AON PLC, 10-K filed on 2/19/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Feb. 15, 2019
Jun. 29, 2018
Document and Entity Information      
Entity Registrant Name Aon plc    
Entity Central Index Key 0000315293    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Amendment Flag false    
Current Fiscal year End Date --12-31    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   239,999,442  
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Entity Public Float     $ 33,332,666,779
v3.10.0.1
Consolidated Statements of Income - USD ($)
shares in Millions, $ in Millions
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenue                      
Total revenue $ 2,770 $ 2,349 $ 2,561 $ 3,090 $ 2,909 $ 2,340 $ 2,368 $ 2,381 $ 10,770 $ 9,998 $ 9,409
Expenses                      
Compensation and benefits                 6,103 6,003 5,514
Information technology                 484 419 386
Premises                 370 348 343
Depreciation of fixed assets                 176 187 162
Amortization and impairment of intangible assets                 593 704 157
Other general expenses                 1,500 1,272 1,036
Total operating expenses                 9,226 8,933 7,598
Operating income 499 262 (16) 799 601 256 (127) 335 1,544 1,065 1,811
Interest income                 5 27 9
Interest expense                 (278) (282) (282)
Other income (expense)                 (25) (125) (137)
Income from continuing operations before income taxes                 1,246 685 1,401
Income taxes                 146 250 148
Net income from continuing operations 284 155 57 604 17 196 (43) 265 1,100 435 1,253
Net income from discontinued operations 69 (2) 1 6 (29) (4) 821 40 74 828 177
Net income 353 153 58 610 (12) 192 778 305 1,174 1,263 1,430
Less: Net income attributable to noncontrolling interests 8 6 10 16 7 7 9 14 40 37 34
Net income attributable to Aon shareholders $ 345 $ 147 $ 48 $ 594 $ (19) $ 185 $ 769 $ 291 $ 1,134 $ 1,226 $ 1,396
Basic net income per share attributable to Aon shareholders                      
Basic net income per share attributable to Aon shareholders, continuing operations (in dollars per share) $ 1.14 $ 0.61 $ 0.19 $ 2.37 $ 0.04 $ 0.74 $ (0.20) $ 0.95 $ 4.32 $ 1.54 $ 4.55
Basic net income per share attributable to Aon shareholders, discontinued operations (in dollars per share) 0.28 (0.01) 0.01 0.02 (0.12) (0.02) 3.13 0.15 0.30 3.20 0.66
Basic net income per share attributable to Aon shareholders (in dollars per share) 1.42 0.60 0.20 2.39 (0.08) 0.72 2.93 1.10 4.62 4.74 5.21
Diluted net income per share attributable to Aon shareholders                      
Diluted net income per share attributable to Aon shareholders, continuing operations (in dollars per share) 1.13 0.61 0.19 2.35 0.04 0.73 (0.20) 0.94 4.29 1.53 4.51
Diluted net income per share attributable to Aon shareholders, discontinued operations (in dollars per share) 0.28 (0.01) 0.00 0.02 (0.11) (0.01) 3.13 0.15 0.30 3.17 0.65
Diluted net income per share attributable to Aon shareholders (in dollars per share) $ 1.41 $ 0.60 $ 0.19 $ 2.37 $ (0.07) $ 0.72 $ 2.93 $ 1.09 $ 4.59 $ 4.70 $ 5.16
Weighted average ordinary shares outstanding - basic (in shares)                 245.2 258.5 268.1
Weighted average ordinary shares outstanding - diluted (in shares)                 247.0 260.7 270.3
v3.10.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]                      
Net income $ 353 $ 153 $ 58 $ 610 $ (12) $ 192 $ 778 $ 305 $ 1,174 $ 1,263 $ 1,430
Less: Net income attributable to noncontrolling interests 8 6 10 16 7 7 9 14 40 37 34
Net income attributable to Aon shareholders $ 345 $ 147 $ 48 $ 594 $ (19) $ 185 $ 769 $ 291 1,134 1,226 1,396
Other comprehensive income (loss), net of tax:                      
Change in fair value of financial instruments                 11 12 (12)
Foreign currency translation adjustments                 (444) 390 (495)
Postretirement benefit obligation                 17 19 16
Total other comprehensive income (loss)                 (416) 421 (491)
Less: Other comprehensive income (loss) attributable to noncontrolling interests                 (4) 5 (2)
Total other comprehensive income (loss) attributable to Aon shareholders                 (412) 416 (489)
Comprehensive income attributable to Aon shareholders                 $ 722 $ 1,642 $ 907
v3.10.0.1
Consolidated Statements of Financial Position - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 656 $ 756
Short-term investments 172 529
Receivables, net 2,760 2,478
Fiduciary assets 10,166 9,625
Other current assets 618 289
Total current assets 14,372 13,677
Goodwill 8,171 8,358
Intangible assets, net 1,149 1,733
Fixed assets, net 588 564
Deferred tax assets 561 389
Prepaid pension 1,133 1,060
Other non-current assets 448 307
Total assets 26,422 26,088
Current liabilities    
Accounts payable and accrued liabilities 1,943 1,961
Short-term debt and current portion of long-term debt 251 299
Fiduciary liabilities 10,166 9,625
Other current liabilities 936 870
Total current liabilities 13,296 12,755
Long-term debt 5,993 5,667
Deferred tax liabilities 181 127
Pension, other postretirement, and postemployment liabilities 1,636 1,789
Other non-current liabilities 1,097 1,102
Total liabilities 22,203 21,440
Equity    
Ordinary shares - $0.01 nominal value Authorized: 750 shares (issued: 2018 - 240.1; 2017 - 247.6) 2 2
Additional paid-in capital 5,965 5,775
Retained earnings 2,093 2,302
Accumulated other comprehensive loss (3,909) (3,496)
Total Aon shareholders' equity 4,151 4,583
Noncontrolling interests 68 65
Total equity 4,219 4,648
Total liabilities and equity $ 26,422 $ 26,088
v3.10.0.1
Consolidated Statements of Financial Position (Parenthetical) - $ / shares
Dec. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Ordinary shares, nominal or par value (in dollars per share) $ 0.01 $ 0.01
Ordinary shares, Authorized shares 750,000,000 750,000,000
Ordinary shares, issued shares 240,100,000 247,600,000
v3.10.0.1
Consolidated Statements of Shareholders' Equity - USD ($)
shares in Millions, $ in Millions
Total
Ordinary Shares and Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss, Net of Tax
Non-controlling Interests
Beginning Balance (in shares) at Dec. 31, 2015   269.8      
Beginning Balance at Dec. 31, 2015 $ 6,059 $ 5,412 $ 4,013 $ (3,423) $ 57
Increase (Decrease) in Shareholders' Equity          
Net income 1,430   1,396   34
Shares issued - employee stock compensation plans (in shares)   4.3      
Shares issued — employee stock compensation plans (125) $ (125)      
Shares purchased (in shares)   (12.1)      
Shares purchased (1,257)   (1,257)    
Tax benefit — employee benefit plans (4) $ (4)      
Share-based compensation expense 331 331      
Dividends to shareholders ($1.56 per share) (345)   (345)    
Change in fair value of financial instruments (12)     (12)  
Net foreign currency translation adjustments (495)     (493) (2)
Net postretirement benefit obligation 16     16  
Net purchases of shares from noncontrolling interests (38) $ (34)     (4)
Dividends paid to noncontrolling interests on subsidiary common stock (28)       (28)
Ending Balance (in shares) at Dec. 31, 2016   262.0      
Ending Balance at Dec. 31, 2016 5,532 $ 5,580 3,807 (3,912) 57
Increase (Decrease) in Shareholders' Equity          
Net income 1,263   1,226   37
Shares issued - employee stock compensation plans (in shares)   3.6      
Shares issued — employee stock compensation plans (121) $ (120) (1)    
Shares purchased (in shares)   (18.0)      
Shares purchased (2,415)   (2,415)    
Share-based compensation expense 321 $ 321      
Dividends to shareholders ($1.56 per share) (364)   (364)    
Change in fair value of financial instruments 12     12  
Net foreign currency translation adjustments 390     385 5
Net postretirement benefit obligation 19     19  
Net purchases of shares from noncontrolling interests (11) $ (4)     (7)
Dividends paid to noncontrolling interests on subsidiary common stock $ (27)       (27)
Ending Balance (in shares) at Dec. 31, 2017 247.6 247.6      
Ending Balance at Dec. 31, 2017 $ 4,648 $ 5,777 2,302 (3,496) 65
Increase (Decrease) in Shareholders' Equity          
Net income 1,174   1,134   40
Shares issued - employee stock compensation plans (in shares)   2.5      
Shares issued — employee stock compensation plans (148) $ (148) 0    
Shares purchased (in shares)   (10.0)      
Shares purchased (1,454)   (1,454)    
Share-based compensation expense 338 $ 338      
Dividends to shareholders ($1.56 per share) (382)   (382)    
