit ratings and the manner in which such ratings are utilized. Moody’s in a disproportionate manner. Each of these developments on ff ff ff ff ff MOODY'S 2021 10-K 27 of the Comptroller of the Currency, the Federal Deposit In addition, MA derives a significant amount of its sales from banks and other financial services providers who are subject to regulatory oversight. U.S. banking regulators, including the Officeff Insurance Corporation, the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Board, as well as many state agencies, have issued guidance to insured depository institutions and other providers of financial services on assessing and managing risks associated with third-party relationships, which include all business arrangements between a financial services provider and another entity, by contract or otherwise, and generally requires banks and financial services providers to exercise comprehensive oversight throughout each phase of a bank or financial service provider’s business arrangement with third-party service providers, and instructs banks and financial service providers to adopt risk management processes commensurate with the level of risk and complexity of their third-party relationships. In light of this, MA’sAA existing or potential bank and financial services customers subject to this guidance have sought to and may further revise their third-party risk management policies and processes and the terms on which they do business with MA. This can result in delayed or reduced sales to such customers, adversely affect with such customers and/or result in MA assuming greater financial and legal risk under service agreements with such customers. MA’sAA relationship with such customers, increase the costs of doing business ff Moody’s Faces Risks Related to Financial Reforms Outside the U.S. Affecting the Credit Rating Industry and Moody’s Customers. In addition to the extensive and evolving U.S. laws and regulations governing the industry, foreign measures to regulate CRAs and the markets for credit ratings. In particular, the EU has adopted a common regulatory framework for CRAs operating in the EU and continues to monitor the credit rating industry and analyze approaches that may strengthen existing regulation. Credit ratings emanating from outside the EU are subject to ESMA’sAA oversight if they are endorsed into the EU. Additionally, other foreign jurisdictions have recently taken measures to increase regulation of CRAs and markets for credit ratings. See “Regulation” in Part 1, Item 1 of this annual report on Form 10-K for more information. jurisdictions have taken ff The EU and other jurisdictions, as discussed further below, adopt legislation and engage in rulemaking on an ongoing basis that significantly impacts operations and the markets for the Company's products and services. Future laws and regulations could extend to products and services not currently regulated. These regulations could: (i) affect rated, (ii) expand supervisory remits to include credit ratings issued outside the home jurisdiction and used forf purposes, (iii) increase the level of competition in the market for credit ratings, (iv) establish criteria for credit ratings or limit the entities authorized to provide credit ratings, (v) restrict the collection, use, accuracy, correction and sharing of personal information by CRAs, or (vi) regulate pricing (for example to require that fees that are based on costs and are non-discriminatory) on products and services provided by MA such as those products that incorporate credit ratings and research originated by MIS. Future regulations could also affect ff Moody’s ESG Solutions Group). products and services the Company offers in the ESG sector (including those offered the need for debt securities to be regulatory by ff ff ff Additionally, as of the date of the filing of this annual report on Form 10-K, there remains uncertainty regarding the future impact that Brexit will have on the credit rating industry within the U.K., the EU and other jurisdictions. Following the Brexit implementation period that ended December 31, 2020 the MIS U.K. registered CRA ceased to be registered with and regulated by ESMA and became subject to regulation by the U.K. Financial Conduct Authority. Regulatory arrangements put in place in both the U.K. and the EU allow credit ratings to be available for regulatory use in both the EU and the U.K. after the end of the Brexit-implementation period. MIS has put arrangements in place to endorse its U.K. credit ratings into the EU and its EU credit ratings into the U.K. On December 31, 2020, the U.K. also onshored CRA Regulation, with certain necessary modifications, into U.K. domestic law (the “U.K. CRA Regulation”). The U.K. CRA Regulation contains requirements for the registration, regulation and supervision of CRAs based in the U.K. It also sets out the circumstances in which U.K. financial institutions can use credit ratings for regulatory purposes, as well as specific obligations for issuers, originators and sponsors relating to structured finance instruments. It is unclear how the EU CRA Regulation and the U.K. CRA Regulation will differ over time. ff Both of Moody’s segments face risks related to financial reforms outside the U.S. affecting the credit rating industry and Moody’s customers. MIS is a registered entity and is therefore subject to formal regulation and periodic or other inspections in the EU and other foreign jurisdictions, such as, but not limited to, Hong Kong and China, where it operates through registered subsidiaries. For example: ff – In the EU and the U.K., applicable rules include procedural requirements with respect to credit ratings of sovereign issuers, liability for intentional or grossly negligent failure to abide by applicable regulations, mandatory rotation requirements of CRAs hired by issuers of securities for credit ratings of resecuritizations, and restrictions on CRAs or their shareholders if certain ownership thresholds are crossed. Additional procedural and substantive requirements include conditions for the issuance of credit ratings, rules regarding the organization of CRAs, restrictions on activities deemed to create a conflict of interest, including fees that are based on costs and are non-discriminatory, and special requirements for credit ratings of structured finance instruments. 28 MOODY'S 2021 10-K – – – In Hong Kong, applicable rules include liability for the intentional or negligent dissemination of false and misleading information and procedural requirements for the notification of certain matters to regulators. In addition, MIS Hong Kong is subject to a code of conduct applicable to CRAs that imposes procedural and substantive requirements on the preparation and issuance of credit ratings, restrictions on activities deemed to create a conflict of interest including the disclosure of its compensation arrangements with rated entities and special requirements for credit ratings of structured finance instruments. A failure to comply with these procedural and substantive requirements also exposes MIS Hong Kong to the risk of regulatory enforcement action which could result in financial penalties or, in serious cases, affect ability to conduct credit rating activities in Hong Kong. its ff In China, while MIS is not a licensed CRA, it does issue global credit ratings from offices Chinese issuers. In addition, the Company holds a 30% investment in a CRA licensed in China. China has laws applicable to domestic CRAs as well as foreign investment in such entities and entities in general (including national security review). Such laws are broadly crafted and the implementation and interpretation of such laws are subject to ff the broad discretion of Chinese regulators, which could affect our ability to conduct business in China. outside of China regarding ff In addition, U.S. economic sanctions have increasingly targeted Chinese persons. In response, China issued a blocking statute that establishes a framework for limiting the effect typically create conflicts of law. An entity that is subject to conflicting laws in multiple jurisdictions may need to determine a means to comply with such laws. Such conflicts could eventually affect laws. of foreign sanctions on Chinese persons. Blocking statutes the ability of entities to adhere to applicable ff ff With respect to MA, regulators in Europe and other foreign markets in which MA is active have issued guidance similar to that issued in the U.S. relating to financial institutions’ assessment and management of risks associated with third-party relationships. In light of this, MA’sAA existing or potential bank and financial services customers subject to this guidance have sought and may further revise their third-party risk management policies and processes and the terms on which they do business with MA. This can result in delayed or reduced sales to such customers, adversely affect MA’sAA relationship with such customers, increase the costs of doing business with such customers and/or result in MA assuming greater financial and legal risk under service agreements with such customers. ff the credit rating industry and Although Moody’s will monitor developments related to financial reforms outside the U.S. affecting Moody’s customers, Moody’s cannot predict the extent of such future laws and regulations, and the effect that they will have on Moody’s business or the potential for increased exposure to liability could be significant. For example, compliance with the EU, U.K. and other foreign regulations may increase costs of operations and could have a significant negative effect operations, profitability or ability to compete, or the markets for its products and services, including in ways that Moody’s presently is unable to predict. In addition, exposure to increased liability under the EU, U.K. regulations and regulations of other foreign jurisdictions may further increase costs and legal risks associated with the issuance of credit ratings and materially and adversely impact Moody’s results of operations. Financial reforms in the EU, U.K. and other foreign jurisdictions may have a material adverse effect on Moody’s business, operating results and financial condition. on Moody’s ff ff ff ff The Company Faces Exposure to Litigation and Government Regulatory Proceedings, Investigations and Inquiries Related to Rating Opinions and Other Business Practices. ff economic times, turbulent markets or otherwise, the number of losses they face in their portfolios. For instance, Moody’s faced numerous class Moody’s faces exposure to litigation and government and regulatory proceedings, investigations and inquiries related to MIS’s ratings actions, as well as other business practices and products within both MIS and MA. If the market value of credit-dependent instruments declines or defaults, whether as a result of difficult investigations and legal proceedings that Moody’s faces could increase significantly. Parties who invest in securities rated by MIS may pursue claims against MIS or Moody’s forff action lawsuits and other litigation, government investigations and inquiries concerning events linked to the U.S. subprime residential mortgage sector and broader deterioration in the credit markets during the financial crisis of 2007-2008. Evolving expectations on ESG disclosures and reporting could also result in new regulatory actions at a corporate and business unit level. Legal proceedings impose additional expenses on the Company and require the attention of senior management to an extent that may significantly reduce their ability to devote time to addressing other business issues, and any of these proceedings, investigations or inquiries could ultimately result in adverse judgments, damages, fines, penalties or activity restrictions. Risks relating to legal proceedings are heightened in foreign jurisdictions that lack the legal protections or liability standards comparable to those that exist in the U.S. In addition, new laws and regulations have been and may continue to be enacted that establish lower liability standards, shift the burden of proof or relax pleading requirements, thereby increasing the risk of successful litigations in the U.S. and in foreign jurisdictions. These litigation risks are often difficult to assess or quantify. Moody’s may not have adequate insurance or reserves to cover these risks, and the existence and magnitude of these risks often remains unknown for substantial periods of time. Furthermore, when Moody’s is unable to achieve dismissals at an early stage and litigation matters proceed to trial, the aggregate legal defense costs incurred by Moody’s increase substantially, as does the risk of an adverse outcome. MOODY'S 2021 10-K 29 Additionally, as litigation or the process to resolve pending matters progresses, Moody’s will continue to review the latest information available and may change its accounting estimates, which could require Moody’s to record or increase liabilities in the consolidated financial statements in future periods. See Note 21 to the consolidated financial statements for more information regarding ongoing investigations and civil litigation that the Company currently faces. Due to the number of these proceedings and the significant amount of damages sought, there is a risk that Moody’s will be subject to judgments, settlements, fines, penalties or other adverse results that have a material adverse effect on its business, operating results and financial condition. ff The Company Is Exposed to Risks Related to Its Compliance and Risk Management Programs. Moody’s operates in a number of countries, and as a result the Company is required to comply with and quickly adapt to numerous international and U.S. federal, state and local laws and regulations. The Company’s ability to comply with applicable laws and regulations, including anti-corruption, antitrust and securities trading laws, is largely dependent on its establishment and maintenance of compliance, review and reporting systems, as well as its ability to attract and retain qualified compliance and risk management personnel. Moody’s policies and procedures to identify, evaluate and manage the Company’s risks, including risks resulting from acquisitions, may not be fully effective, and Moody’s employees or agents may engage in misconduct, fraud or other errors. It is not always possible to deter such errors, and the precautions the Company takes to prevent and detect this activity may not be effective are not effective, ff penalties, regulatory sanctions, injunctive relief, exclusion from certain markets or other penalties, and may suffer reputation, financial condition and operating results. the Company may be subject to criminal and civil liability, the suspension of the Company’s employees, fines, in all cases. If Moody’s employees violate its policies or if the Company’s risk management methods harm to its ff ff ff Moody’s Faces Risks Related to Protecting Its Intellectual Property Rights. Moody’s considers many aspects of its products and services to be proprietary. Failure to protect the Company’s intellectual property adequately could harm its reputation and affect . Businesses the Company acquires also involve intellectual property portfolios, which increase the challenges the Company faces in protecting its strategic advantage. In addition, the Company’s operating results can be adversely affected technological protections for intellectual property and proprietary rights in some jurisdictions and markets. The lack of strong legal and technological intellectual property protections in foreign jurisdictions in which we operate may increase our vulnerability and may pose risks to our business. From time to time, laws are passed that require publication of certain information, in some cases at no cost, that the Company considers to be its intellectual property and that it currently sells or licenses for a fee, which could result in lost revenue. the Company’s ability to compete effectively by inadequate or changing legal and ff ff ff Unauthorized third parties may also try to obtain and use technology or other information that the Company regards as proprietary. It is also possible that Moody’s competitors or other entities could obtain patents related to the types of products and services that Moody’s offers, and attempt to require Moody’s to stop developing or marketing the products or services, to modify or redesign the products or services to avoid infringing, or to obtain licenses from the holders of the patents in order to continue developing and marketing the products and services. Even if Moody’s attempts to assert or protect its intellectual property rights through litigation, it may require considerable cost, time and resources to do so, and there is no guarantee that the Company will be successful. The Company’s ability to establish, maintain and protect its intellectual property and proprietary rights against theft, misappropriation or infringement could be materially and adversely affected and/or changing proprietary rights and intellectual property legal protections in some jurisdictions and markets. These risks, and the cost, time and resources needed to address them, may increase as the Company’s business grows and its profile rises in countries with intellectual property regimes that are less protective than the rules and regulations applied in the United States. ff by insufficient ff Moody’s Faces Risks Related to Tax Matters, Including Changes in Tax Rates or Tax Rules. ff ff tax rate is determined based on the taxable income and applicable tax rates in the various jurisdictions in by changes in the composition of earnings in countries tax rates or other factors, including by increased earnings in jurisdictions where Moody’s faces higher tax As a global company, Moody’s is subject to taxation in the United States and various other countries and jurisdictions. As a result, our effective which the Company operates. Moody’s future tax rates could be affected or states with differing rates, losses incurred in jurisdictions for which Moody’s is not able to realize the related tax benefit, or changes in foreign currency exchange rates. Changes in the tax, accounting and other laws, treaties, regulations, policies and administrative practices, or changes to their interpretation or enforcement, including changes applicable to multinational corporations such as the Base Erosion Profit Shifting initiative being led by the Organization for Economic Co-operation and Development, which requires companies to disclose more information to tax authorities on operations around the world, and the European Union’s state aid rulings, could have a material adverse effect on the Company’s effective tax rate, results of operations and financial condition and may lead to greater audit scrutiny of profits earned in various countries. ff ff 30 MOODY'S 2021 10-K For example, the Tax Act made significant changes to the U.S. federal tax laws. Many aspects of the legislation remain uncertain or unclear. As additional regulatory guidance is issued interpreting or clarifying the Tax Act or if the tax accounting rules are modified, there may be adjustments or changes to the Company’s determination of its mandatory one-time deemed repatriation tax liability (“transition tax”) on previously untaxed accumulated earnings of foreign subsidiaries recorded in 2017. Additional regulatory guidance may also affect have a material adverse effect Tax Act may impact the volume of debt securities issued as discussed in the Risk Factor, Changes in the Volume of Debt Securities Issued in Domestic and/or Global Capital Markets, Asset Levels and Flows into Investment Levels and Changes in Interest Rates and Other Volatility in the Financial Business. ff on Moody’s business, results of operations, cash flows and financial condition. Furthermore, the ii Markets Can Negatively Impact the Nature and Economics of the Company’s tax rates and tax assets and liabilities, which could the Company’s expected future effective ff ff In addition, Moody’s is subject to regular examination of its income tax returns by the Internal Revenue Service and other tax authorities around the world, and the Company is experiencing increased scrutiny as its business grows globally. Moody’s regularly assesses the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of its provision forff could materially and adversely affect reasonable, there can be no assurance that any final determination will not be materially different its income tax provisions, accruals and unrecognized tax benefits, which could materially and adversely affect business, operating results, cash flows and financial condition. income taxes, including unrecognized tax benefits; however, developments in an audit or litigation the Company. Although the Company believes its tax estimates and accruals are than the treatment reflected in the Company’s ff ff ff g B. Risks Relating to our Business The Company is Exposed to Legal, Economic, Operational and Regulatory Risks of Operating in Multiple Jurisdictions. Moody’s conducts operations in various countries outside the U.S. and derives a significant portion of its revenue from foreign sources. Changes in the economic condition of the various foreign economies in which the Company operates have an impact on the Company’s business. For example, economic uncertainty in the Eurozone or elsewhere, including, but not limited to, in Latin America or China, affects addressed elsewhere in this section, operations abroad expose Moody’s to a number of legal, economic and regulatory risks such as: undertaken within those particular areas. In addition to the risks the number of securities offerings ff ff – – exposure to exchange rate movements between foreign currencies and USD; restrictions on the ability to convert local currency into USD and the costs, including the tax impact, of repatriating cash held by entities outside the U.S.; – U.S. laws affecting ff overseas operations, including domestic and foreign export and import restrictions, tariffsff and other trade barriers and restrictions, such as those related to the U.S.’s relationship with China and embargoes and sanctions laws with respect to Russia and Venezuela; VV – – – – – – – – – – – – ff differing Brexit; and potentially conflicting legal or civil liability, compliance and regulatory standards, including as a result of uncertainty about the future relationship between the U.K. and the EU; current and future regulations relating to the imposition of mandatory rotation requirements on CRAs hired by issuers of securities; uncertain and evolving laws and regulations, including those applicable to the financial services industries, such as the European Union’s implementation of the Markets in Financial Instruments Directive II, MiFID II, in January 2018, and to the protection of intellectual property; the transition away from benchmark reference rates based on market participant judgments, such as LIBOR and EURIBOR, to rates based on observable transactions, such as the Secured Overnight Financing Rate (SOFR); uncertainty regarding the future relationship between the U.S. and China, which may result in further restrictions or actions by the U.S. government with respect to doing business in China and/or by the Chinese government with respect to business conducted by foreign entities in China; economic, political and geopolitical market conditions, including the effect customer retention; ff of these conditions on customers and the possibility of nationalization, expropriation, price controls and other restrictive governmental actions; competition with CRAs that have greater familiarity, longer operating histories and/or support from local governments or other institutions; uncertainties in obtaining data and creating products and services relevant to particular geographic markets; reduced protection for intellectual property rights; longer payment cycles and possible problems in collecting receivables; MOODY'S 2021 10-K 31 – – – – – differing ff accounting principles and standards; ff difficulties result of Brexit; in staffingff and managing foreign operations, including potential relocation and/or restaffingff of employees as a difficulties ff and delays in translating documentation into foreign languages; potentially adverse tax consequences; and complexities of compliance with employment laws and new data and cybersecurity rules in numerous jurisdictions. Additionally, Moody’s is subject to complex U.S., foreign and other local laws and regulations that are applicable to its operations abroad, such as laws and regulations governing economic and trade sanctions, tariffs, including the Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act of 2010 and other similar local laws. The internal controls, policies and procedures and employee training and compliance programs to deter prohibited practices the Company has implemented may not be effective internal policies or from material violations of applicable laws and regulations. Any determination or allegations, even if unfounded, that the Company has violated sanctions, anti-bribery or anti-corruption laws could have a material adverse effect Moody’s business, operating results and financial condition. Compliance with international and U.S. laws and regulations that apply to the Company’s international operations increases the cost of doing business in foreign jurisdictions. Violations of such laws and regulations may result in severe fines and penalties, criminal sanctions, administrative remedies, and restrictions on business conduct and could have a material adverse effect business, operating results and financial condition. in preventing employees, contractors or agents from violating or circumventing such on Moody’s reputation, its ability to attract and retain employees, its embargoes, and anticorruption laws on ff ff ff ff Moody’s Operations are Exposed to Risks from Infrastructure Malfunctions or Failures. ff and locations in China used for certain Moody’s work. This may include a Moody’s ability to conduct business may be materially and adversely impacted by a disruption in the infrastructure that supports its businesses and the communities in which Moody’s is located, including New YorkYY City, the location of Moody’s headquarters, major cities worldwide in which Moody’s has offices, disruption involving physical or technological infrastructure (whether or not controlled by the Company), including the Company’s electronic delivery systems, data center facilities, or the Internet, used by the Company or third parties with or through whom Moody’s conducts business. Many of the Company’s products and services are delivered electronically and the Company’s customers depend on the Company’s ability to receive, store, process, transmit and otherwise rapidly handle very substantial quantities of data and transactions on computer-based networks. Some of Moody’s operations require complex processes and the Company’s extensive controls to reduce the risk of error inherent in our operations cannot eliminate such risk completely. The Company’s customers also depend on the continued capacity, reliability and security of the Company’s telecommunications, data centers, networks and other electronic delivery systems, including its websites and connections to the Internet. The Company’s employees also depend on these systems for internal use. Any significant failure, compromise, cyber-breach, interruption or a significant slowdown of operations of the Company’s infrastructure, whether due to human error, capacity constraints, hardware failure or defect, weather (including climate change), natural disasters, fire, power loss, telecommunication failures, break-ins, sabotage, intentional acts of vandalism, acts of terrorism, political unrest, pandemic (including the COVID-19 pandemic), war or otherwise, may impair the Company’s ability to deliver its products and services. ff to secure and plan for potential disruptions of its major operating systems may not be successful. The Company Moody’s efforts relies on third-party providers, including, increasingly, cloud-based service providers, to provide certain essential services. While the Company believes that such providers are reliable, the Company has limited control over the performance of such providers. To the extent any of the Company’s third-party providers ceases to provide these services in an efficient, manner or fails to adequately expand its services to meet the Company’s needs and the needs of the Company’s customers (including as a result of the COVID-19 pandemic), the Company could experience lower revenues and higher costs. Additionally, although the Company maintains processes to prevent, detect and recover from a disruption, the Company also does not have fully redundant systems for most of its smaller officeff of non-essential services. If a disruption occurs in one of Moody’s locations or systems and its personnel in those locations or those who rely on such systems are unable to utilize other systems or communicate with or travel to other locations, such persons’ ability to service and interact with Moody’s customers will suffer adverse effects delays and interruptions. A disruption to Moody’s operations or infrastructure may have a material adverse effect reputation, business, operating results and financial condition. that could result from the Company’s failure, or the failure of a third party, to efficiently address and resolve these locations and low-risk systems, and its disaster recovery plan does not include restoration . The Company cannot predict with certainty all of the ff cost-effective on its ff ff ff ff 32 MOODY'S 2021 10-K Changes in the Volume of Debt Securities Issued in Domestic and/or Global Capital Markets, Asset Levels and Flows into Investment Levels and Changes in Interest Rates and Other Volatility in the Financial Markets Can Negatively Impact the Nature and Economics of the Company’s Business. Moody’s business is impacted by general economic conditions and volatility in the U.S. and world financial markets. Furthermore, issuers of debt securities may elect to issue securities without ratings or securities which are rated or evaluated by non-traditional parties such as financial advisors, rather than traditional CRAs, such as MIS. A majority of Moody’s credit-rating-based revenue is transaction-based, and therefore it is especially dependent on the number and dollar volume of debt securities issued in the capital markets. Market disruptions and economic slowdown and uncertainty have in the past, and may in the future, negatively impact the volume of debt securities issued in global capital markets and the demand for credit ratings. Changes to U.S. tax laws and policy can negatively affect the volume of debt securities issued in the U.S. For example, the Tax Act limits deductibility on interest payments and significantly reduces the tax cost associated with the repatriation of cash held outside the U.S., both of which could negatively affect the volume of debt securities issued. Conditions that reduce issuers’ ability or willingness to issue debt securities, such as market volatility, declining growth, currency devaluations or other adverse economic trends, reduce the number and dollar-equivalent volume of debt issuances for which Moody’s provides ratings services and thereby adversely affect the fees Moody’s earns in its ratings business. ff ff ff Economic and government factors such as the scaling back, wind-down or termination of COVID-19 economic stimulus and economic conditions, and current uncertainty in various other jurisdictions, support programs, a long-term continuation of difficult may have an adverse impact on the Company’s business. Future debt issuances also could be negatively affected by increases in interest rates, the withdrawal of COVID-19 economic stimulus, inflationary pressures, widening credit spreads, regulatory and political developments, growth in the use of alternative sources of credit, and defaults by significant issuers. Declines or other the Company’s business, operating results and changes in the markets for debt securities may materially and adversely affect financial condition. ff ff ff ff or impossible to obtain in the short term, due in part to rent, technology, compliance and other fixed costs associated with Moody’s initiatives to reduce costs to counteract a decline in its business may not be sufficient difficult some of the Company’s operations as well as the need to monitor outstanding ratings. Further, cost-reduction initiatives, including those under-taken to date, could make it difficult accommodate any unexpected increase in the demand for ratings. Volatility in the financial markets, including changes in the volumes of debt securities and changes in interest rates, may have a material adverse effect and financial condition, which the Company may not be able to successfully offset for the Company to rapidly expand operations in order to on the business, operating results and cost reductions may be with cost reductions. ff ff ff ff The Company Faces Increased Pricing Pressure from Competitors and/or Customers. ff ff There is price competition in the credit rating, research, and credit risk management markets, as well as in the market for by MA. Moody’s faces competition globally from other CRAs and research, business intelligence and analytical services offered credit opinions in research, as well as from in-house research operations. from investment banks and brokerage firms that offer Competition for customers and market share has spurred more aggressive tactics by some competitors in areas such as pricing and services, as well as increased competition from non-NRSROs that evaluate debt risk for issuers or investors. At the same time, a challenging business environment and consolidation among both competitors and customers, particularly those involved in structured finance products and commercial real estate, and other factors affecting demand may enhance the market power of competitors and reduce the Company’s customer base. Weak economic growth intensifies competitive pricing pressures and can result in customers’ use of free or lower-cost information that is available from alternative sources or their development of alternative, proprietary systems for assessing credit risk that replace the products currently purchased from Moody’s. While Moody’s seeks to compete primarily on the basis of the quality of its products and services, it can lose market share when its pricing is not sufficiently The formation of additional NRSROs may increase pricing and competitive pressures. Furthermore, in some of the countries in which Moody’s operates, governments may provide financial or other support to local rating agencies. Any inability of Moody’s to compete successfully with respect to the pricing of its products and services will have a material adverse impact on its business, operating results and financial condition. competitive. In addition, the Reform Act was designed to encourage competition among rating agencies. ff ff The Company Is Exposed to Reputation and Credibility Concerns. ff ff a loss in credibility, Moody’s business will be significantly impacted. Factors credibility and could potentially continue to have an impact in this regard include the appearance Moody’s reputation and the strength of its brand are key competitive strengths. To the extent that the rating agency business as a whole or Moody’s, relative to its competitors, suffers that may have already affected of a conflict of interest, the performance of securities relative to the rating assigned to such securities, the timing and nature of changes in ratings, a major compliance failure, negative perceptions or publicity and increased criticism by users of ratings, regulators and legislative bodies, including as to the ratings process, including as to the Company’s recent ESG initiatives, and its implementation with respect to one or more securities and intentional, poor representation of our products and services by our partners or agents, manipulation of our products and services by third parties, or unintentional misrepresentations of Moody’s products and services in advertising materials, public relations information, social media or other external communications. Operational errors, whether by Moody’s or a Moody’s competitor, could also harm the reputation of the Company or the credit rating industry. Damage to reputation and credibility could have a material adverse impact on Moody’s business, operating results and financial condition, as well as on the Company’s ability to find suitable candidates for acquisition. MOODY'S 2021 10-K 33 The Introduction of Competing Products, Technologies or Services by Other Companies Can Negatively Impact the Nature and Economics of the Company’s Business. ff manner is a key factor in maintaining market share. Moody’s The markets for credit ratings, research, credit risk management services, business intelligence and analytical services are highly competitive and characterized by rapid technological change, changes in customer and investor demands, and evolving regulatory requirements, industry standards and market preferences. The ability to develop and successfully launch and maintain innovative products, technologies and services that anticipate customers’ and investors’ changing requirements and utilize emerging technological trends in a timely and cost-effective competitors include both established companies with significant financial resources, brand recognition, market experience and technological expertise, and smaller companies which may be better poised to quickly adopt new or emerging technologies or respond to customer requirements. Competitors may develop quantitative methodologies or related services forff risk that customers and market participants may deem preferable, more cost-effective or more valuable than the credit risk assessment methods currently employed by Moody’s, or may position, price or market their products in manners that differ from those utilized by Moody’s. Moody’s also competes indirectly against consulting firms and technology and information providers, some of whom are also suppliers to Moody’s; these indirect competitors could in the future choose to compete directly with Moody’s, cease doing business with Moody’s or change the terms under which they do business with Moody’s in a way that could negatively impact our business. In addition, customers or others may develop alternative, proprietary systems for assessing credit risk. Such developments could affect Further, the increased availability in recent years of free or relatively inexpensive internet information may reduce the demand for Moody’s products and services. Moody’s growth prospects also could be adversely affected necessary or optimal capital infrastructure expenditures and improvements and the inability of its information technologies to provide adequate capacity and capabilities to meet increased demands of producing quality ratings and research products at levels achieved by competitors. Any inability of Moody’s to compete successfully may have a material adverse effect business, operating results and financial condition. demand for Moody’s products and services and its growth prospects. by Moody’s failure to make assessing credit on its ff ff ff ff ff Moody’s Is Exposed to Risks Related to Loss of Skilled Employees and Related Compensation Cost Pressures. ff ff ff competitive compensation and other incentives or if the regulatory Moody’s success depends upon its ability to recruit, retain and motivate highly skilled, experienced financial analysts and other professionals. Competition for skilled individuals in the financial services industry is intense, and Moody’s ability to attract high quality employees could be impaired if it is unable to offer environment mandates restrictions on or disclosures about individual employees that would not be necessary in competing industries. Rising expenses including wage inflation could adversely affect Moody’s ability to attract and retain high-quality employees. As greater focus has been placed on executive compensation at public companies, in the future, Moody’s may be required to alter its compensation practices in ways that adversely affect Investment banks, investors and competitors may seek to attract analyst talent by providing more favorable working conditions or offering significantly more attractive compensation packages than Moody’s. Moody’s also may not be able to identify and hire the appropriate qualified employees in some markets outside the U.S. with the required experience or skills to perform sophisticated respond to evolving perceptions and goals of those in our workforce or whom we credit analysis. We could also fail to effectively might seek to hire, including in response to changes brought on by the COVID-19 pandemic, with respect to flexible working or other matters. Additionally, relocation and/or restaffingff our ability to attract and retain talent for our European operations. There is a risk that even when the Company invests significant resources in attempting to attract, train and retain qualified personnel, it will not succeed in its efforts, employee expectations in areas such as environmental, social