Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Goodwill

Goodwill

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.

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, 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.

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’s two new reporting units generally consist of: i) businesses offering data and data-driven analytical solutions; and ii) risk-management software, workflow and CRE solutions.

The Company performed qualitative assessments of the reporting units impacted by the reorganization immediately before and after the reorganization became effective. These qualitative assessments resulted in the Company determining that it was not more likely than not that the fair value of any reporting unit was less than its carrying amount.

The Company will perform a quantitative assessment on the new reporting units as of July 31, 2021, the date of the Company’s annual goodwill impairment assessment, which will provide new baseline valuations under the new reporting unit structure.