Change in fair value of financial instruments 11     11  
Net foreign currency translation adjustments (444)     (440) (4)
Net postretirement benefit obligation 17     17  
Net purchases of shares from noncontrolling interests (1) $ 0     (1)
Dividends paid to noncontrolling interests on subsidiary common stock $ (32)       (32)
Ending Balance (in shares) at Dec. 31, 2018 240.1 240.1      
Ending Balance at Dec. 31, 2018 $ 4,219 $ 5,967 $ 2,093 $ (3,909) $ 68
v3.10.0.1
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Stockholders' Equity [Abstract]      
Dividends (in dollars per share) $ 1.56 $ 1.41 $ 1.29
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities      
Net income $ 1,174 $ 1,263 $ 1,430
Net income from discontinued operations 74 828 177
Adjustments to reconcile net income to cash provided by operating activities:      
Loss (gain) from sales of businesses and investments, net 6 16 (39)
Depreciation of fixed assets 176 187 162
Amortization and impairment of intangible assets 593 704 157
Share-based compensation expense 338 319 306
Deferred income taxes (225) (18) (24)
Change in assets and liabilities:      
Fiduciary receivables (679) 171 595
Short-term investments — funds held on behalf of clients (320) (135) (540)
Fiduciary liabilities 999 (36) (55)
Receivables, net (127) (254) (105)
Accounts payable and accrued liabilities 25 96 53
Restructuring reserves 23 172 0
Current income taxes 34 (914) (42)
Pension, other postretirement and other postemployment liabilities (259) (66) 42
Other assets and liabilities 2 (8) 66
Cash provided by operating activities - continuing operations 1,686 669 1,829
Cash provided by operating activities - discontinued operations 0 65 497
Cash provided by operating activities 1,686 734 2,326
Cash flows from investing activities      
Proceeds from investments 71 68 43
Payments for investments (80) (64) (64)
Net sales (purchases) of short-term investments — non-fiduciary 348 (232) 61
Acquisition of businesses, net of cash acquired (58) (1,029) (879)
Sale of businesses, net of cash sold (10) 4,246 107
Capital expenditures (240) (183) (156)
Cash provided by (used for) investing activities - continuing operations 31 2,806 (888)
Cash used for investing activities - discontinued operations 0 (19) (66)
Cash provided by (used for) investing activities 31 2,787 (954)
Cash flows from financing activities      
Share repurchase (1,470) (2,399) (1,257)
Issuance of shares for employee benefit plans (149) (121) (129)
Issuance of debt 5,754 1,654 3,467
Repayment of debt (5,417) (1,999) (2,945)
Cash dividends to shareholders (382) (364) (345)
Noncontrolling interests and other financing activities (35) (36) (77)
Cash used for financing activities - continuing operations (1,699) (3,265) (1,286)
Cash used for financing activities - discontinued operations 0 0 0
Cash used for financing activities (1,699) (3,265) (1,286)
Effect of exchange rates on cash and cash equivalents (118) 69 (39)
Net increase (decrease) in cash and cash equivalents (100) 325 47
Cash and cash equivalents at beginning of period 756 431 384
Cash and cash equivalents at end of period 656 756 431
Supplemental disclosures:      
Interest paid 266 272 272
Income taxes paid, net of refunds $ 337 $ 1,182 $ 218
v3.10.0.1
Basis of Presentation
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
Basis of Presentation
The accompanying Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Financial Statements include the accounts of Aon and its controlled subsidiaries. Intercompany accounts and transactions have been eliminated. The Financial Statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for all periods presented.
Use of Estimates
The preparation of the accompanying Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of reserves and expenses. These estimates and assumptions are based on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management believes its estimates to be reasonable given the current facts available. Aon adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets, and foreign currency exchange rate movements increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment would, if applicable, be reflected in the Financial Statements in future periods.
v3.10.0.1
Summary of Significant Accounting Principles and Practices
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Principles and Practices
Summary of Significant Accounting Principles and Practices
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Aon plc and those entities in which the Company has a controlling financial interest. To determine if Aon holds a controlling financial interest in an entity, the Company first evaluates if it is required to apply the variable interest entity (VIE) model to the entity, otherwise, the entity is evaluated under the voting interest model. Where Aon holds rights that give it the power to direct the activities of a VIE that most significantly impact the VIE's economic performance, combined with a variable interest that gives the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, the Company has a controlling financial interest in that VIE. Aon holds a controlling financial interest in entities that are not VIEs where it, directly or indirectly, holds more than 50% of the voting rights or where it exercises control through substantive participating rights or as a general partner.
Revenue Recognition
The Company generates revenues primarily through commissions, compensation from insurance and reinsurance companies for services provided to them, and fees from customers. Commissions and fees for brokerage services vary depending upon several factors, which may include the amount of premium, the type of insurance or reinsurance coverage provided, the particular services provided to a client, insurer, or reinsurer, and the capacity in which the Company acts. Compensation from insurance and reinsurance companies includes: (1) fees for consulting and analytics services and (2) fees and commissions for administrative and other services provided to or on behalf of insurers. In Aon’s capacity as an insurance and reinsurance broker, the service promised to the customer is placement of an effective insurance or reinsurance policy, respectively. At the completion of the insurance or reinsurance policy placement process once coverage is effective, the customer has obtained control over the services promised by the Company. Judgment is not typically required when assessing whether the coverage is effective. Fees from clients for advice and consulting services are dependent on the extent and value of the services provided. Payment terms for the Company’s principal service lines are discussed below; the Company believes these terms are consistent with current industry practices. Significant financing components are typically not present in Aon’s arrangements.
The Company recognizes revenue when control of the promised services is transferred to the customer in the amount that best reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements where control is transferred over time, an input or output method is applied that represents a faithful depiction of the progress towards completion of the performance obligation. For arrangements that include variable consideration, the Company assesses whether any amounts should be constrained. For arrangements that include multiple performance obligations, the Company allocates consideration based on their relative fair values.
Costs incurred by the Company in obtaining a contract are capitalized and amortized on a systematic basis that is consistent with the transfer of control of the services to which the asset relates, considering anticipated renewals when applicable. Certain contract related costs, including pre-placement brokerage costs, are capitalized as a cost to fulfill and are amortized on a systematic basis consistent with the transfer of control of the services to which the asset relates, which is generally less than one year.
The Company has elected to apply practical expedients to not disclose the revenue related to unsatisfied performance obligations if (1) the contract has an original duration of 1 year or less, (2) the Company has recognized revenue for the amount in which it has the right to bill, and (3) the variable consideration is allocated entirely to an unsatisfied performance obligation which is recognized as a series of distinct goods or services that form a single performance obligation.