matters and corporate governance (ESG) have been rapidly evolving and increasing. A failure to adequately meet employee expectations may result in an inability to attract and retain talented employees. its ability to attract and retain talented employees. of employees due to Brexit could adversely affect and its business could be harmed. Further, ff ff ff ff ff , and other Moody’s is highly dependent on the continued services of Robert Fauber, the President and Chief Executive Officer senior officers and key employees. The loss of the services of skilled personnel for any reason and Moody’s inability to replace them with suitable candidates quickly or at all, as well as any negative market perception resulting from such loss, could have a material adverse effect on Moody’s business, operating results and financial condition. ff ff Moody’s Acquisitions, Dispositions and Other Strategic Transactions or Investments May Not Produce Anticipated Results Exposing the Company to Future Srr Property and Equipment. ignificant Impairment Charges Relating to Its Gtt oodwill, Intangible Assets or Moody’s regularly evaluates and enters into acquisitions, dispositions or other strategic transactions and investments to strengthen its business and grow the Company. For example, Moody’s acquired Bureau van Dijk in 2017, Reis in 2018, Regulatory DataCorp (RDC) in 2020, and RMS in September 2021. Such transactions and investments present significant challenges and risks. The Company faces intense competition for acquisition targets, especially in light of industry consolidation, which may affect significant investments in technology, including software for internal use, which can be expensive, time-intensive and complex to develop and implement. Moody’s ability to complete such transactions on favorable terms or at all. Additionally, the Company makes ff 34 MOODY'S 2021 10-K ff any anticipated benefits from such transactions. Any The anticipated growth, synergies and other strategic objectives of the RMS acquisition, as well as other completed transactions, may not be fully realized, and a variety of factors may adversely affect strategic transaction involves a number of risks, including unanticipated challenges regarding integration of operations, technologies and new employees; the existence of liabilities or contingencies not disclosed to or otherwise known by the Company prior to closing a transaction; unexpected regulatory and operating difficulties and expenditures; scrutiny from competition and antitrust authorities; failure to retain key personnel of the acquired business; future developments that impair the value of purchased goodwill or intangible assets; diversion of management’s focus implement or remediate controls, procedures and policies appropriate for a larger public company at acquired companies that prior to the acquisition lacked such controls, procedures and policies; disputes or litigation arising out of acquisitions or dispositions; challenges retaining the customers of the acquired business; coordination of product, sales, marketing and program and systems management functions; integration of employees from the acquired business into Moody’s organization; integration of the acquired business’s accounting, information technology, human resources, legal and other administrative systems with Moody’s; risks that acquired systems expose us to cybersecurity risks; and for foreign transactions, additional risks related to the integration of operations across different with specific countries. The anticipated benefits from an acquisition or other strategic transaction or investment may not be realized fully, or may take longer to realize than expected. As a result, the failure of acquisitions, dispositions and other strategic transactions and investments to perform as expected may have a material adverse effect on Moody’s business, operating results and financial condition. cultures and languages, and the economic, political, and regulatory risks associated from other business operations; failure to ff ff ff ff At December 31, 2021, Moody’s had $5,999 million of goodwill and $2,467 million of intangible assets on its balance sheet. Approximately 94% of the goodwill and intangible assets reside in the MA business, including those related to Bureau van Dijk and RMS, and are allocated to the two reporting units within MA. The remaining 6% of goodwill and intangible assets reside in MIS and primarily relate to ICRA. Failure to achieve business objectives and financial projections in any of these reporting units could result in a significant asset impairment charge, which would result in a non-cash charge to operating expenses. Goodwill and intangible assets are tested for impairment on an annual basis and also when events or changes in circumstances indicate that impairment may have occurred. Determining whether an impairment of goodwill exists can be especially difficult in periods of market or economic uncertainty and turmoil, and requires significant management estimates and judgment. In addition, the potential for goodwill impairment is increased during periods of economic uncertainty. An asset impairment charge could have a material adverse effect on Moody’s business, operating results and financial condition. ff The global COVID-19 pandemic may have a material adverse impact on our operations and financial performance, and is having a material adverse impact on the operations and financial performance of many of our customers. It is difficult to predict the extent to which the pandemic and related impacts will adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives. ff to predict, the pandemic’s impact on our operations and financial performance, as well as its Our operations and financial performance could be negatively impacted by the continued effects has caused, and is expected to continue to cause, the global slowdown of economic activity and significant volatility and disruption in financial markets. Because the severity, magnitude and duration of the pandemic and its economic consequences continue to be uncertain and difficult impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Further, the ultimate impact of the pandemic on our operations and financial performance as well as the performance of our customers, depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions (including restrictions on travel and workforce pressures); actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; uncertainty presented by approved vaccines, corresponding rollout and unanticipated consequences of such vaccines; and the pace of recovery when the pandemic subsides. of the COVID-19 pandemic that ff ff The COVID-19 pandemic has subjected our operations and financial performance to a number of risks, including, but not limited to, those discussed below: – The global credit market disruptions and economic stimulus measures led to robust U.S. investment grade and U.S. speculative grade issuance that may not continue as government programs are scaled back. – We continue to publish research and issue credit ratings in accordance with our public credit rating methodologies in a highly uncertain, changing environment. Given these unprecedented events, and our prior experience during periods of volatility and economic uncertainty, it is likely that our ratings and research will be challenged and scrutinized around the globe and result in future government and regulatory proceedings, investigations, inquiries and litigation. – – ff to accurately capture the impact of the COVID-19 pandemic within its analytical models across different Likewise, MA continues to offer difficult business sectors and geographies. Any failure of MA’sAA models to sufficiently MA's reputation, brand and credibility and could result in customer dissatisfaction and/or contract cancellations. quantitative analytics in a highly uncertain, rapidly changing environment where it is account for COVID-19 impacts may impact ff ff ff Illness, travel restrictions or workforce disruptions could result in reduced sales opportunities for both MIS and MA. The COVID-19 pandemic may decrease demand forff the financial intelligence and analytical tools MA provides. MOODY'S 2021 10-K 35 – Our customers are being impacted and will be impacted by the COVID-19 pandemic to differing ff degrees. As a result, we may face pricing pressure on our products, delayed renewals for certain subscription based products, and challenges to new sales which would in turn reduce revenue, ultimately impacting our results of operations. – The COVID-19 pandemic has increased volatility in the capital markets. The Company might not be able to continue to access preferred sources of liquidity when we would like, and our borrowing costs could increase. – While we have transitioned to a hybrid work environment combining remote and in-officeff ff maintaining such a state for an extended period of time may have a material adverse effect ability to meet the needs of our customers and may expose us to both operational and security risks. In addition, maintaining an infrastructure that supports a prolonged remote working environment may limit information technology resources available for other projects. work, all employees globally, on our productivity, our – As the COVID-19 pandemic continues to affect the global economy, it may have the effect other risks, such as those surrounding cybersecurity, described in our risk factors in this Form 10-K. Further, the COVID-19 pandemic may also affect that we currently do not expect to present significant risks to our operations or financial results. our operating and financial results in a manner that is not presently known to us or of heightening many of the ff ff C. Technology Risks gy The Company Is Exposed to Risks Related to Cybersecurity and Protection of Confidential Information. The Company’s operations rely on the secure processing, storage and transmission of confidential, sensitive, proprietary and other types of information relating to its business operations and confidential and sensitive information about its customers and employees in the Company’s computer systems and networks, and in those of its third party vendors. Unauthorized disclosure of this information could cause our customers to lose faith in our ability to protect their confidential information and therefore cause customers to cease doing business with us. The risks the Company faces range from cyber-attacks common to most industries, to more advanced threats that target the Company because of its prominence in the global marketplace, or due to its ratings of sovereign debt. Breaches of Moody’s or Moody’s vendors’ technology and systems, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks [some of which may be carried out by state-sponsored actors], hacking, “phishing” attacks, computer viruses, ransomware, or malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions, may result in manipulation or corruption of sensitive data, material interruptions or malfunctions in the Company’s or such vendors’ web sites or systems, applications, data processing, or disruption of other business operations, or may compromise the confidentiality and integrity of material information held by the Company (including information about Moody’s business, employees or customers), as well as sensitive personally identifiable information (PII), the disclosure of which could lead to identity theft. Measures that Moody’s takes to avoid, detect, mitigate or recover from material incidents can be expensive, and may be insufficient, Additionally, the Company may be exposed to additional threats as the Company migrates its data from legacy systems to cloud-based solutions, and increased dependence on third parties to store cloud-based data subjects the Company to further cyber risks. Further, as a result of the COVID-19 pandemic, many of our employees are working remotely, which magnifies the importance of the integrity of our remote access security measures and may expose the Company to additional cyber risks. circumvented, or may become ineffective. ff ff ff ff ff on the Company's operating results, there can be no assurance of a similar result in the future. Because the The Company has invested and continues to invest in risk management and information security measures in order to protect its systems and data, including employee training, disaster plans, and technical defenses. The cost and operational consequences of implementing, maintaining and enhancing further data or system protection measures could increase significantly to overcome increasingly intense, complex, and sophisticated global cyber threats. Despite the Company’s best efforts, it is not fully insulated from, and has in the past experienced, security threats and system disruptions. Although past incidents have not had a material adverse effect methods used for these systems cyberattacks are rapidly changing, the Company, despite significant focus and investment, may be unable to anticipate/deploy sufficient protections against such incidents. Further, the extent of a particular security incident and the steps needed to investigate may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed and full and reliable information about the incident, including the extent of the harm and how best to remediate it, is known. Recent well-publicized security breaches at other companies have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber-attacks, and may in the future result in heightened cybersecurity compliance requirements, including additional regulatory expectations for oversight of vendors and service providers. Cybersecurity incidents, including the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data, could cause reputational harm, loss of customers and revenue, fines, regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard the Company’s customers’ information, or financial losses that are either not insured against or not fully covered through any insurance maintained by the Company. In addition, disclosure or media reports of actual or perceived security vulnerabilities to the Company’s systems or those of the Company’s third parties, even if no breach has been attempted or occurred, could lead to reputational harm, loss of customers and revenue, or increased regulatory actions oversight and scrutiny. Any of the foregoing may have a material adverse effect ff on Moody’s business, operating results and financial condition. 36 MOODY'S 2021 10-K The Company Is Exposed to Risks Related to Protection of Confidential Information To conduct its operations, the Company regularly moves data across national borders, and consequently is subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security [such as the Federal Trade Commission Act in the United States, the General Data Protection Regulation (“GDPR”) in the European Union, the Cyber Security Law in China and various other international, federal, state and local laws and regulations]. The scope of the laws that may be applicable to Moody’s is often uncertain and may be conflicting, particularly with respect to foreign laws. For example, GDPR, which became effective in May 2018, greatly increased the jurisdictional reach of European Union privacy law and added a broad array of requirements for processing personal data, including the public disclosure of significant data breaches. Failure to comply with GDPR requirements could result in penalties of up to 4% of annual worldwide revenue. Additionally, other countries have enacted or are enacting data localization laws that require data to stay within their borders. Further, laws such as the California Consumer Privacy Act, enacted in January 2020, require among other things, covered companies to provide new disclosures to consumers, and affords consumers new abilities to opt-out of certain sales of personal information. The effects jurisdictions are significant, however, and may require us to modify our data processing practices and policies and to incur additional costs and expenses. All of these evolving compliance and operational requirements have required changes to certain business practices, thereby increasing costs, requiring significant management time and attention, and subjecting the Company to negative publicity, as well as remedies that may harm its business, including fines, modified demands or orders, the cessation of existing business practices, and exposure to litigation, regulatory actions, sanctions or other statutory penalties. nd other similar data privacy laws in other of non-compliance with the CCPA aPP ff ff ff The Company Is Dependent on the Use of Third-Party Software, Data, Hosted Solutions, Data Centers, Cloud and Network Infrastructure (Together, “Third Party Technology”), gg Service Offerings, Could Have a Material Adverse Effect on the Company’s Business, Financial Condition Operations. and Any Reduction in Third-Party Product Quality or dd or Results of Moody’s relies on Third Party Technology in connection with its product development and offerings Company depends on the ability of Third Party Technology providers to deliver and support reliable products, enhance their ff current products, develop new products on a timely and cost-effective products and respond to emerging industry standards and other technological changes. The Third Party Technology Moody’s uses can become obsolete or restrictive, incompatible with future versions of the Company’s products, fail to be comprehensive or accurate, unavailable or fail to operate effectively could be adversely affected (including as a result of the COVID-19 pandemic), and Moody’s business basis, provide data necessary to develop and maintain its when the Company is unable to timely or effectively replace such Third Party Technology. and operations. The ff ff ff ff ff the Company cannot ensure that such third parties will permit Moody’s use in the The Company also monitors its use of Third Party Technology to comply with applicable license and other contractual requirements. Despite the Company’s efforts, future, resulting in increased Third Party Technology acquisition costs and loss of rights. In addition, the Company’s operating costs could increase if license or other usage fees for Third Party Technology increase or the efforts enhancements to Third Party Technology are substantial. In the ordinary course, our third-parties, including our vendors, are subject to various forms of cyber attacks. To date, such attacks have not resulted in a material adverse impact to our business operations, but there can be no guarantee we will not experience such an impact. Some of these third-party suppliers are also Moody’s competitors, increasing the risks noted above. When any of these risks materialize, they could have a material adverse effect on the Company’s business, financial condition or results of operations. to incorporate ff ff MOODY'S 2021 10-K 37 ITEM 1B. UNRESOLVEDLL STAFFTT COMMENTS None. ITEM 2. PROPERTIES Moody’s corporate headquarters is located at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, with approximately 797,537 square feet of leased space. As of December 31, 2021, Moody’s operations were conducted from 35 U.S. offices operating and sales requirements worldwide. These properties are generally considered to be both suitable and adequate to meet current operating requirements. locations, all of which are leased. These properties are geographically distributed to meet and 107 non-U.S. officeff ff ITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, see Part II, Item 8 –“Financial Statements”, Note 21 “Contingencies” in this Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 38 MOODY'S 2021 10-K PART II ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RYY ELATEDAA ISSUER PURCHASES OF EQUITY SECURITIES SHAREHOLDER MATTERS AA AND Information in response to this Item is set forth under the captions below. MOODY’S PURCHASES OF EQUITY SECURITIES For the three months ended December 31, 2021: Period October 1- 31 November 1- 30 December 1- 31 Total Total Number of Shares Purchased (1) Average Price Paid per Share Purchased as Part or Total Number of Shares f Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under The Program (2) 1,400 236,692 78,013 316,105 $ $ $ $ — 389.93 389.35 389.78 — 235,647 77,330 312,977 $1,203 million $1,111 million $1,081 million (1) (2) Includes surrender to the Company of 1,400; 1,045 and 683 shares of common stock in October, November and December, respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees. Amounts shown are as of the last day of each of the months. On December 16, 2019, the Board authorized $1 billion in share repurchase authority and on February 9, 2021, the Board approved an additional $1 billion in share repurchase authority. At December 31, 2021, there was approximately $1,081 million of remaining authority. Additionally, on February 7, 2022, the Board of Directors approved an additional $750 million of share repurchase authority. There is no established expiration date for the remaining authorizations. During the fourth quarter of 2021, Moody’s issued 0.1 million shares under employee stock-based compensation plans. COMMON STOCK INFORMATION The Company’s common stock trades on the New York Stock Exchange under the symbol “MCO”. The number of registered shareholders of record at January 31, 2022 was 1,628. A substantially greater number of the Company’s common stock is held by beneficial holders whose shares of record are held by banks, brokers and other financial institutions. EQUITY COMPENSATION PLAN INFORMATION The table below sets forth, as of December 31, 2021, certain information regarding the Company’s equity compensation plans. Plan Category Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) 3,115,970 (1) $ — 3,115,970 $ $ Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (2) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding Securities Reflected in Column (a)) (b) 166.16 — 166.16 (c) 17,171,937 (3) — 17,171,937 (1) (2) (3) Includes 2,246,154 options and unvested restricted shares outstanding under the Company's 2001 Key Employees' Stock Incentive Plan, 140,906 options and unvested restricted shares outstanding under the Risk Management Solutions, Inc. 2015 Equity Incentive Plan and 5,904 unvested restricted shares outstanding under the 1998 Non-Employee Directors' Stock Incentive Plan. This number also includes a maximum of 723,006 performa maximum number of shares issuable pursuant to perforr performance shares granted in 2019, 2020 and 2021. Assuming payout at target, the number of shares to be issued upon the vesting of outstanding performance share awards is 361,503. nce shares outstanding under the Company's 2001 Key Employees' Stock Incentive Plan, which is the rmance share awards assuming the maximum payout of 200% of the target award for rr Does not reflect unvested restricted shares or performance share awards included in column (a) because these awards have no exercise price. Includes 13,283,557 shares available forff issuance as under the 2001 Stock Incentive Plan, of which all may be issued as options and 7,320,392 may be issued as restricted stock, performance shares or other stock-based awards under the 2001 Stock Incentive Plan, 423,884 shares available for issuance as options, shares of restricted stock or performance shares under the Risk Management Solutions, Inc. 2015 Equity Incentive Plan; 880,119 shares available for issuance as options, shares of restricted stock or performance shares under the 1998 Directors Plan; and 2,584,377 shares available forff may be made under the 1998 Stock Incentive Plan, which expired by its terms in June 2008. issuance under the Company’s Employee Stock Purchase Plan. No new grants MOODY'S 2021 10-K 39 PERFORMANCE GRAPH The following graph compares the total cumulative shareholder return of the Company to the performance of Standard & Poor’s 500 Composite Index and the Russell 3000 Financial Services Index. Both of the aforementioned indexes are easily accessible to the Company’s shareholders in newspapers, the internet and other readily available sources for purposes of the following graph. The comparison assumes that $100.00 was invested in the Company’s common stock and in each of the foregoing indices on December 31, 2016. The comparison also assumes the reinvestment of dividends, if any. The total return for the common stock was 335% during the performance period as compared with a total return during the same period of 133% and 110% for the S&P 500 Composite Index and the Russell 3000 Financial Services Index, respectively. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Moody’s Corporation, the S&P 500 Index and the Russell 3000 Financial Services Index Moody’s Corporation S&P 500 Composite Index Russell 3000—Financial Services Index $500 $450 $400 $350 $300 $250 $200 $150 $100 12/16 12/17 12/18 12/19 12/20 12/21 2016 2017 2018 2019 2020 2021 Year Ended December 31, Moody’s Corporation $ 100.00 $ 158.51 $ 152.01 $ 260.32 $ 320.91 $ 435.06 S&P 500 Composite Index $ 100.00 $ 121.83 $ 116.49 $ 153.17 $ 181.35 $ 233.41 Russell 3000—Financial Services Index $ 100.00 $ 119.95 $ 109.93 $ 146.12 $ 155.77 $ 209.63 The comparisons in the graph above are provided in response to disclosure requirements of the SEC and are not intended to forecast or be indicative of future performance of the Company’s common stock. 40 MOODY'S 2021 10-K ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS LL OF FINANCIAL CONDITION AND RESULTSLL OF OPERATIONS AA This discussion and analysis of financial condition and results of operations should be read in conjunction with the Moody’s Corporation consolidated financial statements and notes thereto included elsewhere in this annual report on Form 10-K. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains Forward-Looking Statements. See “Forward-Looking Statements” commencing on page 66 and Item 1A. “Risk Factors” commencing on page 27 for a discussion of uncertainties, risks and other factors associated with these statements. THE COMPANY Moody’s is a global Moody’s reports in two segments: MIS and MA. integrated risk assessment firm that empowers organizations and investors to make better decisions. 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. COVID-19 The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. The Company continues to monitor regional developments relating to the COVID-19 pandemic to inform decisions on the reopening of its offices most of its offices and its business travel policies. As of the date of the filing of this annual report on Form 10-K, the Company has reopened for employees to access on a voluntary basis. ff ff 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. Refer to Item 1A. “Risk Factors” for further disclosure relating to the risks of the COVID-19 pandemic on the Company's business. CRITICAL ACCOUNTING ESTIMATES Moody’s discussion and analysis of its financial condition and results of operations are based on the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Moody’s to make estimates and judgments that affect amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, Moody’s evaluates its critical accounting estimates. Actual results may differ following accounting estimates are considered critical because they are particularly dependent on management’s judgment about matters that are uncertain at the time the accounting estimates are made and changes to those estimates could have a material impact on the Company’s consolidated results of operations or financial condition. from these estimates under different assumptions or conditions. The reported ff ff ff Goodwill and Other Acquired Intangible Assets On July 31st of each year, Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment (i.e., MIS and MA), or one level below an operating segment (i.e., a component of an operating segment). Prior to the second quarter of 2021, MA's reporting unit structure consisted of five reporting units (Content, ERS, MALS, Bureau van Dijk and Reis). Pursuant to a strategic reorganization in the MA segment which was completed in the second quarter of 2021, MA's reporting unit structure has been reorganized into two reporting units. MA’sAA two new reporting units generally consist of: i) businesses offering solutions. This reorganization did not result in a change to the Company's reportable segments. data and data-driven analytical solutions; and ii) risk-management software, workflow and CRE ff The Company performed qualitative assessments of the reporting units impacted by the reorganization immediately before and after the reorganization became effective. more likely than not that the fair value of any reporting unit was less than its carrying amount. These qualitative assessments resulted in the Company determining that it was not ff Subsequent to the aforementioned reorganization of the MA reporting units, the Company now has four reporting units: two within the Company’s ratings business (one for the ICRA business and one that encompasses all of Moody’s other ratings operations) and two reporting units within MA consisting of businesses that offer: ii) risk-management software, workflow and CRE solutions. i) data and data-driven analytical solutions; and ff MOODY'S 2021 10-K 41 The RMS business was acquired on September 15, 2021 and $1,266 million of goodwill was assigned to the MA reporting unit consisting of risk-management software, workflow and CRE solutions, $90 million was assigned to the MIS reporting unit, and $20 million was assigned to the MA reporting unit consisting of businesses offering data and data-driven analytical solutions. In addition, the Company acquired PassFort on November 30, 2021 and $138 million of goodwill was assigned to the reporting unit consisting of businesses offering completed after the Company's annual impairment assessment date of July 31, 2021, goodwill acquired in these transactions was not subject to the Company's impairment assessment described below. data and data-driven analytical solutions. As the acquisitions of these businesses were ff ff The Company evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level. In the first step, the Company assesses various qualitative factors to determine whether the fair value of a reporting unit may be less than its carrying amount. If a determination is made based on the qualitative factors that an impairment does not exist, the Company is not required to perform further testing. If the aforementioned qualitative assessment results in the Company concluding that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount, the fair value of the reporting unit will be quantitatively determined and compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired, and the Company is not required to perform further testing. If the fair value of the reporting unit is less than the carrying value, the Company will record a goodwill impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value. The Company evaluates its reporting units on an annual basis, or more frequently if there are changes in the reporting structure of the Company due to acquisitions, realignments or if there are indicators of potential impairment. For the reporting units where the Company is consistently able to conclude that no impairment exists using only a qualitative approach, the Company’s accounting policy is to perform the second step of the aforementioned goodwill impairment assessment at least once every three years. Annual goodwill impairment assessment performed at July 31, g p p y , 2021 At July 31, 2021, the Company performed quantitative assessments for each of the four reporting units. These quantitative assessments were performed to provide new baseline valuations under the aforementioned new reporting unit structure. These quantitative assessments resulted in fair values that significantly exceeded carrying value for all reporting units. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions, which are more fully described below. In addition, the Company also makes certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of its reporting units. Other assets and liabilities, including applicable corporate assets, are allocated to the extent they are related to the operation of respective reporting units. Matters concerning the ICRA reporting unit ICRA has reported various matters relating to: (i) an adjudication order and fine imposed (and subsequently enhanced) by the Securities and Exchange Board of India (SEBI) in connection with credit ratings assigned to one of ICRA’sAA customers and the customer’s subsidiaries, which are being appealed by ICRA; (ii) the completion of internal examinations regarding various anonymous complaints, and actions taken by ICRA’sAA board based on the examinations’ findings; and (iii) a separate internal examination of certain allegations against two former senior ICRA officials. An unfavorable resolution of the aforementioned matters may negatively impact ICRA’sAA future operating results, which could result in an impairment of goodwill and amortizable intangible assets in future quarters. ff Methodologies and significant estimates utilized in determining the fair value of reporting units: The following is a discussion regarding the Company’s methodology forff determining the fair value of its reporting units, excluding ICRA, at July 31, 2021. As ICRA is a publicly traded company in India, the Company was able to observe its fair value based on its market capitalization. The fair value of each reporting unit, excluding ICRA, was estimated using a discounted cash flow methodology and comparable public company and precedent transaction multiples. The discounted cash flow analysis requires significant estimates, including projections of future operating results and cash flows of each reporting unit that are based on internal budgets and strategic of external factors and plans, expected long-term growth rates, terminal values, weighted average cost of capital and the effects market conditions. Changes in these estimates and assumptions could materially affect the estimated fair value of each reporting unit that could result in an impairment charge to reduce the carrying value of goodwill, which could be material to the Company’s financial position and results of operations. Moody’s allocates newly acquired goodwill to reporting units based on the reporting unit expected to benefit from the acquisition. ff ff The sensitivity analyses on the future cash flows and WACC assumptions are described below. These key assumptions utilized in the discounted cash flow valuation methodology require significant management judgment: – p - The projections forff Future cash flow assumptions experience and assumptions regarding future growth and profitability of each reporting unit. These projections are consistent with the Company’s operating budget and strategic plan. Cash flows for the five years subsequent to the date of the quantitative goodwill impairment test were utilized in the determination of the fair value of each reporting unit. The growth rates assumed a gradual increase in revenue based on new customer acquisition and new products. Beyond five years a terminal value was determined using a perpetuity growth rate based on inflation and real GDP growth rates. A sensitivity future cash flows utilized in the models are derived from historical 42 MOODY'S 2021 10-K analysis of the revenue growth rates was performed on all reporting units. For each reporting unit analyzed, a 10% reduction in the revenue growth rates used would not have resulted in its carrying value exceeding its estimated fair value. – WACCWW - The WACC is the rate used to discount each reporting unit’s estimated future cash flows. The WACC is calculated based on the proportionate weighting of the cost of debt and equity. The cost of equity is based on a risk-free interest rate and an equity risk factor, which is derived from public companies similar to the reporting unit and which captures the perceived risks and uncertainties associated with the reporting unit’s cash flows. The cost of debt component is calculated as the weighted average cost associated with all of the Company’s outstanding borrowings as of the date of the impairment test and was immaterial to the computation of the WACC. The cost of debt and equity is weighted based on the debt to market capitalization ratio of publicly traded companies with similarities to the reporting unit being tested. The WACC for all reporting units ranged from 8.0% to 8.5% as of July 31, 2021. Differences primarily due to distinct risks and uncertainties regarding the cash flows of the different of the WACC was performed on all reporting units as of July 31, 2021 for each reporting unit. For all reporting units, an increase in the WACC of one percentage point would not result in the carrying value of the reporting unit exceeding its fair value. in the WACC used between reporting units is reporting units. A sensitivity analysis ff ff Long-lived assets Long-lived assets, which consist primarily of amortizable intangible assets, operating lease ROU assets and property and equipment, are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Under the first step of the recoverability assessment, Moody's compares the estimated undiscounted future cash flows attributable to the asset or asset group to its carrying value. If the undiscounted future cash flows are greater than the carrying value, no further assessment is required. If the undiscounted future cash flows are less than the carrying value, Moody's proceeds with step two of the assessment. Under step two of this assessment, Moody's is required to determine the fair value of the asset or asset group and recognize an impairment loss if the carrying amount exceeds its fair value. In performing this assessment, Moody's must include assumptions that market participants would use in their estimates of fair value, including the estimated future cash flows and discount rate. Moody's must apply judgment in developing estimated future cash flows and in the determination of market participant assumptions. Income Taxes by the amounts charged for services provided and expenses incurred as well as other tax matters such as The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The Company’s tax assets and liabilities are affected ff intercompany transactions. The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740. Therefore, income tax expense is based on reported income before income taxes, and deferred income taxes reflect the effect purposes and the amounts that are recognized for income tax purposes. between the amounts of assets and liabilities that are recognized for financial reporting of temporary differences ff ff The Company is subject to tax audits in various jurisdictions. The Company regularly assesses the likely outcomes of such audits in order to determine the appropriateness of liabilities for UTPs. The Company classifies interest related to income taxes as a component of interest expense in the Company’s consolidated financial statements and associated penalties, if any, as part of other non-operating expenses. For UTPs, ASC Topic 740 requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective associated interest and penalties requires significant estimates to be made by the Company, there can be no assurance that the Company will accurately predict the outcomes of these audits, and thus the eventual outcomes could have a material impact on the Company’s operating results or financial condition. settlement with a taxing authority. As the determination of liabilities related to UTPs and ff Revenue Recognition and Costs to Obtain a Contract with a Customer Revenue is recognized when control of promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The discussion below outlines areas of the Company’s revenue recognition process that require significant management judgment and estimates. Refer to Note 2 of the consolidated financial statements for a comprehensive discussion regarding the Company’s accounting policies relating to the recognition of revenue and costs to obtain a contract with a customer. Allocating consideration to performance obligations: g p g Management judgment is required in the determination of the SSP, wP hich is utilized to allocate the transaction price to each distinct performance obligation at contract inception when the contract includes multiple distinct performance obligations. In the MIS segment, the SSP for both ratings and monitoring services is generally based upon directly observable selling prices where the rating or monitoring service is sold separately. MOODY'S 2021 10-K 43 In the MA segment, for performance obligations where an observable price exists, such as PCS, the observable price is utilized. If an observable price does not currently exist, the Company will utilize management’s best estimate of SSP for that good or service using estimation methods that maximize the use of observable data points. The SSP in both segments is usually apportioned along the lines of class of customer, nature of product/services, and other attributes related to those products and services. Once SSP is determined for each performance obligation, the transaction price, including any discount, is allocated based on the relative SSP of the separate performance obligations. Costs to Obtain a Contract with a Customer: Costs incurred to obtain customer contracts, such as sales commissions, are deferred and recorded within other current assets and other assets when such costs are determined to be incremental to obtaining a contract, would not have been incurred otherwise and the Company expects to recover those costs. These costs are amortized to expense on a systematic basis consistent with the transfer of products or services to the customer for which the asset relates. Depending on the line of business to which the contract relates, this amortization period may be based upon the average economic life of the products sold or average period for which services are provided, inclusive of anticipated contract renewals. Contingencies Accounting for contingencies, including those matters described in Note 21 to the consolidated financial statements, is highly subjective and requires the use of judgments and estimates in assessing their magnitude and likely outcome. In many cases, the outcomes of such matters will be determined by third parties, including governmental or judicial bodies. The provisions made in the consolidated financial statements, as well as the related disclosures, represent management’s best estimates of the current status of such matters and their potential outcome based on a review of the facts and in consultation with outside legal counsel where deemed appropriate. The Company regularly reviews contingencies and as new information becomes available may, in the future, adjust its associated liabilities. 