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.

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.

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


Cash		$	60
Accounts receivable		38
Other current assets		11
Property and equipment, net		13
Operating lease right-of-use assets		64
Intangible assets:
Customer relationships (23 year useful life)	523
Product technology (7 year useful life)	212
Trade name (9 year useful life)	49
Total intangible assets (18 year weighted average useful life)		784
Goodwill		1,389
Deferred tax assets, net		46
Other assets		92
Liabilities:
Accounts payable and accrued liabilities	(101)
Deferred revenue	(89)
Operating lease liabilities	(68)
Deferred tax liabilities, net	(213)
Uncertain tax positions	(90)
Total liabilities		(561)
Net assets acquired		$	1,936

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

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

Goodwill, of which $1,299 million and $90 million has been assigned to the MA and MIS segments, respectively, is not deductible for tax purposes. The amount of goodwill allocated to the MIS segment relates to the integration of certain of RMS's models/processes into the Company's ESG solutions offerings.

Other assets in the table above includes an indemnification asset of $88 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.

Supplemental information on an unaudited pro forma basis is presented below for the nine months ended September 30, 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 in the jurisdiction for which the pro forma adjustment relates.

The unaudited pro forma results do not include any anticipated cost savings or other effects of the planned integration of RMS. Accordingly, the pro forma results above are not necessarily indicative of the results that would have been reported if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future. The RMS results included in the above have been converted to U.S. GAAP from IFRS as issued by the IASB and have been translated to USD at rates in effect for the periods presented. The RMS amounts in the pro forma results include an addition to revenue of approximately $3 million and a reduction to revenue of approximately $21 million relating to a fair value adjustment to deferred revenue required as part of acquisition accounting for the nine months ended September 30, 2021 and 2020, respectively.

The following acquisitions occurred prior to the third quarter 2021 and 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. Additionally, the near term impact to the Company’s operations and cash flows is not material.

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


Current assets			$	7
Intangible assets:
Database (10 year useful life)	$	38
Customer relationships (18 year useful life)	9
Product technology (8 year useful life)	9
Trade name (5 year useful life)	1
Total intangible assets (11 year weighted average useful life)			57
Goodwill(1)			79
Deferred tax assets(1)			16
Other assets			2
Liabilities:
Accounts payable and accrued liabilities	$	(1)
Deferred revenue	(4)
Deferred tax liabilities	(15)
Other liabilities	(2)
Total liabilities			(22)
Net assets acquired			$	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.

The Company has performed a preliminary valuation analysis of the fair market value of assets and liabilities of the Cortera 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 materially from the preliminary allocation. The final allocation may include changes in allocations to acquired intangible assets as well as goodwill and other changes to assets and liabilities including reserves for UTPs and deferred tax liabilities. The estimated useful lives of acquired intangibles assets are also preliminary.

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.

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


Current assets			$	24
Intangible assets:
Customer relationships (25 year useful life)	$	174
Database (10 year useful life)	86
Product technology (4 year useful life)	17
Trade name (3 year useful life)	3
Total intangible assets (19 year weighted average life)			280
Goodwill			494
Other assets			2
Liabilities:
Accounts payable and accrued liabilities	$	(5)
Deferred revenue	(20)
Deferred tax liabilities	(71)
Other liabilities	(2)
Total liabilities			(98)
Net assets acquired			$	702

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.