SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2019

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 as well as ICRA non-ratings revenue.

The MA segment develops a wide range of products and services that support the risk management activities of institutional participants in global financial markets. The MA segment consists of three LOBs—RD&A, ERS and PS.

Revenue for MIS and expenses for MA include an intersegment royalty charged to MA for the rights to use and distribute content, data and products developed by MIS. The royalty rate charged by MIS approximates the fair value of the aforementioned content, data and products and is generally based on comparable market transactions. Also, revenue for MA and expenses for MIS include an intersegment fee charged to MIS from MA for certain MA products and services utilized in MIS’s ratings process. These fees charged by MA are generally equal to the costs incurred by MA to produce these products and services.

Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resources and legal. Such costs and corporate expenses that exclusively benefit one segment are fully charged to that segment. For overhead and corporate expenses that benefit both segments, in years prior to 2019, the Company generally allocated costs ratably based on each segment’s share of total revenue.

Beginning in 2019, the Company refined its methodology such that costs allocated to each segment based on the segment’s share of 2018 actual revenue comprise 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. The Company believes that this allocation method will better align the amount of overhead costs consumed by each segment and contribute stability to each segment’s costs over time. The impact of this refined methodology would not have resulted in a material change to previously reported segment results.

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

Financial Information by Segment

The table below shows revenue, Adjusted Operating Income and 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 for further details on the components of the Company’s revenue.


	Year Ended December 31,
	2019														2018
	MIS		MA		Eliminations		Consolidated		MIS		MA		Eliminations		Consolidated
Revenue	$	3,009	$	1,963	$	(143)	$	4,829	$	2,836	$	1,743	$	(136)	$	4,443
Total Expense	1,376		1,598		(143)		2,831		1,276		1,435		(136)		2,575
Operating income	1,633		365		—		1,998		1,560		308		—		1,868
Add:
Restructuring	31		29		—		60		32		17		—		49
Depreciation and amortization	71		129		—		200		65		127		—		192
Acquisition-Related Expenses	—		3		—		3		—		8		—		8
Loss pursuant to the divestiture of MAKS	—		14		—		14		—		—		—		—
Captive insurance company settlement	10		6		—		16		—		—		—		—
Adjusted Operating Income	$	1,745	$	546	$	—	$	2,291	$	1,657	$	460	$	—	$	2,117


	Year Ended December 31, 2017
	MIS⁽¹⁾		MA⁽¹⁾		Eliminations		Consolidated⁽¹⁾
Revenue	$	2,886	$	1,446	$	(128)	$	4,204
Total Expense	1,314		1,197		(128)		2,383
Operating Income	1,572		249		—		1,821
Add:
Depreciation and amortization	74		84		—		158
Acquisition-Related Expenses	—		23		—		23
Adjusted Operating income	$	1,646	$	356	$	—	$	2,002

⁽¹⁾The Company adopted ASU No. 2017-07 in the first quarter of 2018, whereby all components of pension expense except for the service cost component are required to be presented in non-operating (expense) income, net. The service cost component continues to be reported as an operating expense. Segment results for 2017 have been restated to reflect this reclassification. Accordingly, operating and SG&A expenses for MIS and MA were reduced by $8 million and $4 million, respectively, for the year ended December 31, 2017.

The cumulative restructuring charges related to the 2018 Restructuring Program, as more fully discussed in Note 12, for the MIS and MA reportable segments are $63 million and $46 million, respectively.

CONSOLIDATED REVENUE AND LONG-LIVED ASSETS INFORMATION BY GEOGRAPHIC AREA


	Year Ended December 31,
	2019		2018		2017
Revenue:
U.S.	$	2,544	$	2,330	$	2,348
Non-U.S.:
EMEA	1,446		1,377		1,132
Asia-Pacific	551		493		471
Americas	288		243		253
Total Non-U.S.	2,285		2,113		1,856
Total	$	4,829	$	4,443	$	4,204
Long-lived assets at December 31:
U.S.	$	1,290	$	982	$	673
Non-U.S.	4,678		4,685		5,037
Total	$	5,968	$	5,667	$	5,710