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. ff of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative In view of the inherent difficulty 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, 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 those estimates. if any, on its operations and financial condition and to accrue for and from ff ff Accounts Receivable Allowances On January 1, 2020, the Company adopted ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic of Credit Losses on Financial Instruments” as more fully described in Note 1 to the consolidated financial statements. As the Company's accounts receivable are short-term in nature, the adoption of this ASU did not have a material impact to the Company's allowance for bad debts or its policies and procedures for determining the allowance. TT 326): Measurement In order to determine an estimate of expected credit losses, receivables are segmented based on similar risk characteristics including historical credit loss patterns and industry or class of customers to calculate reserve rates. The Company uses an aging method for developing its allowance for credit losses by which receivable balances are grouped based on aging category. A reserve rate is calculated for each aging category, which is generally based on historical information, and is adjusted, when necessary, forff future. The Company also considers customer specific information (e.g., bankruptcy or financial difficulty) expected credit losses, as well as the economic environment of the customers, both from an industry and geographic perspective, in evaluating the need for allowances. Expected credit losses are reflected as additions to the accounts receivable allowance. Actual uncollectible account write-offsff are recorded against the allowance. current conditions (e.g., macroeconomic or industry related) and reasonable and supportable forecasts about the when estimating its ff The impact on operating income relating to a one percentage point change in the Company's reserve rates would be approximately $18 million. 44 MOODY'S 2021 10-K Pension and Other Retirement Benefits The expenses, assets and liabilities that Moody’s reports for its Retirement Plans are dependent on many assumptions concerning the outcome of future events and circumstances. These significant assumptions include the following: – – future compensation increases based on the Company’s long-term actual experience and future outlook; long-term expected return on pension plan assets based on historical portfolio results and the expected future average annual return for each major asset class within the plan’s portfolff investments); and io (which is principally comprised of equity and fixed-income – discount rates based on current yields on high-grade corporate long-term bonds. The discount rates used to measure the present value of the Company’s benefit obligation for its Retirement Plans as of December 31, 2021 were derived using a cash flow matching method whereby the Company compares each plan’s projected payment obligations by year with the corresponding yield on the FTSE pension discount curve. The cash flows by plan are then discounted back to present value to determine the discount rate applicable to each plan. Moody’s major assumptions vary by plan and assumptions used are set forth in Note 15 to the consolidated financial statements. In determining these assumptions, the Company consults with third-party actuaries and other advisors as deemed appropriate. While the Company believes that the assumptions used in its calculations are reasonable, differences changes in assumptions could have a significant effect ff Retirement Plans. Additionally, the Company has updated its mortality assumption by adopting the newly released mortality improvement scale MP-2021 to accompany the Pri2012 mortality tables to reflect the latest information regarding future mortality expectations by the Society of Actuaries. on the expenses, assets and liabilities related to the Company’s in actual experience or ff ff from the assumptions used, actuarial gains or losses arise. Excluding differences When actual plan experience differs the expected long-term rate of return assumption and actual returns on plan assets, the Company amortizes, as a component of annual pension expense, total outstanding actuarial gains or losses over the estimated average future working lifetime of active plan participants to the extent that the gain/loss exceeds 10% of the greater of the beginning-of-year projected benefit obligation or the market-related value of plan assets. For Moody’s Retirement Plans, the total actuarial losses as of December 31, 2021 that have not been recognized in annual expense are $65 million, and Moody’s expects to recognize a net periodic expense of $4 million in 2022 related to the amortization of actuarial losses. between ff ff ff For Moody’s funded U.S. pension plan, the differences returns could also affect impact of asset returns over a five-year period forf determining the expected return on assets’ component of annual expense and in calculating the total unrecognized gain or loss subject to amortization. As of December 31, 2021, the Company has an unrecognized asset gain of $44 million, of which $13 million will be recognized in the market-related value of assets that is used to calculate the expected return on assets component of 2022 expense. the net periodic pension expense. As permitted under ASC Topic 715, the Company amortizes the purposes of calculating the market-related value of assets that is used in between the expected long-term rate of return assumption and actual The table below shows the estimated effect Moody’s 2022 income before provision for income taxes. These effects projections of 2022 expenses, assets and liabilities related to Moody’s Retirement Plans, which could change as updated data becomes available. that a one percentage-point decrease in each of these assumptions will have on have been calculated using the Company’s current ff ff (dollars in millions) Weighted Average Discount Rates (1) Weighted Average Assumed Compensation Growth Rate Assumed Long-TermTT Rate of Return on Pension Assets Assumptions Used for 2022 Estimated Impact on 2022 Income before Provision for Income Taxes (Decrease)/Increase 2.60%/2.65% $ 3.63 % $ 5.05 % $ (10) 1 (5) (1) Weighted average discount rates of 2.60% and 2.65% for pension plans and Other Retirement Plans, respectively. Based on current projections, the Company estimates that expenses related to Retirement Plans will be approximately $13 million in 2022, a decrease compared to the $31 million recognized in 2021. Leases The Company’s operating leases do not provide an implicit interest rate. Accordingly, the Company must estimate the secured incremental borrowing rate attributable to the currency in which the lease is denominated in the derivation of operating lease liabilities and related operating lease ROU Assets. This secured incremental borrowing rate is based on the information available at the lease commencement date and is utilized in the determination of the present value of lease payments. MOODY'S 2021 10-K 45 In addition, certain of Moody’s leases have the option to extend the lease beyond the initial term or terminate the lease prior to the end of the term. For these leases, Moody’s may be required to exercise significant judgment to determine when that option is reasonably certain of being exercised, which will impact the lease term and determination of the lease liability and corresponding ROU Asset. Investments in Non-consolidated Affiliates Equity method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis. These investments are written down to fair value if there is evidence of a loss in value that is other-than-temporary. For equity investments without a readily determinable fair value for which the Company does not have significant influence, Moody's generally elects to measure these investments at cost, less impairment, adjusted for subsequent observable price changes as of the date that an observable transaction takes place. The Company performs an assessment on a quarterly basis to determine if there are indicators of impairment for its investments in non-consolidated affiliates. records an impairment if the carrying value of the investment exceeds its fair value. If there are indicators of impairment, the Company estimates the investment’s fair value and ff In situations where estimation of fair value is required for investments in non-consolidated affiliates, the Company considers various factors, including: recent observable investee equity transactions, comparable public company/precedent transaction multiples and discounted cash flow models. The estimation of fair value for these investments may involve significant judgment. ff Other Estimates In addition to the critical accounting estimates described above, there are other accounting estimates within Moody’s consolidated financial statements. Management believes the current assumptions and other considerations used to estimate amounts reflected in Moody’s consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in Moody’s consolidated financial statements, the resulting changes could have a material adverse effect on Moody’s consolidated results of operations or financial condition. ff ff See Note 2 to the consolidated financial statements for further information on significant accounting policies that impact Moody’s. REPORTABLE SEGMENTS The Company is organized into two reportable segments at December 31, 2021: MIS and MA, which are more fully described in the section entitled “The Company” above and in Note 22 to the consolidated financial statements. RESULTS OF OPERATIONS This section of this Form 10-K generally discusses year ended December 31, 2021 and 2020 financial results and year-to-year comparisons between these years. Discussions related to the year ended December 31, 2019 financial results and year-to-year comparisons between the years ended December 31, 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Impact of acquisitions/divestitures on comparative results – Moody’s completed the following acquisitions, which impact the Company's year-over-year comparative results: – Regulatory DataCorp on February 13, 2020; – – Acquire Media on October 21, 2020; ZM Financial Systems on December 7, 2020; – Catylist on December 30, 2020; – Cortera on March 19, 2021; – RMS on September 15, 2021; and – RealXData on September 17, 2021. – Refer to the section entitled "Non-GAAP Financial Measures" of this MD&A for the definitions of how the Company determines certain organic growth measures used in this MD&A that exclude the impact of acquisition activity. 46 MOODY'S 2021 10-K Year ended December 31, 2021 compared with year ended December 31, 2020 Executive Summaryy The following table provides an executive summary of key operating results for the year ended December 31, 2021. Following this executive summary is a more detailed discussion of the Company’s operating results as well as a discussion of the operating results of the Company’s reportable segments. Year Ended December 31, Financial measure: 2021 2020 % Change Favorable / (Unfavorable) Insight and Key Drivers of Change Compared to Prior Year Moody's total revenue $ 6,218 $ 5,371 16 % — reflects strong growth in both segments MIS External Revenue $ 3,812 $ 3,292 16 % — strong growth mainly driven by leveraged finance issuance as issuers refinanced existing debt and funded M&A activity; and — increased CLO and CMBS activity amid favorable market conditions MA External Revenue $ 2,406 $ 2,079 16 % — strong growth in KYC and compliance solutions, as well as research and data feeds; — inorganic growth from acquisitions; — ongoing recurring revenue growth in ERS from subscription-based sales to banking, insurance and asset management customers; and — favorable changes in FX translation rates; partially offset by: — a decline in ERS transaction-based revenue reflecting MA's strategic shift to higher margin SaaS-based products, which produce recurring revenue $ 3,117 $ 2,704 (15 %) — Approximately seven percentage points of the growth Total operating and SG&A expenses Total non-operating (expense) income, net $ (89) $ (159) Operating Margin Adjusted Operating Margin 45.7 % 49.9 % 44.5 % 49.7 % reflects inorganic expenses from acquisitions, including $22 million in acquisition-related costs for RMS; and — Approximately five percentage points of the growth reflects higher incentive compensation, stock-based compensation, and commissions aligned with operating performance. 44% — a $45 million benefit related to the reversal of tax-related interest accruals pursuant to the resolution of uncertain tax positions; and — a $36 million non-cash gain relating to the exchange of the Company's minority investment in VisibleRisk for shares of BitSight 120BPS — margin expansion reflects strong revenue growth outpacing 20BPS operating expense growth ETR 19.6 % 20.3 % 70BPS — higher benefits of approximately $36 million from the resolution of UTPs in 2021; partially offset by — lower Excess Tax Benefits in 2021 Diluted EPS $ 11.78 $ 9.39 25 % — increase reflects strong operating income/Adjusted Adjusted Diluted EPS $ 12.29 $ 10.15 21 % Operating Income growth as described above and includes $0.54/share and $0.20/share in benefits related to the resolution of uncertain tax positions (and related interest) in 2021 and 2020, respectively. MOODY'S 2021 10-K 47 Moody’s Corporation Revenue: United States Non-U.S.: EMEA Asia-Pacific Americas Total Non-U.S. Total Expenses: Operating SG&A Restructuring Depreciation and amortization Loss pursuant to the divestiture of MAKS Total Operating income Adjusted Operating Income (1) Interest expense, net Other non-operating income, net Non-operating (expense) income, net Net income attributable to Moody’s Diluted weighted average shares outstanding Diluted EPS attributable to Moody’s common shareholders Adjusted Diluted EPS (1) Operating margin Adjusted Operating Margin (1) Effective tax rate ff Year Ended December 31, 2021 2020 % Change Favorable (Unfavorable) $ 3,416 $ 2,955 1,866 596 340 2,802 6,218 1,637 1,480 — 257 — 3,374 2,844 3,101 (171) 82 (89) 2,214 187.9 11.78 12.29 $ $ $ $ $ $ 1,545 571 300 2,416 5,371 1,475 1,229 50 220 9 2,983 2,388 2,667 (205) 46 (159) 1,778 189.3 9.39 10.15 45.7 % 49.9 % 19.6 % 44.5 % 49.7 % 20.3 % 16% 21% 4% 13% 16% 16% (11%) (20%) 100% (17%) 100% (13%) 19% 16% 17% 78% 44% 25% 1% 25% 21% (1) Adjusted Operating Income, Adjusted Operating Margin and Adjusted Diluted EPS attributable to Moody’s common shareholders are non- GAAP financial measures. Refer to the section entitled “Non-GAAP Financial Measures” of this Management Discussion and Analysis for further information regarding these measures. GLOBAL REVENUE 2021----------------------------------------------------------------------------------------------------------------------2020 __________________________________________________________________________________________________________________________________________________________ 55% 45% 45% 55% 55% 56% 45% 44% U.S. Non-U.S. Transaction Recurring U.S. Non-U.S. Transaction Recurring 48 MOODY'S 2021 10-K Global revenue ⇑ $847 million U.S. Revenue ⇑ $461 million Non-U.S. Revenue ⇑ $386 million The increase in global revenue reflected growth in both reportable segments. Refer to the section entitled “Segment Results” of this MD&A for a more fulsome discussion of the Company’s segment revenue. Operating Expense ⇑ $162 million SG&A Expense ⇑ $251 million $1,637 $1,475 $1,480 $1,229 Compensation Non-compensation Compensation Non-compensation 2021 2020 - ------------------------------------- 2021 2020 ----------- Compensation expenses increased $126 million reflecting: Compensation expenses increased $133 million reflecting: — higher incentive and stock-based compensation accruals — higher incentive and stock-based compensation accruals aligned with financial and operating performance; aligned with financial and operating performance; — inorganic growth from acquisitions; and — inorganic growth from acquisitions; and — hiring and salary increases — hiring and salary increases Non-compensation expenses increased $36 million reflecting: Non-compensation expenses increased $118 million reflecting: — higher costs relating to strategic initiatives to support — higher costs relating to strategic initiatives to support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency; and ff business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency; and ff — operational costs associated with recent acquisitions — costs associated with recent acquisitions, including $22 million in RMS acquisition-related costs Other Expenses The restructuring charge of $50 million in 2020 primarily relates to: – – the non-cash impairment of certain leased real estate assets (ROU Assets and leasehold improvements) pursuant to the rationalization of certain real estate in response to the COVID-19 pandemic; and severance costs associated with a strategic realignment in the MA segment. Further detail on the Company's restructuring programs are more fully discussed in Note 11 to the consolidated financial statements. The 2020 amount includes a $9 million loss pursuant to the divestiture of MAKS relating to customary post-closing completion adjustments pursuant to the sale of the business in the fourth quarter of 2019. Operating margin 45.7%, up 120 BPS Adjusted Operating Margin 49.9%, up 20 BPS Operating margin and Adjusted Operating Margin expansion reflects strong revenue growth outpacing growth in total operating expenses. MOODY'S 2021 10-K 49 Interest Expense, net ⇓ $34 million Other non-operating income ⇑ $36 million The decrease in expense is primarily due to: The increase in income is primarily due to: — approximately $40 million higher benefit in 2021 related to the reversal of tax-related interest accruals pursuant to the resolution of uncertain tax positions; — a $36 million non-cash gain relating to the exchange of the Company's minority investment in VisibleRisk for shares of BitSight; and — a decrease of $11 million in prepayment penalties on the early repayment of long-term debt; partially offset by — higher income of $18 million in 2021 on certain of the Company's investments in non-consolidated affiliates; ff partially offset by — a $15 million lower benefit from cross currency swaps (more fully discussed in Note 7 to the consolidated financial statements). — a $13 million benefit in 2020 relating to statute of limitations lapses on certain indemnification obligations relating to the MAKS divestiture; and — a $13 million loss on a forff ward rr portion of the GBP denominated RMS purchase price. contract used to hedge a ETR ⇓ 70BPS The 2021 and 2020 ETR include $70 million and $34 million, respectively, in tax benefits relating to the resolution of uncertain tax positions. The aforementioned benefit to the 2021 ETR was diluted by higher income before provision for income taxes compared to the prior year. Additionally, there was a $29 million decrease in Excess Tax Benefits in 2021 compared to the prior year. Diluted EPS ⇑ $2.39 Adjusted Diluted EPS ⇑ $2.14 Diluted EPS in 2021 of $11.78 increased $2.39 compared to 2020, mainly due to higher operating income. Diluted EPS in 2021 and 2020 also include $0.54/share and $0.20/share, respectively, in benefits related to the aforementioned resolution of uncertain tax positions (and related interest). Adjusted Diluted EPS of $12.29 in 2021 increased $2.14 compared to 2020 (refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for items excluded in the derivation of Adjusted Diluted EPS) mainly due to higher Adjusted Operating Income. Adjusted Diluted EPS in 2021 and 2020 includes $0.54/share and $0.20/share, respectively, in benefits related to the aforementioned resolution of uncertain tax positions (and related interest). Refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for items excluded in the derivation of Adjusted Diluted EPS. 50 MOODY'S 2021 10-K Segment Results Moody’s Investors Service The table below provides a summary of revenue and operating results, followed by further insight and commentary: r Ended December 31, 2021 2020 % Change Favorable (Unfavorable) Revenue: Corporate finance (CFG) Financial institutions (FIG) Public, project and infrastructure finance (PPIF) Structured finance (SFG) Total ratings revenue MIS Other Total external revenue Intersegment royalty Total Expenses: Operating and SG&A (external) Operating and SG&A (intersegment) Total operating and SG&A Adjusted Operating Income Adjusted Operating Margin Restructuring Depreciation and amortization $ 2,087 $ 1,857 602 521 560 3,770 42 3,812 165 3,977 1,496 7 1,503 2,474 $ 530 496 362 3,245 47 3,292 148 3,440 1,380 7 1,387 2,053 62.2 % 59.7 % (1) 72 19 70 $ 12% 14% 5% 55% 16% (11%) 16% 11% 16% (8%) —% (8%) 21% 105% (3%) The following chart presents changes in rated issuance volumes compared to 2020. To the extent that changes in rated issuance volumes had a material impact to MIS's revenue compared to the prior year, those impacts are discussed below. Changes in Rated Issuance Volumes Total MIS Rated Issuance 9% Structured Finance Leveraged Loans Financial Institutions High Yield Bonds Public, Project and Infrastructure Finance (20)% Investment Grade (36)% 13% 12% 123% 104% MOODY'S 2021 10-K 51 MOODY'S INVESTORS SERVICE REVENUE 2021----------------------------------------------------------------------------------------------------------------------2020 __________________________________________________________________________________________________________________________________________________________ 39% 31% 37% 34% 61% 69% 63% 66% U.S. Non-U.S. Transaction Recurring U.S. Non-U.S. Transaction Recurring MIS: Global revenue ⇑ $520 million U.S. Revenue ⇑ $276 million Non-U.S. Revenue ⇑ $244 million – – The increase in global MIS revenue reflected strong growth across all ratings LOBs. Transaction revenue grew $458 million compared to the same period in the prior year. CFG REVENUE 2021----------------------------------------------------------------------------------------------------------------------2020 __________________________________________________________________________________________________________________________________________________________ 34% 66% 23% 30% 25% 77% 70% 75% U.S. Non-U.S. Transaction Recurring U.S. Non-U.S. Transaction Recurring CFG: Global revenue ⇑ $230 million U.S. Revenue ⇑ $93 million Non-U.S. Revenue ⇑ $137 million Global CFG revenue for the years ended December 31, 2021 and 2020 was comprised as follows: $2,087 $631 $606 $411 $439 2021 $1,857 $582 $287 $352 $636 2020 Bank loans High-yield Investment-grade (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. 52 MOODY'S 2021 10-K The increase in CFG revenue of 12% reflected growth both in the U.S. (7%) and internationally (24%), which resulted in a $199 million increase in transaction revenue. The most notable drivers of this increase were: – strong growth in bank loan and speculative-grade bond activity in the U.S. and EMEA as issuers refinanced existing debt in light of favorable market conditions and funded M&A activity; partially offset by: – lower investment grade rated issuance volumes following very strong issuance volumes in the prior year when issuers were bolstering their balance sheets in light of uncertainties relating to the COVID-19 crisis. FIG REVENUE 2021----------------------------------------------------------------------------------------------------------------------2020 __________________________________________________________________________________________________________________________________________________________ 48% 52% 53% 47% 47% 53% 50% 50% U.S. Non-U.S. Transaction Recurring U.S. Non-U.S. Transaction Recurring FIG: Global revenue ⇑ $72 million U.S. Revenue ⇑ $39 million Non-U.S. Revenue ⇑ $33 million Global FIG revenue for the years ended December 31, 2021 and 2020 was comprised as follows: $602 $36 $145 $411 2021 $530 $28 $137 $355 2020 Other accounts (FIG) Managed investments Insurance Banking The increase in FIG revenue of 14% reflected growth both in the U.S. (16%) and internationally (12%) which resulted in a $55 million increase in transaction revenue compared to the prior year. The most notable driver of the increase was higher banking revenue in the U.S. and EMEA reflecting both the benefit of favorable changes in product mix and pricing increases coupled with opportunistic issuer activity in light of favorable market conditions. MOODY'S 2021 10-K 53 PPIF REVENUE 2021----------------------------------------------------------------------------------------------------------------------2020 __________________________________________________________________________________________________________________________________________________________ 42% 58% 32% 37% 32% 68% 63% 68% U.S. Non-U.S. Transaction Recurring U.S. Non-U.S. Transaction Recurring PPIF: Global revenue ⇑ $25 million U.S. Revenue ⇓ $7 million Non-U.S. Revenue ⇑ $32 million Global PPIF revenue for the years ended December 31, 2021 and 2020 was comprised as follows: $521 $277 $244 2021 $496 $246 $250 2020 Project and infrastructure Public finance / sovereign Transaction revenue increased $17 million compared to the same period in the prior year. The 5% increase in PPIF revenue reflected growth internationally (17%) partially offset growth was driven by: ff be a slight decline in the U.S. (2%). The – higher project and infrastructure finance revenue which benefitted from favorable changes in product mix and pricing increases; partially offset ff by: – a decline in U.S. public finance revenue, as issuance volumes fell given higher issuer liquidity following strong issuance in the prior year and from the infusion of federal funding related to the COVID-19 crisis. 54 MOODY'S 2021 10-K SFG REVENUE 2021----------------------------------------------------------------------------------------------------------------------2020 __________________________________________________________________________________________________________________________________________________________ 35% 35% 65% 65% 41% 59% 48% 52% U.S. Non-U.S. Transaction Recurring U.S. Non-U.S. Transaction Recurring SFG: Global revenue ⇑ $198 million U.S. Revenue ⇑ $150 million Non-U.S. Revenue ⇑ $48 million Global SFG revenue for the years ended December 31, 2021 and 2020 was comprised as follows: $560 $215 $102 $123 $118 2021 $362 $105 $61 $96 $98 2020 Structured credit CMBS RMBS Asset-backed securities The increase in SFG revenue of 55% reflected growth both in the U.S. (70%) and internationally (32%). Transaction revenue increased $187 million. The most notable drivers of the growth in SFG revenue were: – an increase in CLO refinancing and securitization activity as a result of: – – favorable market conditions for this asset class in the U.S. and EMEA; higher issuance to complete deals prior to the expected market transition from LIBOR – an increase in U.S. CMBS activity reflecting a narrowing of credit spreads forff prior year period when securitization activity for retail and hotel properties was adversely impacted by the COVID-19 crisis. this asset class compared to a challenging Foreign currency translation favorably impacted SFG revenue by two percentage points. MOODY'S 2021 10-K 55 MIS: Operating and SG&A Expense ⇑ $116 million $1,496 $1,104 $392 2021 $1,380 $1,011 $369 2020 Compensation Non-compensation The growth reflects a $93 million and $23 million increase in compensation and non-compensation expenses, respectively. The most notable drivers of these increases are as follows: Compensation costs Non-compensation costs The increase is primarily due to: The increase is primarily due to: — higher incentive and stock-based compensation accruals aligned with financial and operating performance — higher costs to support the Company’s initiative to enhance technology infrastructure to enable automation, innovation and efficiency as well as to support business growth; partially offset by: — lower estimates for credit losses primarily reflecting an increase in reserves in 2020 resulting from the anticipated impact of the COVID-19 crisis Other Expenses The restructuring charge in 2020 relates to the Company's restructuring programs as more fully discussed in Note 11 to the consolidated financial statements. MIS: Adjusted Operating Margin 62.2% ⇑ 250BPS MIS Adjusted Operating Margin increased reflecting strong revenue growth partially offset expenses. ff by growth in operating and SG&A 56 MOODY'S 2021 10-K Moody’s Analytics The table below provides a summary of revenue and operating results, followed by further insight and commentary: Year Ended December 31, 2021 2020 % Change Favorable (Unfavorable) Revenue: Research, data and analytics (RD&A) Enterprise risk solutions (ERS) Total external revenue Intersegment revenue Total MA Revenue Expenses: Operating and SG&A (external) Operating and SG&A (intersegment) Total operating and SG&A Adjusted Operating Income Adjusted Operating Margin Restructuring Depreciation and amortization Loss pursuant to the divestiture of MAKS MOODY'S ANALYTICS REVENUE $ $ 1,745 661 2,406 7 2,413 1,621 165 1,786 627 $ $ 1,514 565 2,079 7 2,086 1,324 148 1,472 614 26.0 % 29.4 % 1 185 — 31 150 9 15% 17% 16% —% 16% (22%) (11%) (21%) 2% 97% (23%) 100% __________________________________________________________________________________________________________________________________________________________ 2021----------------------------------------------------------------------------------------------------------------------2020 45% 55% 7% 93% 43% 57% 9% 91% U.S. Non-U.S. Recurring Transaction U.S. Non-U.S. Recurring Transaction MA: Global revenue ⇑ $327 million U.S. Revenue ⇑ $185 million Non-U.S. Revenue ⇑ $142 million The 16% increase in global MA revenue reflects strong growth both in the U.S. (21%) and internationally (12%). – Foreign currency translation favorably impacted MA revenue by two percentage points. – Organic revenue growth was 9%. MOODY'S 2021 10-K 57 RD&A REVENUE __________________________________________________________________________________________________________________________________________________________ 2021----------------------------------------------------------------------------------------------------------------------2020 43% 57% U.S. Non-U.S. 5% 95% Recurring Transaction 44% 56% 5% 95% U.S. Non-U.S. Recurring Transaction RD&A: Global revenue ⇑ $231 million U.S. Revenue ⇑ $90 million Non-U.S. Revenue ⇑ $141 million Global RD&A revenue grew 15% compared to 2020 reflecting growth in the U.S. (13%) and internationally (17%). The most notable drivers of the growth include: – – – strong demand for KYC and compliance solutions reflecting increased customer and supplier risk data usage; strong renewals and new sales related to credit research and data feeds; and inorganic revenue growth from acquisitions. Foreign currency translation favorably impacted RD&A revenue by two percentage points. Organic revenue growth for RD&A was 12%. ERS REVENUE __________________________________________________________________________________________________________________________________________________________ 2021----------------------------------------------------------------------------------------------------------------------2020 48% 52% 12% 39% 21% 88% 61% 79% U.S. Non-U.S. Recurring Transaction U.S. Non-U.S. Recurring Transaction ERS: Global revenue ⇑ $96 million U.S. Revenue ⇑ $95 million Non-U.S. Revenue ⇑ $1 million Global ERS revenue increased 17% compared to 2020, mainly from growth in the U.S. (43%). Recurring revenue grew 30% compared to 2020. Transaction revenue declined by 32% compared to 2020. 58 MOODY'S 2021 10-K The most notable drivers of the growth reflected: – – inorganic revenue growth from the acquisitions of RMS and ZMFS; growth in subscription-based revenue, most notably for actuarial modeling tools in support of certain international accounting standards relating to insurance contracts and demand from asset managers for risk management solutions; and – favorable foreign currency translation which impacted revenue by two percentage points. partially offset by: – lower non-recurring software and services revenue due to a de-emphasizing of these lower margin offerings. ff Organic total revenue and organic recurring revenue for ERS grew 1% and 11%, respectively. Organic transaction revenue declined 38%. MA: Operating and SG&A Expense ⇑ $297 million $1,621 $1,031 $590 2021 $1,324 $864 $460 2020 Compensation Non-compensation The increase in operating and SG&A expenses compared to 2020 reflected growth in both compensation and non-compensation costs of $167 million and $130 million, respectively. The most notable drivers of this growth were: Compensation costs Non-compensation costs — salary increases and inorganic expense growth from — accelerated spending relating to strategic initiatives to acquisitions; — higher incentive compensation accruals aligned with financial and operating performance; and support business growth coupled with enhancements to technology infrastructure to enable automation, innovation and efficiency; and — unfavorable changes in FX translation rates — costs associated with recent acquisitions, including $22 million in RMS acquisition-related costs Other Expenses The restructuring charge in 2020 relates to the Company's restructuring programs as more fully discussed in Note 11 to the consolidated financial statements. The $9 million loss pursuant to the divestiture of MAKS in 2020 is related to a customary post-closing completion adjustment pursuant to the sale of the business in the fourth quarter of 2019. MA: Adjusted Operating Margin 26.0% ⇓ 340BPS The Adjusted Operating Margin contraction for MA reflects operating expense growth outpacing RD&A and ERS revenue growth. MOODY'S 2021 10-K 59 MARKET RISK Foreign exchange risk: g g rr Moody’s maintains a presence in more than 40 countries. In 2021, approximately 42% of the Company’s revenue and approximately 38% of the Company expenses were denominated in functional currencies other than the U.S. dollar, principally in the British pound and the euro. As such, the Company is exposed to market risk from changes in FX rates. As of December 31, 2021, approximately 52% of Moody’s assets were located outside the U.S., making the Company susceptible to fluctuations in of translating assets and liabilities of non-U.S. operations with non-U.S. functional currencies to the U.S. FX rates. The effects dollar are charged or credited to OCI. ff The effects of revaluing assets and liabilities that are denominated in currencies other than a subsidiary’s functional currency are ff charged to other non-operating income (expense), net in the Company’s consolidated statements of operations. Accordingly, the Company enters into foreign exchange forwards to partially mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. The following table shows the impact to the fair value of the forward contracts if currencies being purchased were to weaken by 10%: Foreign Currency Forwards (1) Sell U.S. dollar U.S. dollar U.S. dollar U.S. dollar U.S. dollar U.S. dollar U.S. dollar British pound Buy British pound Canadian dollar Euro Japanese yen Singapore dollar Indian Rupee Russian Ruble U.S. dollar Impact on fair value of contract $12 million unfavorable impact $11 million unfavorable impact $36 million unfavorable impact $2 million unfavorable impact $6 million unfavorable impact $1 million unfavorable impact $1 million unfavorable impact $21 million unfavorable impact $90 million unfavorable impact (1) Refer to Note 7 to the consolidated financial statements in Item 8 of this Form 10-K for further detail on the forwf ard contracts. The change in fair value of the foreign exchange forward contracts would be offset underlying assets and liabilities denominated in currencies other than a subsidiary’s functional currency. by FX revaluation gains or losses on ff Derivatives and non-derivatives designated as net investment hedges: g g The Company designates derivative instruments and foreign currency-denominated debt as hedges of foreign currency risk of net investments in certain foreign subsidiaries (net investment hedges) under ASC Topic 815, Derivatives and Hedging. Cross-currency swaps As of December 31, 2021, the Company had the following derivative instruments designated as hedges of euro denominated net investments in subsidiaries: – Cross-currency swaps to exchange an aggregate amount of €909 million with corresponding euro fixed interest rates for an aggregate amount of $1,050 million with corresponding USD fixed interest rates. – Cross-currency swaps to exchange an aggregate amount of €1,179 million with corresponding interest based on the floating 3-month EURIBOR for an aggregate amount of $1,350 million with corresponding interest based on the floating 3-month U.S. LIBOR. If the euro were to strengthen 10% relative to the U.S. dollar, there would be an approximate $237 million unfavorable impact to the fair value of the cross-currency swaps recognized in OCI, which would be offset the Company’s euro net investment in foreign subsidiaries. by favorable currency translation gains on ff Euro-denominated debt As of December 31, 2021, the Company has designated €500 million of the 2015 Senior Notes and €750 million of the 2019 Senior Notes as a net investment hedge to mitigate FX exposure relating to euro denominated net investments in subsidiaries. If the euro were to strengthen 10% relative to the U.S. dollar, there would be an approximate $142 million unfavorable adjustment to OCI related to these net investment hedges. This adjustment would be offset Company’s euro net investment in subsidiaries. by favorable translation adjustments on the ff 60 MOODY'S 2021 10-K Interest rate and credit risk: Interest rate swaps designated as a fair value hedge: g g p The Company’s interest rate risk management objectives are to reduce the funding cost and volatility to the Company and to alter the interest rate exposure to a desired risk profile. Moody’s uses interest rate swaps as deemed necessary to assist in accomplishing these objectives. The Company is exposed to interest rate risk on its various outstanding fixed-rate debt for which the fair value of the outstanding fixed rate debt fluctuates based on changes in interest rates. 