Disaggregation of Revenue
The following is a description of principal service lines from which the Company generates its revenue:
Commercial Risk Solutions includes retail brokerage, cyber solutions, global risk consulting, and captives. Revenue primarily includes insurance commissions and fees for services rendered. Revenue is predominantly recognized at a point in time upon the effective date of the underlying policy, or for a limited number of arrangements, over the term of the arrangement using output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements recognized over time, various output measures, including units transferred and time elapsed, are utilized to provide a faithful depiction of the progress towards completion of the performance obligation. Revenue is recorded net of allowances for estimated policy cancellations, which are determined based on an evaluation of historical and current cancellation data. Commissions and fees for brokerage services may be invoiced near the effective date of the underlying policy or over the term of the arrangement in installments during the policy period.
Reinsurance Solutions includes treaty and facultative reinsurance brokerage and capital markets. Revenue primarily includes reinsurance commissions and fees for services rendered. Revenue is predominantly recognized at a point in time upon the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement using output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. For arrangements recognized over time, various output measures, including units delivered and time elapsed, are utilized to provide a faithful depiction of the progress towards completion of the performance obligation. Commissions and fees for brokerage services may be invoiced at the inception of the reinsurance period for certain reinsurance brokerage, or more commonly, over the term of the arrangement in installments based on deposit or minimum premiums for most treaty reinsurance arrangements.
Retirement Solutions includes core retirement, investment consulting, and talent, rewards & performance. Revenue consists primarily of fees paid by customers for consulting services, such as risk management strategies, health and benefits, and human capital consulting services. Revenue recognized for these arrangements is predominantly recognized over the term of the arrangement using input or output measures to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services, or for certain arrangements, at a point in time upon completion of the services. For consulting arrangements recognized over time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the services to the customer, utilizing an appropriate input or output measure to provide a reasonable assessment of the progress towards completion of the performance obligation including units delivered or time elapsed. Fees paid by customers for consulting services are typically charged on an hourly, project or fixed-fee basis, and revenue for these arrangements is typically recognized based on time incurred, days elapsed, or reports delivered. Revenue from time-and-materials or cost-plus arrangements are recognized as services are performed using input or output measures to provide a reasonable assessment of the progress towards completion of the performance obligation including hours worked, and revenue for these arrangements is typically recognized based on time and materials incurred. Reimbursements received for out-of-pocket expenses are recorded as a component of revenue. Payment terms vary but are typically over the contract term in installments.
Health Solutions includes health and benefits brokerage and health care exchanges. Revenue primarily includes insurance commissions and fees for services rendered. For brokerage commissions, revenue is predominantly recognized at the effective date of the underlying policy (or policies), or for a limited number of arrangements, over the term of the arrangement to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services using input or output measures, including units delivered or time elapsed, to provide a faithful depiction of the progress towards completion of the performance obligation. Revenue from health care exchange arrangements are typically recognized upon successful enrollment of participants, net of a reserve for estimated cancellations. Commissions and fees for brokerage services may be invoiced at the effective date of the underlying policy or over the term of the arrangement in installments during the policy period. Payment terms for other services vary but are typically over the contract term in installments.
Data & Analytic Services includes Affinity, Aon InPoint, and ReView.  Revenue consists primarily of fees for services rendered and is generally recognized over the term of the arrangement to depict the transfer of control of the services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Payment terms vary but are typically over the contract term in installments. For Data & Analytic Services arrangements recognized over time, revenue will be recognized based on a measure of progress that depicts the transfer of control of the services to the customer, utilizing an appropriate input or output measure to provide a faithful depiction of the progress towards completion of the performance obligation, including units delivered or time elapsed. Input and output measures utilized vary based on the arrangement but typically include reports provided or days elapsed.
Share-Based Compensation Costs
Share-based payments to employees, including grants of restricted share units and performance share awards, are measured based on estimated grant date fair value. The Company recognizes compensation expense over the requisite service period for awards expected to ultimately vest. Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates.
Pension and Other Postretirement Benefits
The Company records net periodic cost relating to its pension and other postretirement benefit plans based on calculations that include various actuarial assumptions, including discount rates, assumed rates of return on plan assets, inflation rates, mortality rates, compensation increases, and turnover rates. The Company reviews its actuarial assumptions on an annual basis and modifies these assumptions based on current rates and trends. The effects of gains, losses, and prior service costs and credits are amortized over future service periods or future estimated lives if the plans are frozen. The funded status of each plan, calculated as the fair value of plan assets less the benefit obligation, is reflected in the Company’s Consolidated Statements of Financial Position using a December 31 measurement date.
Net Income per Share
Basic net income per share is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding, including participating securities, which consist of unvested share awards with non-forfeitable rights to dividends. Diluted net income per share is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding, which have been adjusted for the dilutive effect of potentially issuable ordinary shares, including certain contingently issuable shares. The diluted earnings per share calculation reflects the more dilutive effect of either (1) the two-class method that assumes that the participating securities have not been exercised, or (2) the treasury stock method.
Potentially issuable shares are not included in the computation of diluted income per share if their inclusion would be antidilutive.
Cash and Cash Equivalents and Short-term Investments
Cash and cash equivalents include cash balances and all highly liquid investments with initial maturities of three months or less. Short-term investments consist of money market funds. The estimated fair value of Cash and cash equivalents and Short-term investments approximates their carrying values.
At December 31, 2018, Cash and cash equivalents and Short-term investments totaled $828 million compared to $1,285 million at December 31, 2017. Of the total balance, $91 million and $96 million was restricted as to its use at December 31, 2018 and 2017, respectively. Included within the December 31, 2018 and 2017 balances, respectively, were £42.7 million ($53.9 million at December 31, 2018 exchanges rates) and £42.7 million ($57.1 million at December 31, 2017 exchange rates) of operating funds required to be held by the Company in the U.K. by the FCA, which were included in Short-term investments. 
Fiduciary Assets and Liabilities
In its capacity as an insurance agent and broker, Aon collects premiums from insureds and, after deducting its commission, remits the premiums to the respective insurers. Aon also collects claims or refunds from insurers on behalf of insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers are recorded as Fiduciary assets in the Company’s Consolidated Statements of Financial Position. Unremitted insurance premiums and claims are held in a fiduciary capacity and the obligation to remit these funds is recorded as Fiduciary liabilities in the Company’s Consolidated Statements of Financial Position.
Aon held fiduciary assets for premiums collected from insureds but not yet remitted to insurance companies and claims collected from insurance companies but not yet remitted to insureds of $3.9 billion and $3.7 billion at December 31, 2018 and 2017, respectively. These funds and a corresponding liability are included in Fiduciary assets and Fiduciary liabilities, respectively, in the accompanying Consolidated Statements of Financial Position.
Allowance for Doubtful Accounts
The Company’s allowance for doubtful accounts with respect to receivables is based on a combination of factors, including evaluation of historical write-offs, aging of balances, and other qualitative and quantitative analyses. Receivables, net included an allowance for doubtful accounts of $62 million and $59 million at December 31, 2018 and 2017, respectively.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Included in this category is internal use software, which is software that is acquired, internally-developed or modified solely to meet internal needs, with no plan to market externally. Costs related to directly obtaining, developing, or upgrading internal use software are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which are generally as follows:
Asset Description
 
