Notes to Financial Statements
1.
Background and Plan Description
The Profit Participation Plan of Moody’s Corporation is a defined contribution plan established
to provide a convenient way for eligible U.S. employees to save on a regular and long-term basis for retirement. The Plan is subject to the provisions of ERISA.
The following summary provides an overview of major Plan provisions and is provided for general information purposes. U.S. employees who
participate in the Plan or former U.S. employees who have assets in the Plan should refer to the Plan document for more complete information and a full description of Plan provisions and qualifications.
Eligibility
Full-time U.S. employees of the Company who are hired or rehired on or after January 1, 2008 are automatically enrolled in the Plan with
contributions equal to 3% of compensation as defined in the Plan unless they elect otherwise. The default fund for the automatic deferrals is the Fidelity Freedom Fund that most closely matches the participants’ retirement dates based upon date
of birth.
Prior to January 1, 2008, full-time U.S. employees of the Company were immediately eligible to participate in the Plan on
their date of hire.
Part-time U.S. employees are eligible to participate in the Plan when they work at least one thousand hours either
during the consecutive twelve-month period following their date of hire, or in any calendar year following employment. After January 1, 2008, upon completion of the eligibility requirements, employees are automatically enrolled in the Plan with
contributions equal to 3% of the compensation as defined in the Plan unless they elect otherwise.
Contributions
Participants contribute to the Plan by authorizing payroll deductions from their compensation as defined in the Plan. Participants’
contributions under the Plan may be made from after-tax earnings and/or from before-tax earnings, the latter form of contribution having the effect of reducing the participant’s current taxable earnings for Federal income tax purposes.
Participants are eligible to contribute up to 50% of their compensation to the Plan each year. Before-tax contributions are subject to the overall limit imposed by the IRC of $18,000 in 2015 with an additional contribution of $6,000 permitted for
participants who are age 50 or older. The Company makes matching contributions currently equal to 50% of the first 6% of annual compensation (as defined) that is contributed to the Plan. Payroll deductions for participant contributions and the
corresponding Company Matching Contribution that are not remitted to the Plan until after year-end are recorded as receivables in the Plan financial statements.
Under the Plan all eligible U.S. employees (excluding those for whom applicable law prohibits a profit sharing contribution) receive a
contribution if certain financial targets of the Company are met, regardless of whether they contribute to the Plan. The Company will make this contribution if year-over-year EPS growth for any plan year equals or exceeds a threshold set forth
in the Plan. This threshold is defined as (i) 10% growth in EPS and (ii) 2% in excess of targeted EPS percentage growth for the plan year. For year ended December 31, 2015, the Company did not achieve the required EPS growth necessary
for this contribution. For the year ended December 31, 2014, the Company achieved the required EPS growth necessary for such a contribution. Accordingly, the employer contributions receivable in the Plan’s Statement of Net Assets Available
for Plan Benefits for the year ended December 31, 2014 includes approximately $5 million for this contribution which was paid to the Plan in March 2015.
Participants at their discretion may invest their contributions in any, or all, of the investment fund options offered under the Plan,
including the Moody’s Corporation Stock Fund but excluding the Dun & Bradstreet Legacy Fund, which has not been open to new investments since 2000.
Effective January 1, 2008, the Company’s U.S. defined benefit pension plan was closed to new participants. However, in lieu of
defined benefit pension plan benefits, employees of the Company who are hired, rehired or who transfer to the U.S. payroll from a non–U.S. location on or after January 1, 2008 are eligible to receive a retirement contribution to the Plan.
The retirement contribution is based upon an eligible U.S. employee’s compensation as well as combined age and years of service as defined in the Plan. Participants that are eligible for the retirement contribution will receive this
contribution regardless of whether they contribute to the Plan.
7
The Plan permits participants to have their interests in other qualified plans rolled over to the
Plan. Transfers or rollovers to the Plan may only be made with the approval of the Management Benefits and Compensation Committee and do not affect any other contributions made by or on behalf of a participant.
Starting on May 1, 2014, the Plan permitted participants to make an election for Roth Contributions, on an after-tax basis. Participants
at their discretion may invest their Roth Contributions in any, or all, of the investment fund options offered under the Plan, including the Moody’s Corporation Stock Fund but excluding the Dun & Bradstreet Legacy Fund, which has not
been open to new investments since 2000. Participant contributions, withdrawals, gains, losses and other credits shall be credited to the participant’s Roth Contributions account.