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 and 6-month LIBOR. These swaps are adjusted to fair market value based on prevailing interest rates at the end of each reporting period and fluctuations are recorded as a reduction or addition to the carrying value of the borrowing, while net interest payments are recorded as interest expense/income in the Company’s consolidated statement of operations. A hypothetical change of 100 BPS in the LIBOR-based swap rate would result in an approximate $69 million change to the fair value of the swap, which would be offset by the change in fair value of the hedged item. ff Additional information on these interest rate swaps is disclosed in Note 7 to the consolidated financial statements located in Item 8 of this Form 10-K. Moody’s cash equivalents consist of investments in high-quality investment-grade securities within and outside the U.S. with maturities of three months or less when purchased. The Company manages its credit risk exposure by allocating its cash equivalents among various money market deposit accounts and certificates of deposit and by limiting the amount it can invest with any single issuer. Short-term investments primarily consist of certificates of deposit. LIQUIDITY AND CAPITAL RESOURCES Moody's remains committed to using its strong cash flow to create value for shareholders by both investing in the Company's employees and growing the business through targeted organic initiatives and inorganic acquisitions aligned with strategic priorities. Additional excess capital is returned to the Company’s shareholders via a combination of dividends and share repurchases. Cash Flow The Company is currently financing its operations, capital expenditures, acquisitions and share repurchases from operating and financing cash flows. The following is a summary of the changes in the Company’s cash flows followed by a brief discussion of these changes: Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Free Cash Flow (1) Year Ended December 31, 2021 2,005 (2,619) (122) 1,866 $ $ $ $ 2020 2,146 (1,077) (351) 2,043 $ $ $ $ $ $ $ $ $ Change Favorable (unfavorable) (141) (1,542) 229 (177) (1) Free Cash Flow is a non-GAAP measure and is defined by the Company as net cash provided by operating activities minus cash paid for capital expenditures. Refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for further information on this financial measure. Net cash provided by operating activities Net cash flows from operating activities decreased $141 million compared to the prior year reflecting: – – higher cash paid for income taxes of $418 million, which includes amounts pursuant to the settlement of UTPs; and various changes in working capital, most notably from higher accounts receivable balances at December 31, 2021 resulting from the Company's strong performance in the fourth quarter of 2021; partially offset by: – – – an increase in net income compared to the same period in the prior year reflecting the Company's strong performance in 2021 (see section entitled “Results of Operations” for further discussion); a $99 million contribution to the Company's funded pension plan in 2020 that did not recur in 2021; and a $68 million payment made in conjunction with the settlement of a treasury lock interest rate forward contract in 2020 that did not recur in 2021. Net cash used in investing activities The $1,542 million increase in cash flows used in investing activities compared to 2020 primarily reflects: – an increase in cash paid for acquisitions of $1,282 million (refer to Note 9 to the consolidated financial statements for further discussion on the Company's M&A activity); and MOODY'S 2021 10-K 61 – $250 million of cash paid for a minority investment in BitSight (refer to Note 13 to the consolidated financial statements for further discussion on the Company's investments in non-consolidated affiliates). ff Net cash used in financing activities The $229 million decrease in cash used in financing activities was primarily attributed to: – the net issuance of $1.2 billion in long-term debt during 2021 compared to a net issuance of $691 million during 2020; partially offset by: – an increase in cash paid for treasury share repurchases of $247 million compared to the prior year. Cash and cash equivalents and short-term investments The Company’s aggregate cash and cash equivalents and short-term investments of $1.9 billion at December 31, 2021 included approximately $1.5 billion located outside of the U.S. Approximately 26% of the Company’s aggregate cash and cash equivalents and short-term investments is denominated in euros and British pounds. The Company manages both its U.S. and non-U.S. liquidity in all regions to effectively meet its operating needs. cash flow to maintain sufficient ff As a result of the Tax Act, all previously net undistributed foreign earnings have now been subject to U.S. tax. The Company continues to evaluate which entities it will indefinitely reinvest earnings outside the U.S. The Company has provided deferred taxes for those entities whose earnings are not considered indefinitely reinvested. Accordingly, the Company has commenced repatriating a portion of its non-U.S. cash in these subsidiaries and will continue to repatriate certain of its offshore manner that addresses compliance with local statutory requirements, sufficient may be relevant in certain jurisdictions. Notwithstanding the Tax Act, which generally eliminated federal income tax on future cash repatriation to the U.S., cash repatriation may be subject to state and local taxes or withholding or similar taxes. ff working capital and any other factors that cash in a offshore ff ff Material Cash Requirements q The Company's material cash requirements consist of the following contractual and other obligations: Arrangements Financing Arrangements g Indebtedness At December 31, 2021, Moody’s had $7.4 billion of outstanding debt and approximately $1 billion of additional capacity available under the Company’s CP program, which is backstopped by the $1.25 billion 2021 Facility. The repayment schedule forff the Company’s borrowings outstanding at December 31, 2021 is as follows: $700 $500 $500 $568 $500 $400 $853 $600 $600 $600 $400 $300 $500 $500 $— 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 // 2041 // 2044 // 2048 // 2050 // 2060 2061 USD Fixed EUR Fixed Future interest payments and fees associated with the Company's debt and credit facility are expected to be $3.3 billion, of which approximately $212 million is expected to be paid over the next twelve months. For additional information on the Company's outstanding debt, CP program and 2021 Facility, refer to Note 18 to the consolidated financial statements. Management may consider pursuing additional long-term financing when it is appropriate in light of cash requirements for operations, share repurchases and other strategic opportunities, which would result in higher financing costs. Purchase Obligations Purchase obligations generally include multi-year agreements with vendors to purchase goods or services and mainly include data center/cloud hosting fees and fees for information technology licensing and maintenance. As of December 31, 2021, these purchase obligations totaled $233 million, of which $133 million is expected to be paid in the next twelve months. 62 MOODY'S 2021 10-K Leases The Company has operating lease obligations of $560 million at December 31, 2021, primarily related to real estate leases, of which approximately $120 million in payments are expected over the next twelve months. For more information on the Company's operating leases, refer to Note 20 to the consolidated financial statements. Pension and Other Retirement Plan Obligations The Company does not anticipate making significant contributions to its funded pension plan in the next twelve months. This plan investments to fund future benefit obligations. Payments ff is overfunded at December 31, 2021, and accordingly holds sufficient for the Company's unfunded plans are not expected to be material in either the short or long-term. For further information on the Company's pension and other retirement plan obligations, refer to Note 15 to the consolidated financial statements. Dividends and share repurchases On February 7, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share for Moody’s common stock, payable March 18, 2022 to shareholders of record at the close of business on February 25, 2022. The continued payment of dividends at this rate, or at all, is subject to the discretion of the Board. On December 16, 2019, the Board authorized $1 billion in share repurchase authority and on February 9, 2021, the Board approved an additional $1 billion in share repurchase authority. At December 31, 2021, the Company had approximately $1,081 million of remaining authority. Additionally, on February 7, 2022, the Board of Directors approved an additional $750 million of share repurchase authority. There is no established expiration date for the remaining authorizations. y Sources of Funding to Satisfy Material Cash Requirements q g The Company believes that it has the financial resources needed to meet its cash requirements and expects to have positive operating cash flow in 2022. Cash requirements for periods beyond the next twelve months will depend, among other things, on the Company’s profitability and its ability to manage working capital requirements. The Company may also borrow from various sources as described above. Non-GAAP Financial Measures: In addition to its reported results, Moody’s has included in this MD&A certain adjusted results that the SEC defines as “non- GAAP financial measures.” Management believes that such adjusted financial measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s perforr investors of supplemental information used by management in its financial and operational decision-making. These adjusted measures, as defined by the Company, are not necessarily comparable to similarly defined measures of other companies. Furthermore, these adjusted measures should not be viewed in isolation or used as a substitute for other GAAP measures in rr mance or cash flows of the Company. Below are brief descriptions of the Company’s adjusted assessing the operating perfor financial measures accompanied by a reconciliation of the adjusted measure to its most directly comparable GAAP measure. rmance, facilitate comparisons to competitors’ operating results and provide greater transparency to Adjusted Operating Income and Adjusted Operating Margin: The Company presents Adjusted Operating Income and Adjusted Operating Margin because management deems these metrics to be useful measures to provide additional perspective on Moody's operating performance. Adjusted Operating Income excludes the impact of: i) depreciation and amortization; ii) restructuring charges/adjustments; and iii) a loss pursuant to the divestiture of MAKS. Depreciation and amortization are excluded because companies utilize productive assets of different different methods of acquiring and depreciating productive assets. Restructuring charges are excluded as the frequency and magnitude of these charges may vary widely across periods and companies. The loss pursuant to the divestiture of MAKS is excluded as the frequency and magnitude of divestiture activity may vary widely from period to period and across companies. ages and use ff ff Management believes that the exclusion of the aforementioned items, as detailed in the reconciliation below, allows for an additional perspective on the Company’s operating results from period to period and across companies. The Company defines Adjusted Operating Margin as Adjusted Operating Income divided by revenue. Operating income Adjustments: Restructuring Depreciation and amortization Loss pursuant to the divestiture of MAKS Adjusted Operating Income Operating margin Adjusted Operating Margin $ $ Year ended December 31, 2021 2020 2,844 $ 2,388 — 257 — 50 220 9 3,101 $ 2,667 45.7 % 49.9 % 44.5 % 49.7 % MOODY'S 2021 10-K 63 Adjusted Net Income and Adjusted Diluted EPS attributable to Moody’sd common shareholders: The Company presents Adjusted Net Income and Adjusted Diluted EPS because management deems these metrics to be useful measures to provide additional perspective on Moody's operating performance. Adjusted Net Income and Adjusted Diluted EPS exclude the impact of: i) amortization of acquired intangible assets; ii) restructuring charges/adjustments; iii) a non-cash gain relating to the Company’s minority investment in BitSight; and iv) a loss pursuant to the divestiture of MAKS. ff ff ages and have different methods of acquiring and amortizing intangible assets. These intangible assets were recorded The Company excludes the impact of amortization of acquired intangible assets as companies utilize intangible assets with different as part of acquisition accounting and contribute to revenue generation. The amortization of intangible assets related to acquisitions will recur in future periods until such intangible assets have been fully amortized. Furthermore, the timing and magnitude of business combination transactions are not predictable and the purchase price allocated to amortizable intangible assets and the related amortization period are unique to each acquisition and can vary significantly from period to period and across companies. Restructuring charges, the non-cash gain relating to the Company's minority interest in BitSight and the loss pursuant to the divestiture of MAKS are excluded as the frequency and magnitude of these items may vary widely across periods and companies. The Company excludes the aforementioned items to provide additional perspective when comparing net income and diluted EPS from period to period and across companies as the frequency and magnitude of similar transactions may vary widely across periods. Amounts in millions Net income attributable to Moody’s common shareholders Pre-TaxTT Acquisition-Related Intangible Amortization Expenses Tax on Acquisition-Related Intangible Amortization Expenses Net Acquisition-Related Intangible Amortization Expenses Pre-TaxTT Restructuring Tax on Restructuring Net Restructuring Pre-TaxTT gain relating to minority investment in BitSight Tax on gain relating to minority investment in BitSight Net gain relating to minority investment in BitSight Loss pursuant to the divestiture of MAKS $ $ $ 158 (36) — — (36) 9 Year ended December 31, 2021 $ 2,214 2020 $ 1,778 124 (28) 50 (12) — — $ $ $ 122 — (27) — 96 38 — 9 Adjusted Net Income $ 2,309 $ 1,921 Below is a reconciliation of this measure to its most directly comparable U.S. GAAP amount: Diluted earnings per share attributable to Moody’s common shareholders Pre-TaxTT Acquisition-Related Intangible Amortization Expenses Tax on Acquisition-Related Intangible Amortization Expenses Net Acquisition-Related Intangible Amortization Expenses Pre-TaxTT Restructuring Tax on Restructuring Net Restructuring Pre-TaxTT gain relating to minority investment in BitSight Tax on gain relating to minority investment in BitSight Net gain relating to minority investment in BitSight Loss pursuant to the divestiture of MAKS Year ended December 31, 2021 2020 $ 11.78 $ 9.39 $ $ $ 0.66 (0.15) 0.26 (0.06) — — 0.65 — (0.14) — 0.51 0.20 — 0.05 $ $ 0.84 (0.19) — — $ (0.19) 0.05 Adjusted Diluted EPS $ 12.29 $ 10.15 Note: the tax impacts in the table above were calculated using tax rates in effect ff in the jurisdiction forf which the item relates. 64 MOODY'S 2021 10-K Free Cash Flow: The Company defines Free Cash Flow as net cash provided by operating activities minus payments for capital additions. Management believes that Free Cash Flow is a useful metric in assessing the Company’s cash flows to service debt, pay dividends and to fund acquisitions and share repurchases. Management deems capital expenditures essential to the Company’s product and service innovations and maintenance of Moody’s operational capabilities. Accordingly, capital expenditures are deemed to be a recurring use of Moody’s cash flow. Below is a reconciliation of the Company’s net cash flows from operating activities to Free Cash Flow: Net cash provided by operating activities Capital additions Free Cash Flow Net cash used in investing activities Net cash used in financing activities Organic rr Revenue: Year ended December 31, 2021 2,005 (139) 1,866 (2,619) (122) $ $ $ $ 2020 2,146 (103) 2,043 (1,077) (351) $ $ $ $ The Company presents the organic revenue and organic revenue growth (including organic recurring revenue and organic recurring revenue growth for the MA segment) because management deems these metrics to be useful measures which provide additional perspective in assessing the revenue growth excluding the inorganic revenue impacts from certain acquisition activity. The following table details the periods excluded from each acquisition to determine organic revenue. Acquisition Acquisition Date Period excluded to determine organic revenue growth Regulatory DataCorp February 13, 2020 Acquire Media October 21, 2020 ZM Financial Systems December 7, 2020 Catylist Cortera RMS RealXData December 30, 2020 March 19, 2021 September 15, 2021 September 17, 2021 January 1, 2021 - February 12, 2021 January 1, 2021 - October 20, 2021 January 1, 2021 - December 6, 2021 January 1, 2021 - December 29, 2021 March 19, 2021 - December 31, 2021 September 15, 2021 - December 31, 2021 September 17, 2021 - December 31, 2021 Below is a reconciliation of MA's reported revenue and growth rates to its organic revenue and organic growth rates: Amounts in millions MA revenue Inorganic revenue from acquisitions Organic MA revenue RD&A revenue Inorganic revenue from acquisitions Organic RD&A revenue ERS revenue Inorganic revenue from acquisitions Organic ERS revenue ERS recurring revenue Inorganic recurring revenue from acquisitions Organic ERS recurring revenue ERS transaction revenue Inorganic transaction revenue from acquisitions Organic ERS transaction revenue Year Ended December 31, 2021 2020 Change $ $ $ $ $ $ $ $ $ $ 2,406 (136) 2,270 1,745 (46) 1,699 661 (90) 571 582 (84) 498 79 (6) 73 $ $ $ $ $ $ $ $ $ $ 2,079 — 2,079 1,514 — 1,514 565 — 565 448 — 448 117 — 117 $ $ $ $ $ $ $ $ $ $ 327 (136) 191 231 (46) 185 96 (90) 6 134 (84) 50 (38) (6) (44) Growth 16% 9% 15% 12% 17% 1% 30% 11% (32%) (38%) MOODY'S 2021 10-K 65 Amounts in millions MA recurring revenue Inorganic recurring revenue from acquisitions Organic MA recurring revenue Recently Issued Accounting Pronouncements Year Ended December 31, 2021 2020 Change $ $ 2,236 (130) 2,106 $ $ 1,882 — 1,882 $ $ 354 (130) 224 Growth 19% 12% Refer to Note 2 to the consolidated financial statements located in Part II, Item 8 on this Form 10-K for a discussion on the impact to the Company relating to recently issued accounting pronouncements. CONTINGENCIES Legal proceedings in which the Company is involved also may impact Moody’s liquidity or operating results. No assurance can be provided as to the outcome of such proceedings. In addition, litigation inherently involves significant costs. For information regarding legal proceedings, see Part II, Item 8 – “Financial Statements”, Note 21 “Contingencies” in this Form 10-K. Forward-Looking Statements ff materially from those contemplated, expressed, projected, anticipated or implied in the Certain statements contained in this annual report on Form 10-K are forward-looking statements and are based on future expectations, plans and prospects for the business and operations of the Company that involve a number of risks and uncertainties. Such statements involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ forward-looking statements. Those statements appear at various places throughout this annual report on Form 10-K, including in the sections entitled “Contingencies” under Item 7, “MD&A”, commencing on page 41 of this annual report on Form 10-K, under “Legal Proceedings” in Part I, Item 3, of this Form 10-K, and elsewhere in the context of statements containing the words “believe”, “expect”, “anticipate”, “intend”, “plan”, “will”, “predict”, “potential”, “continue”, “strategy”, “aspire”, “target”, “forecast”, “project”, “estimate”, “should”, “could”, “may” and similar expressions or words and variations thereof relating to the Company’s views on future events, trends and contingencies or otherwise convey the prospective nature of events or outcomes generally indicative of forward-looking statements. Stockholders and investors are cautioned not to place undue reliance on these forward- looking statements. The forward-looking statements and other information are made as of the date of this annual report on Form 10-K, and the Company undertakes no obligation (nor does it intend) to publicly supplement, update or revise such statements on a going-forward basis, whether as a result of subsequent developments, changed expectations or otherwise, except as required by applicable law or regulation. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company is identifying examples of factors, risks and uncertainties that could cause actual results to ff differ , perhaps materially, from those indicated by these forward-looking statements. ff ff ff ff ff and possible the volume of debt and other the volume of debt and other ff credit markets, international trade and economic policy, tax agreements and trade barriers; concerns in the marketplace affecting market perceptions of the integrity or utility of independent credit agency ratings; the introduction of Those factors, risks and uncertainties include, but are not limited to the impact of COVID-19 on volatility in the U.S. and world financial markets, on general economic conditions and GDP in the U.S. and worldwide, and on Moody’s own operations and personnel; future worldwide credit market disruptions or economic slowdowns, which could affect securities issued in domestic and/or global capital markets; other matters that could affect securities issued in domestic and/or global capital markets, including regulation, credit quality concerns, changes in interest rates, inflation and other volatility in the financial markets such as that due to Brexit and uncertainty as companies transition away from LIBOR; the level of merger and acquisition activity in the U.S. and abroad; the uncertain effectiveness collateral consequences of U.S. and foreign government actions affecting including those related to tariffs, otherwise affecting competing products or technologies by other companies; pricing pressure from competitors and/or customers; the level of success of new product development and global expansion; the impact of regulation as an NRSRO, the potential forff state and local legislation and regulations; the potential for increased competition and regulation in the EU and other foreign jurisdictions; exposure to litigation related to our rating opinions, as well as any other litigation, government and regulatory proceedings, investigations and inquiries to which Moody’s may be subject from time to time; provisions in U.S. legislation modifying the pleading standards and EU regulations modifying the liability standards, applicable to credit rating agencies in a manner adverse to credit rating agencies; provisions of EU regulations imposing additional procedural and substantive requirements on the pricing of services and the expansion of supervisory remit to include non-EU ratings used for regulatory purposes; the possible loss of key employees; failures or malfunctions of our operations and infrastructure; any vulnerabilities to cyber threats or other cybersecurity concerns; the outcome of any review by controlling tax authorities of Moody’s global tax planning initiatives; exposure to potential criminal sanctions or civil remedies if Moody’s fails to comply with foreign and U.S. laws and regulations that are applicable in the jurisdictions in which Moody’s operates, including data protection and privacy laws, sanctions laws, anti-corruption laws, and local laws prohibiting corrupt payments to government officials; acquisitions or other business combinations and the ability of Moody’s to successfully integrate acquired businesses; currency and foreign exchange volatility; the level of future cash flows; the levels of capital investments; and a decline in the demand for credit risk management tools by financial institutions. Other factors, risks and uncertainties relating to our acquisition of RMS could cause our actual results to differ risks relating to the integration of RMS’s operations, products and employees into Moody’s and the possibility that anticipated , perhaps materially, from those indicated by these forward-looking statements, including the impact of mergers, our credibility or new U.S., ff ff ff 66 MOODY'S 2021 10-K ff on the business of RMS or its prospects, including, synergies and other benefits of the acquisition will not be realized in the amounts anticipated or will not be realized within the expected timeframe; risks that the acquisition could have an adverse effect without limitation, on relationships with vendors, suppliers or customers; claims made, from time to time, by vendors, suppliers or on customers; changes in the U.S., Europe (primarily the U.K.), Japan, India or global marketplaces that have an adverse effect the business of RMS. These factors, risks and uncertainties as well as other risks and uncertainties that could cause Moody’s actual results to differ ff materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements are currently, or in the future could be, amplified by the COVID-19 outbreak, and are described in greater detail under “Risk Factors” in Part I, Item 1A of Moody’s annual report on Form 10-K for the year ended December 31, 2021, and in other filings made by Moody’s from time to time with the SEC or in materials incorporated herein or therein. Stockholders and investors are cautioned that the occurrence of any of these factors, risks and uncertainties may cause Moody’s actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements, which could have a material and adverse effect on Moody’s business, results of operations and financial condition. New factors may emerge from time to time, and it is not possible for Moody’s to predict new factors, nor can Moody’s assess the potential effect new factors on it. Forward-looking and other statements in this document may also address our corporate responsibility progress, plans, and goals (including sustainability and environmental matters), and the inclusion of such statements is not an indication that these contents are necessarily material to investors or required to be disclosed in the Company’s filings with the Securities and Exchange Commission. In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. of any b ff ff ff ff ITEM 7A. QUANTITATTT IVE AND QUALITATTT IVE DISCLOSURES ABOUT MARKET RISK Information in response to this item is set forth under the caption “Market Risk” in Part II, Item 7 on page 60 of this annual report on Form 10-K. MOODY'S 2021 10-K 67 ITEM 8. FINANCIAL STATTT EMENTS Index to Financial Statements Management’s Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Financial Statements: Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Shareholders’ Equity Notes to Consolidated Financial Statements Page(s) 69 70-71 72 73 74 75 76-78 79-129 Schedules are omitted as not required or inapplicable or because the required information is provided in the consolidated financial statements, including the notes thereto. 68 MOODY'S 2021 10-K MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Moody’s Corporation is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. of internal control over financial reporting. As defined by the SEC in Rules ff ff Moody’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of Moody’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. ff Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. to the risk that controls may become inadequate b ff Management of the Company evaluated and assessed the design and operational effectiveness control over financial reporting as of December 31, 2021 based on criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). of the Company’s internal ff Our assessment of and conclusion on the effectiveness did not include the internal controls of RMS, which was acquired during our fiscal year ended December 31, 2021 and will be of our internal control over financial reporting for the fiscal included in our assessment of and conclusion on the effectiveness year ending December 31, 2022. The total assets (excluding acquired goodwill and intangible assets which are included within the scope of this assessment) and revenues of RMS represent approximately $333 million and $81 million, respectively, of the corresponding amounts in our consolidated financial statements for the fiscal year ended December 31, 2021. of our internal control over financial reporting as of December 31, 2021 ff ff Based on the assessment performed, management has concluded that Moody’s maintained effective financial reporting as of December 31, 2021. ff internal control over ff The effectiveness independent registered public accounting firm, as stated in their accompanying report which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by KPMG LLP, aP n of Moody's internal control over financial reporting as of December 31, 2021. ff /s/ ROBERT FAUBFF ER Robert Fauber President and Chief Executive Officer /s/ MARK KAYEAA Mark Kaye Executive Vice President and Chief Financial ii Officer February 18, 2022 MOODY'S 2021 10-K 69 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Moody’s Corporation: Opinions on the Consolidated Financial Statements and Internal Control over Financial ii Reporting We have audited the accompanying consolidated balance sheets of Moody’s Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Frameworkww Sponsoring Organizations of the Treadway Commission. (2013) issued by the Committee of In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021 in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. internal control over financial reporting as of December 31, ff The Company acquired RMS during 2021, and management excluded from its assessment of the effectiveness Company’s internal control over financial reporting as of December 31, 2021, RMS’s internal control over financial reporting associated with total assets of $333 million and total revenues of $81 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of RMS. of the ff Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective ff over financial reporting, and for its assessment of the effectiveness accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. of internal control over financial reporting, included in the internal control ff We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective respects. internal control over financial reporting was maintained in all material ff Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. of internal control based on the ff Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. to the risk that controls may become inadequate b ff 70 MOODY'S 2021 10-K Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Carrying value of goodwill As discussed in Note 10 to the consolidated financial statements, the goodwill balance as of December 31, 2021 was $5,999 million. The Company evaluates its reporting units for impairment on an annual basis, or more frequently if there are changes in the reporting structure of the Company or indicators of potential impairment. The Company has four primary reporting units as of December 31, 2021: two within the Company’s Moody’s Investors Service segment and two within the Moody’s Analytics segment. We identified the assessment of the carrying value of goodwill in the reporting units within the Moody’s Analytics segment as a critical audit matter due to the significant degree of judgment required in evaluating assumptions about revenue growth rates and the discount rates used to measure the reporting unit fair values. ff of certain internal controls over the Company’s goodwill impairment process, The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness including controls related to revenue growth rates and the discount rates used to measure the reporting unit fair values. We evaluated management’s judgments relating to the assumed revenue growth rates by comparing the Company’s revenue growth rates to the Company’s underlying business strategies and growth plans. We evaluated management’s judgments relating to the Company’s discount rates by comparing them to appropriate benchmark interest rates. We also performed sensitivity analyses to assess the impact of alternative assumptions on management’s impairment conclusion. We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the significant assumptions used to develop the discount rates, including the relevance and reliability of the information used. Gross uncertain tax positions As discussed in Note 17 to the consolidated financial statements, the Company has recorded uncertain tax positions (UTPs), excluding associated interest, of $388 million as of December 31, 2021. The Company determines whether it is more-likely-than-not that a tax position will be sustained based on its technical merits as of the reporting date. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit ff that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. We identified the assessment of the Company’s gross UTPs as a critical audit matter because complex judgment was required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution of the tax positions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of internal controls over the Company’s tax process, including those related to the timely identification of UTPs, the assessment of new information related to previously identified UTPs, and the measurement of UTPs. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing transfer pricing studies for compliance with applicable laws and regulations. Additionally, we involved tax professionals with specialized skills and knowledge, who assisted in: ff • • • • evaluating the Company’s interpretation of tax laws and judgments about the administrative practices of tax authorities inspecting settlement documents with applicable taxing authorities assessing the expiration of statutes of limitations performing an assessment of the Company’s tax positions and comparing the results to the Company’s assessment. In addition, we evaluated the Company’s ability to accurately estimate its gross UTPs by comparing historical gross UTPs to actual results upon conclusion of tax audits or expiration of the statute of limitations. / //s/ GKPMG LLP We have served as the CCompa yny’s auditor since 2008. New York, New Yo krk February 18, 2022 y MOODY'S 2021 10-K 71 2019 4,829 1,387 1,167 60 200 3 14 2,831 1,998 (208) 20 (188) 1,810 381 1,429 7 1,422 7.51 7.42 189.3 191.6 Year Ended December 31, 2021 2020 $ 6,218 $ 5,371 $ 1,637 1,480 — 257 — — 3,374 2,844 (171) 82 (89) 2,755 541 2,214 — 2,214 11.88 11.78 186.4 187.9 $ $ $ 1,475 1,229 50 220 — 9 2,983 2,388 (205) 46 (159) 2,229 452 1,777 (1) 1,778 9.48 9.39 187.6 189.3 $ $ $ MOODY’S CORPORATION AA CONSOLIDATEDAA (Amounts in millions, except per share data) STATTT EMENTS OF OPERATIONS AA Revenue Expenses Operating Selling, general and administrative Restructuring Depreciation and amortization Acquisition-Related Expenses Loss pursuant to the divestiture of MAKS Total expenses Operating income Non-operating (expense) income, net Interest expense, net Other non-operating income, net Non-operating (expense) income, net Income before provision for income taxes Provision for income taxes Net income Less: Net (loss) income attributable to noncontrolling interests Net income attributable to Moody’s Earnings per share Basic Diluted Weighted average shares outstanding Basic Diluted $ $ $ The accompanying notes are an integral part of the consolidated financial statements. 72 MOODY'S 2021 10-K MOODY’S CORPORATION AA CONSOLIDATEDAA (Amounts in millions) STATTT EMENTS OF COMPREHENSIVE INCOME Net Income Other Comprehensive Income (Loss): Foreign Currency Adjustments: Foreign currency translation adjustments, net Foreign currency translation adjustments - reclassification of losses included in net income Net gains (losses) on net investment hedges Net investment hedges - reclassification of gains included in net income Cash Flow Hedges: Net losses on cash flow hedges Reclassification of losses included in net income Pension and Other Retirement Benefits: Amortization of actuarial losses/prior service costs and settlement charge included in net income Net actuarial gains (losses) and prior service costs Total Other Comprehensive Income (Loss) Comprehensive Income Less: comprehensive (loss) income attributable to noncontrolling interests Comprehensive Income Attributable to Moody’s Year Ended December 31, 2021 Pre-tax amounts Tax amounts After-tax amounts Year Ended December 31, 2020 Pre-tax amounts Tax amounts After-tax amounts Year Ended December 31, 2019 Pre-tax amounts Tax amounts After-tax amounts $ 2,214 $ 1,777 $ 1,429 $ (303) $ 11 $ (292) $ 361 $ (13) $ 348 $ (22) $ (1) $ (23) — 319 (2) — 2 19 73 — — — (77) 242 (364) (1) (1) 1 — — (5) (18) (68) 3 8 — 2 14 55 — (9) 1 — — 32 26 (2) — — — 91 — 17 (1) (2) — (273) 32 35 (1) (3) — — (51) 2 6 3 (1) 2 (42) 10 (32) (32) 8 (24) $ 108 $ (88) $ 20 $ (103) $ 102 $ (1) $ 13 $ (2) $ 11 2,234 (2) 1,776 (8) 1,440 11 $ 2,236 $ 1,784 $ 1,429 The accompanying notes are an integral part of the consolidated financial statements. MOODY'S 2021 10-K 73 MOODY’S CORPORATION AA CONSOLIDATEDAA (Amounts in millions, except share and per share data) BALANCE SHEETS ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowances forff credit losses of $32 in 2021 and $34 in 2020 Other current assets Total current assets Property and equipment, net Operating lease right-of-use assets Goodwill Intangible assets, net Deferred tax assets, net Other assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities Current portion of operating lease liabilities Deferred revenue Total current liabilities Non-current portion of deferred revenue Long-term debt Deferred tax liabilities, net Uncertain tax positions Operating lease liabilities Other liabilities Total liabilities Contingencies (Note 21) Shareholders’ equity: Preferred stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding Series common stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding Common stock, par value $.01 per share; 1,000,000,000 shares authorized; 342,902,272 shares issued at December 31, 2021 and December 31, 2020, respectively. Capital surplus Retained earnings Treasury stock, at cost; 157,262,484 and 155,808,563 shares of common stock at December 31, 2021 and December 31, 2020, respectively Accumulated other comprehensive loss Total Moody’s shareholders’ equity Noncontrolling interests Total shareholders’ equity December 31, 2021 2020 $ 1,811 $ 91 1,720 389 4,011 347 438 5,999 2,467 384 1,034 2,597 99 1,430 383 4,509 278 393 4,556 1,824 334 515 $ $ 14,680 $ 12,409 1,142 $ 105 1,249 2,496 86 7,413 488 388 455 438 1,039 94 1,089 2,222 98 6,422 404 483 427 590 11,764 10,646 — — 3 885 12,762 (10,513) (410) 2,727 189 2,916 — — 3 735 11,011 (9,748) (432) 1,569 194 1,763 Total liabilities and shareholders’ equity $ 14,680 $ 12,409 The accompanying notes are an integral part of the consolidated financial statements. 74 MOODY'S 2021 10-K MOODY’S CORPORATION AA CONSOLIDATEDAA (Amounts in millions) STATTT EMENTS OF CASH FLOWS Cash flows from operating activities Net income Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Deferred income taxes Prepayment penalty relating to early redemption of debt Non-cash gain related to minority interest in BitSight Settlement of treasury rate lock ROU asset impairment & other non-cash restructuring/impairment charges Loss pursuant to the divestiture of MAKS Changes in assets and liabilities: Accounts receivable Other current assets Other assets Lease obligations Accounts payable and accrued liabilities Deferred revenue Unrecognized tax positions and other non-current tax liabilities Other liabilities Net cash provided by operating activities Cash flows from investing activities Capital additions Purchases of investments Sales and maturities of investments Cash received upon disposal of a business, net of cash transferred to purchaser Cash paid forf acquisitions, net of cash acquired Receipts from settlements of net investment hedges Payments for settlements of net investment hedges Net cash (used in) provided by investing activities Cash flows from financing activities Issuance of notes Repayment of notes Issuance of commercial paper Repayment of commercial paper Proceeds from stock-based compensation plans Repurchase of shares related to stock-based compensation Treasury shares Dividends Dividends to noncontrolling interests Payment for noncontrolling interest Debt issuance costs, extinguishment costs and related fees Net cash used in financing activities Effeff ct of exchange rate changes on cash and cash equivalents (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period The accompanying notes are an integral part of the consolidated financial statements. Year Ended December 31, 2021 2020 2019 $ 2,214 $ 1,777 $ 1,429 257 175 (218) 13 (36) — — — (257) (12) (26) (11) 80 65 (184) (55) 2,005 (139) (437) 147 — (2,179) 37 (48) (2,619) 1,672 (500) — — 38 (83) (750) (463) (5) — (31) (122) (50) (786) 220 154 (44) 24 — (68) 36 9 31 (38) (49) (10) 247 (29) (12) (102) 2,146 (103) (181) 104 — (897) 2 (2) (1,077) 1,491 (800) 789 (792) 51 (104) (503) (420) (1) (23) (39) (351) 47 765 $ 2,597 1,811 $ 1,832 2,597 $ 200 136 (38) 12 — — 38 14 (134) (88) (69) (16) 65 76 8 42 1,675 (69) (138) 174 226 (162) 12 (7) 36 824 (950) 1,317 (1,320) 45 (77) (991) (378) (3) (12) (18) (1,563) (1) 147 1,685 1,832 MOODY'S 2021 10-K 75 y t i u q E 6 5 6 9 2 4 , 1 ) 3 8 3 ( — 6 3 1 ) 2 3 ( ) 2 1 ( 7 1 ) 1 9 9 ( 3 3 ) 4 2 ( 2 1 3 8 l a t o T l ’ s r e d o h e r a h S 7 ) 3 ( ) 3 ( 7 1 4 ) 0 8 3 ( 2 2 4 , 1 — 6 3 1 ) 2 3 ( ) 9 ( — ) 1 9 9 ( 9 2 ) 4 2 ( 2 ) 0 2 ( 9 2 ) 4 2 ( 2 8 3 6 . 1 ) 5 7 9 ( ) 2 . 5 ( 6 3 1 ) 0 7 ( ) 9 ( ) 6 1 ( 4 9 5 , 8 2 2 4 , 1 ) 0 8 3 ( 0 2 e h t o t g n i t l a e r , 2 0 - 8 1 0 2 U S A f o n o i t p o d A t c A x a T t e n , t s o c e g a r e v a t l a s n a p n o i t a s n e p m o c d e s a b - k c o t s r o ff f d e u s s i s e r a h S n o i t a s n e p m o c d e s a b - k c o t S t s e r e n t i g n i l l o r t n o c n o n f o e s a h c r u P ) e r a h s r e p 0 0 . 