Expected Life
Software
 
Lesser of the life of an associated license, or 4 to 7 years
Leasehold improvements
 
Lesser of estimated useful life or lease term, not to exceed 10 years
Furniture, fixtures and equipment
 
4 to 10 years
Computer equipment
 
4 to 6 years
Buildings
 
35 years
Automobiles
 
6 years

Goodwill and Intangible Assets
Goodwill represents the excess of acquisition cost over the fair value of the net assets in the acquisition of a business. Goodwill is allocated to various reporting units. Upon disposition of a business entity, goodwill is allocated to the disposed entity based on the fair value of that entity compared to the fair value of the reporting unit in which it was included. Goodwill is not amortized, but instead is tested for impairment at least annually. The goodwill impairment test is performed at the reporting unit level. The Company may initially perform a qualitative analysis to determine if it is more likely than not that the goodwill balance is impaired. If a qualitative assessment is not performed or if a determination is made that it is not more likely than not that their value of the reporting unit exceeds its carrying amount, then the Company will perform a two-step quantitative analysis. First, the fair value of each reporting unit is compared to its carrying value. If the fair value of the reporting unit is less than its carrying value, the Company performs a hypothetical purchase price allocation based on the reporting unit’s fair value to determine the fair value of the reporting unit’s goodwill. Any resulting difference will be a charge to Amortization and impairment of intangible assets in the Consolidated Statements of Income in the period in which the determination is made. Fair value is determined using a combination of present value techniques and market prices of comparable businesses.
We classify our intangible assets acquired as either tradenames, customer-related and contract-based, or technology and other. Amortization basis and estimated useful lives by intangible asset type are generally as follows:
Intangible Asset Description
 
Amortization Basis
 
Expected Life
Customer-related and contract-based
 
In line with underlying cash flows
 
7 to 20 years
Tradenames
 
Straight-line

1 to 3 years
Technology and other
 
Straight-line

5 to 7 years

Derivatives
Derivative instruments are recognized in the Consolidated Statements of Financial Position at fair value. Where the Company has entered into master netting agreements with counterparties, the derivative positions are netted by counterparties and are reported accordingly in Other assets or Other liabilities. Changes in the fair value of derivative instruments are recognized in earnings each period, unless the derivative is designated and qualifies as a cash flow or net investment hedge.
The Company has historically designated the following hedging relationships for certain transactions: (1) a hedge of the change in fair value of a recognized asset or liability or firm commitment (“fair value hedge”), (2) a hedge of the variability in cash flows from a recognized variable-rate asset or liability or forecasted transaction (“cash flow hedge”), and (3) a hedge of the net investment in a foreign operation (“net investment hedge”).
In order for a derivative to qualify for hedge accounting, the derivative must be formally designated as a fair value, cash flow, or a net investment hedge by documenting the relationship between the derivative and the hedged item. The documentation must include a description of the hedging instrument, the hedged item, the risk being hedged, Aon’s risk management objective and strategy for undertaking the hedge, the method for assessing the effectiveness of the hedge, and the method for measuring hedge ineffectiveness. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in either the fair value or cash flows of the hedged item at both the inception of the hedge and on an ongoing basis. Aon assesses the ongoing effectiveness of its hedges and measures and records hedge ineffectiveness, if any, at the end of each quarter or more frequently if facts and circumstances require.
For a derivative designated as a fair value hedging instrument, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For a cash flow hedge that qualifies for hedge accounting, the effective portion of the change in fair value of a hedging instrument is recognized in Other comprehensive income (“OCI”) and subsequently reclassified to earnings in the same period the hedged item impacts earnings. The ineffective portion of the change in fair value is recognized immediately in earnings. For a net investment hedge, the effective portion of the change in fair value of the hedging instrument is recognized in OCI as part of the cumulative translation adjustment, while the ineffective portion is recognized immediately in earnings.
Changes in the fair value of a derivative that is not designated as part of a hedging relationship (commonly referred to as an “economic hedge”) are recorded in Other income (expense) in the Consolidated Statements of Income.
The Company discontinues hedge accounting prospectively when (1) the derivative expires or is sold, terminated, or exercised, (2) the qualifying criteria are no longer met, or (3) management removes the designation of the hedging relationship.
Foreign Currency
Certain of the Company’s non-U.S. operations use their respective local currency as their functional currency. These operations that do not have the U.S. dollar as their functional currency translate their financial statements at the current rates of exchange in effect at the balance sheet date and revenues and expenses using rates that approximate those in effect during the period. The resulting translation adjustments are included in Net foreign currency translation adjustments within the Consolidated Statements of Shareholders’ Equity. Further, for all entities, gains and losses from the remeasurement of monetary assets and liabilities that are denominated in a non-functional currency of that entity are included in Other income (expense) within the Consolidated Statements of Income.
Income Taxes
Deferred income taxes are recognized for the effect of temporary differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted marginal tax rates and laws that are currently in effect. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in the period when the rate change is enacted.
Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. Deferred tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carry-forwards, taxable income in carry-back years, and tax planning strategies that are both prudent and feasible.
The Company recognizes the effect of income tax positions only if sustaining those positions is more likely than not. Tax positions that meet the more likely than not recognition threshold but are not highly certain are initially and subsequently measured based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement with the taxing authority.  Only information that is available at the reporting date is considered in the Company’s recognition and measurement analysis, and events or changes in facts and circumstances are accounted for in the period in which the event or change in circumstance occurs. 
The Company records penalties and interest related to unrecognized tax benefits in Income taxes in the Company’s Consolidated Statements of Income.
New Accounting Pronouncements
Adoption of New Accounting Standards
Presentation of Net Periodic Pension and Postretirement Benefit Costs
In March 2017, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. Additionally, only the service cost component is eligible for capitalization, when applicable. The Company has applied the new guidance retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the Consolidated Statement of Income, and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension costs and net periodic postretirement benefit cost in assets. The new guidance allows a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company did not apply the practical expedient upon adoption of this guidance. The new guidance was effective for Aon in the first quarter of 2018. The adoption of this guidance had no impact on the net income of the Company. 
Upon adoption of the guidance, the presentation of the results reflect a change in Operating income (loss) offset by an equal and offsetting change in Other income (expense) for each period, as follows:
 