Participant Accounts
A separate account is established and maintained for each Plan participant. Contributions are invested in one or more of the Plan’s
investment funds as designated by the participant. Effective November 1, 2011, participants are not permitted to invest more than 10% of their current contributions or existing individual account balances into the Moody’s Corporation Stock
Fund (however, participants whose accounts were more than 10% invested on November 1, 2011 or subsequently became so due to investment returns are not required to divest any portion of their Moody’s Corporation Stock Fund holdings). Prior
to November 1, 2011, participants were not permitted to invest more than 25% of their current contributions or existing individual account balances into the Moody’s Corporation Stock Fund. Net appreciation or depreciation on Plan
investments for a given fund is allocated on a daily basis in proportion to the participant’s account balance in that fund. Interest and dividend income are allocated to participants’ accounts when paid.
The Moody’s Corporation Stock Fund is an ESOP which allows participants to choose whether any cash dividends paid are reinvested in the
Stock Fund or paid to the participant in cash.
Starting May 1, 2014, with the addition of the Roth option to the Plan, participants
electing to make Roth Contributions will have separate accounts for those contributions.
Distributions
Upon retirement or other termination of service with the Company, participants (or their designated beneficiaries) become eligible for a lump
sum distribution of the vested portion of their account balance. In the case of account balances in excess of $1,000, participants may select a deferred distribution method from various options available under the Plan. Participants’ whose
vested benefits are $1,000 or less will receive an automatic distribution of their balance. The Plan also permits participant withdrawals after attaining age
59
1
⁄
2
or due to certain financial hardships to be made out of vested account balances.
Notes receivable from participants
Participants may obtain loans from the Plan, which are collateralized by the participant’s account balance. The Plan limits the total
number of loans outstanding at any time for each participant to two general-purpose loans and a principal residence loan. The minimum loan permitted by the Plan is $500 and the maximum permissible amount of all loans outstanding at any time is the
lower of 50% of a participant’s vested account balance or $50,000. Interest rates applicable to Plan loans are based on the prime rate as reported in The Wall Street Journal on the last business day of the month before the loan is processed
plus 200 basis points. At December 31, 2015 and 2014, interest rates on participant loans ranged from 5.25% to 11.50%, respectively. Maturity dates for the participant loans ranged from one month to ten years and one month to 11 years at
December 31, 2015 and 2014, respectively. Principal and interest is paid ratably by the participants through semi-monthly payroll deductions.
In the event of a default, the Management Benefits and Compensation Committee may accelerate the repayment of the loan; demand immediate
repayment of the entire amount outstanding; renegotiate the terms of the loan; or approve a financial necessity distribution of the participant’s loan subject to the terms of the Plan.
8
Vested Benefits and Forfeitures
Participants immediately vest in their own contributions to the Plan, as well as any earnings thereon. The Plan provides for vesting in the
value of all Company contributions to a participant’s Plan account after three years of service beginning on the participant’s initial employment date with the Company. In addition, a participant becomes 100% vested in the value of Company
contributions immediately upon attainment of age 65, upon death, or if they become totally and permanently disabled.
Amounts forfeited by
nonvested participants who terminated employment during the year ended December 31, 2015 were $2.3 million. Forfeited amounts can be used to reduce future Company contributions and to pay administrative fees of the Plan. During the year ended
December 31, 2015, approximately $2.2 million of the cumulative forfeiture pool was used to offset Company contributions and $0.2 million was used to pay administrative fees. As of December 31, 2015 and 2014, the Plan held forfeited
amounts totaling $0.3 million and $0.4 million, respectively.
Administration of the Plan
The Plan is administered by the Management Benefits and Compensation Committee. Fidelity Management Trust Company is Trustee of the Plan and
has custody of the Plan’s assets. The Management Benefits and Compensation Committee designated Evercore Trust Company, N.A., as the Investment Manager for the assets of the Plan that consist of shares of Moody’s common stock held in the
Moody’s Corporation Stock Fund.
