Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Leases

We determine whether an arrangement meets the criteria for an operating lease or a finance lease at the inception of the arrangement. We have operating leases for office space and equipment. Our leases have remaining lease terms of 1 year to 13 years, some of which include options to extend the leases for up to 12 years, and some of which include options to terminate the leases within 1 year. We consider these options in determining the lease term used to establish our right of use ("ROU") assets and associated lease liabilities. We sublease certain real estate leases to third parties which mainly consist of operating leases for space within our offices.

Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expenses for these leases on a straight line-basis over the lease term in operating-related expenses and selling and general expenses.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. Our future minimum based payments used to determine our lease liabilities include minimum based rent payments and escalations. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The following table provides information on the location and amounts of our leases on our consolidated balance sheets as of September 30, 2020 and December 31, 2019:



(in millions)		September 30,		December 31,
Balance Sheet Location		2020		2019
Assets
Right of use assets	Lease right of use assets	$	610	$	676

Liabilities
Other current liabilities	Current lease liabilities	102		112
Lease liabilities — non-current	Non-current lease liabilities	563		620

The components of lease expense for the periods ended September 30 are as follows:


(in millions)	Three Months						Nine Months
	2020		2019		2020		2019
Operating lease cost	$	35	$	39	$	110	$	116





Sublease income	—		(4)		(5)		(13)
Total lease cost	$	35	$	35	$	105	$	103

Supplemental information related to leases for the periods ended September 30 are as follows:


(in millions)	Three Months					Nine Months
	2020		2019		2020	2019
Cash paid for amounts included in the measurement for operating lease liabilities
Operating cash flows from operating leases	$	32	$	39	105	110



Right of use assets obtained in exchange for lease obligations
Operating leases	—		34		6	772

Weighted-average remaining lease term and discount rate for our operating leases are as follows:


	September 30,		December 31,
	2020		2019

Weighted-average remaining lease term (years)	8.5		9.0


Weighted-average discount rate	3.86	%	3.93	%

Maturities of lease liabilities for our operating leases are as follows:


(in millions)
2020 (Excluding the nine months ended September 30, 2020)	$	31
2021	114
2022	97
2023	79
2024	67
2025 and beyond	360
Total undiscounted lease payments	$	748
Less: Imputed interest	83
Present value of lease liabilities	$	665

Related Party Agreements

In June of 2012, we entered into a license agreement (the "License Agreement") with the holder of S&P Dow Jones Indices LLC noncontrolling interest, CME Group, replacing the 2005 license agreement between Indices and CME Group. Under the terms of the License Agreement, S&P Dow Jones Indices LLC receives a share of the profits from the trading and clearing of CME Group's equity index products. During the three and nine months ended September 30, 2020, S&P Dow Jones Indices LLC earned $32 million and $119 million, respectively, of revenue under the terms of the License Agreement. During the three and nine months ended September 30, 2019, S&P Dow Jones Indices LLC earned $28 million and $87 million, respectively, of revenue under the terms of the License Agreement. The entire amount of this revenue is included in our consolidated statement of income and the portion related to the 27% noncontrolling interest is removed in net income attributable to noncontrolling interests.

Legal and Regulatory Matters

In the normal course of business both in the United States and abroad, the Company and its subsidiaries are defendants in a number of legal proceedings and are often the subject of government and regulatory proceedings, investigations and inquiries.

In the second quarter of 2020, Indices, a joint venture with CME Group controlled by the Company, received a “Wells Notice” from the Staff of the SEC stating that the Staff has made a preliminary determination to recommend that the SEC file an enforcement action against Indices. The proposed action would allege violations of federal securities laws with respect to the absence of disclosure of a quality assurance mechanism and the impact of that mechanism on certain volatility related index values published on one business day in 2018. The Staff’s recommendation may involve a civil injunctive action, a cease and desist proceeding, disgorgement, pre-judgment interest and civil money penalties. The Wells Notice is neither a formal allegation nor a finding of wrongdoing. It allows Indices the opportunity to provide its perspective and to address the issues raised by the Staff before any decision is made by the SEC on whether to authorize the commencement of an enforcement proceeding. Indices has been cooperating with the SEC in this matter and intends to continue to do so.

The Company is aware of a potential class action complaint relating to alleged investment losses in collateralized debt obligations rated by Ratings prior to the financial crisis, which was filed in Australia on August 7, 2020 against the Company and a subsidiary of the Company. The Company and its subsidiary have not been served. We can provide no assurance that we will not be obligated to pay significant amounts in order to resolve these matters on terms deemed acceptable.

From time to time, the Company receives customer complaints, particularly, though not exclusively, in its Ratings and Indices segments. The Company believes it has strong contractual protections in the terms and conditions included in its arrangements with customers. Nonetheless, in the interest of managing customer relationships, the Company from time to time engages in

dialogue with such customers in an effort to resolve such complaints, and if such complaints cannot be resolved through dialogue, may face litigation regarding such complaints. The Company does not expect to incur material losses as a result of these matters.

In addition, various government and self-regulatory agencies frequently make inquiries and conduct investigations into our compliance with applicable laws and regulations, including those related to ratings activities and antitrust matters. For example, as a nationally recognized statistical rating organization registered with the SEC under Section 15E of the Securities Exchange Act of 1934, S&P Global Ratings is in ongoing communication with the staff of the SEC regarding compliance with its extensive obligations under the federal securities laws. Although S&P Global seeks to promptly address any compliance issues that it detects or that the staff of the SEC or another regulator raises, there can be no assurance that the SEC or another regulator will not seek remedies against S&P Global for one or more compliance deficiencies. Any of these proceedings, investigations or inquiries could ultimately result in adverse judgments, damages, fines, penalties or activity restrictions, which could adversely impact our consolidated financial condition, cash flows, business or competitive position.

In view of the uncertainty inherent in litigation and government and regulatory enforcement matters, we cannot predict the eventual outcome of such matters or the timing of their resolution, or in most cases reasonably estimate what the eventual judgments, damages, fines, penalties or impact of activity (if any) restrictions may be. As a result, we cannot provide assurance that such outcomes will not have a material adverse effect on our consolidated financial condition, cash flows, business or competitive position. As litigation or the process to resolve pending matters progresses, as the case may be, we will continue to review the latest information available and assess our ability to predict the outcome of such matters and the effects, if any, on our consolidated financial condition, cash flows, business or competitive position, which may require that we record liabilities in the consolidated financial statements in future periods.