 
Years ended December 31
 
 
2017
 
2016
 
 
As Reported
 
Adjustments
 
As Adjusted
 
As Reported
 
Adjustments
 
As Adjusted
Operating income (loss) (1)
 
$
979

 
$
86

 
$
1,065

 
$
1,638

 
$
173

 
$
1,811

Other income (expense)
 
$
(39
)
 
$
(86
)
 
$
(125
)
 
$
36

 
$
(173
)
 
$
(137
)
(1)
Reclassification from Operating income is recorded in Compensation and benefits.
Income Tax Consequences of Intercompany Transactions
In October 2016, the FASB issued new accounting guidance on the income tax consequences of intra-entity asset transfers other than inventory. The guidance requires that the seller and buyer recognize the consolidated current and deferred income tax consequences of a transaction in the period the transaction occurs rather than deferring to a future period and recognizing those consequences when the asset has been sold to an outside party or otherwise recovered through use (i.e. depreciated, amortized, or impaired). The Company has applied the new guidance on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The new guidance was effective for Aon in the first quarter of 2018. Upon the adoption of this guidance on January 1, 2018, the Company recognized an increase to Deferred tax assets of $23 million, an increase to Deferred tax liabilities of $12 million, and a decrease to Other non-current assets of $26 million on the Consolidated Statement of Financial Position through a cumulative adjustment of $15 million decrease to Retained earnings. For the twelve months ended December 31, 2018, the impact of adopting this guidance on the Consolidated Statement of Income was insignificant.
Statement of Cash Flows
In August 2016, the FASB issued new accounting guidance on the classification of certain cash receipts and cash payments. Under the new guidance, an entity no longer has discretion to choose the classification for a number of transactions, including contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The new standard was effective for the Company in the first quarter of 2018. The adoption of this guidance had no impact on the Company’s Consolidated Statements of Cash Flows.
Financial Assets and Liabilities
In January 2016, the FASB issued new accounting guidance on recognition and measurement of financial assets and financial liabilities. The amendments in the new guidance make targeted improvements, which include the requirement to measure equity investments with readily determinable fair values at fair value through net income, simplification of the impairment assessment for equity investments without readily determinable fair values, adjustments to existing and additional disclosure requirements, and additional tax considerations. The Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with the exception of the amendments related to equity securities without readily determinable fair values, including disclosure requirements, which were applied prospectively. Upon the adoption of this guidance on January 1, 2018, the Company recognized an increase to Accumulated other comprehensive loss of $1 million on the Consolidated Statement of Financial Position through a cumulative adjustment of $1 million increase to Retained earnings. For the twelve months ended December 31, 2018, the impact of adopting this guidance on the Consolidated Statement of Income was insignificant.
Revenue Recognition
In May 2014, the FASB issued a new accounting standard on revenue from contracts with customers (the “Standard” or “ASC 606”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP (“ASC 605”). The core principal of the Standard is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Standard also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. Two methods of transition were permitted upon adoption: full retrospective and modified retrospective. The Company elected to apply the modified retrospective adoption approach to all contracts. Under this approach, prior periods were not restated. Rather, revenues and other disclosures for prior periods were provided in the notes to the financial statements as previously reported under ASC 605, and the cumulative effect of initially applying the guidance was recognized as an adjustment to Retained earnings.
The following summarizes the significant changes to the Company as a result of the adoption of ASC 606 on January 1, 2018.

The Company previously recognized revenue either at a point in time or over a period of time based on the transfer of value to customers or as the remuneration became determinable. Under ASC 606, the revenue related to certain brokerage services recognized over a period of time is recognized on the effective date of the associated policies when control of the policy transfers to the customer. As a result, revenue from these arrangements are typically recognized in earlier periods under ASC 606 in comparison to ASC 605, changing the timing and amount of revenue recognized for annual and interim periods. This change resulted in a significant shift in timing of interim revenue for the Reinsurance Solutions revenue line and, to a lesser extent, certain other brokerage services.

The Standard provides guidance on accounting for certain revenue-related costs including when to capitalize costs associated with obtaining and fulfilling a contract. The majority of these costs were previously expensed as incurred under ASC 605. Assets recognized for the costs to obtain a contract, which includes certain sales commissions, are amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates, considering anticipated renewals when applicable. For situations where the renewal period is one year or less and renewal costs are commensurate with the initial contract, the Company applied a practical expedient and recognizes the costs of obtaining a contract as an expense when incurred. Assets recognized as costs to fulfill a contract, which includes internal costs related to pre-placement broking activities, as well as other costs, are amortized on a systematic basis that is consistent with the transfer of the services to which the asset relates, which is generally less than one year.

As a result of applying the modified retrospective method to adopt ASC 606, the following adjustments were made to the Consolidated Statement of Financial Position as of January 1, 2018:
 
 
December 31,
2017
 
 
 
January 1,
2018
(millions)
 
As Reported
 
Adjustments
 
As Adjusted
Assets
 
 

 
 
 
 

Receivables, net
 
$
2,478

 
$
252

 
$
2,730

Other current assets
 
$
289

 
$
298

 
$
587

Deferred tax assets
 
$
389

 
$
(128
)
 
$
261

Other non-current assets
 
$
307

 
$
145

 
$
452

 
 
 
 
 
 
 
Liabilities
 
 

 
 
 
 

Accounts payable and accrued liabilities
 
$
1,961

 
$
8

 
$
1,969

Other current liabilities
 
$
870

 
$
13

 
$
883

Deferred tax liabilities
 
$
127

 
$
42

 
$
169

Other non-current liabilities
 
$
1,102

 
$
(3
)
 
$
1,099

 
 
 
 
 
 
 
Equity
 
 

 
 
 
 

Total equity
 
$
4,648

 
$
507

 
$
5,155


The following tables summarize the impacts of adopting ASC 606 on the Company’s Consolidated Statement of Income, Financial Position, and Cash Flows as of and for the twelve months ended December 31, 2018.
Consolidated Statement of Income
 