2 $ ( s d n e d v D i i x a t f o t e n ( y t i v i t c a e g d e h t n e m t s e v n i t e n ) n o i l l i m 9 $ f o ) n o i l l i m 1 $ f o x a t f o t e n ( s e s s o l l a i r a u t c a d n a s t s o c i e c v rr r e s r o i r p f o n o i t a z i t r o m A i e c v r e s r o i r p d n a s e s s o l l a i r a u t c a t e N ) n o i l l i m 8 $ f o x a t f o t e n ( t s o c f o t e n , t j n e m t s u d a n o i t a s n a r t l y c n e r r u C d e s a h c r u p e r s e r a h s y r u s a e r T s i r i E o e g V i f i o n o i t i s u q c a y t i r o a a m j m o r f g n i t l u s e r t s e r e t n i g n i l l o r t n o c - n o N $ 7 9 1 $ 9 5 4 - n o N s t s e r e t n I g n i l l o r t n o C y t i u q E s ’ y d o o M l a t o T l ’ s r e d o h e r a h S r e h t O d e t a l u m u c c A e v i s n e h e r p m o C $ ) 6 2 4 ( s s o L $ ) 3 1 3 , 8 ( $ ) 6 . 1 5 1 ( t n u o m A s e r a h S n o i t a r o p r o C s ’ y d o o M l f o s r e d o h e r a h S k c o t S y r u s a e r T k c o t S n o m m o C I Y T U Q E ’ S R E D L O H E R A H S F O S T N E M E T A T TT S D E T AA A D I L O S N O C ) a t a d e r a h s r e p t p e c x e , s n o i l l i m n i s t n u o m A ( I N O T AA A R O P R O C S Y D O O M ’ d e n i a t e R i s g n n r a E l a t i p a C l s u p r u S t n u o m A s e r a h S $ 1 0 6 $ 3 $ . 9 2 4 3 8 1 0 2 , 1 3 r e b m e c e D t a e c n a l a B e m o c n i t e N $ 9 1 2 $ 2 1 6 $ ) 9 3 4 ( $ ) 0 5 2 , 9 ( $ ) 2 . 5 5 1 ( 6 5 6 , 9 $ 2 4 6 $ 3 $ . 9 2 4 3 9 1 0 2 , 1 3 r e b m e c e D t a e c n a l a B . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e h t f o t r a p l a r g e n t i n a e r a s e t o n i g n y n a p m o c c a e h T ) e g a p t x e n n o d e u n i t n o c ( K - 0 1 ' 1 2 0 2 S Y D O O M 6 7 y t i u q E 1 3 8 8 7 7 , 1 ) 4 2 4 ( ) 2 ( 4 5 1 ) 3 5 ( ) 7 1 ( ) 3 0 5 ( 4 7 ) 2 3 ( 6 ) 9 4 ( 3 6 7 , 1 l a t o T l ’ s r e d o h e r a h S — ) 3 ( ) 4 1 ( ) 8 ( ) 1 2 4 ( 8 7 7 , 1 ) 2 ( 4 5 1 ) 3 ( ) 3 5 ( ) 3 0 5 ( 2 8 ) 2 3 ( 6 ) 9 4 ( 2 8 ) 2 3 ( 6 ) 9 4 ( 5 4 . 1 ) 3 0 5 ( ) 0 . 2 ( 4 5 1 ) 8 5 ( ) 3 ( — 6 5 6 , 9 8 7 7 , 1 ) 1 2 4 ( ) 2 ( , t s o c e g a r e v a t l a s n a p n o i t a s n e p m o c d e s a b - k c o t s r o ff f d e u s s i s e r a h S t e n t s e r e n t i g n i l l o r t n o c n o n f o e s a h c r u P d e s a h c r u p e r s e r a h s y r u s a e r T s e s s o L t i d e r C w e N f o n o i t p o d A d r a d n a t S g n i t n u o c c A n o i t a s n e p m o c d e s a b - k c o S t ) e r a h s r e p 4 2 . 2 $ ( s d n e d v D i i x a t f o t e n ( y t i v i t c a e g d e h t n e m t s e v n i t e n ) n o i l l i m 8 7 $ f o ) n o i l l i m 2 $ f o x a t f o t e n ( s e s s o l l a i r a u t c a d n a s t s o c i e c v rr r e s r o i r p f o n o i t a z i t r o m A i e c v rr r e s r o i r p d n a s e s s o l l a i r a u t c a t e N ) n o i l l i m 0 1 $ f o x a t f o t e n ( t s o c n o s s o l d e z i l a e r n u d n a d e z i l a e r t e N 6 1 $ f o x a t f o t e n ( s e g d e h w o l f h s a c ) n o i l l i m f o t e n , t j n e m t s u d a n o i t a s n a r t l y c n e r r u C $ 9 1 2 $ 2 1 6 - n o N s t s e r e t n I g n i l l o r t n o C y t i u q E s ’ y d o o M l a t o T l ’ s r e d o h e r a h S $ ) 9 3 4 ( s s o L $ ) 0 5 2 , 9 ( $ ) 2 . 5 5 1 ( t n u o m A s e r a h S r e h t O d e t a l u m u c c A e v i s n e h e r p m o C k c o t S y r u s a e r T d e n i a t e R i s g n n r a E l a t i p a C l s u p r u S t n u o m A s e r a h S k c o t S n o m m o C $ 2 4 6 $ 3 $ . 9 2 4 3 9 1 0 2 , 1 3 r e b m e c e D t a e c n a l a B e m o c n i t e N n o i t a r o p r o C s ’ y d o o M l f o s r e d o h e r a h S d e u n i t n o c Y T U Q E I ’ S R E D L O H E R A H S F O S T N E M E T A T TT S D E T AA A D I L O S N O C ) a t a d e r a h s r e p t p e c x e , s n o i l l i m n i s t n u o m A ( I N O T AA A R O P R O C S Y D O O M ’ 7 7 K - 0 1 ' 1 2 0 2 S Y D O O M . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e h t f o t r a p l a r g e n t i n a e r a s e t o n i g n y n a p m o c c a e h T ) e g a p t x e n n o d e u n i t n o c ( $ 4 9 1 $ 9 6 5 , 1 $ ) 2 3 4 ( $ ) 8 4 7 , 9 ( $ ) 8 . 5 5 1 ( 1 1 0 , 1 1 $ 5 3 7 $ 3 $ . 9 2 4 3 0 2 0 2 , 1 3 r e b m e c e D t a e c n a l a B y t i u q E 3 6 7 , 1 4 1 2 , 2 ) 6 6 4 ( 5 7 1 ) 0 4 ( ) 0 5 7 ( l a t o T l ’ s r e d o h e r a h S - n o N s t s e r e t n I g n i l l o r t n o C y t i u q E s ’ y d o o M l a t o T l ’ s r e d o h e r a h S s s o L r e h t O d e t a l u m u c c A e v i s n e h e r p m o C t n u o m A s e r a h S d e n i a t e R i s g n n r a E l a t i p a C l s u p r u S t n u o m A s e r a h S k c o t S y r u s a e r T k c o t S n o m m o C n o i t a r o p r o C s ’ y d o o M l f o s r e d o h e r a h S $ 4 9 1 $ 9 6 5 , 1 $ ) 2 3 4 ( $ ) 8 4 7 , 9 ( $ ) 8 . 5 5 1 ( 1 1 0 , 1 1 $ 5 3 7 $ 3 $ . 9 2 4 3 0 2 0 2 , 1 3 r e b m e c e D t a e c n a l a B d e u n i t n o c Y T U Q E I ’ S R E D L O H E R A H S F O S T N E M E T A T TT S D E T AA A D I L O S N O C ) a t a d e r a h s r e p t p e c x e , s n o i l l i m n i s t n u o m A ( I N O T AA A R O P R O C S Y D O O M ’ — ) 3 ( ) 3 6 4 ( 5 7 1 4 1 2 , 2 ) 0 4 ( ) 0 5 7 ( ) 5 1 ( ) 0 5 7 ( 7 . 0 ) 2 . 2 ( ) 3 6 4 ( 4 1 2 , 2 5 7 1 ) 5 2 ( — t e n , t s o c e g a r e v a t l a s n a p n o i t a s n e p m o c d e s a b - k c o t s r o ff f d e u s s i s e r a h S n o i t a s n e p m o c d e s a b - k c o t S d e s a h c r u p e r s e r a h s y r u s a e r T ) e r a h s r e p 8 4 . 2 $ ( s d n e d v D i i e m o c n i t e N ) 1 5 ( ) 2 ( ) 9 4 ( ) 9 4 ( 5 5 4 1 2 5 5 4 1 2 5 5 4 1 2 x a t f o t e n ( y t i v i t c a e g d e h t n e m t s e v n i t e n ) n o i l l i m 5 6 $ f o t s o c e c v rr r e s i r o i r p d n a s n a g i l a i r a u t c a t e N ) n o i l l i m 8 1 $ f o x a t f o t e n ( e g r a h c t n e m e l t t e s d n a s e s s o l l a i r a u t c a / s t s o c i e c v rr r e s r o i r p f o n o i t a z i t r o m A ) n o i l l i m 5 $ f o x a t f o t e n ( h s a c n o n a g d e z i i l a e r n u d n a d e z i l a e r t e N s e g d e h w o l f 6 1 9 , 2 $ 9 8 1 $ 7 2 7 , 2 $ ) 0 1 4 ( $ ) 3 1 5 , 0 1 ( $ ) 3 . 7 5 1 ( 2 6 7 , 2 1 $ 5 8 8 $ 3 $ . 9 2 4 3 1 2 0 2 , 1 3 r e b m e c e D t a e c n a l a B f o t e n , t j n e m t s u d a n o i t a s n a r t l y c n e r r u C . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e h t f o t r a p l a r g e n t i n a e r a s e t o n i g n y n a p m o c c a e h T K - 0 1 ' 1 2 0 2 S Y D O O M 8 7 MOODY’S CORPORATION NOTES TO CONSOLIDATEDAA (tabular dollar and share amounts in millions, except per share data) AA FINANCIAL STATTT EMENTS NOTE 1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Moody’s is a global Moody’s reports in two reportable segments: MIS and MA. integrated risk assessment firm that empowers organizations and investors to make better decisions. 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. Adoption of New Accounting Standards On January 1, 2020, the Company adopted ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic of Credit Losses on Financial Instruments.” The Company has implemented policies and procedures in compliance with the “expected credit loss” impairment model, which included: (1) refinement of the grouping of receivables with similar risk characteristics; and (2) processes to identify information that can be used to develop reasonable and supportable forecasts of factors that could affect the collectability of the reported amount of the receivable. As the Company's accounts receivable are short-term in nature, the adoption of this ASU did not have a material impact to the Company's allowance for bad debts or its policies and procedures for determining the allowance. Refer to Note 2 forff its reserves for expected credit losses. The Company recorded a $2 million cumulative-effect increase its allowance for credit losses upon adoption. further information on how the Company determines adjustment to retained earnings to 326): Measurement TT ff ff On January 1, 2020, the Company adopted ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same provisions of authoritative guidance for internal-use software, and amortized over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The Company is now required to present the amortization of capitalized implementation costs in the same line item in the statement of operations as the fees associated with the hosting service (i.e. operating and SG&A expense) and classify the related payments in the statement of cash flows in the same manner as payments made for fees associated with the hosting service (i.e. cash flows from operating activities). This ASU also requires capitalization of implementation costs in the balance sheet to be consistent with the location of prepayment of fees for the hosting element (i.e. within other current assets or other assets). The Company adopted this ASU prospectively to all implementation costs incurred after the date of adoption and it did not have a material impact on the Company's current financial statements. The future impact to the Company's financial statements will relate to the aforementioned classification of these capitalized costs and related amortization. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of the original guidance, ASU No. 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU No. 2020-04"), issued in March 2020. ASU No. 2020-04 provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered rates to alternative reference rates. Both ASU's were effective upon issuance, and the Company may elect to apply the amendments prospectively through December 31, 2022 as the transition from LIBOR is completed. Refer to Recently Issued Accounting Pronouncements in Note 2 forf information. Rate (LIBOR) and other interbank offered further ff ff ff ff On December 31, 2020, the Company adopted ASU No. 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans —General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans”. This ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other postretirement plans. The Company is also now required to present a narrative description of significant gains or losses in the benefit obligation over the past year. The Company adopted this ASU retrospectively for all periods presented with the new required disclosures presented in Note 15. On January 1, 2021, the Company adopted ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments— Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments.” This ASU clarifies and improves guidance related to the recently issued standards updates on credit losses, hedging, and recognition and measurement of financial instruments. The Company adopted this ASU prospectively and it did not have a material impact on the Company's financial statements. MOODY'S 2021 10-K 79 On January 1, 2021, the Company adopted ASU No. 2019-12, "Income Taxes (Topic Taxes." This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740, Income Taxes, and clarifies certain aspects of the existing guidance to promote consistency among reporting entities. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted this ASU prospectively and it did not have a material impact on the Company's current financial statements. 740): Simplifying the Accounting for Income TT 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. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation ff of all intercompany transactions have been eliminated. Investments in companies for which the Company has significant The consolidated financial statements include those of Moody’s Corporation and its majority- and wholly-owned subsidiaries. The effects influence over operating and financial policies but not a controlling interest are accounted for on an equity basis whereby the Company records its proportional share of the investment’s net income or loss as part of other non-operating income (expense), net and any dividends received reduce the carrying amount of the investment. Equity investments without a readily determinable fair value for which the Company does not have significant influence are accounted for under the ASC 321 measurement alternative; these investments are recorded at initial cost, less impairment, adjusted upward or downward for any observable price changes in similar investments. The Company applies the guidelines set forth in Topic 810 of the ASC in assessing its interests in variable interest entities to decide whether to consolidate an entity. The Company has reviewed the potential variable interest entities and determined that there are no consolidation requirements under Topic 810 of the ASC. The Company consolidates its ICRA subsidiaries on a three month lag. Cash and Cash Equivalents Cash equivalents principally consist of investments in money market deposit accounts as well as certificates of deposit with maturities of three months or less when purchased. Short-term Investments Short-term investments are securities with maturities greater than 90 days at the time of purchase that are available for operations in the next 12 months. The Company’s short-term investments primarily consist of certificates of deposit and their cost approximates fair value due to the short-term nature of the instruments. Interest and dividends on these investments are recorded into income when earned. Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives. Expenditures for maintenance and repairs that do not extend the economic useful life of the related assets are charged to expense as incurred. Computer Software Developed or Obtained for Internal Use The Company capitalizes costs related to software developed or obtained for internal use. These assets, included in property and equipment in the consolidated balance sheets, relate to the Company’s financial, website and other systems. Such costs generally consist of direct costs for third-party license fees, professional services provided by third parties and employee compensation, in each case incurred either during the application development stage or in connection with upgrades and enhancements that increase functionality. Such costs are depreciated over their estimated useful lives on a straight-line basis. Costs incurred during the preliminary project stage of development as well as maintenance costs are expensed as incurred. The Company also capitalizes implementation costs incurred in cloud computing arrangements (i.e., hosting arrangements) and depreciates the costs over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised or forff which the exercise is controlled by the service provider. The Company classifies the amortization of capitalized implementation costs in the same line item in the statement of operations as the fees associated with the hosting service (i.e., operating and SG&A expense) and classifies the related payments in the statement of cash flows in the same manner as payments made for fees associated with the hosting service (i.e. cash flows from operating activities). In addition, the capitalization of implementation costs is reflected in the balance sheet consistent with the location of prepayment of fees for the hosting element (i.e., within other current assets or other assets). Goodwill and Other Acquired Intangible Assets Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment (i.e., MIS and MA), or one level below an operating segment (i.e., a component of an operating segment), annually as of July 31 or more frequently if impairment indicators arise in accordance with ASC Topic 350. 80 MOODY'S 2021 10-K The Company evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level. In the first step, the Company assesses various qualitative factors to determine whether the fair value of a reporting unit may be less than its carrying amount. If a determination is made based on the qualitative factors that an impairment does not exist, the Company is not required to perform further testing. If the aforementioned qualitative assessment results in the Company concluding that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount, the fair value of the reporting unit will be quantitatively determined and compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and the Company is not required to perform further testing. If the fair value of the reporting unit is less than the carrying value, the Company will record a goodwill impairment charge forff the amount by which the carrying value exceeds the reporting unit’s fair value. The Company evaluates its reporting units on an annual basis, or more frequently if there are changes in the reporting structure of the Company due to acquisitions, reporting unit realignments or if there are indicators of potential impairment. For the reporting units where the Company is consistently able to conclude that no impairment exists using only a qualitative approach, the Company’s accounting policy is to perform the second step of the aforementioned goodwill impairment assessment at least once every three years. Goodwill is assigned to a reporting unit at the date when an acquisition is integrated into one of the established reporting units, and is based on which reporting unit is expected to benefit from the synergies of the acquisition. For purposes of assessing the recoverability of goodwill, the Company has four reporting units: two within the Company’s ratings business (one for the ICRA business and one that encompasses all of Moody’s other ratings operations) and two reporting units within MA consisting of businesses that offer: workflow and CRE solutions. i) data and data-driven analytical solutions; and ii) risk-management software, ff Impairment of long-lived assets and definite-lived intangible assets Long-lived assets (including ROU Assets) and amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Under the first step of the recoverability assessment, the Company compares the estimated undiscounted future cash flows attributable to the asset or asset group to their carrying value. If the undiscounted future cash flows are greater than the carrying value, no further assessment is required. If the undiscounted future cash flows are less than the carrying value, Moody's proceeds with step two of the assessment. Under step two of this assessment, Moody's is required to determine the fair value of the asset or asset group (reduced by the estimated cost to sell the asset for assets or disposal groups classified as held-for-sale) and recognize an impairment loss if the carrying amount exceeds its fair value. Stock-Based Compensation The Company records compensation expense over the requisite service period for all share-based payment award transactions granted to employees based on the fair value of the equity instrument at the time of grant. This includes shares issued under stock option and restricted stock plans. Derivative Instruments and Hedging Activities Based on the Company’s risk management policy, the Company may use derivative financial instruments to reduce exposure to changes in foreign exchange rates and interest rates. The Company does not enter into derivative financial instruments for speculative purposes. All derivative financial instruments are recorded on the balance sheet at their respective fair values on a gross basis. The changes in the value of derivatives that qualify as fair value hedges are recorded in the same income statement line item in earnings in which the corresponding adjustment to the carrying value of the hedged item is presented. The entire change in the fair value of derivatives that qualify as cash flow hedges is recorded to OCI and such amounts are reclassified from AOCI(L) to the same income statement line in earnings in the same period or periods during which the hedged transaction for net investment hedges using the spot-method. The entire change in affects the fair value of derivatives that qualify as net investment hedges is initially recorded to OCI. Those changes in fair value attributable to components included in the assessment of hedge effectiveness currency translation adjustment component of OCI and remain in AOCI(L) until the period in which the hedged item affects earnings. Those changes in fair value attributable to components excluded from the assessment of hedge effectiveness investment hedge are recorded to OCI and amortized to earnings using a systematic and rational method over the duration of the hedge. Any changes in the fair value of derivatives that the Company does not designate as hedging instruments under Topic 815 of the ASC are recorded in the consolidated statements of operations in the period in which they occur. income. The Company assesses effectiveness in a net investment hedge are recorded in the in a net TT ff ff ff ff ff MOODY'S 2021 10-K 81 Revenue Recognition and Costs to Obtain or Fulfill a Contract with a Customer Revenue recognition: Revenue is recognized when control of promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. When contracts with customers contain multiple performance obligations, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to each distinct performance obligation on a relative SSP basis. The Company determines the SSP by using the price charged for a deliverable when sold separately or uses management’s best estimate of SSP for goods or services not sold separately using estimation techniques that maximize observable data points, including: internal factors relevant to its pricing practices such as costs and margin objectives; standalone sales prices of similar products; pricing policies; percentage of the fee charged forff relative to a related product or service; and customer segment and geography. Additional consideration is also given to market conditions such as competitor pricing strategies and market trends. a primary product or service Sales, usage-based, value added and other taxes are excluded from revenues. MIS Revenue In the MIS segment, revenue arrangements with multiple elements are generally comprised of two distinct performance obligations, a rating and the related monitoring service. Revenue attributed to ratings of issued securities is generally recognized when the rating is delivered to the issuer. Revenue attributed to monitoring of issuers or issued securities is recognized ratably over the period in which the monitoring is performed, generally one year. In the case of certain structured finance products, primarily CMBS, issuers can elect to pay all of the annual monitoring fees upfront. These fees are deferred and recognized over the future monitoring periods based on the expected lives of the rated securities. MIS arrangements generally have standard contractual terms for which the stated payments are due at conclusion of the ratings process for ratings and either upfront or in arrears for monitoring services; and are signed by customers either on a per issue basis or at the beginning of the relationship with the customer. In situations when customer fees for an arrangement may be variable, the Company estimates the variable consideration at inception using the expected value method based on analysis of similar contracts in the same line of business, which is constrained based on the Company’s assessment of the realization of the adjustment amount. The Company allocates the transaction price within arrangements that include multiple performance obligations based upon the relative SSP of each service. The SSP for both rating and monitoring services is generally based upon observable selling prices where the rating or monitoring service is sold separately to similar customers. MA Revenue by the Company include hosted research and data subscriptions, installed and In the MA segment, products and services offered hosted software subscriptions, perpetual installed software licenses and related maintenance, or PCS, and professional services. Subscription and PCS contracts are generally invoiced in advance of the contractual coverage period, which is principally one year, but can range from 3-5 years; while perpetual software licenses are generally invoiced upon delivery and professional services are invoiced as those services are provided. Payment terms and conditions vary by contract type, but primarily include a requirement of payment within 30 to 60 days. ff Revenue from research, data and other hosted subscriptions is recognized ratably over the related subscription period as MA's performance obligation to provide access to these products is progressively fulfilled over the stated term of the contract. A large portion of these services are invoiced in the months of November, December and January. Revenue from the sale of a software license, when considered distinct from the related software implementation services, is generally recognized at the time the product master or first copy is delivered or transferred to the customer. PCS is generally recognized ratably over the contractual period commencing when the software license is fully delivered. Revenue from installed software subscriptions, which includes PCS, is bifurcated into a software license performance obligation and a PCS performance obligation, which follow the patterns of recognition described above. For implementation services and other service projects within the ERS and ESA businesses for which fees are fixed, the Company determined progress towards completion is most accurately measured on a percentage-of-completion basis (input method) as this approach utilizes the most directly observable data points and is therefore used to recognize the related revenue. For implementation services where price varies based on time expended, a time-based measure of progress towards completion of the performance obligation is utilized. Revenue from professional services rendered is generally recognized as the services are performed over time. ff within the MA segment are sold either stand-alone or together in various combinations. In Products and services offered instances where an arrangement contains multiple performance obligations, the Company accounts for the individual performance obligations separately if they are considered distinct. Revenue is generally allocated to all performance obligations based upon the relative SSP at contract inception. For certain performance obligations, judgment is required to determine the revenue recognition noted above. SSP. Revenue is recognized for each performance obligation based upon the conditions forff 82 MOODY'S 2021 10-K In the MA segment, customers usually pay a fixed fee for the products and services based on signed contracts. However, accounting for variable consideration is applied mainly for: based services. i) estimates for cancellation rights and price concessions and ii) T&M ff The Company estimates the variable consideration associated with cancellation rights and price concessions based on the expected amount to be provided to customers and reduces the amount of revenue to be recognized. T&M based contracts represent about half of MA’s service projects within the ERS and ESA businesses. The Company provides agreed upon services at a contracted daily or hourly rate. The commitment represents a series of goods and services that are substantially the same and have the same pattern of transfer to the customer. As such, if T&M services are sold with other MA products, the Company allocates the variable consideration entirely to the T&M performance obligation if the services are sold at standard pricing or at a similar discount level compared to other performance obligations in the same revenue contract. If these criteria are not met, the Company estimates variable consideration for each performance obligation upfront. Each form of variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Costs to Obtain or Fulfill a Contract with a Customer: Costs to obtain a contract with a customer Costs incurred to obtain customer contracts, such as sales commissions, are deferred and recorded within other current assets and other assets when such costs are determined to be incremental to obtaining a contract, would not have been incurred otherwise and the Company expects to recover those costs. These costs are amortized to expense on a systematic basis consistent with the transfer of the products or services to the customer. Depending on the line of business to which the contract relates, this may be based upon the average economic life of the products sold or average period for which services are provided, inclusive of anticipated contract renewals. Determining the estimated economic life of the products sold requires judgment with respect to anticipated future technological changes. Costs to obtain customer contracts are only incurred in the MA segment. Cost to fulfill a contract with a customer Costs incurred to fulfill customer contracts, are deferred and recorded within other current assets and other assets when such costs relate directly to a contract, generate or enhance resources of the Company that will be used in satisfying performance obligations in the future and the Company expects to recover those costs. The Company capitalizes work-in-process costs for in-progress MIS ratings, which is recognized consistent with the rendering of the related services to the customers, as ratings are issued. In addition, within the MA segment, the Company capitalizes royalty costs related to third-party information data providers associated with hosted company information and business intelligence products. These costs are amortized to expense consistent with the recognition pattern of the related revenue over time. Accounts Receivable Allowances In order to determine an estimate of expected credit losses, receivables are segmented based on similar risk characteristics including historical credit loss patterns and industry or class of customers to calculate reserve rates. The Company uses an aging method for developing its allowance for credit losses by which receivable balances are stratified based on aging category. A reserve rate is calculated for each aging category which is generally based on historical information, and is adjusted, when necessary, forff future. The Company also considers customer specific information (e.g., bankruptcy or financial difficulty) expected credit losses, as well as the economic environment of the customers, both from an industry and geographic perspective, in evaluating the need for allowances. Expected credit losses are reflected as additions to the accounts receivable allowance. Actual uncollectible account write-offsff are recorded against the allowance. current conditions (e.g., macroeconomic or industry related) and reasonable and supportable forecasts about the when estimating its ff Leases The Company has operating leases, of which substantially all relate to the lease of officeff are classified as finance leases are not material to the consolidated financial statements. space. The Company’s leases which The Company determines if an arrangement meets the definition of a lease at contract inception. The Company recognizes in its consolidated balance sheet a lease liability and an ROU Asset for all leases with a lease term greater than 12 months. In determining the length of the lease term, the Company utilizes judgment in assessing the likelihood of whether it is reasonably certain that it will exercise an option to extend or early-terminate a lease, if such options are provided in the lease agreement. ROU Assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU Assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As substantially all of the Company’s leases do not provide an implicit interest rate, the Company uses its estimated secured incremental borrowing rates at the lease commencement date in determining the present value of lease payments. These secured incremental borrowing rates are attributable to the currency in which the lease is denominated. MOODY'S 2021 10-K 83 At commencement, the Company’s initial measurement of the ROU Asset is calculated as the present value of the remaining lease payments (i.e., lease liability), with additive adjustments reflecting: initial direct costs (e.g., broker commissions) and prepaid lease payments (if any); and reduced by any lease incentives provided by the lessor if: (i) received before lease commencement or (ii) receipt of the lease incentive is contingent upon future events for which the occurrence is both probable and within the Company’s control. Lease expense for minimum operating lease payments is recognized on a straight-line basis over the lease term. This straight- line lease expense represents a single lease cost which is comprised of both an interest accretion component relating to the lease liability and amortization of the ROU Assets. The Company records this single lease cost in operating and SG&A expenses. However, in situations where an operating lease ROU Asset has been impaired, the subsequent amortization of the ROU Asset is then recorded on a straight-line basis over the remaining lease term and is combined with accretion expense on the lease liability to result in single operating lease cost (which subsequent to impairment will no longer follow a straight-line recognition pattern). The Company has lease agreements which include lease and non-lease components. For the Company’s office space leases, the lease components (e.g., fixed rent payments) and non-lease components (e.g., fixed common-area maintenance costs) are combined and accounted for as a single lease component. Variable lease payments (e.g. variable common-area-maintenance costs) are only included in the initial measurement of the lease liability to the extent those payments depend on an index or a rate. Variable lease payments not included in the lease liability are recognized in net income in the period in which the obligation for those payments is incurred. Contingencies Moody’s is involved in legal and tax proceedings, governmental, regulatory and legislative investigations and inquiries, claims and litigation that are incidental to the Company’s business, including claims based on ratings assigned by MIS. Moody’s is also subject to ongoing tax audits in the normal course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. Moody’s discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate. For claims, litigation and proceedings and governmental investigations and 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. ff of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative In view of the inherent difficulty 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, 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 those estimates. if any, on its operations and financial condition and to accrue for and from ff ff Operating Expenses Operating expenses include costs associated with the development and production of the Company’s products and services and their delivery to customers. These expenses principally include employee compensation and benefits and travel costs that are incurred in connection with these activities. Operating expenses are charged to income as incurred. Selling, General and Administrative Expenses SG&A expenses include such items as compensation and benefits for corporate officers expenses related to sales. They also include items such as officeff losses from sales and disposals of assets. SG&A expenses are charged to income as incurred. ff rent, business insurance, professional fees and gains and and staff aff nd compensation and other Foreign Currency Translation For all operations outside the U.S. where the Company has designated the local currency as the functional currency, assets and liabilities are translated into U.S. dollars using end of year exchange rates, and revenue and expenses are translated using average exchange rates for the year. For these foreign operations, currency translation adjustments are recorded to other comprehensive income. 84 MOODY'S 2021 10-K Comprehensive Income Comprehensive income represents the change in net assets of a business enterprise during a period due to transactions and other events and circumstances from non-owner sources including: foreign currency translation impacts; net actuarial gains and losses and net prior service costs related to pension and other retirement plans; and gains and losses on derivative instruments designated as net investment hedges or cash flow hedges. Comprehensive income items, including cumulative translation adjustments of entities that are less-than-wholly-owned subsidiaries, will be reclassified to noncontrolling interests and thereby, adjusting accumulated other comprehensive income proportionately in accordance with the percentage of ownership interest of the non-controlling shareholder. Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740. Therefore, income tax expense is based on reported income before income taxes and deferred income taxes reflect the effect differences that are recognized for income tax purposes. between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts of temporary ff ff The Company classifies interest related to unrecognized tax benefits as a component of interest expense in its consolidated statements of operations. Penalties are recognized in other non-operating expenses. For UTPs, the Company first determines whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. ff On December 22, 2017, the Tax Act was signed into law, resulting in all previously undistributed foreign earnings being subject to U.S. tax. The Company has provided deferred taxes for those entities whose earnings are not considered indefinitely reinvested. Fair Value of Financial Instruments The Company’s financial instruments include cash, cash equivalents, trade receivables and payables, and certain short-term investments consisting primarily of certificates of deposit and money market deposits, all of which are short-term in nature and, accordingly, approximate fair value. The Company also invests in mutual funds, which are accounted for as equity securities with readily determinable fair values under ASC Topic 321. The Company measures these investments at fair value with both realized gains and losses and unrealized holding gains and losses for these investments included in net income. Also, the Company uses derivative instruments to manage certain financial exposures that occur in the normal course of business. These derivative instruments are carried at fair value in the Company’s consolidated balance sheets. Fair value is defined by the ASC 820 as the price that would be received from selling an asset or paid to transfer a liability (i.e., an exit price) in an orderly transaction between market participants at the measurement date. The determination of this fair value is based on the principal or most advantageous market in which the Company could commence transactions and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance. Also, determination of fair value assumes that market participants will consider the highest and best use of the asset. The ASC establishes a fair value hierarchy whereby the inputs contained in valuation techniques used to measure fair value are categorized into three broad levels as follows: Level 1: quoted market prices in active markets that the reporting entity has the ability to access at the date of the fair value measurement; Level 2: inputs other than quoted market prices described in Level 1 that are observable indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; for the asset or liability, either directly or rr Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement of the assets or liabilities. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk principally consist of cash and cash equivalents, short-term investments, trade receivables and derivatives. The Company manages its credit risk exposure by allocating its cash equivalents among various money market deposit accounts and certificates of deposits. Short-term investments primarily consist of certificates of deposit as of December 31, 2021 and 2020. The Company manages its credit risk exposure on cash equivalents and short-term investments by limiting the amount it can invest with any single entity. No customer accounted for 10% or more of accounts receivable at December 31, 2021 or 2020. MOODY'S 2021 10-K 85 Earnings per Share of Common Stock Basic shares outstanding is calculated based on the weighted average number of shares of common stock outstanding during to all potentially dilutive common shares, assuming the reporting period. Diluted shares outstanding is calculated giving effect that such shares were outstanding and dilutive during the reporting period. ff Pension and Other Retirement Benefits Moody’s maintains various noncontributory DBPPs as well as other contributory and noncontributory retirement plans. The expense and assets/liabilities that the Company reports for its pension and other retirement benefits are dependent on many assumptions concerning the outcome of future events and circumstances. These assumptions represent the Company’s best estimates and may vary by plan. The differences assets and actual experience is spread over a five-year period to the market-related value of plan assets, which is used in determining the expected return on assets component of annual pension expense. All other actuarial gains and losses are generally deferred and amortized over the estimated average future working life of active plan participants. between the assumptions for the expected long-term rate of return on plan ff The Company recognizes as an asset or liability in its consolidated balance sheet the funded status of its defined benefit retirement plans, measured on a plan-by-plan basis. Changes in the funded status due to actuarial gains/losses are recorded as part of other comprehensive income during the period the changes occur. Use of Estimates ff The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ estimates. from those ff Recently Issued Accounting Pronouncements In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of of Reference Rate Reform on Financial Reporting" ("ASU No. the original guidance, ASU No. 2020-04, "Facilitation of the Effects 2020-04"), issued in March 2020 (codified into ASC Topic 848 "Reference Rate Reform"). ASU No. 2020-04 provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered interbank offered apply the amendments prospectively through December 31, 2022 as the transition from LIBOR is completed. Rate (LIBOR) and other upon issuance, and the Company may elect to rates to alternative reference rates. Both ASU's were effective ff ff ff ff As of December 31, 2021, the Company has interest rate swaps designated as fair value hedges and cross currency swaps designated as net investment hedges referencing three-month or six-month USD LIBOR with aggregate notional amounts as disclosed in Note 6. For derivative instruments that will be outstanding at the transition date, the Company intends to modify the contractual terms of the instruments to replace LIBOR with another reference rate, such as SOFR. Pursuant to the modification of the contractual terms of these instruments, the Company intends to utilize the various optional expedients set forth in ASC Topic 848 relating to derivative instruments used in hedging relationships. In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic Contract Liabilities from Contracts with Customers" ("ASU No. 2021-08"). ASU No. 2021-08 will require 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. Under current GAAP, aP n acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 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. ASU No. 2021-08 is effective 2022, with early adoption permitted. The Company intends to early adopt this ASU effective for fiscal years beginning after December 15, ff 805): Accounting for Contract Assets and January 1, 2022. TT ff 86 MOODY'S 2021 10-K NOTE 3 REVENUES Revenue by Category The following table presents the Company’s revenues disaggregated by LOB: MIS: Corporate finance (CFG) Investment-grade High-yield Bank loans Other accounts (CFG) (1) Total CFG Financial institutions (FIG) Banking Insurance Managed investments Other accounts (FIG) Total FIG Public, project and infrastructure finance (PPIF) Public finance / sovereign Project and infrastructure Total PPIF Structured finance (SFG) Asset-backed securities RMBS CMBS Structured credit Other accounts (SFG) Total SFG Total ratings revenue MIS Other Total external revenue Intersegment royalty Total MIS MA: Research, data and analytics (RD&A) Enterprise risk solutions (ERS) Professional services (PS)(2) Total external revenue Intersegment revenue Total MA Eliminations Total MCO Year Ended December 31, 2021 2020 2019 $ $ 439 411 606 631 $ 636 352 287 582 379 258 313 547 2,087 1,857 1,497 411 145 36 10 602 244 277 521 118 123 102 215 2 560 3,770 42 3,812 165 3,977 1,745 661 — 2,406 7 2,413 (172) 355 137 28 10 530 250 246 496 98 96 61 105 2 362 3,245 47 3,292 148 3,440 1,514 565 — 2,079 7 2,086 (155) $ 6,218 $ 5,371 $ 320 119 25 12 476 222 224 446 99 95 81 148 4 427 2,846 29 2,875 134 3,009 1,273 522 159 1,954 9 1,963 (143) 4,829 (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. (2) Subsequent to the divestiture of MAKS in 2019, revenue from the MALS reporting unit, which previous to 2020 was reported in the PS LOB, is now reported as part of the RD&A LOB. Prior periods have not been reclassified as the amounts were not material. MOODY'S 2021 10-K 87 The following table presents the Company’s revenues disaggregated by LOB and geographic area: Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 U.S. Non-U.S. Total U.S. Non-U.S. Total U.S. Non-U.S. Total MIS: Corporate finance $ 1,384 $ Financial institutions Public, project and infrastructure finance Structured finance 289 304 364 703 313 217 196 $ 2,087 $ 1,291 $ 602 521 560 250 311 214 566 280 185 148 $ 1,857 $ 530 496 362 $ 968 200 282 270 529 276 164 157 $ 1,497 476 446 427 Total ratings revenue MIS Other Total MIS MA: Research, data and analytics Enterprise risk solutions Professional services (PS)(1) Total MA Total MCO 2,341 1,429 3,770 2,066 1,179 3,245 1,720 1,126 2,846 3 39 42 2 45 47 1 28 29 2,344 1,468 3,812 2,068 1,224 3,292 1,721 1,154 2,875 758 314 — 987 347 — 1,745 661 — 1,072 1,334 2,406 668 219 — 887 846 346 — 1,514 565 — 1,192 2,079 558 201 64 823 715 321 95 1,131 1,273 522 159 1,954 $ 3,416 $ 2,802 $ 6,218 $ 2,955 $ 2,416 $ 5,371 $ 2,544 $ 2,285 $ 4,829 (1) Subsequent to the divestiture of MAKS in 2019, revenue from the MALS reporting unit, which previous to 2020 was reported in the PS LOB, is now reported as part of the RD&A LOB. Prior periods have not been reclassified as the amounts were not material. The following table presents the Company's reportable segment revenues disaggregated by segment and geographic region: Year Ended December 31, 2021 2020 2019 $ 2,344 $ 2,068 $ 1,721 930 357 181 1,468 3,812 1,072 936 239 159 1,334 2,406 6,218 $ 727 345 152 1,224 3,292 887 818 226 148 1,192 2,079 5,371 $ 686 320 148 1,154 2,875 823 760 231 140 1,131 1,954 4,829 $ MIS: U.S. Non-U.S.: EMEA Asia-Pacific Americas Total Non-U.S. Total MIS MA: U.S. Non-U.S.: EMEA Asia-Pacific Americas Total Non-U.S. Total MA Total MCO 88 MOODY'S 2021 10-K 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. Year Ended December 31, 2021 2020 2019 Transaction Recurring Total Transaction Recurring Total Transaction Recurring Total Corporate Finance $ 1,600 Financial Institutions $ 320 77 % Public, Project and Infrastructure Finance $ Structured Finance MIS Other $ $ 53 % 354 68 % 362 65 % 4 10 % $ $ $ $ $ 487 $2,087 $ 1,401 23 % 100 % 75 % 282 $ 602 $ 265 47 % 100 % 50 % 167 $ 521 32 % 100 % 198 $ 560 35 % 100 % 38 $ 42 90 % 100 % $ $ $ 337 68 % 175 48 % 4 9 % $ $ $ $ $ 456 $1,857 $ 1,057 25 % 100 % 71 % 265 $ 530 $ 212 50 % 100 % 45 % 159 $ 496 32 % 100 % 187 $ 362 52 % 100 % 43 $ 47 91 % 100 % $ $ $ 292 65 % 246 58 % 2 7 % $ $ $ $ $ 440 $1,497 29 % 100 % 264 $ 476 55 % 100 % 154 $ 446 35 % 100 % 181 $ 427 42 % 100 % 27 $ 29 93 % 100 % Total MIS $ 2,640 $ 1,172 $3,812 $ 2,182 $ 1,110 $3,292 $ 1,809 $ 1,066 $2,875 69 % 31 % 100 % 66 % 34 % 100 % 63 % 37 % 100 % Research, data and analytics Enterprise risk solutions Professional services(1) $ $ 91 $ 1,654 $1,745 $ 80 $ 1,434 $1,514 $ 16 $ 1,257 $1,273 5 % 95 % 100 % 5 % 95 % 100 % 1 % 99 % 100 % 79 $ 582 $ 661 $ 117 $ 448 $ 565 $ 118 $ 404 $ 522 12 % 88 % 100 % 21 % 79 % 100 % 23 % 77 % 100 % $ — $ — $ — $ — $ — $ — $ 159 $ — $ 159 — % — % — % — % — % — % 100 % — % 100 % Total MA $ 170 $ 2,236 $2,406 $ 197 $ 1,882 $2,079 $ 293 $ 1,661 $1,954 7 % 93 % 100 % 9 % 91 % 100 % 15 % 85 % 100 % Total Moody’s Corporation $ 2,810 $ 3,408 $6,218 $ 2,379 $ 2,992 $5,371 $ 2,102 $ 2,727 $4,829 45 % 55 % 100 % 44 % 56 % 100 % 44 % 56 % 100 % (1) Subsequent to the divestiture of MAKS in 2019, the RD&A LOB now includes revenue from MALS beginning in the first quarter of 2020. MALS revenue was previously reported as part of the PS LOB and prior year revenue by LOB has not been reclassified as the amounts were not material. MOODY'S 2021 10-K 89 The following table presents the timing of revenue recognition: Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 MIS MA Total MIS MA Total MIS MA Total Revenue recognized at a point in time Revenue recognized over time $ 2,640 $ 101 $ 2,741 $ 2,182 $ 121 $ 2,303 $ 1,809 $ 132 $ 1,941 1,172 2,305 3,477 1,110 1,958 3,068 1,066 1,822 2,888 Total $ 3,812 $ 2,406 $ 6,218 $ 3,292 $ 2,079 $ 5,371 $ 2,875 $ 1,954 $ 4,829 Unbilled Receivables, Deferred Revenue and Remaining Performance Obligations rr Unbilled receivables At December 31, 2021 and December 31, 2020, accounts receivable included approximately $386 million and $361 million, respectively, of unbilled receivables related to the MIS segment. Certain MIS arrangements contain contractual terms whereby the customers are billed in arrears for annual monitoring services and rating fees, 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. Consequently, at December 31, 2021 and December 31, 2020, accounts receivable included approximately $152 million and $98 million, respectively, of unbilled receivables related to the MA segment. The increase in unbilled receivables is driven by organic growth and the integration of recent acquisitions. Deferred revenue The Company recognizes deferred revenue when a contract requires a customer to pay consideration to the Company in advance of when revenue 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 year ended December 31, 2021 are as follows: Balance at December 31, 2020 Changes in deferred revenue Revenue recognized that was included in the deferred revenue balance at the beginning of the period Increases due to amounts billable excluding amounts recognized as revenue during the period Increases due to acquisitions during the period ff Effect of exchange rate changes Total changes in deferred revenue Balance at December 31, 2021 Deferred revenue - current Deferred revenue - noncurrent Year Ended December 31, 2021 MIS MA Total $ 313 $ 874 $ 1,187 (220) (810) (1,030) 207 — (4) (17) 296 214 82 $ $ $ 884 94 (3) 165 1,039 1,035 4 $ $ $ 1,091 94 (7) 148 1,335 1,249 86 $ $ $ For the MA segment, for the year ended December 31, 2021, the increase in the deferred revenue balance was primarily due to acquisitions (Cortera, RMS, and PassFort) and organic growth. 90 MOODY'S 2021 10-K Significant changes in the deferred revenue balances during the year ended December 31, 2020 are as follows: Balance at December 31, 2019 Changes in deferred revenue Revenue recognized that was included in the deferred revenue balance at the beginning of the period Increases due to amounts billable excluding amounts recognized as revenue during the period Increases due to acquisitions during the period ff Effect of exchange rate changes Total changes in deferred revenue Balance at December 31, 2020 Deferred revenue—current Deferred revenue—noncurrent Year Ended December 31, 2020 MIS MA Total $ 322 $ 840 $ 1,162 (229) (800) (1,029) 215 — 5 (9) 313 216 97 $ $ $ 792 24 18 34 874 873 1 $ $ $ 1,007 24 23 25 1,187 1,089 98 $ $ $ For the MA segment, for the year ended December 31, 2020, the increase in the deferred revenue balance was primarily due to acquisitions (RDC, Acquire Media, ZMFS, and Catylist) and changes in FX translation rates. Significant changes in the deferred revenue balances during the year ended December 31, 2019 are as follows: Balance at December 31, 2018 Changes in deferred revenue Revenue recognized that was included in the deferred revenue balance at the beginning of the period Increases due to amounts billable excluding amounts recognized as revenue during the period Increases due to acquisitions during the period ff Effect of exchange rate changes Total changes in deferred revenue Balance at December 31, 2019 Deferred revenue—current Deferred revenue—noncurrent Year Ended December 31, 2019 MIS MA Total $ 325 $ 750 $ 1,075 (209) 202 3 1 (3) 322 214 108 $ $ $ (714) (923) 789 6 9 90 840 836 4 $ $ $ 991 9 10 87 1,162 1,050 112 $ $ $ For the MA segment, for the year ended December 31, 2019, the increase in the deferred revenue balance was primarily due to organic growth. Remaining performance obligations g p g 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 December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $112 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 of unsatisfied performance obligations relating to 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 December 31, 2021 as well as amounts not yet invoiced to customers as of December 31, 2021 largely reflecting future revenue related to signed multi-year arrangements for hosted and installed subscription-based products. As of December 31, 2021, 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 65% of this balance within one year, approximately 25% of this balance between one to two years and the remaining amount thereafter. MOODY'S 2021 10-K 91 Costs to Obtain or Fulfill a Contract with a Customer MA Costs to Obtain a Contrarr ct with a Customer As of December 31, 2021 2020 Capitalized costs to obtain sales contracts $ 183 $ 180 Year ended December 31, 2021 2020 2019 Amortization of capitalized costs to obtain sales contracts $ 60 $ 59 $ 53 Amortization of costs incurred to obtain customer contracts is included within SG&A expenses in the consolidated statements of operations. Costs incurred to obtain customer contracts are only in the MA segment. MIS and MA Costs to Fulfill a Contracrr t withww a Customer Capitalized costs to fulfill sales contracts $ 14 $ 44 $ 58 $ 12 $ 35 $ 47 As of December 31, 2021 As of December 31, 2020 MIS MA Total MIS MA Total Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 MIS MA Total MIS MA Total MIS MA Total Amortization of capitalized costs to fulfill sales contracts $ 48 $ 76 $ 124 $ 47 $ 66 $ 113 $ 42 $ 56 $ 98 Amortization of costs to fulfill customer contracts is included within operating expenses in the consolidated statements of operations. NOTE 4 RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING Below is a reconciliation of basic to diluted shares outstanding: Basic Dilutive effect ff of shares issuable under stock-based compensation plans Diluted Antidilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above Year Ended December 31, 2021 186.4 1.5 187.9 2020 187.6 1.7 189.3 2019 189.3 2.3 191.6 0.2 0.2 0.2 The calculation of diluted EPS requires certain assumptions regarding the use of both cash proceeds and assumed proceeds that would be received upon the exercise of stock options and vesting of restricted stock outstanding as of December 31, 2021, 2020 and 2019. NOTE 5 ACCELERATED SHARE REPURCHASE PROGRAM On February 20, 2019, 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 2.2 million shares of its common stock. Final settlement of the ASR agreement was completed on April 26, 2019 and the Company received delivery of an additional 0.6 million shares of the Company’s common stock. In total, the Company repurchased 2.8 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 $180.33/share over the duration of the program. The initial share repurchase and final share settlement were recorded as a reduction to shareholders’ equity. 92 MOODY'S 2021 10-K NOTE 6 CASH EQUIVALENTS AND INVESTMENTS The table below provides additional information on the Company’s cash equivalents and investments: Gross Unrealized Gains Cost As of December 31, 2021 Balance sheet location Fair Value Cash and cash equivalents Short-term investments Other assets Certificates of deposit and money market deposit accounts (1) Mutual funds $ $ 691 65 $ $ — $ 8 $ 691 73 $ $ 584 $ — $ 91 $ — $ 16 73 Gross Unrealized Gains Cost As of December 31, 2020 Balance sheet location Fair Value Cash and cash equivalents Short-term investments Other assets Certificates of deposit and money market deposit accounts (1) Mutual funds $ $ 1,430 54 $ $ — $ 1,430 6 $ 60 $ $ 1,325 $ — $ 99 $ — $ 6 60 (1) Consists of time deposits and money market deposit accounts. The remaining contractual maturities forff as short-term investments were one to 12 months at December 31, 2021 and at December 31, 2020. The remaining contractual maturities for the certificates of deposits classified in other assets are 13 to 29 months at December 31, 2021 and 13 to 23 months at December 31, 2020. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents. the certificates of deposits classified In addition, the Company invested in Corporate-Owned Life Insurance (COLI) in the first quarter of 2020. As of December 31, 2021 and December 31, 2020, the contract value of the COLI was $37 million and $17 million, respectively. NOTE 7 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes. Derivatives and non-derivative instruments designated as accounting hedges: Interest Rate Swaps Designated as Fair Value Hedges 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 and 6-month LIBOR. 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 each period within interest expense, net in the Company’s consolidated statements of operations. and the net cash settlements on the swaps are recorded ff The following table summarizes the Company’s interest rate swaps designated as fair value hedges: Nature of Swap Nature of Swap 2 021 2020 Notional Amount As of December 31, Hedged Item 2012 Senior Notes due 2022(1) Pay Floating/Receive Fixed 2017 Senior Notes due 2023 Pay Floating/Receive Fixed 2017 Senior Notes due 2028 Pay Floating/Receive Fixed 2020 Senior Notes due 2025 2014 Senior Notes due 2044(2) 2018 Senior Notes due 2048(2) Pay Floating/Receive Fixed Pay Floating/Receive Fixed Pay Floating/Receive Fixed Total $ $ $ $ $ $ $ — $ 250 500 300 300 300 1,650 $ $ $ $ $ $ Floating Interest Rate 330 250 500 300 3-month LIBOR 3-month LIBOR 3-month LIBOR 6-month LIBOR — 3-month LIBOR — 3-month LIBOR 1,380 (1) Terminated in conjunction with the repayment of the 2012 Senior Notes due 2022 in the fouf rth quarter of 2021. (2) Executed in the third quarter of 2021. Refer to Note 18 for information on the cumulative amount of fair value hedging adjustments included in the carrying amount of the above hedged items. MOODY'S 2021 10-K 93 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 Interest expense, net Descriptions Net interest settlements and accruals on interest rate swaps Location on Consolidated Statements of Operations Interest expense, net Fair value changes on interest rate swaps Interest expense, net Fair value changes on hedged debt Interest expense, net $ $ $ $ Net Investment Hedges Amount of Income (Expense) Recognized in the Consolidated Statements of Operations Year Ended December 31, 2021 2020 2019 (171) $ (205) $ (208) 23 $ (60) $ 60 $ 19 47 $ $ (47) $ 3 25 (25) Debt designated as net investment hedges g g 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 g g p y 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: Nature of Swap Pay Fixed/Receive Fixed Pay Floating/Receive Floating Total Nature of Swap Pay Fixed/Receive Fixed Pay Floating/Receive Floating Total December 31, 2021 Pay Weighted Average Interest Rate 2.16% Based on 3-month EURIBOR Notional Amount 909 1,179 2,088 December 31, 2020 Pay Notional Amount 1,079 Weighted Average Interest Rate 1.43% 959 Based on 3-month EURIBOR 2,038 € € € € Notional Amount 1,050 1,350 2,400 Notional Amount 1,220 1,080 2,300 $ $ $ $ Receive Weighted Average Interest Rate 4.45% Based on 3-month USD LIBOR Receive Weighted Average Interest Rate 3.96% Based on 3-month USD LIBOR 94 MOODY'S 2021 10-K As of December 31, 2021, these hedges will expire and the notional amounts will be settled as follows unless terminated early at the discretion of the Company: Year Ending December 31, 2023 2024 2026 2027 2028 Total € € € € € € 442 443 450 246 507 2,088 Forward contracts designated as net investment hedges g g The Company also entered into forward contracts to mitigate FX exposure related to a portion of the Company’s euro and GBP net investment in certain foreign subsidiaries against changes in euro/USD and GBP/euro exchange rates. The following table summarizes the notional amounts of the Company's outstanding forward contracts that were designated as net investment hedges: Notional amount of net investment hedges Sell Buy Sell Buy Contract to sell EUR for USD Contract to sell GBP for EUR € £ — $ — € — € — £ 524 134 $ € 627 148 December 31, 2021 December 31, 2020 These forward contracts expired in August 2021. 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 table provides information on the gains/(losses) on the Company’s net investment and cash flow hedges: 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) Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships Year Ended December 31, Year Ended December 31, Year Ended December 31, 2021 2020 2019 2021 2020 2019 2021 2020 2019 FX forward contracts $ 18 $ (14) $ 4 Cross currency swaps Long-term debt 143 81 (165) (95) 29 (7) (1) Total net investment hedges $ 242 $ (274) $ 26 $ $ Derivatives in Cash Flow Hedging Relationships Interest rate contracts Total cash flow hedges — — (51) (51) Total $ 242 $ (325) $ — — 26 1 — — 1 (2) (2) $ $ — $ — — — $ (2) (2) $ (1) $ (2) $ 2 — — 2 — — 2 $ $ $ — $ — $ 35 — 35 — — 35 $ $ 50 — 50 — — 50 $ $ — 52 — 52 — — 52 (1) Due to the Company's adoption of ASU 2018-02 during 2019, $3 million related to the tax effect of this net investment hedge was reclassified to retained earnings. MOODY'S 2021 10-K 95 The cumulative amount of net investment hedge and cash flow hedge gains (losses) remaining in AOCL is as follows: Net invii esvv tment hedges d FX forwards Cross currency swaps Long-term debt Total net investment hedges Cash flow hedges Interest rate contracts Cross-currency swap Total cash flow hedges Total net (loss) gain in AOCL Derivatives not designated as accounting hedges: Cumulative Gains/(Losses), net of tax December 31, 2021 December 31, 2020 $ $ $ 29 19 (27) 21 (49) 2 (47) (26) $ 12 (124) (108) (220) (51) 2 (49) (269) Foreign exchange forff wards g g rr 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 (expense) income, net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through April 2022. The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards: Notional Amount of Currency Pair: Contracts to sell USD for GBP Contracts to sell USD for Japanese Yen Contracts to sell USD for Canadian dollars Contracts to sell USD for Singapore dollars Contracts to sell USD for Euros Contracts to sell Euros for GBP Contracts to sell USD for Russian Ruble Contracts to sell USD for Indian Rupee Contracts to sell GBP for USD $ $ $ $ $ € $ $ £ December 31, 2021 Sell Buy December 31, 2020 Sell Buy 126 22 120 67 364 £ ¥ C$ S$ € — £ ₽ 16 7 172 ₹ $ 92 2,500 150 90 315 $ $ $ $ $ — € $ $ £ 500 231 1,200 £ ¥ C$ S$ € £ ₽ 295 15 107 59 447 135 13 18 ₹ — $ 222 1,600 140 79 376 121 1,000 1,350 — NOTE: € = Euro, £ = British pound, S$ = Singapore dollar, $ = U.S. dollar, ¥ = Japanese yen, C$ = Canadian dollar, ₽= Russian Ruble, ₹= Indian Rupee 96 MOODY'S 2021 10-K The following table summarizes the impact to the consolidated statements of operations relating to the net gain (loss) on the Company’s derivatives which are not designated as hedging instruments: Derivatives Not Designated as Accounting Hedges FX forwards Foreign exchange forf wards relating to RMS acquisition(1) rr Location on Statement of Operations Other non-operating expense, net Other non-operating income, net $ $ Year Ended December 31, 2021 (27) $ 2020 41 $ 2019 (11) (13) $ — $ — (1) The Company entered into forward contracts to sell $1,675 million for €1,200 to hedge a portion of the GBP denominated RMS purchase price. The contract was terminated on September 14, 2021 and resulted in a $13 million loss. The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of derivative instruments 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 December 31, 2021 December 31, 2020 Assets: Derivatives designated as accounting hedges: Cross-currency swaps designated as net investment hedges Other assets Interest rate swaps designated as fair value hedges Other assets Total derivatives designated as accounting hedges Derivatives not designated as accounting hedges: FX forwards on certain assets and liabilities Other current assets Total assets Liabilities: Derivatives designated as accounting hedges: FX forwards designated as net investment hedges Cross-currency swaps designated as net investment hedges Accounts payable and accrued liabilities Accounts payable and accrued liabilities $ $ $ Cross-currency swaps designated as net investment hedges Other liabilities Interest rate swaps designated as fair value hedges Other liabilities Total derivatives designated as accounting hedges Non-derivative instruments designated as accounting hedge: $ 53 13 66 1 67 $ — $ — 17 23 40 — 57 57 31 88 16 23 144 1 184 Long-term debt designated as net investment hedge Long-term debt 1,421 1,530 Derivatives not designated as accounting hedges: FX forwards on certain assets and liabilities Total liabilities Accounts payable and accrued liabilities 12 $ 1,473 $ 2 1,716 MOODY'S 2021 10-K 97 NOTE 8 PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted of: Officeff and computer equipment (3 - 10 year estimated useful life) Offiff ce furniture and fixtures (3 - 10 year estimated useful life) Internal-use computer software (1 - 10 year estimated useful life) Leasehold improvements and building (1 - 20 year estimated useful life) Total property and equipment, at cost Less: accumulated depreciation and amortization Total property and equipment, net $ $ December 31, 2021 300 $ 52 771 234 1,357 (1,010) 347 $ 2020 260 49 666 231 1,206 (928) 278 Depreciation and amortization expense related to the above assets was $99 million, $96 million, and $97 million for the years ended December 31, 2021, 2020 and 2019, respectively. NOTE 9 ACQUISITIONS AND DIVESTITURE The following is a discussion of material acquisitions completed by the Company. The business combinations described below are accounted for using the acquisition method of accounting whereby assets acquired and liabilities assumed were recognized at fair value 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. With the exception of RMS, the Company has not presented pro forma combined results for these acquisitions because the impact on previously reported statements of operations would not have been material. PassFort On November 30, 2021, the Company acquired 100% of PassFort, a U.K. SaaS-based workflow platform for identity verification, customer onboarding, and risk analysis. The table below details the total consideration relating to the acquisition: Cash paid at closing Additional consideration to be paid to sellers in 2022 (1) Total consideration $ $ 157 1 158 (1) Represents additional consideration to be paid to the sellers folloff wing finalization of customary post-closing completion adjustments. 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 Accounts receivable Intangible assets: Product technology (5 year useful life) Customer relationships (16 year useful life) Trade name (4 year useful life) Total intangible assets (9 year weighted average useful life) Goodwill Liabilities: Accounts payable and accrued liabilities Deferred revenue Deferred tax liabilities Total liabilities Net assets acquired 98 MOODY'S 2021 10-K $ $ $ $ 14 8 1 (7) (1) (6) 10 1 23 138 (14) 158 The Company has performed a preliminary valuation analysis of the fair market value of the assets and liabilities of the PassFort business. The final purchase price allocation will be determined when the Company has completed and fully reviewed the detailed valuations. The final allocation could differ changes in allocations to acquired intangible assets as well as goodwill and other changes to assets and liabilities including deferred tax liabilities. The estimated useful lives of acquired intangible assets are also preliminary. ff materially from the preliminary allocation. The final allocation may include Goodwill The goodwill recognized as a result of this acquisition includes, among other things, value created by combining the complementary risk assessment products of the Company and PassFort. The integration of PassFort’s platform into Moody’s suite of KYC and compliance offerings customers. is expected to create a holistic workflow solution to benefit both new and existing Moody's ff Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes. Transaction costs Transaction costs directly related to the PassFort acquisition were not material. 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. ff The table below details the total consideration relating to the acquisition: Cash paid at closing Replacement equity compensation awards Total consideration $ $ 1,922 5 1,927 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 Accounts receivable Other current assets Property and equipment Operating lease right-of-use assets Intangible assets: Customer relationships (23 year useful life) Product technology (7 year useful life) Trade name (9 year useful life) Total intangible assets (18 year weighted average useful life) Goodwill Deferred tax assets, net Other assets Liabilities: Accounts payable and accrued liabilities Deferred revenue Operating lease liabilities Deferred tax liabilities, net Uncertain tax positions Other liabilities Total liabilities Net assets acquired 60 38 11 13 64 779 1,376 48 99 $ 518 212 49 (92) (89) (68) (214) (96) (2) $ $ (561) 1,927 $ MOODY'S 2021 10-K 99 The Company has performed a preliminary valuation analysis of the fair market value of the 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 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. ff materially from the preliminary allocation and may include changes in allocations to acquired intangible 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. ff Goodwill, of which $1,286 million and $90 million has been assigned to the MA and MIS segments, respectively, is not deductible foff r 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. ff 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 directly related to the RMS acquisition were $22 million and were recorded in SG&A expenses in the statement of operations. Supplementary Unaudited Pro Forma Information pp y Supplemental information on an unaudited pro forma basis is presented below for the twelve months ended December 31, 2021 and 2020 as if the acquisition of RMS occurred on January 1, 2020. The pro forma financial information is presented for comparative purposes only, 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 the jurisdiction for which the pro forma adjustment relates. in ff Unaudited Pro forma Revenue Pro forma Net Income attributable to Moody's Year Ended December 31, 2021 2020 $ $ 6,463 $ 2,244 $ 5,667 1,666 The unaudited pro forma results do not include any anticipated cost savings or other effects 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 for the periods presented. The RMS amounts in the pro forma results include an addition to translated to USD at rates in effect revenue of approximately $18 million and a reduction to revenue of approximately $22 million relating to a fair value adjustment to deferred revenue required as part of acquisition accounting for the years ended December 31, 2021 and 2020, respectively. of the planned integration of RMS. ff ff Cortera On March 19, 2021, the Company acquired 100% of Cortera, a provider of North American credit data and workflow solutions. The table below details the total consideration relating to the acquisition: Cash paid at closing Additional consideration paid to sellers in 2021 (1) Total consideration $ $ 138 1 139 (1) Represents additional consideration paid to the sellers following finalization of customary post-closing completion adjustments. Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition: 100 MOODY'S 2021 10-K assets Intangible assets: Database (10 year useful life) Customer relationships (18 year useful life) Product technology (8 year useful life) Trade name (5 year useful life) Total intangible assets (11 year weighted average useful life) Goodwill(1) Deferred tax assets(1) Other assets Liabilities: Accounts payable and accrued liabilities Deferred revenue Deferred tax liabilities Other liabilities Total liabilities Net assets acquired $ $ 38 9 9 1 (1) (4) (15) (2) $ 7 57 79 16 2 $ (22) 139 (1) During the third quarter of 2021, the Company received further information, that existed as of the acquisition date, with respect to Cortera’s deferred taxes. Accordingly, the Company recorded a measurement period adjustment of $16 million to its preliminary estimate for deferred tax assets. Current assets in the table above include acquired cash of $4 million and accounts receivable of approximately $2 million. Goodwill The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary risk assessment products of the Company and Cortera, which is expected to extend the Company’s reach to new and evolving market segments as well as cost savings synergies, expected new customer acquisitions and products. Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes. Transaction costs Transaction costs directly related to the Cortera acquisition were not material. RDC On February 13, 2020, the Company acquired 100% of RDC, a provider of anti-money laundering and know-your-customer data and due diligence services. The table below details the total consideration relating to the acquisition: Cash paid at closing Additional consideration paid to sellers in 2020 (1) Total consideration $ $ 700 2 702 (1) Represents additional consideration paid to the sellers following finalization of customary post-closing completion adjustments. Shown below is the purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition: MOODY'S 2021 10-K 101 in millions) Current assets Intangible assets: Customer relationships (25 year useful life) Database (10 year useful life) Product technology (4 year useful life) Trade name (3 year useful life) Total intangible assets (19 year weighted average life) Goodwill Other assets Liabilities: Accounts payable and accrued liabilities Deferred revenue Deferred tax liabilities Other liabilities Total liabilities Net assets acquired $ $ 174 86 17 3 (5) (20) (71) (2) $ 24 280 494 2 $ (98) 702 Current assets in the table above include acquired cash of $6 million. Additionally, current assets include accounts receivable of approximately $14 million. Goodwill The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary product portfolios of the Company and RDC, which is expected to extend the Company’s reach to new and evolving market segments as well as cost savings synergies, expected new customer acquisitions and products. Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes. Transaction costs Transaction costs directly related to the RDC acquisition were not material. Other Acquisitions During the fourth quarter of 2020, the Company acquired three additional businesses within the MA reportable segment, which were not individually material, but are material in aggregate, to Moody's consolidated financial statements: – – – In December 2020, the Company acquired 100% of Catylist, Inc., a provider of commercial real estate solutions forff Catylist revenue is reported in the RD&A LOB. brokers. In December 2020, the Company acquired 100% of ZM Financial Systems, a provider of financial management software for the U.S. banking sector. ZMFS revenue is reported in the ERS LOB. In October 2020, the Company acquired 100% of Acquire Media, an aggregator and distributor of curated real-time news, multimedia, data, and alerts. AM revenue is reported in the RD&A LOB. The aggregate consideration transferred for the aforementioned acquisitions of $205 million was funded by cash on hand. 102 MOODY'S 2021 10-K The following table summarizes the aggregate fair value of the assets acquired and liabilities assumed as of the respective closing dates for each acquisition. (Amounts in millions) Current assets Intangible assets: Customer relationships (18 year useful life) Product technology (8 year useful life) Database (10 year useful life) Trade name (14 year useful life) Total intangible assets (14 year weighted average life) Goodwill Other assets Liabilities: Current liabilities Long-term liabilities Total liabilities Net assets acquired Divestiture $ 5 $ $ 47 23 8 4 (8) (8) $ 82 131 3 (16) 205 On November 8, 2019, the Company completed the sale of MAKS to Equistone Partners Europe Limited (Equistone), a European private equity firm for $227 million in net cash proceeds. This divestiture resulted in a loss of $23 million ($9 million in 2020 and $14 million in 2019), which included $32 million of currency translation losses reclassified from AOCL to the statements of operations. Additionally, in connection with this divestiture, the Company has recorded certain indemnification provisions. These provisions totaled $33 million as of both December 31, 2021 and December 31, 2020. These amounts are included in other liabilities at December 31, 2021 and 2020 in the consolidated balance sheets of the Company. NOTE 10 GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS The following table summarizes the activity in goodwill: Year Ended December 31, 2021 MIS Accumulated impairment charge Gross goodwill Net goodwill Gross goodwill MA Accumulated impairment charge Net goodwill Gross goodwill Consolidated Accumulated impairment charge Net goodwill Balance at beginning of year Additions/ adjustments (1) Foreign currency translation adjustments Ending Balance $ 311 $ — $ 311 $ 4,257 $ (12) $ 4,245 $ 4,568 $ (12) $ 4,556 90 (5) — — 90 1,525 — 1,525 1,615 — 1,615 (5) (167) — (167) (172) — (172) $ 396 $ — $ 396 $ 5,615 $ (12) $ 5,603 $ 6,011 $ (12) $ 5,999 MOODY'S 2021 10-K 103 Year Ended December 31, 2020 MIS Accumulated impairment charge Gross goodwill Net goodwill Gross goodwill MA Accumulated impairment charge Net goodwill Gross goodwill Consolidated Accumulated impairment charge Net goodwill Balance at beginning of year Additions/ adjustments (2) Foreign currency translation adjustments Ending balance $ 315 $ — $ 315 $ 3,419 $ (12) $ 3,407 $ 3,734 $ (12) $ 3,722 (2) (2) — — (2) 628 (2) 210 — — 628 626 210 208 — — 626 208 $ 311 $ — $ 311 $ 4,257 $ (12) $ 4,245 $ 4,568 $ (12) $ 4,556 (1) 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. (2) The 2020 additions/adjustments for the MA segment in the table above relate to the acquisitions of RDC, AM, ZMFS, and Catylist. Acquired intangible assets and related accumulated amortization consisted of: Customer relationships Accumulated amortization Net customer relationships Software/product technology Accumulated amortization Net software/product technology Database Accumulated amortization Net database Trade names Accumulated amortization Net trade names Other (1) Accumulated amortization Net other Total December 31, 2021 2020 $ 2,101 $ (381) 1,720 663 (219) 444 179 (46) 133 207 (47) 160 54 (44) 10 1,623 (313) 1,310 441 (177) 264 144 (29) 115 161 (38) 123 55 (43) 12 $ 2,467 $ 1,824 (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: Amortization expense Year Ended December 31, 2020 2019 2021 $ 158 $ 124 $ 103 104 MOODY'S 2021 10-K Estimated future annual amortization expense for intangible assets subject to amortization is as follows: Year Ending December 31, 2022 2023 2024 2025 2026 Thereafter Total estimated future amortization Matters concerning the ICRA reporting unit $ $ 191 189 185 180 177 1,545 2,467 ICRA has reported various matters relating to: (i) an adjudication order and fine imposed (and subsequently enhanced) by the Securities and Exchange Board of India (SEBI) in connection with credit ratings assigned to one of ICRA’sAA customers and the customer’s subsidiaries, which are being appealed by ICRA; (ii) the completion of internal examinations regarding various anonymous complaints, and actions taken by ICRA’sAA board based on the examinations’ findings; and (iii) a separate internal examination of certain allegations against two former senior ICRA officials. An unfavorable resolution of the aforementioned matters may negatively impact ICRA’sAA future operating results, which could result in an impairment of goodwill and amortizable intangible assets in future quarters. ff NOTE 11 RESTRUCTURING On December 22, 2020, the chief executive officer 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 $20 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. of Moody’s approved a restructuring program (the “2020 MA Strategic ff ff On July 29, 2020, the chief executive officer Restructuring Program”) primarily in response to the COVID-19 pandemic which revolved around the rationalization and exit of certain real estate leases. The exit from certain leased officeff space began in the third quarter of 2020 and was substantially completed at December 31, 2020. The 2020 Real Estate Rationalization Restructuring Program primarily reflected non-cash charges related to the impairment of operating lease right-of-use assets and leasehold improvements. The 2020 Restructuring Program is expected to result in an estimated annualized savings of approximately $5 to $6 million a year. of Moody’s approved a restructuring program (the “2020 Real Estate Rationalization ff On October 26, 2018, the chief executive officer of Moody’s approved a restructuring program (the “2018 Restructuring Program”) that the Company estimates will result in annualized savings of approximately $60 million per year. The 2018 Restructuring Program, the scope of which was expanded in the second quarter of 2019, was substantially completed at December 31, 2020. The 2018 Restructuring Program included relocation of certain functions from high-cost to lower-cost jurisdictions, a reduction of staff,ff positions, and the rationalization and exit of certain real estate due to consolidation of various business activities. The exit from certain leased officeff space began in the fourth quarter of 2018 and resulted in approximately $50 million of the charges to either terminate or sublease the affected real estate leases. The 2018 Restructuring Program also included $55 million of personnel- related restructuring charges, an amount that includes severance and related costs primarily determined under the Company’s existing severance plans. Cash outlays associated with the employee termination cost component of the 2018 Restructuring Program were $55 million. including from acquisitions and pursuant to a review of the business criticality of certain ff Total expenses included in the accompanying consolidated statements of operations relating to the Company's restructuring programs are as follows: 2018 Restructuring Program 2020 Real Estate Rationalization Restructuring Program 2020 MA Strategic Reorganization Restructuring Program Total Restructuring Year Ended December 31, 2021 2020 (2) $ (4) $ — 2 — $ 36 18 50 $ 2019 60 — — 60 $ $ MOODY'S 2021 10-K 105 Cumulative expense incurred through December 31, 2021 Employee Termination Costs Contract Termination Costs 2018 Restructuring Program 55 $ 48 $ 2020 Real Estate Rationalization Restructuring Program: 2020 MA Strategic Reorganization Restructuring Program: $ $ — $ 20 $ 36 — The restructuring liability for the aforementioned plans was not material at December 31, 2021, December 31, 2020, and December 31, 2019. NOTE 12 FAIR VALUE The table below presents information about items which are carried at fair value on a recurring basis at December 31, 2021 and 2020: Assets: Liabilities: Assets: Liabilities: Description Derivatives (1) Mutual funds Total Derivatives (1) Total Description Derivatives (1) Mutual funds Total Derivatives (1) Total ir value Measurement as of December 31, 2021 Balance Level 1 Level 2 $ 67 73 140 $ 52 52 $ $ — $ 73 73 $ — $ — $ 67 — 67 52 52 Fair Value Measurement as of December 31, 2020 Balance Level 1 Level 2 $ 88 60 148 $ 186 186 $ $ — $ 60 60 $ — $ — $ 88 — 88 186 186 $ $ $ $ $ $ $ $ (1) Represents FX forwards on certain assets and liabilities as well as interest rate swaps and cross-currency swaps as more fully described in Note 7 to the consolidated financial statements. The following are descriptions of the methodologies utilized by the Company to estimate the fair value of its derivative contracts and 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. 