Voting Rights
The Company’s common stock held in the Stock Fund is voted by the Trustee at the Company’s stockholder meetings in accordance with
the confidential instructions of the participants whose accounts are invested in the common stock. All shares of the Company’s common stock for which the Trustee receives voting instructions from participants to whose accounts the shares are
allocated are voted in accordance with those instructions. All shares of the Company’s common stock for which the Trustee does not receive timely voting instructions are voted by the Trustee in the same proportion on each issue as it votes
those shares credited to participants’ accounts for which it has received voting instructions from participants.
Plan
Termination
While the Company has not expressed any intent to discontinue its contributions or to terminate the Plan, the Company
is free to do so at any time subject to the provisions of ERISA and the IRC which state that, in such event, all participants of the Plan shall become fully vested in the employer contributions credited to their accounts.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan have been prepared using the accrual method of accounting. For financial statement purposes, participant
withdrawals and distributions are recorded when paid. At December 31, 2015 and 2014, all Benefit Payments processed and approved for payment had been paid by the Plan.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management of the Plan to make estimates and assumptions that affect
the reported amounts in the Statements of Net Assets Available for Plan Benefits and disclosures at the date of the financial statements and the reported amounts of additions and deductions in the Statement of Changes in Net Assets Available for
Plan Benefits. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan provides for various investment options consisting of common stocks, mutual funds, and other investment securities. Investment
securities are exposed to various risks, such as interest rate fluctuations, market conditions and credit risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of
investment securities, it is possible that changes in valuations in the near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Plan Benefits and the Statement of
Changes in Net Assets Available for Plan Benefits. Plan participants who are invested in the Moody’s Corporation Stock Fund are exposed to market risk in the event of a significant decline in the value of Moody’s Corporation common stock.
9
Certain Plan assets invest directly or indirectly in securities with contractual cash flows, such
as asset-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities, including securities backed by sub-prime mortgage loans. The value, liquidity and related income of these securities are sensitive to changes
in various economic conditions. These conditions include, but are not limited to, real estate values, delinquencies and/or defaults on cash flows underlying the securities. Furthermore, the value of these securities may be adversely affected by
shifts in market perception of the issuer as well as changes in interest rates.
Investment Valuation
Investments in mutual funds are valued at quoted market prices based on the net asset value of the shares held by the Plan and generally are
based on the fair value of the underlying assets. Common trust funds are valued at the net asset value of the shares held by the Plan which represents their fair value.
Fully benefit-responsive investment contracts included in the stable value common trust fund are presented at fair value on the Statement of
Net Assets Available for Plan Benefits. The investments in the fund that invests in the fully benefit-responsive investment contracts are adjusted to contract value which is equal to the principal balance plus accrued interest as contract value is
the amount at which participants ordinarily transact. Refer to Note 3 for a more detailed description regarding the fair value of the fund that invests in fully benefit-responsive investment contracts.
Moody’s Corporation common stock and The Dun & Bradstreet Corporation common stock are stated at the fair value determined by
the closing quoted price for the companies’ common stock.
Notes Receivable from Participants
Notes receivable from participants are stated at their unpaid principal balances plus any accrued but unpaid interest. No allowances for credit
losses have been recorded as of December 31, 2015 and 2014 as the participant loans are secured by the participants’ vested balance in their accounts. Accordingly, in the event of a default, the Plan Administrator will deem the loan
balance to be a distribution to the participant.
Investment Transactions and Investment Income
Purchases and sales of securities are reflected on a trade-date basis. Dividend income is recorded on the ex-dividend date. Other investment
income is recorded as earned on an accrual basis.
Net Appreciation (Depreciation) of Investments
The net appreciation (depreciation) in the fair value of plan investments presented in the Statement of Changes in Net Assets Available for
Plan Benefits consists of realized gains or losses and unrealized appreciation or depreciation on those investments.
Recently
issued accounting standards:
In May 2015, the FASB issued ASU No. 2015-07, “Disclosures for Investments in Certain
Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU removes the requirement to include investments in the fair value hierarchy for which fair value is measured using the net asset value per share as a practical
expedient. ASU No. 2015-07 is effective retrospectively for fiscal years beginning after December 15, 2016, with early adoption permitted. The adoption of this ASU will only impact the presentation of the Plan’s common trust
funds in the fair value hierarchy disclosures.