 
Twelve months ended December 31, 2018
(millions)
 
As Reported
 
Adjustments
 
Balances Without Adoption of ASC 606
Revenue
 
 
 
 
 
 
Total revenue
 
$
10,770

 
$
(61
)
 
$
10,709

Expenses
 
 
 
 
 
 
Compensation and benefits
 
$
6,103

 
$
51

 
$
6,154

Other general expenses
 
$
1,500

 
$
(1
)
 
$
1,499

Other income (expense)
 
$
(25
)
 
$
1

 
$
(24
)
Income taxes
 
$
146

 
$
(34
)
 
$
112


Adoption of ASC 606 had a favorable impact of $78 million on net income from continuing operations, or $0.32 per share, for the twelve months ended December 31, 2018.
Consolidated Statement of Financial Position
 
 
As of December 31, 2018
(millions)
 
As Reported
 
Adjustments
 
Balances Without Adoption of ASC 606
Assets
 
 

 
 
 
 

Receivables, net
 
$
2,760

 
$
(301
)
 
$
2,459

Other current assets
 
$
618

 
$
(319
)
 
$
299

Deferred tax assets
 
$
561

 
$
137

 
$
698

Other non-current assets
 
$
448

 
$
(155
)
 
$
293

 
 
 
 
 
 
 
Liabilities
 
 

 
 
 
 

Other current liabilities
 
$
936

 
$
(43
)
 
$
893

Deferred tax liabilities
 
$
181

 
$
(28
)
 
$
153

Other non-current liabilities
 
$
1,097

 
$
2

 
$
1,099

 
 
 
 
 
 
 
Equity
 
 

 
 
 
 

Total equity
 
$
4,219

 
$
(569
)
 
$
3,650


Consolidated Statement of Cash Flows
 
 
Twelve months ended December 31, 2018
(millions)
 
As Reported
 
Adjustments
 
Balances Without Adoption of ASC 606
Cash flows from operating activities
 
 

 
 
 
 

Net income
 
$
1,174

 
$
(78
)
 
$
1,096

Receivables, net
 
$
(127
)
 
$
49

 
$
(78
)
Accounts payable and accrued liabilities
 
$
25

 
$
8

 
$
33

Current income taxes
 
$
34

 
$
(34
)
 
$

Other assets and liabilities
 
$
2

 
$
55

 
$
57


The adoption of ASC 606 had no impact on total Cash provided by operating activities.
Refer to Note 3 “Revenue from Contracts with Customers” for further information.
Accounting Standards Issued but Not Yet Adopted
Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued new accounting guidance related to the disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. The guidance requires sponsors of these plans to provide additional disclosures, including weighted-average interest rates used in the entity’s cash balance pension plans and a narrative description of reasons for any significant gains or losses impacting the benefit obligation for the period, and eliminates certain previous disclosure requirements. The guidance is effective for Aon in the first quarter of 2021 with early adoption permitted and will be applied retrospectively. The Company is currently evaluating the impact that the guidance will have on the Financial Statements and the period of adoption.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the FASB issued new accounting guidance related to reclassification of certain tax effects from accumulated other comprehensive income. The guidance allows a reclassification from accumulated comprehensive income to retained earnings for stranded tax effects resulting from the Tax Reform Act. In addition, the entity is required to provide certain disclosures regarding stranded tax effects. The guidance is effective for Aon in the first quarter of 2019 and early adoption is permitted, including adoption in any interim period. The guidance should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. The Company does not anticipate electing to reclassify stranded tax effects in accumulated other comprehensive income to retained earnings and will adopt the disclosure guidance in the first quarter of 2019. Refer to Note 11 “Income Taxes” for further discussion of the Tax Reform Act.  
Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB issued new accounting guidance on targeted improvements to accounting for hedging activities. The new guidance amends its hedge accounting model to enable entities to better portray their risk management activities in the financial statements. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and requires the effect of a hedging instrument to be presented in the same income statement line as the hedged item. Further, in December 2018, the FASB issued additional guidance which added to the list of U.S. benchmark interest rates that are eligible to be hedged, the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate. Thus, entities may designate the OIS rate in hedging relationships they enter into on or after the date of adoption of this guidance. An entity will apply the new guidance on a modified retrospective basis with a cumulative effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the period of adoption. Changes to income statement presentation and financial statement disclosures will be applied prospectively. The new guidance is effective for Aon in the first quarter of 2019 and early adoption is permitted. The Company will adopt the new guidance in the first quarter of 2019 and does not expect a significant impact on the Financial Statements.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued new accounting guidance on simplifying the test for goodwill impairment. Currently the standard requires an entity to perform a two-step test to determine the amount, if any, of goodwill impairment. In Step 1, an entity compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performs Step 2 and compares the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill is recorded, limited to the amount of goodwill allocated to that reporting unit. The new guidance removes Step 2, resulting in an entity applying a line-step quantitative test and will record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. An entity will apply the new guidance on a prospective basis. The new guidance is effective for Aon in the first quarter of 2020 and early adoption is permitted beginning in the first quarter of 2019. The Company is currently evaluating the period of adoption, but does not expect a significant impact on the Financial Statements.
Credit Losses
In June 2016, the FASB issued new accounting guidance on the measurement of credit losses on financial instruments. The new guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. An entity will apply the new guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The guidance is effective for Aon in the first quarter of 2020 and early adoption is permitted beginning in the first quarter of 2019. The Company is currently evaluating the impact that the standard will have on the Financial Statements and period of adoption.
Leases
In February 2016, the FASB issued a new accounting standard on leases, which requires lessees to recognize assets and liabilities for most leases. Under the new standard, a lessee is required to recognize in the Consolidated Statement of Financial Position liabilities to make future lease payments and right-of-use assets representing its right to use the underlying assets for the lease term. The recognition, measurement, timing, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current U.S. GAAP standards. The new standard is effective for the Company in the first quarter of 2019, with early adoption permitted and must be applied using a modified retrospective transition approach. In July 2018, the FASB amended this guidance and provided an additional transition method with which to adopt the guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. Under this transition method, an entity's reporting for the comparative periods prior to adoption presented in the financial statements would continue to be in accordance with current lease guidance and thus not restated. The Company will adopt the new standard as of January 1, 2019 using the cumulative-effect adjustment transition method approved by the FASB. Additionally, the Company will provide expanded lease disclosures required under the new standard in the first quarter of 2019, including both qualitative and quantitative information. 
The modified retrospective approach includes several optional practical expedients that entities may elect to apply upon transition. The Company has determined it will elect the package of practical expedients permitted under the transition guidance within the new standard, which allows a lessee to carryforward their population of existing leases, the classification of each lease, as well as the treatment of initial direct costs as of the period of adoption. In addition, the Company will elect the practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allows a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease component. Furthermore, the Company has made a policy election to not recognize right-of-use assets and lease liabilities that arise from leases with an initial term of twelve months or less on the Consolidated Statements of Financial Position. Lastly, the Company has determined it will not elect the practical expedient related to hindsight in determining the lease term and in assessing impairment of right-of-use assets.
The Company will implement the standard as of January 1, 2019 and has executed a comprehensive approach to identify arrangements that may contain a lease, has performed completeness assessments over the identified lease population, and has implemented system solutions and processes to appropriately account for the lease right-of-use assets and lease liabilities upon transition and an ongoing basis. Further, control activities related to the adoption of this standard as well as ongoing transactional processes and procedures have been designed and begun to be implemented to ensure compliance with the new standard.
The Company expects to recognize lease liabilities ranging from approximately $1.3 billion to $1.5 billion and corresponding right-of-use assets ranging from $1.1 billion to $1.3 billion on the Consolidated Statements of Financial Position upon the adoption of this standard. The Company does not anticipate that the new standard will have a significant impact on the Consolidated Statements of Income or the Consolidated Statements of Cash Flows.
v3.10.0.1
Revenue from Contracts with Customers
12 Months Ended
Dec. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers
Revenue from Contracts with Customers
Disaggregation of Revenue
The following table summarizes revenue from contracts with customers by principal service line (in millions):
 