106 MOODY'S 2021 10-K NOTE 13. OTHER BALANCE SHEET INFORMATION The following tables contain additional detail related to certain balance sheet captions: Other current assets: Prepaid taxes Prepaid expenses Capitalized costs to obtain and fulfill sales contracts Foreign exchange forf wards rr on certain assets and liabilities Other Total other current assets Other assets: Investments in non-consolidated affiliates ff Deposits for real-estate leases Indemnification assets related to acquisitions Mutual funds and fixed deposits Company owned life insurance (at contract value) Costs to obtain sales contracts Derivative instruments designated as accounting hedges Pension and other retirement employee benefits Other Total other assets Accounts payable and accrued liabilities: Salaries and benefits Incentive compensation Customer credits, advanced payments and advanced billings Dividends Professional service fees Interest accrued on debt Accounts payable Income taxes Pension and other retirement employee benefits Accrued royalties Foreign exchange forf wards rr on certain assets and liabilities Restructuring liability Derivative instruments designated as accounting hedges Other $ $ $ $ $ Total accounts payable and accrued liabilities $ 1,142 $ December 31, 2021 2020 112 $ 99 103 1 74 94 91 93 31 74 389 $ 383 December 31, 2021 2020 443 $ 14 106 89 37 138 66 77 64 1,034 $ 135 19 15 66 17 134 57 21 51 515 December 31, 2021 2020 $ 211 324 100 6 75 85 47 115 7 36 12 4 — 120 197 226 42 11 53 82 39 128 45 19 2 18 39 138 1,039 MOODY'S 2021 10-K 107 December 31, 2021 2020 Other liabilities: Pension and other retirement employee benefits $ 235 $ Interest accrued on UTPs MAKS indemnification provisions Income tax liability – non-current portion Derivative instruments designated as accounting hedges Other Total other liabilities 59 33 23 40 48 $ 438 $ 244 113 33 18 145 37 590 The following table provides additional detail regarding Moody's investments in non-consolidated affiliates, other assets in the consolidated balance sheets: ff as included within Investments in non-consolidated affiliates: Equity method investments (1) Investments measured using the measurement alternative (2) Other Total investments in non-consolidated affiliates ff December 31, 2021 2020 $ $ $ 121 318 4 443 $ 118 16 1 135 (1) (2) 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 Equity securities without readily determinable fair value for which the Company has elected to apply the measurement alternative in accordance with ASC Topic 321, which is more fully discussed in Note 2. 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. Refer to Note 24 for disclosure on earnings from non-consolidated affiliates, net. ff which is included within other non-operating income, 108 MOODY'S 2021 10-K NOTE 14 COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME The following table provides details about the reclassifications out of AOCL: Year Ended December 31, 2021 2020 2019 Location in the consolidated statements of operations Currency translation adjustment losses Sale of foreign subsidiaries $ — $ — $ (32) Loss pursuant to the divestiture of MAKS Total currency translation adjustment losses Losses on cash flow hedges Interest rate contract Income tax effect ff of item above Total net losses on cash flow hedges Gains on net investment hedges Cross currency swaps FX forwards Total before income taxes Income tax effect ff of item above Total net gains on net investment hedges Pension and other retirement benefits Amortization of actuarial losses and prior service costs included in net income Accelerated recognition of loss due to settlement Total before income taxes Income tax effect ff of item above Total pension and other retirement benefits Total net losses included in Net Income attributable to reclassifications out of AOCL — (2) — (2) — 2 2 (1) 1 (11) (8) (19) 5 (14) — (3) 1 (2) 1 — 1 — 1 (6) (2) (8) 2 (6) (32) — Other non-operating income, net — Provision for income taxes — — Other non-operating income, net 3 Other non-operating income, net 3 (1) Provision for income taxes 2 (3) Other non-operating income, net — Other non-operating income, net (3) 1 Provision for income taxes (2) $ (15) $ (7) $ (32) The following table shows changes in AOCL by component (net of tax): Year Ended December 31, 2021 Pension and Other Retirement Benefits Gains / (Losses) on Cash Flow Hedges Foreign Currency Translation Adjustments Net Investment Hedges Total Balance December 31, 2020 $ (118) $ (49) $ (45) $ (220) $ (432) Other comprehensive income/(loss) before reclassifications Amounts reclassified from AOCL Other comprehensive income/(loss) Balance December 31, 2021 55 14 69 — 2 2 (290) — (290) 242 (1) 241 7 15 22 $ (49) $ (47) $ (335) $ 21 $ (410) MOODY'S 2021 10-K 109 Year Ended December 31, 2020 Pension and Other Retirement Benefits Gains / (Losses) on Cash Flow Hedges Foreign Currency Translation Adjustments Net Investment Hedges Total Balance December 31, 2019 $ (92) $ — $ (401) $ 54 $ (439) Other comprehensive income/(loss) before reclassifications Amounts reclassified from AOCL Other comprehensive income/(loss) Balance December 31, 2020 (32) 6 (26) (51) 2 (49) 356 — 356 (273) (1) (274) — 7 7 $ (118) $ (49) $ (45) $ (220) $ (432) Year Ended December 31, 2019 Pension and Other Retirement Benefits Gains / (Losses) on Cash Flow Hedges Foreign Currency Translation Adjustments Net Investment Hedges Total Balance December 31, 2018 $ Adoption of ASU 2018-02 Other comprehensive income/(loss) before reclassifications Amounts reclassified from AOCL Other comprehensive income/(loss) Balance December 31, 2019 (53) $ (17) (24) 2 (39) — $ (406) $ 33 $ (426) — — — — — (27) 32 5 (3) 26 (2) 21 (20) (25) 32 (13) $ (92) $ — $ (401) $ 54 $ (439) NOTE 15 PENSION AND OTHER RETIREMENT BENEFITS U.S. Plans Moody’s maintains funded and unfunded noncontributory Defined Benefit Pension Plans ("DBPPs"). The DBPPs provide defined benefits using a cash balance formula based on years of service and career average salary or final average pay for selected executives. The Company also provides certain healthcare and life insurance benefits for retired U.S. employees. The retirement healthcare plans are contributory; the life insurance plans are noncontributory. Moody’s funded and unfunded U.S. pension plans, the U.S. retirement healthcare plans and the U.S. retirement life insurance plans are collectively referred to herein as the “Retirement Plans”. The U.S. retirement healthcare plans and the U.S. retirement life insurance plans are collectively referred to herein as the “Other Retirement Plans”. Through 2007, substantially all U.S. employees were eligible to participate in the Company’s DBPPs. Effective the Company no longer offers instead will receive a retirement contribution in similar benefit value under the Company’s Profit Participation Plan. Current participants of the Company’s Retirement Plans and Other Retirement Plans continue to accrue benefits based on existing plan benefit formulas. January 1, 2008, DBPPs to U.S. employees hired or rehired on or after January 1, 2008 and new hires in the U.S. ff ff 110 MOODY'S 2021 10-K Following is a summary of changes in benefit obligations and fair value of plan assets for the Retirement Plans for the years ended December 31: Pension Plans Other Retirement Plans 2021 2020 2021 2020 Change in benefit obligation: Benefit obligation, beginning of the period Service cost Interest cost Plan participants’ contributions Benefits paid Actuarial (loss) gain Assumption changes Benefit obligation, end of the period Change in plan assets: Fair value of plan assets, beginning of the period Actual return on plan assets Benefits paid Employer contributions Plan participants’ contributions Fair value of plan assets, end of the period Funded Status of the plans Amounts recorded on the consolidated balance sheets: Pension and retirement benefits asset – non current Pension and retirement benefits liability – current Pension and retirement benefits liability – non current Net amount recognized Accumulated benefit obligation, end of the period $ $ $ $ $ $ $ $ (663) $ (19) (14) — 68 (6) 64 (570) $ $ 528 34 (68) 50 — 544 $ (26) $ $ 74 (5) (95) (26) $ (524) $ (589) $ (17) (17) — 22 6 (68) (663) $ $ 395 45 (22) 110 — $ 528 (135) $ $ 21 (44) (112) (135) $ (601) (48) $ (4) (1) (1) 2 (3) 7 (48) $ — $ — (2) 1 1 — $ (48) $ — $ (1) (47) (48) $ (42) (3) (1) (1) 2 2 (5) (48) — — (2) 1 1 — (48) — (1) (47) (48) The net decrease in the pension benefit obligation from assumption changes and actuarial losses in 2021 primarily resulted from increases to the discount rates and changes to certain actuarial assumptions, including increased rates of retirement at younger ages. The net increase in the benefit obligation in 2020 primarily resulted from reductions in discount rates, partially offset decrease related to lower cash balance conversion interest rates. by a ff The following information is for those pension plans with an accumulated benefit obligation in excess of plan assets: Aggregate projected benefit obligation Aggregate accumulated benefit obligation December 31, 2021 101 86 $ $ 2020 156 138 $ $ The following table summarizes the pre-tax net actuarial losses and prior service costs recognized in AOCL for the Company’s Retirement Plans as of December 31: Net actuarial losses Net prior service credits Total recognized in AOCL – pretax Pension Plans Other Retirement Plans 2021 (61) $ 3 (58) $ 2020 (144) $ 3 (141) $ 2021 (4) $ — (4) $ 2020 (8) — (8) $ $ MOODY'S 2021 10-K 111 Net periodic benefit expenses recognized forff the Retirement Plans for years ended December 31: Pension Plans Other Retirement Plans 2021 2020 2019 2021 2020 2019 Components of net periodic expense Service cost $ Interest cost Expected return on plan assets Amortization of net actuarial loss and prior service credits from earlier periods Loss on settlement of pension obligations $ 19 14 (27) $ 17 17 (20) 11 8 7 2 Net periodic expense $ 25 $ 23 $ $ 17 21 (20) 4 — 22 $ 4 1 — 1 — 6 $ $ 3 1 — — — 4 $ $ 3 1 — — — 4 The following table summarizes the pre-tax amounts recorded in OCI related to the Company’s Retirement Plans for the years ended December 31: Pension Plans Other Retirement Plans 2021 2020 2019 2021 2020 2019 Amortization of net actuarial losses and prior service credit Settlement loss Net actuarial (loss)/gain arising during the period Total recognized in OCI – pre-tax $ ADDITIONAL INFORMATION: Assumptions—Retirement Plans $ 11 $ 8 65 84 $ $ 7 2 (37) (28) $ $ 4 — (24) (20) $ 1 — 4 5 $ $ — $ — (3) (3) $ — — (6) (6) Weighted-average assumptions used to determine benefit obligations at December 31: Discount rate Rate of compensation increase Pension Plans Other Retirement Plans 2021 2.60 % 3.63 % 2020 2.24 % 3.62 % 2021 2.65 % — 2020 2.30 % — Weighted-average assumptions used to determine net periodic benefit expense for years ended December 31: Discount rate Expected return on plan assets Rate of compensation increase Cash balance plan interest crediting rate Pension Plans Other Retirement Plans 2021 2.24 % 5.45 % 3.62 % 2020 3.04 % 4.45 % 3.64 % 2019 4.07 % 5.65 % 3.69 % 4.50 % 4.50 % 4.50 % 2021 2.30 % 2020 3.05 % 2019 4.10 % — — — — — — — — — The expected rate of return on plan assets represents the Company’s best estimate of the long-term return on plan assets and is determined by using a building block approach, which generally weighs the underlying long-term expected rate of return for each major asset class based on their respective allocation target within the plan portfolio, net of plan paid expenses. As the assumption reflects a long-term time horizon, the plan performance in any one particular year does not, by itself, significantly influence the Company’s evaluation. For 2021, the expected rate of return used in calculating the net periodic benefit costs was 5.45%. For 2022, the Company’s expected rate of return assumption is 5.05% to reflect the Company’s current view of long-term capital market outlook. In addition, the Company has updated its mortality assumption by adopting the newly released mortality improvement scale MP-2021 to accompany the Pri2012 mortality tables to reflect the latest information regarding future mortality expectations by the Society of Actuaries. 112 MOODY'S 2021 10-K Plan Assets Moody’s investment objective for the assets in the funded pension plan is to earn total returns that will minimize future contribution requirements over the long-term within a prudent level of risk. The Company works with its independent investment consultants to determine asset allocation targets for its pension plan investment portfolio based on its assessment of business and financial conditions, demographic and actuarial data, funding characteristics, and related risk factors. Other relevant factors, including historical and forward looking views of inflation and capital market returns, are also considered. Risk management practices include monitoring plan asset performance, diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets. The Company’s Asset Management Committee is responsible for overseeing the investment activities of the plan, which includes selecting acceptable asset classes, defining allowable ranges of holdings by asset class and by individual investment managers, defining acceptable securities within each asset class, and establishing investment performance expectations. Ongoing monitoring of the plan includes reviews of investment performance and managers on a regular basis, annual liability measurements, and periodic asset/liability studies. The Company’s investment policy uses risk-controlled investment strategies by increasing the plan’s asset allocation to fixed income securities and specifying ranges of acceptable target allocation by asset class based on different levels of the plan’s accounting funded status. In addition, the investment policy also requires the investment-grade fixed income assets be rebalanced between shorter and longer duration bonds as the interest rate environment changes. This investment policy is designed to help protect the plan’s funded status and to limit volatility of the Company’s contributions. Based on the policy, the Company’s current target asset allocation is approximately 33% (range of 28% to 38%) in equity securities, 62% (range of 57% to 67%) in fixed income securities and 5% (range of 2% to 8%) in other investments and the plan will use a combination of active and passive investment strategies and different investment styles for its investment portfolios within each asset class. The plan’s equity investments are diversified across U.S. and non-U.S. stocks of small, medium and large capitalization. The plan’s fixed income investments are diversified principally across U.S. and non-U.S. government and corporate bonds, which are expected to help reduce plan exposure to interest rate variation and to better align assets with obligations. The plan also invests in other fixed income investments such as debts rated below investment grade, emerging market debt, and convertible securities. The plan’s other investment, which is made through a private real estate debt fund, is expected to provide additional diversification benefits and absolute return enhancement to the plan assets. ff ff Fair value of the assets in the Company’s funded pension plan by asset category at December 31, 2021 and 2020 are as follows: Fair Value Measurement as of December 31, 2021 Balance Level 1 Level 2 $ 4 $ — $ 4 $ Asset Category Cash and cash equivalent Common/collective trust funds—equity securities U.S. large-cap U.S. small and mid-cap Emerging markets Total equity investments Emerging markets bond fund Common/collective trust funds—fixed income securities Intermediate-term investment grade U.S. government/ corporate bonds Mutual funds U.S. Treasury Inflation-Protected Securities (TIPs) Convertible securities Private investment fund—high yield securities Total fixed-income investments Other investment—private real estate fund 135 23 27 185 30 245 24 17 14 330 25 Total Assets $ 544 $ — — — — — — 24 17 — 41 — 41 135 23 27 185 — 245 — — — 245 — $ 434 $ Measured using NAV practical expedient (1) — — — — — 30 — — — 14 44 25 69 % of total assets 1 % 25 % 4 % 5 % 34 % 6 % 45 % 4 % 3 % 3 % 61 % 4 % 100 % MOODY'S 2021 10-K 113 Asset Category Cash and cash equivalent Common/collective trust funds—equity securities U.S. large-cap U.S. small and mid-cap Emerging markets Total equity investments Emerging markets bond fund Common/collective trust funds—fixed income securities Intermediate-term investment grade U.S. government/ corporate bonds Mutual funds U.S. Treasury Inflation-Protected Securities (TIPs) Convertible securities Private investment fund—high yield securities Total fixed-income investments Other investment—private real estate debt fund 143 28 32 203 32 214 23 16 12 297 24 Fair Value Measurement as of December 31, 2020 Balance Level 1 Level 2 $ 4 $ — $ 4 $ Measured using NAV practical expedient (1) — — — — — 32 — — — 12 44 24 68 % of total assets 1 % 27 % 5 % 6 % 38 % 6 % 41 % 4 % 3 % 2 % 56 % 5 % 100 % — — — — — — 23 16 — 39 — 39 143 28 32 203 — 214 — — — 214 — $ 421 $ Total Assets $ 528 $ (1) Investments are measured using the net asset value per share (or its equivalent) practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit a reconciliation of the fair value hierarchy to the value of the total plan assets. Cash and cash equivalents are primarily comprised of investments in money market mutual funds. In determining fair value, Level 1 investments are valued based on quoted market prices in active markets. Investments in common/collective trust funds are valued using the NAV pAA trust, minus its liabilities, and then divided by the number of shares outstanding. Common/collective trust funds are categorized in Level 2 to the extent that they are considered to have a readily determinable fair value. Investments for which fair value is estimated by using the NAV pAA er unit in each fund. The NAV iAA s based on the value of the underlying investments owned by each er share (or its equivalent) as a practical expedient are not categorized in the fair value hierarchy. Except for the Company’s U.S. funded pension plan, all of Moody’s Retirement Plans are unfunded and therefore have no plan assets. Cash Flows The Company did not contribute to its U.S. funded pension plan during 2021, but contributed $99 million to this plan during the year ended December 31, 2020. The Company made payments of $50 million and $11 million related to its U.S. unfunded pension plan obligations during the years ended December 31, 2021 and 2020, respectively. The Company currently does not anticipate making a contribution to its funded pension plan in 2022, and does not anticipate making payments related to its unfunded U.S. pension plans and other Retirement Plans during the year ended December 31, 2022 that would be material to the Company's financial statements. Estimated Future Benefits Payable Estimated future benefits payments for the Retirement Plans are as follows as of year ended December 31, 2021: Year Ending December 31, 2022 2023 2024 2025 2026 2027 - 2031 114 MOODY'S 2021 10-K $ Pension Plans 21 23 32 26 30 157 $ Other Retirement Plans 1 2 2 2 2 15 Defined Contribution Plans Moody’s has a Profit Participation Plan covering substantially all U.S. employees. The Profit Participation Plan provides for an employee salary deferral and the Company matches employee contributions, equal to 50% of employee contribution up to a maximum of 3% of the employee’s pay. Effective January 1, 2008, all new hires are automatically enrolled in the Profit Participation Plan when they meet eligibility requirements unless they decline participation. As the Company’s U.S. DBPPs are closed to new entrants effective Participation Plan in value similar to the pension benefits. Additionally, effective January 1, 2008, the Company implemented a deferred compensation plan in the U.S., which is unfunded and provides for employee deferral of compensation and Company matching contributions related to compensation in excess of the IRS limitations on benefits and contributions under qualified retirement plans. Total expenses associated with U.S. defined contribution plans were $54 million, $44 million and $43 million in the years ended December 31, 2021, 2020, and 2019, respectively. January 1, 2008, all eligible new hires will instead receive a retirement contribution into the Profit ff ff January 1, 2008, Moody’s has designated the Moody’s Stock Fund, an investment option under the Profit Participation Effective Plan, as an Employee Stock Ownership Plan and, as a result, participants in the Moody’s Stock Fund may receive dividends in cash or may reinvest such dividends into the Moody’s Stock Fund. Moody’s paid approximately $1 million during each of the years ended December 31, 2021, 2020 and 2019, respectively, forff Fund. The Company records the dividends as a reduction of retained earnings in the Consolidated Statements of Shareholders’ Equity (Deficit). The Moody’s Stock Fund held approximately 328,500 and 360,600 shares of Moody’s common stock at December 31, 2021 and 2020, respectively. the Company’s common shares held by the Moody’s Stock Non-U.S. Plans Certain of the Company’s non-U.S. operations provide pension benefits to their employees. The non-U.S. defined benefit pension plans are immaterial. For defined contribution plans, company contributions are primarily determined as a percentage of employees’ eligible compensation. Expenses related to these defined contribution plans for the years ended December 31, 2021, 2020 and 2019 were $32 million, $29 million and $25 million, respectively. NOTE 16 STOCK-BASED COMPENSATION PLANS Under the 1998 Plan, 33.0 million shares of the Company’s common stock have been reserved for issuance. The 2001 Plan, which is shareholder approved, permits the granting of up to 50.6 million shares, of which not more than 14.0 million shares are available for grants of awards other than stock options. The Stock Plans also provide for the granting of restricted stock. The Stock Plans provide that options are exercisable not later than ten years from the grant date. The vesting period for awards under the Stock Plans is generally determined by the Board at the date of the grant and has been four years except for employees who are at or near retirement eligibility, as defined, for which vesting is between one and four years. Additionally, the vesting period is three years for certain performance-based restricted stock that contain a condition whereby the number of shares that ultimately vest are based on the achievement of certain non-market based performance metrics of the Company. Options may not be granted at less than the fair market value of the Company’s common stock at the date of grant. The Company maintains the Directors’ Plan for its Board, which permits the granting of awards in the form of non-qualified stock options, restricted stock or performance shares. The vesting period is determined by the Board at the date of the grant and is generally one year for both options and restricted stock. Under the Directors’ Plan, 1.7 million shares of common stock were reserved for issuance. Any director of the Company who is not an employee of the Company or any of its subsidiaries as of the date that an award is granted is eligible to participate in the Directors’ Plan. On September 15, 2021, the Company acquired RMS, which is discussed in more detail in Note 9. As part of the acquisition, the Company registered the RMS 2014 Equity Award Plan and the RMS 2015 Equity Incentive Plan (collectively, "RMS Plans") as part of the purchase agreement to acquire RMS. Under the RMS Plans, 1.2 million shares of the Company’s common stock have been reserved for issuance. The RMS Plans provide that options are exercisable not later than ten years from the grant date. The vesting period is generally determined by the Board at the date of the grant and is four years for both options and restricted stock granted during 2021. As a result of the acquisition, certain RMS employees' unvested equity awards (employee stock options and restricted stock) with an acquisition-date fair value of $33 million were converted into equity awards of the Company based on an exchange ratio as defined in the purchase agreement. The portion of the fair value of the replacement awards related to services provided prior to the acquisition was $5 million and was accounted for as consideration transferred (See Note 9). The remaining portion of the replacement awards of $28 million, which is associated with a future service requirement, will be recognized as compensation expense over the remaining vesting period. Presented below is a summary of the stock-based compensation expense and associated tax benefit in the accompanying Consolidated Statements of Operations: Stock-based compensation expense Tax benefit Year Ended December 31, 2021 2020 2019 $ $ 175 42 $ $ 154 30 $ $ 136 29 MOODY'S 2021 10-K 115 The fair value of each employee stock option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted below. The expected dividend yield is derived from the annual dividend rate on the date of grant. The expected stock volatility is based on an assessment of historical weekly stock prices of the Company as well as implied volatility from Moody’s traded options. The risk-free interest rate is based on U.S. government zero coupon bonds with maturities similar to the expected holding period. The expected holding period was determined by examining historical and projected post-vesting exercise behavior activity. The following weighted average assumptions were used for options granted (excluding the aforementioned RMS replacement awards): Expected dividend yield Expected stock volatility Risk-free interest rate Expected holding period -in years Year Ended December 31, 2021 0.89 % 28 % 0.82 % 5.6 2020 0.80 % 23 % 1.43 % 5.7 2019 1.14 % 24 % 2.56 % 6.2 Due to the RMS replacement option awards being heavily in-the-money at the acquisition date, the Company utilized a binomial valuation approach to determine the fair value of the options, which approximated the intrinsic value of the replaced awards at the acquisition date. The following represents the fair value of the options at grant date, including RMS replacement option awards: Weighted average grant date fair value per share (including RMS replacement option awards) $ 121.14 $ 60.66 $ 43.29 Year Ended December 31, 2021 2020 2019 A summary of option activity as of December 31, 2021 and changes during the year then ended is presented below: Options Outstanding, December 31, 2020 Granted (including RMS replacement awards) Exercised Outstanding, December 31, 2021 Vested and expected to vest, December 31, 2021 Exercisable, December 31, 2021 Shares 1.0 0.2 $ $ (0.2) $ 1.0 1.0 0.6 $ $ $ Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value 132.80 249.99 101.03 166.16 165.26 119.88 5.8 years $ 5.7 years $ 4.4 years $ 224 221 159 The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference closing stock price on the last trading day of the year ended December 31, 2021 and the exercise prices, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options as of December 31, 2021. This amount varies based on the fair value of Moody’s stock. As of December 31, 2021, there was $22 million of total unrecognized compensation expense related to options. The expense is expected to be recognized over a weighted average period of 2.2 years. between Moody’s ff The following table summarizes information relating to stock option exercises: Proceeds from stock option exercises Aggregate intrinsic value Tax benefit realized upon exercise Year Ended December 31, 2021 24 55 13 $ $ $ 2020 39 132 32 $ $ $ 2019 36 114 27 $ $ $ 116 MOODY'S 2021 10-K A summary of nonvested restricted stock activity for the year ended December 31, 2021 is presented below: Nonvested Restricted Stock Balance, December 31, 2020 Granted (including RMS replacement awards) Vested Forfeited Balance, December 31, 2021 Shares Weighted Average Grant Date Fair Value Per Share 1.5 0.7 $ $ (0.7) $ (0.1) $ 1.4 $ 201.30 296.84 177.96 242.12 253.85 As of December 31, 2021, there was $209 million of total unrecognized compensation expense related to nonvested restricted stock. The expense is expected to be recognized over a weighted average period of 2.6 years. The following table summarizes information relating to the vesting of restricted stock awards: Fair value of shares vested Tax benefit realized upon vesting Year Ended December 31, 2021 194 46 $ $ 2020 202 46 $ $ 2019 156 36 $ $ A summary of performance-based restricted stock activity for the year ended December 31, 2021 is presented below: Performance-based restricted stock Balance, December 31, 2020 Granted Vested Balance, December 31, 2021 Shares Weighted Average Grant Date Fair Value Per Share 0.3 0.2 $ $ (0.1) $ 0.4 $ 197.19 329.71 162.06 266.89 The following table summarizes information relating to the vesting of the Company’s perforr rmance-based restricted stock awards: Fair value of shares vested Tax benefit realized upon vesting Year Ended December 31, 2021 28 7 $ $ 2020 70 17 $ $ 2019 47 11 $ $ As of December 31, 2021, there was $63 million of total unrecognized compensation expense related to this plan. The expense is expected to be recognized over a weighted average period of 2.1 years. The Company has a policy of issuing treasury stock to satisfy shares issued under stock-based compensation plans. In addition, the Company also sponsors the ESPP. Under the ESPP, 6P million shares of common stock were reserved for issuance. The ESPP permits eligible employees to purchase common stock of the Company on a monthly basis at a discount to the average of the high and the low trading prices on the New York Stock Exchange on the last trading day of each month. This discount was 5% in 2021, 2020, and 2019 resulting in the ESPP qualifying for non-compensatory status under Topic 718 of the ASC. Accordingly, no compensation expense was recognized for the ESPP in 2021, 2020, and 2019. The employee purchases are funded through after-tax payroll deductions, which plan participants can elect from one percent to ten percent of compensation, subject to the annual federal limit. MOODY'S 2021 10-K 117 NOTE 17 INCOME TAXES Components of the Company’s income tax provision are as follows: Current: Federal State and Local Non-U.S. Total current Deferred: Federal State and Local Non-U.S. Total deferred Total provision for income taxes Year Ended December 31, 2021 2020 2019 $ $ 404 106 249 759 (172) (45) (1) (218) 541 $ $ 213 68 215 496 6 — (50) (44) 452 $ $ 179 59 181 419 (19) (3) (16) (38) 381 A reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate on income before provision for income taxes is as follows: U.S. statutory tax rate State and local taxes, net of federal tax benefit Benefit of foreign operations Other Effective ff tax rate Income tax paid The source of income before provision for income taxes is as follows: U.S. Non-U.S. Income before provision forf income taxes Year Ended December 31, 2021 2020 21.0 % 1.5 % (1.5)% (1.4)% 19.6 % 21.0 % 2.3 % (1.5)% (1.5)% 20.3 % 932 $ 514 $ Year Ended December 31, 2021 2020 1,563 $ 1,349 $ 1,192 880 2,755 $ 2,229 $ 2019 21.0 % 2.2 % (0.1)% (2.1)% 21.0 % 458 2019 1,039 771 1,810 $ $ $ 118 MOODY'S 2021 10-K The components of deferred tax assets and liabilities are as follows: December 31, 2021 2020 Deferred tax assets: Account receivable allowances Accumulated depreciation and amortization Stock-based compensation Accrued compensation and benefits Capitalized costs Operating lease liabilities Deferred revenue Net operating loss Restructuring Uncertain tax positions Self-insured related reserves Loss on net investment hedges - OCI Other Total deferred tax assets Deferred tax liabilities: Accumulated depreciation and amortization of intangible assets and capitalized software ROU Assets Capital Gains Self-insured related income Revenue Accounting Standard - ASC 606 Deferred tax on unremitted foreign earnings Gain on net investment hedges - OCI Other Total deferred tax liabilities Net deferred tax liabilities Valuation allowance Total net deferred tax liabilities $ 8 $ 10 50 101 33 134 252 33 1 86 10 11 16 745 (659) (102) (31) (10) (7) (12) (4) (6) (831) (86) (18) $ (104) $ 9 2 42 99 39 122 30 17 3 98 10 93 10 574 (468) (90) (23) (10) (10) (16) (8) (4) (629) (55) (15) (70) On December 22, 2017, the Tax Act was signed into law, which resulted in significant changes to U.S. corporate tax laws. The Tax Act includes a mandatory one-time deemed repatriation tax (“transition tax”) on previously untaxed accumulated earnings of foreign subsidiaries and beginning in 2018 reduces the statutory federal corporate income tax rate from 35% to 21%. Due to the complexities of the Tax Act, the SEC issued guidance requiring that companies provide a reasonable estimate of the impact of the Tax Act to the extent such reasonable estimate has been determined. Accordingly, as of December 31, 2017, the Company recorded a provisional estimate for the transition tax of $247 million. In September, 2018, the Company filed its 2017 federal income tax return and revised its determination of the transition tax to $236 million, a reduction of $11 million from the estimate at December 31, 2017. The revised determination of transition tax may be impacted by a number of additional considerations, including but not limited to the issuance of additional regulations. As a result of the Tax Act, all previously net undistributed foreign earnings have now been subject to U.S. tax. The Company regularly evaluates which entities it will indefinitely reinvest earnings. The Company has provided deferred taxes for those entities whose earnings are not considered indefinitely reinvested. The Company’s annual tax expense for the year ended December 31, 2021 includes Excess Tax Benefits from stock compensation of $31 million, benefits from the resolution of certain UTPs of $70 million and other net decreases to tax positions of $25 million. The Company had valuation allowances of $18 million and $15 million at December 31, 2021 and 2020, respectively, related to foreign net operating losses for which realization is uncertain. As of December 31, 2021, the Company had $388 million of UTPs of which $353 million represents the amount that, if recognized, would impact the effective uncertain tax positions. The increase in 2020 was primarily due to the additional reserves established for non-U.S. tax exposures. tax rate in future periods. The decrease in 2021 resulted primarily from the resolutions of ff MOODY'S 2021 10-K 119 A reconciliation of the beginning and ending amount of UTPs is as follows: ff tax positions related to the current year Balance as of January 1 Additions forff Additions for tax positions of prior years Reductions for tax positions of prior years Settlements with taxing authorities Lapse of statute of limitations Reclassification to indemnification liability related to MAKS divestiture Balance as of December 31 $ $ $ $ Year Ended December 31, 2021 483 102 18 — (134) (81) — 388 2020 477 37 17 (2) (5) (41) — 483 $ $ 2019 495 35 22 (2) (1) (44) (28) 477 The Company classifies interest related to UTPs in interest expense in its consolidated statements of operations. Penalties are recognized in other non-operating expenses. During the year ended December 31, 2021 the Company accrued net interest income of $21 million related to UTPs. During the years ended December 31, 2020 and 2019 the Company incurred net interest expense of $34 million and $28 million, respectively, related to UTPs. As of December 31, 2021, 2020 and 2019 the amount of accrued interest recorded in the Company’s consolidated balance sheets related to UTPs was $59 million, $113 million and $82 million, respectively. 