In July 2015, the FASB issued ASU No. 2015-12 “Plan Accounting: Defined Benefit
Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962) and Health and Welfare Benefit Plans (Topic 965): I. Fully Benefit-Responsive Investment Contracts; II. Plan Investment Disclosures; III. Measurement Date Practical
Expedient.” Part III of this ASU is not applicable to the Plan. Part I of this ASU requires contract value to be utilized for measuring and disclosing fully benefit-responsive investment contracts. Part II of this ASU simplifies current benefit
plan accounting and requires benefit plans to disaggregate their investments measured using fair value by general type, either on the face of the financial statements or in the notes to the financial statements. This ASU also eliminates the
requirement to disclose the investment
10
strategy for certain investments that are measured using Net Asset Value (“NAV”) per share using the practical expedient in the FASB ASC Topic 820. Additionally, this ASU eliminates the
disclosure of investments exceeding 5% of the total net assets available for benefits. The amendments in Part I and Part II of this standard are effective retrospectively for fiscal years beginning after December 15, 2015, with early adoption
permitted. The adoption of this ASU will change the presentation of the investment information disclosures and will also result in the Plan’s fully benefit-responsive investment contracts included in the stable value common trust fund being
reported at contract value.
In January 2016, the FASB issued ASU No. 2016-01 “Financial Instruments – Recognition and
Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10).” The amendments in this ASU update various aspects of recognition, measurement, presentation and disclosures relating to the financial instruments. ASU
No. 2016-01 is effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of this ASU on the Plan’s financial statements.
3. Fair Value Measurements
Fair value is
defined by the ASC as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value is based on the principal or
most advantageous market in which the Plan 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 under the ASC 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 for the asset or liability, either directly or 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;
|
|
|
•
|
|
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.
|
11
Investments Measured at Fair Value on a Recurring Basis
Investments measured at fair value on a recurring basis consisted of the following types of instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
(amounts in thousands)
|
|
Fair value measurements using input
type
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Employer-related common stock funds
|
|
$
|
50,814
|
|
|
$
|
—
|
|
|
$
|
50,814
|
|
|
Common trust funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity index
|
|
|
—
|
|
|
|
138,165
|
|
|
|
138,165
|
|
|
Stable-value
|
|
|
—
|
|
|
|
58,756
|
|
|
|
58,756
|
|
|
Fixed income
|
|
|
—
|
|
|
|
34,988
|
|
|
|
34,988
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. equity
|
|
|
163,896
|
|
|
|
—
|
|
|
|
163,896
|
|
|
Life-cycle funds
|
|
|
101,981
|
|
|
|
—
|
|
|
|
101,981
|
|
|
International equity
|
|
|
72,747
|
|
|
|
—
|
|
|
|
72,747
|
|
|
Fixed income
|
|
|
31,511
|
|
|
|
—
|
|
|
|
31,511
|
|
|
Real estate
|
|
|
12,228
|
|
|
|
—
|
|
|
|
12,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$
|
433,177
|
|
|
$
|
231,909
|
|
|
$
|
665,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
(amounts in thousands)
|
|
Fair value measurements using input
type
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Employer-related common stock funds
|
|
$
|
49,466
|
|
|
$
|
—
|
|
|
$
|
49,466
|
|
|
Common trust funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity index
|
|
|
—
|
|
|
|
131,501
|
|
|
|
131,501
|
|
|
Stable-value
|
|
|
—
|
|
|
|
56,483
|
|
|
|
56,483
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. equity
|
|
|
166,994
|
|
|
|
—
|
|
|
|
166,994
|
|
|
Life-cycle funds
|
|
|
83,574
|
|
|
|
—
|
|
|
|
83,574
|
|
|
International equity
|
|
|
71,868
|
|
|
|
—
|
|
|
|
71,868
|
|
|
Fixed income
|
|
|
68,694
|
|
|
|
—
|
|
|
|
68,694
|
|
|
Real estate
|
|
|
11,594
|
|
|
|
—
|
|
|
|
11,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$
|
452,190
|
|
|
$
|
187,984
|
|
|
$
|
640,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Plan does not have any investments measured at fair value on a recurring basis that utilize Level 3
inputs.
The Plan’s valuation methodology used to measure the fair values of employer-related common stock and mutual funds is based
on quoted prices as these instruments and their underlying investments have active markets. The valuation methodology for the equity index common trust fund is reported at its net asset value which is based on the fair value of the underlying
investments as determined by the investment manager using quoted prices in active markets or other significant inputs that are deemed observable. The valuation methodologies for the fully benefit-responsive stable-value common trust fund as
determined by the investment manager vary by the different investments held within the fund and include discounted cash flow models which consider recent bids as determined by recognized dealers; recent bid prices if quoted market prices are readily
available; matrix pricing for fixed income securities which consider yield or price of bonds of comparable quality, coupon and maturity; and pricing services that incorporate dealer-supplied valuations and valuation models.