 
Years ended December 31
 
 
2018
 
2017
 
2016
Commercial Risk Solutions
 
$
4,652

 
$
4,169

 
$
3,929

Reinsurance Solutions
 
1,563

 
1,429

 
1,361

Retirement Solutions
 
1,865

 
1,755

 
1,707

Health Solutions
 
1,596

 
1,515

 
1,370

Data & Analytic Services
 
1,105

 
1,140

 
1,050

Elimination
 
(11
)
 
(10
)
 
(8
)
Total revenue
 
$
10,770

 
$
9,998

 
$
9,409


Consolidated revenue from contracts with customers by geographic area, which is attributed on the basis of where the services are performed, is as follows (in millions):
 
 
Years ended December 31
 
 
2018
 
2017
 
2016
United States
 
$
4,677

 
$
4,425

 
$
3,981

Americas other than United States
 
940

 
976

 
899

United Kingdom
 
1,555

 
1,436

 
1,354

Europe, Middle East, & Africa other than United Kingdom
 
2,413

 
2,025

 
1,760

Asia Pacific
 
1,185

 
1,136

 
1,415

Total revenue
 
$
10,770

 
$
9,998

 
$
9,409



Contract Costs

The Company recognizes an asset for costs incurred to fulfill a contract for costs that are specifically identified and relate to a contract or anticipated contract, generate or enhance resources used in satisfying the Company’s performance obligations, and are expected to be recovered. Assets recognized as costs to fulfill a contract, which includes internal costs related to pre-placement broking activities, as well as other costs, are amortized on a systematic basis that is consistent with the transfer of control of the services to which the asset relates. The amortization is primarily included in Compensation and benefits on the Consolidated Statements of Income.

An analysis of the changes in the net carrying amount of costs to fulfill contracts with customers is as follows (in millions):
 
 
2018
Balance at beginning of period (1)
 
$
298

Additions
 
1,504

Amortization
 
(1,465
)
Impairment
 

Foreign currency translation and other
 
(8
)
Balance at end of period
 
$
329

(1)
Upon adoption of the new revenue recognition standard on January 1, 2018, Aon capitalized $298 million of costs to fulfill contracts with customers.

The Company capitalizes incremental costs to obtain a contract with a customer that are expected to be recovered. Assets recognized for the costs to obtain a contract, which includes certain sales commissions, will be amortized on a systematic basis that is consistent with the transfer of control of the services to which the asset relates, considering anticipated renewals when applicable. For situations where the renewal period is one year or less and renewal costs are commensurate with the initial contract, the Company has applied a practical expedient and recognized the costs of obtaining a contract as an expense when incurred. The amortization is primarily included in Compensation and benefits on the Consolidated Statements of Income.

An analysis of the changes in the net carrying amount of costs to obtain contracts with customers is as follows (in millions):
 
 
2018
Balance at beginning of period (1)
 
$
145

Additions
 
53

Amortization
 
(41
)
Impairment
 

Foreign currency translation and other
 
(1
)
Balance at end of period
 
$
156

(1)
Upon adoption of the new revenue recognition standard on January 1, 2018, Aon capitalized $145 million of costs to obtain contracts with customers.
Please refer to Note 2 “Summary of Significant Accounting Principles and Practices” for further information regarding the Company’s revenue recognition policy.
v3.10.0.1
Other Financial Data
12 Months Ended
Dec. 31, 2018
Other Financial Data [Abstract]  
Other Financial Data
Other Financial Data
Consolidated Statements of Income Information
Other Income (Expense)
Other income (expense) consists of the following (in millions):
 
Years ended December 31
 
2018
 
2017
 
2016
Foreign currency remeasurement
$
25

 
$
(37
)
 
$
(2
)
Disposal of business
(6
)
 
(16
)
 
39

Pension and other postretirement
1

 
(86
)
 
(173
)
Equity earnings
4

 
12

 
13

Financial instruments
(49
)
 
2

 
(14
)
Total
$
(25
)
 
$
(125
)
 
$
(137
)

Consolidated Statements of Financial Position Information
Allowance for Doubtful Accounts
An analysis of the allowance for doubtful accounts is as follows (in millions):
 
2018
 
2017
 
2016
Balance at January 1
$
59

 
$
56

 
$
58

Provision charged to Other general expenses
24

 
18

 
10

Accounts written off, net of recoveries
(25
)
 
(18
)
 
(15
)
Foreign currency translation
4

 
3

 
3

Balance at December 31
$
62

 
$
59

 
$
56


Other Current Assets
The components of Other current assets are as follows (in millions):
As of December 31
2018
 
2017
Costs to fulfill contracts with customers (1)
$
329

 
$

Taxes receivable
113

 
114

Prepaid expenses
97

 
126

Receivables from the Divested Business (2)
12

 
28

Other
67

 
21

Total
$
618

 
$
289


(1)
Refer to Note 3 “Revenue from Contracts with Customers” for further information.
(2)
Refer to Note 5 “Discontinued Operations” for further information.