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 are currently under examination and New York City tax returns for 2014 through 2017 are currently under examination. After the resolution of a tax audit for 2012, certain of the Company’s U.K. subsidiaries’ returns from 2012 to 2020 remain open to examination. For current ongoing audits related to open tax years, the Company estimates that it is possible that the balance of UTPs could decrease in the next twelve months as a result of the effective 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 might necessitate increases to the balance of UTPs. As the Company is unable to predict the timing of conclusion of these audits, the Company is unable to estimate the amount of changes to the balance of UTPs at this time. settlement of these audits, which might involve the payment of ff 120 MOODY'S 2021 10-K NOTE 18 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 are 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: December 31, 2021 Principal Amount Fair Value of Interest Rate Swaps(1) Unamortized (Discount) Premium Unamortized Debt Issuance Costs Carrying Value Notes Payable: 4.875% 2013 Senior Notes, due 2024 $ 5.25% 2014 Senior Notes, due 2044 1.75% 2015 Senior Notes, due 2027 2.625% 2017 Senior Notes, due 2023 3.25% 2017 Senior Notes, due 2028 4.25% 2018 Senior Notes, due 2029 4.875% 2018 Senior Notes, due 2048 0.950% 2019 Senior Notes, due 2030 3.75% 2020 Senior Notes, due 2025 3.25% 2020 Senior Notes, due 2050 2.55% 2020 Senior Notes, due 2060 2.00% 2021 Senior Notes, due 2031 2.75% 2021 Senior Notes, due 2041 3.10% 2021 Senior Notes, due 2061 500 600 568 500 500 400 400 853 700 300 500 600 600 500 $ — $ (1) $ (1) $ (7) — 5 8 — (7) — (9) — — — — — 3 — — (3) (2) (6) (2) (1) (4) (4) (8) (13) (7) (5) (2) (1) (2) (2) (4) (5) (4) (3) (5) (5) (6) (5) 498 591 566 504 503 396 383 846 686 293 491 587 581 488 Total long-term debt $ 7,521 $ (10) $ (48) $ (50) $ 7,413 December 31, 2020 Principal Amount Fair Value of Interest Rate Swaps (1) Unamortized (Discount) Premium Unamortized Debt Issuance Costs Carrying Value Notes Payable: 4.50% 2012 Senior Notes, due 2022 $ 4.875% 2013 Senior Notes, due 2024 5.25% 2014 Senior Notes, due 2044 1.75% 2015 Senior Notes due 2027 2.625% 2017 Senior Notes, due 2023 3.25% 2017 Senior Notes, due 2028 4.25% 2018 Senior Notes, due 2029 4.875% 2018 Senior Notes, due 2048 0.950% 2019 Senior Notes, due 2030 3.75% 2020 Senior Notes, due 2025 3.25% 2020 Senior Notes, due 2050 2.55% 2020 Senior Notes, due 2060 $ 500 500 600 612 500 500 400 400 918 700 300 500 Total long-term debt $ 6,430 $ 14 — — — 12 31 — — — (1) — — 56 $ (1) $ (1) $ (1) 3 — — (4) (3) (6) (3) (1) (4) (4) (1) (5) (2) (2) (3) (3) (4) (6) (5) (3) (5) 512 498 598 610 510 524 394 390 909 693 293 491 $ (24) $ (40) $ 6,422 (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. MOODY'S 2021 10-K 121 Credit Facility On December 17, 2021, the Company entered into a five-year senior, unsecured revolving credit facility with the capacity to borrow up to $1.25 billion, which expires December 2026. The 2021 Facility replaces the Company’s $1 billion 2018 Credit Facility that was scheduled to mature in November 2023. Further information on the key terms of these credit facilities is below. The following summarizes information relating to the Company's revolving credit facilities: Issue Date Capacity Maturity Drawn Undrawn Drawn Undrawn December 31, 2021 December 31, 2020 2018 Credit Facility November 14, 2018 2021 Credit Facility December 17, 2021 2018 Credit Facility November 13, 2023 (Terminated TT 2021) in 1,000 1,250 December 17, 2026 $ $ $ $ — $ — $ — $ 1,000 — $ 1,250 $ — $ — Interest on borrowings under the 2018 Credit Facility ranged from 0 BPS to 22.5 BPS per annum for Alternate Base Rate loans (as defined in the 2018 Facility agreement) or payable at rates based on the London InterBank Offered premium that ranged from 80.5 BPS to 122.5 BPS depending on the Company’s index debt ratings, as set forth in the 2018 Facility agreement. The Company also paid quarterly facility fees, regardless of borrowing activity under the facility. The quarterly fees for the 2018 Facility ranged from 7 BPS of the facility amount to 15 BPS, depending on the Company’s index debt ratings. The 2018 Facility contained certain customary covenants including a financial covenant that required the Company to maintain a total debt to EBITDA ratio of (i) not more than 4 to 1 at the end of any fiscal quarter or (ii) not more than 4.5 to 1 as of the end of the first three consecutive quarters immediately following any acquisition with consideration in excess of $500 million, subject to certain conditions as set forth in the 2018 Facility agreement. Rate (“LIBOR”) plus a ff 2021 Credit Facility Interest on borrowings under the 2021 Credit Facility is payable at rates that are based on an adjusted term SOFR Rate plus a premium that can range from 80.5 basis points to 122.5 basis points, depending on the Company’s index debt ratings, as set forth in the 2021 Facility Agreement. The Company also has the option to choose other rates, such as those based on adjusted Daily Simple SOFR or an alternate base rate as set forth in the 2021 Facility Agreement. The Company also pays quarterly facility fees, regardless of borrowing activity under the Facility. The quarterly fees for the 2021 Facility can range from 7 basis points of the 2021 Credit Facility amount to 15 basis points, depending on the Company’s index debt ratings. The facility fees for the 2021 Credit Facility are subject to sustainability-based pricing adjustments based on the Company’s annual performance with respect to certain spending with vendors who have committed to and publicly announced the setting of science-based targets to reduce greenhouse gas emissions. The 2021 Facility contains a financial covenant that requires the Company to maintain a total debt to EBITDA Ratio of (i) not more than 4 to 1 at the end of any fiscal quarter or (ii) not more than 4.5 to 1 as of the end of the first three consecutive quarters immediately following any acquisition with consideration in excess of $500 million, subject certain conditions as set forth in the 2021 Facility. to b Commercial Paper On August 3, 2016, the Company entered into a private placement commercial paper program under which the Company may issue CP notes up to a maximum amount of $1.0 billion. Borrowings under the CP Program are backstopped by the 2021 Facility. Amounts under the CP Program may be re-borrowed. The maturity of the CP Notes will vary, but may not exceed 397 days from the date of issue. The CP Notes are sold at a discount from par, or alternatively, sold at par and bear interest at rates that will vary based upon market conditions. The rates of interest will depend on whether the CP Notes will be a fixed or floating rate. The interest on a floating rate may be based on the following: (a) certificate of deposit rate; (b) commercial paper rate; (c) the federal funds rate; (d) the LIBOR; (e) prime rate; (f) Treasury rate; or (g) such other base rate as may be specified in a supplement to the private placement agreement. The CP Program contains certain events of default including, among other things: non-payment of principal, interest or fees; entrance into any form of moratorium; and bankruptcy and insolvency events, subject in certain instances to cure periods. As of December 31, 2021, the Company has no CP borrowings outstanding. Notes Payable The Company may prepay certain of its senior notes, in whole or in part, but may incur a Make-Whole Amount penalty. During 2021, the Company issued the 2021 Senior Notes due 2031, the 2021 Senior Notes due 2041, and the 2021 Senior Notes due 2061. The key terms of these debt issuances are set forth in the table above. Additionally, in 2021, the Company fully repaid $500 million of the 2012 Senior Notes due 2022 (along with a Make-Whole Amount of approximately $13 million). The Company also recognized in interest expense, net, an $8 million benefit relating to carrying value adjustments pursuant to the early termination of interest rate swaps designated as fair value hedges that were associated with the 2012 Senior Notes due 2022. 122 MOODY'S 2021 10-K At December 31, 2021, the Company was in compliance with all covenants contained within all of the debt agreements. All of 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 December 31, 2021, there were no such cross defaults. The repayment schedule forff 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 Total 2022 2023 2024 2025 2026 Thereafter $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — — 500 — — — — — — — — — — — 600 568 500 — — — — — — — — — — — — — — — — — — — — 500 400 400 853 — — 700 — — — — — — — — — — — — — — — — — — — $ 500 — $ 500 — $ 700 — $ — 300 500 600 600 500 5,821 Total $ 500 $ 600 $ 568 $ 500 $ 500 $ 400 $ 400 $ 853 $ 700 $ 300 $ 500 $ 600 $ 600 $ 500 $7,521 Interest expense, net The following table summarizes the components of interest as presented in the consolidated statements of operations: Expense on borrowings Expense on UTPs and other tax related liabilities(1) Net periodic pension costs—interest component Income Capitalized Total Interest paid (2) Year Ended December 31, 2021 (185) $ 2020 (163) $ 21 (16) 9 — (34) (19) 11 — (171) $ 162 $ (205) $ 132 $ 2019 (176) (28) (22) 17 1 (208) 167 $ $ $ (1) (2) The amount for the year ended December 31, 2021 includes a $45 million benefit relating to the reversal of tax-related interest accruals pursuant to the resolution of tax matters. Interest paid includes net settlements on interest rate swaps more fully discussed in Note 7. The fair value and carrying value of the Company’s debt as of December 31, 2021 and 2020 are as follows: December 31, 2021 December 31, 2020 Carrying Amount Estimated Fair Value rr Carrying Amount Estimated Fair Value 4.50% 2012 Senior Notes, due 2022 $ — $ — $ 4.875% 2013 Senior Notes, due 2024 5.25% 2014 Senior Notes, due 2044 1.75% 2015 Senior Notes, due 2027 2.625% 2017 Senior Notes, due 2023 3.25% 2017 Senior Notes, due 2028 4.25% 2018 Senior Notes, due 2029 4.875% 2018 Senior Notes, due 2048 0.950% 2019 Senior Notes, due 2030 3.75% 2020 Senior Notes, due 2025 3.25% 2020 Senior Notes, due 2050 2.55% 2020 Senior Notes, due 2060 2.00% 2021 Senior Notes, due 2031 2.75% 2021 Senior Notes, due 2041 3.10% 2021 Senior Notes, due 2061 498 591 566 504 503 396 383 846 686 293 491 587 581 488 538 805 607 509 539 451 526 866 750 311 432 581 579 488 $ 512 498 598 610 510 524 394 390 909 693 293 491 — — — 530 562 828 674 522 561 480 544 974 785 329 467 — — — Total $ 7,413 $ 7,982 $ 6,422 $ 7,256 MOODY'S 2021 10-K 123 The fair value of the Company’s 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 19 CAPITAL STOCK Authorized Capital Stock The total number of shares of all classes of stock that the Company has authority to issue under its Restated Certificate of Incorporation is 1.02 billion shares with a par value of $0.01, of which 1.0 billion are shares of common stock, 10.0 million are shares of preferred stock and 10.0 million are shares of series common stock. The preferred stock and series common stock can be issued with varying terms, as determined by the Board. Share Repurchase Program The Company implemented a systematic share repurchase program in the third quarter of 2005 through an SEC Rule 10b5-1 program. Moody’s may also purchase opportunistically when conditions warrant. As a result, Moody’s share repurchase activity will continue to vary from quarter to quarter. The table below summarizes the Company’s remaining authority under its share repurchase program as of December 31, 2021: Date Authorized February 9, 2021 December 16, 2019 Total Remaining Authority at December 31, 2021 Amount Authorized 1,000 1,000 $ $ Remaining Authority 1,000 81 1,081 $ $ $ Additionally, on February 7, 2022, the Board of Directors approved an additional $750 million of share repurchase authority. During 2021, Moody’s repurchased 2.2 million shares of its common stock under its share repurchase program and issued a net 0.8 million shares under employee stock-based compensation plans. The net amount includes shares withheld for employee payroll taxes. Dividends The Company’s cash dividends were: Dividends Per Share Year ended December 31, First quarter Second quarter Third quarter Fourth quarter Total $ $ 2021 2020 2019 Declared Paid Declared Paid Declared 0.62 $ 0.62 $ 0.56 $ 0.56 $ 0.50 $ 0.62 0.62 0.62 0.62 0.62 0.62 0.56 0.56 0.56 0.56 0.56 0.56 0.50 0.50 0.50 2.48 $ 2.48 $ 2.24 $ 2.24 $ 2.00 $ Paid 0.50 0.50 0.50 0.50 2.00 On February 7, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share of Moody’s common stock, payable on March 18, 2022 to shareholders of record at the close of business on February 25, 2022. The continued payment of dividends at the rate noted above, or at all, is subject to the discretion of the Board. 124 MOODY'S 2021 10-K NOTE 20 LEASE COMMITMENTS The Company has operating leases, substantially all of which relate to the lease of officeff 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 from one to 20 years at the Company's discretion. space. The Company's leases The following table presents the components of the Company’s lease cost: Operating lease cost Sublease income Variable lease cost Total lease cost Year Ended December 31, 2021 2020 2019 $ $ 98 $ (6) 19 111 $ 96 $ (5) 19 110 $ 97 (2) 17 112 The following tables present other information related to the Company’s operating leases: Cash paid for amounts included in the measurement of operating lease liabilities Right-of-use assets obtained in exchange for new operating lease liabilities Year Ended December 31, 2021 2020 2019 $ $ 113 137 $ $ 108 $ 36 $ 106 41 Year Ended December 31, 2021 2020 2019 Weighted-average remaining lease term (in years) Weighted-average discount rate applied to operating leases 5.6 3.1 % 6.0 3.6 % 6.8 3 .6 % The following table presents a maturity analysis of the future minimum lease payments included within the Company’s operating lease liabilities at December 31, 2021: Year Ending December 31, Operating Leases 2022 2023 2024 2025 2026 Thereafter Total lease payments (undiscounted) Less: Interest Present value of lease liabilities: Lease liabilities - current Lease liabilities - noncurrent $ $ $ $ 121 118 109 93 74 95 610 50 560 105 455 MOODY'S 2021 10-K 125 NOTE 21 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 17 to the 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. ff of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative In view of the inherent difficulty 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, 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 those estimates. if any, on its operations and financial condition and to accrue for and from ff ff NOTE 22 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, SFG, FIG and PPIF 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 two LOBs - RD&A and ERS. 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 forff 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 sff uch 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. 126 MOODY'S 2021 10-K 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 3 forff further details on the components of the Company’s revenue. Year Ended December 31, 2021 2020 MIS MA Eliminations Consolidated MIS MA Eliminations Consolidated Revenue Operating, SG&A Adjusted Operating Income Depreciation and amortization Restructuring Loss pursuant to the divestiture of MAKS Operating Income $ 3,977 $ 2,413 $ (172) $ 6,218 $ 3,440 $ 2,086 $ (155) $ 1,503 1,786 (172) 3,117 1,387 1,472 (155) 2,474 627 72 (1) — 185 1 — — — — — 3,101 2,053 614 257 — — 70 19 — 150 31 9 — — — — 5,371 2,704 2,667 220 50 9 Revenue Operating, SG&A Adjusted Operating Income Depreciation and amortization Restructuring Acquisition-Related Expenses Loss pursuant to the divestiture of MAKS Captive insurance company settlement Operating income $ 2,844 $ 2,388 Year Ended December 31, 2019 MIS MA Eliminations Consolidated $ 3,009 $ 1,963 $ 1,264 1,745 71 31 — — 10 1,417 546 129 29 3 14 6 (143) $ (143) — — — — — — 4,829 2,538 2,291 200 60 3 14 16 $ 1,998 The cumulative restructuring charges related to the 2018 Restructuring Program for the MIS and MA reportable segments are $60 million and $43 million, respectively. The cumulative restructuring charges related to the 2020 Restructuring Program for the MIS and MA reportable segments were $21 million and $15 million, respectively. The cumulative restructuring charge for the MA reportable segment related to the 2020 MA Strategic Reorganization Restructuring Program is $20 million. The restructuring programs are more fully discussed in Note 11. MOODY'S 2021 10-K 127 CONSOLIDATED REVENUE AND LONG-LIVED ASSETS INFORMATION BY GEOGRAPHIC AREA Revenue: U.S. Non-U.S.: EMEA Asia-Pacific Americas Total Non-U.S. Total Long-lived assets at December 31: U.S. Non-U.S. Total Year Ended December 31, 2021 2020 2019 $ 3,416 $ 2,955 $ 2,544 1,866 596 340 2,802 1,545 571 300 2,416 6,218 $ 5,371 $ 4,449 $ 2,162 $ 4,802 4,889 9,251 $ 7,051 $ 1,446 551 288 2,285 4,829 1,290 4,678 5,968 $ $ $ NOTE 23 VALUATION AND QUALIFYING ACCOUNTS Accounts receivable allowances represent estimates for uncollectible accounts. The valuation allowance on deferred tax assets relates to foreign net operating tax losses for which realization is uncertain. Below is a summary of activity: Year Ended December 31, 2021 Balance at Beginning of the Year Adoption of New Expected Credit Losses Accounting Standard Charged to costs and expenses Deductions (1) Balance at End of the Year Allowances for credit losses Deferred tax assets—valuation allowance 2020 Allowances for credit losses Deferred tax assets—valuation allowance 2019 Allowances for credit losses Deferred tax assets—valuation allowance $ $ $ $ $ $ (34) $ (15) $ (20) $ (9) $ (20) $ (5) $ — $ — $ (2) $ — $ — $ — $ (13) $ (4) $ (26) $ (6) $ (10) $ (4) $ 15 1 $ $ 14 $ — $ 10 $ — $ (32) (18) (34) (15) (20) (9) (1) Reflects write-off off f uncollectible accounts receivable or expiration of foreign net operating tax losses. NOTE 24 OTHER NON-OPERATING INCOME, NET The following table summarizes the components of other non-operating income, net as presented in the consolidated statements of operations: FX (loss) gain Purchase price hedge loss(1) Net periodic pension costs—other components(2) ff Income from investments in non-consolidated affiliates (3) Other Total Year Ended December 31, 2021 (1) $ (13) 9 60 27 82 $ 2020 2 $ — 13 6 25 46 $ 2019 (18) — 18 13 7 20 $ $ (1) (2) (3) Reflects a loss on a forf war rr d contract to hedge a portion of the RMS British pound-denominated purchase price. The amount for the year ended December 31, 2021 includes an $8 million loss related to a settlement of pension obligations. The amount for the year ended December 31, 2021 includes a $36 million non-cash gain relating to the exchange of Moody’s minority investment in VisibleRisk (accounted for under the equity method) forff shares of BitSight, a cybersecurity ratings company. 128 MOODY'S 2021 10-K NOTE 25 SUBSEQUENT EVENT On February 7, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share for Moody’s common stock, payable March 18, 2022 to shareholders of record at the close of business on February 25, 2022. MOODY'S 2021 10-K 129 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS TT ON ACCOUNTING AND FINANCIAL ITEM 9. DISCLOSURE Not applicable. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures ff ff have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective The Company carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer , of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the communication to the Company’s management, including the Company’s Chief Executive Officer allow timely decisions regarding required disclosure. During the fiscal year ended December 31, 2021, the Company acquired RMS and management has excluded this acquired business from its assessment of the effectiveness procedures as of the Evaluation Date. The total assets (excluding acquired goodwill and intangible assets which are included within the scope of this assessment) and revenues of RMS represent $333 million and $81 million, respectively, of the corresponding amounts in the Company's consolidated financial statements for the fiscal year ended December 31, 2021. and Chief Financial Officer and Chief Financial Officer of disclosure controls and , as appropriate to to ff ff ff ff ff ff Changes In Internal Control Over Financial Reporting Information in response to this Item is set forth under the caption “Management’s Report on Internal Control Over Financial Reporting”, in Part II, Item 8 of this annual report on Form 10-K. ff ff , has determined that there were no changes in the Company’s internal control over financial reporting that have materially Except as described below, the Company’s management, including the Company’s Chief Executive Officer Officer affected, these internal controls over financial reporting during the three months ended December 31, 2021. Although a significant portion of the Company's workforce has been working remotely due to the COVID-19 pandemic, Moody's has not experienced any material impact to its internal controls over financial reporting. or are reasonably likely to materially affect, and Chief Financial ff ff During the fiscal year ended December 31, 2021, the Company acquired RMS and is in the process of integrating the acquired entity into the Company’s financial reporting processes and procedures and internal controls over financial reporting. ITEM 9B. OTHER INFORMATION AA Not applicable. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PAA REVENT INSPECTIONS Not applicable. 130 MOODY'S 2021 10-K PART III Except for the information relating to the executive officers the information called for by Items 10-14 is contained in the Company’s definitive proxy statement for use in connection with its annual meeting of stockholders scheduled to be held on April 26, 2022, and is incorporated herein by reference. of the Company set forth in Part I of this annual report on Form 10-K, ff ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEAA GOVERNANCE Information required by this Item 10 is included under the heading “Information about our Executive Officers” this Form 10‑K, as well as under the headings “Item 1–Election of Directors,” “Corporate Governance–Codes of Business Conduct and Ethics,” and “The Audit Committee,” in the 2022 Proxy Statement and is incorporated by reference. ff in Part I, Item 1 of ITEM 11 EXECUTIVE COMPENSATION AA Information required by this Item 11 is included under the headings “Compensation Discussion and Analysis,” “Summary Compensation Table,” “Grants of Plan-Based Awards Table for 2021,” “Outstanding Equity Awards at Fiscal Year-End Table for 2021,” “Option Exercises and Stock Vested Table for 2021,” “Pension Benefits Table for 2021,” “Non-Qualified Deferred Compensation Table,” “Potential Payments Upon Termination of Compensation Practices to Risk Management” “CEO Pay Ratio,” and “Report of the Compensation & Human Resources Committee” in the 2022 Proxy Statement and is incorporated by reference. or Change in Control,” “Compensation of Directors,” “Relationship TT ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDAA STOCKHOLDER MATTERS AA Information required by this Item 12 is included under the heading “Equity Compensation Plan Information” in Part II, Item 5 of this Form 10-K, as well as under the heading “Security Ownership of Certain Beneficial Owners and Management” in the 2022 Proxy Statement and is incorporated by reference. ITEM 13 CERTAIN RELATIONSHIPS AA AND RELATEDAA TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required by this Item 13 is included under the headings “Corporate Governance –Director Independence” and “Certain Relationships and Related Transactions” in the 2022 Proxy Statement and is incorporated by reference. ITEM 14 PRINCIPALPP ACCOUNTING FEES AND SERVICES RR Information required by this Item 14 is included under the headings “Item 2–Ratification of Appointment of Independent Registered Public Accountants–Principal Accounting Fees and Services” and “The Audit Committee” in the 2022 Proxy Statement and is incorporated by reference. MOODY'S 2021 10-K 131 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATTT EMENT SCHEDULES LIST OF DOCUMENTS FILED AS PART OF THIS REPORT. (1) Financial Statements. See Index to Financial Statements on page 68, in Part II. Item 8 of this Form 10-K. (2) Financial Statement Schedules. None. (3) Exhibits. INDEX TO EXHIBITS S-K EXHIBIT NUMBER 2 3 4 132 MOODY'S 2021 10-K Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession .1.1# .1.2 Purchase Agreement, dated as of August 5, 2021, among Moody’s Analytics, Inc., Daily Mail and General Trust plc, DMG Atlantic Ltd, and DMG US Investments, Inc. (incorporated by reference to Exhibit 2.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 6, 2021) Amendment No.1 to Purchase Agreement, dated as of September 15, 2021, among Moody’s Analytics, Inc., Daily Mail and General Trust plc, DMG Atlantic Ltd, and DMG US Investments, Inc. (incorporated by reference to Exhibit 2.2 to the Report on Form 8-K of the Registrant, file number 1-14037, filed September 15, 2021) Articles of Incorporation and By-laws .1 .2 Restated Certificate of Incorporation of the Registrant, effective to Exhibit 3.3 to the Report on Form 8-K of the Registrant, file number 1-14037, filed April 27, 2020) April 22, 2020 (incorporated by reference ff Amended and Restated By-laws of Moody’s Corporation, effective December 14, 2020 (incorporated by reference to Exhibit 3.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed December 18, 2020) Instruments Defining the Rights of Security Holders, Including Indentures .1 .2 .3.1 .3.2 .3.3 .3.4 .3.5.1 .3.5.2 .3.6 Description of the Registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 22, 2021) Specimen Common Stock certificate (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed October 4, 2000) Indenture, dated as of August 19, 2010, between Moody’s Corporation and Wells Fargo, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 19, 2010) Second Supplemental Indenture, dated as of August 20, 2012, between Moody’s Corporation and Wells Fargo, National Association, as trustee, including the form of the 4.50% Senior Notes due 2022 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 20, 2012) Third Supplemental Indenture, dated as of August 12, 2013, between Moody’s Corporation and Wells Fargo, National Association, as trustee, including the form of the 4.875% Senior Notes due 2024 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 12, 2013) Fourth Supplemental Indenture, dated July 16, 2014, between the Company and Wells Fargo Bank, National Association, as trustee, including the form of 5.250% Senior Notes due 2044 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed July 16, 2014) Fifth Supplemental Indenture, dated March 9, 2015, between the Company, Wells Fargo Bank, National Association, as trustee and Elavon Financial Services Limited, UK Branch as paying agent and transfer agent and Elavon Financial Services Limited as registrar, including the form or 1.75% Senior Notes due 2027 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed March 10, 2015) Agency Agreement, dated March 9, 2015, between the Company, Wells Fargo Bank, National Association, as trustee and Elavon Financial Services Limited, UK Branch as paying agent and transfer agent and Elavon Financial Services Limited as registrar ((incorporated by reference to Exhibit 4.3 to the Report on Form 8-K of the Registrant, file number 1-14037, filed March 10, 2015) Seventh Supplemental Indenture, dated as of June 12, 2017, between Moody’s Corporation and Wells Fargo, National Association, as trustee, including the form of 2.625% Senior Notes due 2023 and the form of 3.250% Senior Notes due 2028 (incorporated by reference to Exhibit 4.3 to the Report on Form 8- K of the Registrant, file number 1-14037, filed June 12, 2017) .3.7 .3.8.1 .3.8.2 .3.9 .3.10 .3.11 .3.12 .3.13 Ninth Supplemental Indenture, dated as of December 17, 2018, between the Company and Wells Fargo Bank, National Association, as trustee, including the form of 4.250% Senior Note due 2029 and the form of 4.875% Senior Note due 2048 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed December 21, 2018) Tenth Supplemental Indenture, dated as of November 25, 2019, between the Company, Wells Fargo Bank, National Association, as trustee, Elavon Financial Services Limited, UK Branch as paying agent and U.S. Bank National Association as registrar and transfer agent, including the form of 0.950% Senior Note due 2030 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed November 25, 2019) Agency Agreement, dated November 25, 2019, between the Company, Wells Fargo Bank, National Association, as trustee, Elavon Financial Services Limited, UK Branch as paying agent and U.S. Bank National Association as registrar and transfer agent. (incorporated by reference to Exhibit 4.3 to the Report on Form 8-K of the Registrant, file number 1-14037, filed November 25, 2019) Eleventh Supplement Indenture, dated as of March 24, 2020, between the Company and Wells Fargo Bank, National Association, as trustee, including the form of 3.750% Senior Note due 2025 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed March 25, 2020) Twelfthff Supplemental Indenture, dated as of May 20, 2020, between the Company and Wells Fargo Bank, National Association, as trustee, including the form of 3.250% Senior Note due 2050 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed May 20, 2020) Thirteenth Supplemental Indenture, dated as of August 18, 2020, between the Company and Wells Fargo Bank, National Association, as trustee, including the form of 2.550% Senior Note due 2060 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 18, 2020) Fourteenth Supplemental Indenture, dated as of August 19, 2021, between the Company and Wells Fargo Bank, National Association, as trustee, including the form of 2.000% Senior Note due 2031 and the form of 2.750% Senior Notes due 2041 (incorporated by reference to Exhibit 4.1 to the Report on Form 8- K of the Registrant, file number 1-14037, filed August 19, 2021) Fifteenth Supplemental Indenture, dated as of November 29, 2021, between the Company and Computershare Trust Company, N.A. as successor to Wells Fargo Bank, National Association, as trustee, including the form of 3.100% Senior Note due 2061 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed November 29, 2021 10 Material Contracts .1.1† .1.2† .2† .3.1† .3.2.1† .3.2.2† .3.3.1† .3.3.2† 1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan (Adopted September 8, 2000; Amended and Restated as of December 11, 2012, October 20, 2015, December 14, 2015 and December 18, 2017) (incorporated by reference to Exhibit 10.2.1 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 27, 2018) Form of Non-Employee Director Restricted Stock Unit Grant Agreement (for awards after 2017) forff 1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan (Adopted September 8, 2000; Amended and Restated as of December 11, 2012, October 20, 2015, December 14, 2015 and December 18, 2017) (incorporated by reference to Exhibit 10.2.3 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 27, 2018) the Moody’s Corporation 1999 Employee Stock Purchase Plan (as amended and restated December 15, 2008) (formerly, The Dun & Bradstreet Corporation 1999 Employee Stock Purchase Plan) (incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed March 2, 2009) Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (as amended and restated as of January 1, 2021) (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q, file number 1-14037, filed October 29, 2021) Form of Employee Non-Qualified Stock Option Grant Agreement (for awards granted between 2017 and 2019) forff (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 24, 2017) the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan Form of Employee Non-Qualified Stock Option Grant Agreement (for awards granted in 2020 or later) for the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to Exhibit 10.3.3.2 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 24, 2020) Form of Performance Share Award Letter (for awards granted between 2018 and 2019) for the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to Exhibit 10.4.6 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 27, 2018) Form of Performance Share Award Letter (for awards granted in 2020 or later) for the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to Exhibit 10.3.4.3 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 24, 2020) MOODY'S 2021 10-K 133 .3.4.1† .3.4.2† Form of Restricted Stock Unit Grant Agreement (for awards granted prior to 2020) forff the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 24, 2017) Form of Restricted Stock Unit Grant Agreement (for awards granted in 2020 or later) for the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to Exhibit 10.3.5.2 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 24, 2020) .4† .5† .6† .7† .8.1† .8.2† .8.3† .9† .10.1† .10.2†* .11.1† .11.2†* .12†* .13.1†* .14† .15† .16† .17 .18† .19 .20 .21.1 2004 Moody’s Corporation Covered Employee Cash Incentive Plan (as amended on February 10, 2015) (incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 26, 2015) Moody’s Corporation Deferred Compensation Plan (amended and restated effective as of January 1, 2020) (incorporated by reference to Exhibit 10.5 the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 22, 2021) Supplemental Executive Benefit Plan of Moody’s Corporation, amended and restated as of January 1, 2008 (incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 29, 2008) Pension Benefit Equalization Plan of Moody’s Corporation, amended and restated as of January 1, 2008 (incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 29, 2008) Moody’s Corporation Cafeteria Plan, effeff ctive January 1, 2008 (incorporated by reference to Exhibit 10.46 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed March 2, 2009) First Amendment to the Moody’s Corporation Cafeteria Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on form 10-Q, file number 1-14037, filed July 31, 2014) Second Amendment to the Moody’s Corporation Cafeteria Plan (incorporated by reference to Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 26, 2015) Moody’s Corporation Change in Control Severance Plan (as amended December 18, 2017) (incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 27, 2018) Moody’s Corporation Retirement Account (amended and restated as of January 1, 2021) (incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 22, 2021) First Amendment to the Moody’s Corporation Retirement Account (effective ff January 1, 2021) Profit Participation Plan of Moody’s Corporation (amended and restated as of January 1, 2020) (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 22, 2021) First Amendment to the Profit Participation Plan of Moody’s Corporation (effective ff January 1, 2020) The Moody’s Corporation Nonfunded Deferred Compensation Plan forff Non-Employee Directors (as amended December 16, 2008, October 15, 2015 and December 19, 2016) Amended and Restated Moody’s Corporation Career Transition Plan (amended and restated as of November 8, 2021) Supplemental Executive Disability Benefit Plan of Moody’s Corporation, effective as of January 1, 2019 (incorporated by reference to Exhibit 10.22 to Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 25, 2019) Risk Management Solutions, Inc. 2014 Equity Award Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 of the Registrant, file number 333-259539, filed September 15, 2021) Risk Management Solutions, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-8 of the Registrant, file number 333-259539, filed September 15, 2021) Form Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed December 22, 2017) Employment Offeff (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Registrant, file number 1-14037, filed on October 31, 2018) r Letter between Moody’s Corporation and Mark Kaye, dated July 18, 2018 Settlement Agreement dated January 13, 2017 between (1) Moody’s Corporation, Moody’s Investors Service, Inc. and Moody’s Analytics, Inc., and (2) the United States, acting through the United States Department of Justice and the United States Attorney’s Office for the District of New Jersey, along with various States and the District of Columbia, acting through their respective Attorneys General (incorporated by reference to the Report on Form 8-K of the Registrant, file number 1-14037, filed January 17, 2017) Form Commercial Paper Dealer Agreement between Moody’s Corporation, as Issuer, and the Dealer party thereto (incorporated by reference to Exhibit 10.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 3, 2016) Tax Matters Agreement, dated as of August 5, 2021, among Moody’s Analytics, Inc., Daily Mail and General Trust plc and DMG Atlantic Ltd. (incorporated by reference to Exhibit 10.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 6, 2021) 134 MOODY'S 2021 10-K 21* 23 31 32 .21.2 .22 Amendment No.1 to Tax Matters Agreement, dated as of September 15, 2021, among Moody’s Analytics, Inc., Daily Mail and General Trust plc and DMG Atlantic Ltd. (incorporated by reference to Exhibit 10.2 to the Report on Form 8-K of the Registrant, file number 1-14037, filed September 15, 2021) Credit Agreement, dated as of December 17, 2021, among Moody’s Corporation, the borrowing subsidiaries party thereto, the lenders and issuing banks party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents party thereto (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed December 20, 2021). Subsidiaries of the Registrant List of Active Subsidiaries as of December 31, 2021 Consent of Independent Registered Public Accounting Firm .1* Consent of KPMG LLP Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .1* .2* Chief Executive Officer ff Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 .1* .2* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. (The Company has furnished this certification and does not intend for it to be considered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. (The Company has furnished this certification and does not intend for it to be considered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 101 Inline XBRL .INS* .SCH* .CAL* .DEF* .LAB* .PRE* Inline XBRL Instance Document Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Extension Calculation Linkbase Document Inline XBRL Definitions Linkbase Document Inline XBRL Taxonomy Extension Labels Linkbase Document Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 ______ __ ____ ___ ____ ____ The cover page from this Annual Report on Form 10-K (formatted in Inline XBRL and contained in Exhibit 101) * † # Filed herewith Management contract of compensatory plan or arrangement Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Moody’s hereby undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the Securities and Exchange Commission. ITEM 16 None. FORM 10-K SUMMARYRR MOODY'S 2021 10-K 135 AA SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MOODY’S CORPORATION AA (Registrant) By: /s/ ROBERT FAUBER FF Robert Fauber President and Chief Executive Officer Date: February 18, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/ ROBERT FAUBER Robert Fauber, President and Chief Executive Officer (principal executive officer) /s/ KATHRYN M. HILL Kathryn M. Hill, Director /s/ MARK KAYE Mark Kaye, /s/ LLOYD W. HOWELL, JR. Lloyd W. Howell, Jr., Executive Vice President and Chief Financial ii Officer Director (principal financial officer) /s/ CAROLINE SULLIVAN Caroline Sullivan, /s/ RAYMOND W. MCDANIEL, JR. Raymond W. McDaniel, Jr., Senior Vice President and Corporate Controller Chairman (principal accounting officer) /s/ JORGE A. BERMUDEZ Jorge A. Bermudez, Director /s/ THÉRÈSE ESPERDY Thérèse Esperdy, Director /s/ VINCENT A. FORLENZA Vincent A. Forlenza, Lead Independent Director 136 MOODY'S 2021 10-K /s/ LESLIE F. SEIDMAN Leslie F. Seidman, Director /s/ ZIG SERAFIN Zig Serafin, Director /s/ BRUCE VAN SAUN Bruce Van Saun, Director Date: February 18, 2022 Moody’s Corporate Information CORPORATE OFFICE 7 World Trade Center 250 Greenwich Street New York, NY 10007 +1.212.553.0300 moodys.com TRANSFER AGENT, REGISTRAR American Stock Transfer & Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219 U.S.: +1.866.714.7299 Outside the U.S.: +1.718.921.8124 Hearing impaired: +1.866.703.9077 Online Shareholder Account Information amstock.com info@amstock.com INDEPENDENT ACCOUNTANTS KPMG LLP 345 Park Avenue New York, NY 10154 CORPORATE GOVERNANCE The Company has ﬁled its annual report on Form 10-K for the year ended December 31, 2021 with the Securities and Exchange Commission. The Form 10-K, along with other Moody’s SEC ﬁlings and corporate governance documents, are available, without charge, upon request to the Investor Relations Department at the Corporate Ofﬁce or on ir.moodys.com. The Company has submitted to the New York Stock Exchange the Chief Executive Ofﬁcer’s certiﬁcation that he is unaware of any violation by the Company of the NYSE’s corporate governance listing standards. The Company has ﬁled with the SEC the Chief Executive Ofﬁcer and Chief Financial Ofﬁcer certiﬁcations as exhibits to the most recently ﬁled Form 10-K, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. COMMON STOCK INFORMATION The Company’s common stock trades on the New York Stock Exchange under the symbol “MCO”. INVESTOR RELATIONS +1.212.553.4857 ir@moodys.com ir.moodys.com MOODY’S ENVIRONMENTAL POLICY Moody’s Corporation is committed to doing our part to protect and care for the environments in which we live and work. This commitment is demonstrated by the continuous development and implementation of practical and effective corporate policies and programs that support the more efﬁcient use of natural resources and reduce the impact of our businesses on the environment. These programs and policies include, where feasible, the reduction and elimination of waste through re-use, recovery and recycling. As part of these efforts, Moody’s is committed to reducing its global operations’ contribution to climate change. Our environmental programs are structured to minimize the impact on our greenhouse gas emissions to the extent possible. Moody’s Corporation recognizes that our environmental impacts are limited and include greenhouse gas emissions (from energy used in buildings and for transport), water use and waste (from ofﬁce operations). Nonetheless, we are committed to minimizing the impact of our operations and services on the environment by: » Complying with the letter and spirit of all relevant environmental legislation » Establishing applicable corporate environmental goals and objectives which will be reviewed and revised as necessary on an ongoing basis » Minimizing the environmental risks to our employees and the communities in which we operate » Using various communications channels to ensure that our employees are aware of environmental concerns and the impact of their activities on the environment, and to encourage them to minimize these impacts » Adopting a purchasing program that takes into consideration the environmental practices of potential suppliers and contractors » Seeking to reduce internal and client-facing travel whenever practical » Where possible, consider “green” building choices or, at a minimum, those that provide the efﬁcient use of energy and materials when selecting new ofﬁce locations » Reducing, and where possible eliminating, waste through re-use, recovery and recycling by participating in building-wide conservation efforts for water and energy conservation » Tracking and reporting the results our efforts annually in our Corporate Social Responsibility Report » Responding to CDP Climate Change questionnaire annually » Ensuring that our policy is available for public review and is communicated to employees to increase their awareness of environmental concerns and to further encourage them to minimize the impact they have on the environment Our commitment is demonstrated by the continuous development and implementation of practical and effective corporate policies and programs that support the more efﬁcient use of natural resources and reduce the impact of our businesses on the environment. All paper in this report is certiﬁed to the Forest Stewardship Council® (FSC®) standards. The 10-K of this report is printed on paper that contains recycled ﬁber.

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