12
There were no transfers or reclassifications of investments between Level 1, Level 2 or Level 3
within the fair value hierarchy during the years ended December 31, 2015 and 2014. Furthermore, there were no changes in valuation methodologies used to measure the fair value of the Plan’s investments as of and for the years ended
December 31, 2015 and 2014.
The funds within the Plan are redeemable daily and, excluding the fund which invests in fully
benefit-responsive investment contracts, generally have no restrictions on redemptions other than for certain funds, a fee may be charged to a participant for redeeming an investment within a specified amount of time after the original purchase of
the investment. For the fund that invests in fully-benefit responsive investment contracts, withdrawals or exchanges into another investment option may be made at any time, except that exchanges cannot be made into a competing fund (e.g. money
market funds or other fixed income funds). The Plan has no contractual obligation to further invest in any of the funds.
Certain events
could limit the ability of the Plan to transact at contract value with the issuers of the contracts held by the fund which invests in fully benefit-responsive investment contracts. Such events could include, but are not limited to, the following:
premature termination of contracts by this fund, Plan termination, bankruptcy, partial plan termination or plan mergers, early retirement incentives that could cause significant withdrawals from the Plan and failure of the Plan to qualify under the
applicable sections of the IRC. The Plan Administrator does not believe that the occurrence of any of these events, which could limit the Plan’s ability to transact at contract value with participants, is probable.
13
The Plan’s assets are invested in various common stock funds, common trust funds and mutual
funds as described below. Individual investment balances that represent 5% or more of net assets are listed separately as of the applicable date.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
(amounts in thousands)
|
|
2015
|
|
|
2014
|
|
|
Employer-related common stock funds:
|
|
|
Moody’s Corporation Stock Fund
(1)
|
|
$
|
48,953
|
|
|
$
|
47,234
|
|
|
Common stock fund individually less than 5% of net assets
(2)
|
|
|
1,861
|
|
|
|
2,232
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50,814
|
|
|
|
49,466
|
|
|
|
|
|
|
|
|
|
|
|
|
Common trust funds:
|
|
|
|
|
|
|
|
|
|
Fidelity U.S. Equity Index Commingled Pool
|
|
|
138,165
|
|
|
|
131,501
|
|
|
Fidelity Managed Income Portfolio II
(3)
|
|
|
58,756
|
|
|
|
56,483
|
|
|
Prudential Core Plus Bond Fund
|
|
|
34,988
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
231,909
|
|
|
|
187,984
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Midcap Value Fund
|
|
|
51,786
|
|
|
|
62,159
|
|
|
PIMCO Total Return Fund
|
|
|
—
|
|
|
|
38,929
|
|
|
Spartan Extended Market Index Fund
|
|
|
37,755
|
|
|
|
37,341
|
|
|
Fidelity Diversified International Fund
|
|
|
37,214
|
|
|
|
34,501
|
|
|
Mainstay Large-Cap Growth Fund
(4)
|
|
|
36,300
|
|
|
|
32,356
|
|
|
Fidelity Low-Priced Stock Fund
|
|
|
34,039
|
|
|
|
32,369
|
|
|
Mutual funds individually less than 5% of net assets
|
|
|
185,269
|
|
|
|
165,069
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
382,363
|
|
|
|
402,724
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments at fair value
|
|
$
|
665,086
|
|
|
$
|
640,174
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of 476,553 and 481,002 shares of Moody’s Corporation common stock and $1,123 thousand and $1,150 thousand in cash at December 31, 2015 and 2014, respectively.
|
|
(2)
|
Consists of 17,180 and 17,813 shares of Dun & Bradstreet Corporation common stock and $76 thousand and $77 thousand in cash at December 31, 2015 and 2014, respectively.
|
|
(3)
|
Fully benefit-responsive investment contract; contract value was $58,337 thousand and $55,670 thousand at December 31, 2015 and 2014, respectively.
|
|
(4)
|
Fund is 5% or greater of net assets only at December 31, 2015. The December 31, 2014 balance is shown for comparative purposes.
|
14
The Plan’s investments depreciated in value (including realized and unrealized gains and losses) as follows:
|
|
|
|
|
|
|
(amounts in thousands)
|
|
Year ended
December 31, 2015
|
|
|
Employer-related common stock funds:
|
|
|
|
|
|
Moody’s Corporation Stock Fund
|
|
$
|
2,234
|
|
|
The Dun & Bradstreet Legacy Fund
|
|
|
(261
|
)
|
|
Common trust funds
|
|
|
1,299
|
|
|
Mutual funds
|
|
|
(31,682
|
)
|
|
|
|
|
|
|
|
Net depreciation
|
|
$
|
(28,410
|
)
|
|
|
|
|
|
|
The Fidelity Managed Income Portfolio II (“the Fund”) consists of fully benefit-responsive
investment contracts. The Fund invests in fixed income securities or bond funds and may include derivative instruments such as futures contracts and swap agreements that aid in the preservation of capital within the Fund enabling a competitive level
of income over time. The Plan’s interest in this investment is calculated by applying the Plan’s ownership percentage in the Fund to the net asset value of the entire Fund. Average annual yields relating to the Fund are presented below:
|
|
|
|
|
|
|
|
|
|
|
Average Yields
|
|
2015
|
|
|
2014
|
|
|
Based on actual earnings of the Fund
|
|
|
1.97
|
%
|
|
|
1.70
|
%
|
|
Based on interest rates credited to participants
|
|
|
1.52
|
%
|
|
|
1.38
|
%
|
Crediting interest rates on the Fund are determined quarterly and are based on a formula with the issuer,
which considers current economic and market conditions and the general interest rate environment. There is no correlation between future crediting rates and the adjustment from the contract value to the fair value as reported on the Statements of
Net Assets Available for Plan Benefits.
4. Related Party Transactions
Certain Plan investments are managed by the Trustee and Investment Manager, and therefore qualify as party-in-interest transactions. The
expenses of administering the Plan are paid by the Company, except for certain Trustee and Investment Manager fees which are charged to the Plan, and totaled approximately $90,000 for the year ended December 31, 2015. Additionally, certain
investment management fees are charged to the individual funds in the Plan and are included in the net depreciation in the fair value of investments in the Statement of Changes in Net Assets Available for Plan Benefits. Plan investments in the
common stock of the Company also qualify as party-in-interest transactions. At December 31, 2015 and 2014, the Stock Fund held 476,553 and 481,002 shares, respectively, of common stock in Moody’s Corporation, the Plan sponsor, with a cost
basis of $11.8 million and $11.7 million, respectively. The Plan earned dividends of approximately $646,200 and $549,400 from Moody’s Corporation common stock during the years ended December 31, 2015 and 2014, respectively.
15
5. Tax Status
The Internal Revenue Service has determined and informed the Company, by a letter dated January 29, 2015, that the Plan and related trust
are designed in accordance with the applicable sections of the IRC. The Plan Administrator believes that the Plan is designed and is currently operated in compliance with applicable requirements of the IRC.
GAAP requires the Plan sponsor to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain
position that more likely than not would not be sustained upon examination by the IRS. The Company has concluded that as of December 31, 2015, there were no uncertain positions taken or expected to be taken that would require recognition
or other disclosure in the Plan’s financial statements.
The Plan is subject to routine audits by various taxing jurisdictions. There
are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examination for the years prior to 2012.
6. Reconciliation of Financial Statements to Form 5500
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
(amounts in thousands)
|
|
2015
|
|
|
2014
|
|
|
Net assets available for plan benefits:
|
|
|
Financial statements
|
|
$
|
676,460
|
|
|
$
|
654,144
|
|
|
Participant loans deemed distributed for Form 5500 reporting
|
|
|
(37
|
)
|
|
|
(26
|
)
|
|
Corrective distributions paid in subsequent year
(1)
|
|
|
6
|
|
|
|
11
|
|
|
Adjustment from fair value to contract value for fully benefit-responsive investment
contracts
|
|
|
419
|
|
|
|
813
|
|
|
|
|
|
|
|
|
|
|
|
|
Form 5500
|
|
$
|
676,848
|
|
|
$
|
654,942
|
|
|
|
|
|
|
|
|
|
|
|