Fixed Assets, net
The components of Fixed assets, net are as follows (in millions):
As of December 31
2018
 
2017
Software
$
693

 
$
680

Leasehold improvements
334

 
349

Computer equipment
279

 
295

Furniture, fixtures and equipment
228

 
240

Construction in progress
154

 
79

Other
45

 
90

Fixed assets, gross
1,733

 
1,733

Less: Accumulated depreciation
1,145

 
1,169

Fixed assets, net
$
588

 
$
564


Depreciation expense, which includes software amortization, was $176 million, $187 million, and $162 million for the years ended December 31, 2018, 2017, and 2016, respectively.
Other Non-Current Assets
The components of Other non-current assets are as follows (in millions):
As of December 31
2018
 
2017
Costs to obtain contracts with customers (1)
$
156

 
$

Investments
54

 
57

Taxes receivable
100

 
84

Other
138

 
166

Total
$
448

 
$
307


(1) Refer to Note 3 “Revenue from Contracts with Customers” for further information.
Other Current Liabilities
The components of Other current liabilities are as follows (in millions):
As of December 31
2018
 
2017
Deferred revenue (1)
$
251

 
$
311

Taxes payable (2)
83

 
139

Other
602

 
420

Total
$
936

 
$
870


(1)
During the twelve months ended December 31, 2018, $487 million was recognized in the Consolidated Statements of Income.
(2)
Includes $42 million for the current portion of the Transition Tax as of December 31, 2017. Refer to Note 11 “Income Taxes” for further information on the Transition Tax.
Other Non-Current Liabilities
The components of Other non-current liabilities are as follows (in millions):
As of December 31
2018
 
2017
Taxes payable (1)
$
585

 
$
529

Leases
169

 
153

Compensation and benefits
56

 
67

Deferred revenue
65

 
49

Other
222

 
304

Total
$
1,097

 
$
1,102


(1)
Includes $240 million and $222 million for the non-current portion of the Transition Tax, as of December 31, 2018 and December 31, 2017, respectively. Refer to Note 11 “Income Taxes” for further information on the Transition Tax.
v3.10.0.1
Discontinued Operations
12 Months Ended
Dec. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Discontinued Operations
On February 9, 2017, the Company entered into a Purchase Agreement with Tempo Acquisition, LLC (the “Purchase Agreement”) to sell the Divested Business to an entity formed and controlled by affiliates of The Blackstone Group L.P. (the “Buyer”) and certain designated purchasers that are direct or indirect subsidiaries of the Buyer.
On May 1, 2017, the Buyer purchased all of the outstanding equity interests of the Divested Business, plus certain related assets and liabilities, for a purchase price of $4.3 billion in cash paid at closing, subject to customary adjustments set forth in the Purchase Agreement, and deferred consideration of up to $500 million. Cash proceeds after customary adjustments and before taxes due were $4.2 billion.
Aon and the Buyer entered into certain transaction related agreements at the closing, including two commercial agreements, a transition services agreement, certain intellectual property license agreements, sub-leases, and other customary agreements. Aon expects to continue to be a significant client of the Divested Business and the Divested Business has agreed to use Aon for its broking and other services for a specified period of time.
The financial results of the Divested Business for the years ended December 31, 2018, 2017, and 2016 are presented as Net income from discontinued operations on the Company’s Consolidated Statements of Income. The following table presents the financial results of the Divested Business (in millions):
 
 
Years ended December 31
 
 
2018
 
2017
 
2016
Revenue
 
 
 
 
 
 
Total revenue
 
$

 
$
698

 
$
2,218

Expenses
 
 
 
 
 
 
Total operating expenses
 
12

 
656

 
1,950

Operating Income from discontinued operations
 
(12
)
 
42

 
268

Other income
 

 
10

 

Income from discontinued operations before income taxes
 
(12
)
 
52

 
268

Income tax expense (benefit)
 
(4
)
 
3

 
91

Net income (loss) from discontinued operations, excluding gain
 
(8
)
 
49

 
177

Gain on sale of discontinued operations, net of tax
 
82

 
779

 

Net income from discontinued operations
 
$
74

 
$
828

 
$
177


Upon triggering held for sale criteria in February 2017, Aon ceased depreciating and amortizing all long-lived assets included in discontinued operations. Total operating expenses for the years ended December 31, 2017, and 2016 include, respectively, $8 million and $70 million of depreciation of fixed assets and $11 million and $120 million of intangible asset amortization for the time prior to the Company triggering held for sale criteria.
The Company’s Consolidated Statements of Cash Flows present the operating, investing, and financing cash flows of the Divested Business as discontinued operations. Aon uses a centralized approach to cash management and financing of its operations. Prior to the closing of the Transaction, portions of the Divested Business’s cash were transferred to Aon daily, and Aon would fund the Divested Business as needed. There were no Cash and cash equivalents of discontinued operations at December 31, 2017. Total proceeds received for the sale of the Divested Business and taxes paid as a result of the sale are recognized on the Consolidated Statements of Cash Flows in Cash provided by investing activities - continuing operations and Cash provided by operating activities - continuing operations, respectively.
v3.10.0.1
Restructuring
12 Months Ended
Dec. 31, 2018
Restructuring and Related Activities [Abstract]  
Restructuring
Restructuring
In 2017, Aon initiated a global restructuring plan (the “Restructuring Plan”) in connection with the sale of the Divested Business. The Restructuring Plan is intended to streamline operations across the organization and deliver greater efficiency, insight, and connectivity. The Company expects these restructuring activities and related expenses to affect continuing operations through the fourth quarter of 2019, including an estimated 4,800 to 5,400 role eliminations. In the fourth quarter of 2018, Aon expanded the Restructuring Plan, which resulted in additional expected costs of approximately $200 million, consisting of $150 million of cash investment and $50 million of non-cash charges.
The Restructuring Plan is expected to result in cumulative costs of approximately $1,225 million through the end of the plan, consisting of approximately $450 million in employee termination costs, $130 million in technology rationalization costs, $65 million in lease consolidation costs, $50 million in non-cash asset impairments, and $530 million in other costs, including certain separation costs associated with the sale of the Divested Business.
From the inception of the Restructuring Plan through December 31, 2018, the Company has eliminated 4,366 positions and incurred total expenses of $982 million for restructuring and related separation costs. These charges are included in Compensation and benefits, Information technology, Premises, Depreciation of fixed assets, and Other general expenses in the accompanying Consolidated Statements of Income.
The following table summarizes restructuring and separation costs by type that have been incurred through December 31, 2018 and are estimated to be incurred through the end of the Restructuring Plan (in millions). Estimated costs by type may be revised in future periods as these assumptions are updated:
 
 
Year Ended December 31, 2018
 
Inception to Date
 
Estimated Remaining Costs
 
Estimated Total Cost (1)
Workforce reduction
 
$
115

 
$
414

 
$
36

 
$
450

Technology rationalization (2)
 
47

 
80

 
50

 
130

Lease consolidation (2)
 
28

 
36

 
29

 
65

Asset impairments
 
13

 
39

 
11

 
50

Other costs associated with restructuring and separation (2) (3)
 
282

 
413

 
117

 
530

Total restructuring and related expenses
 
$
485

 
982

 
$
243

 
$
1,225

(1)
Actual costs, when incurred, may vary due to changes in the assumptions built into the Restructuring Plan. Significant assumptions that may change when plans are finalized and implemented include, but are not limited to, changes in severance calculations, changes in the assumptions underlying sublease loss calculations due to changing market conditions, and changes in the overall analysis that might cause the Company to add or cancel component initiatives.
(2)
Total contract termination costs incurred under the Restructuring Plan associated with Technology rationalizations, Lease consolidations, and Other costs associated with restructuring and separation, respectively, for the twelve months ended December 31, 2018 were $5 million, $25 million, and $85 million; and since inception of the Restructuring Plan, were $6 million, $33 million, and $88 million, respectively. Total estimated contract termination costs expected to be incurred under the Restructuring Plan associated with Technology rationalizations, Lease consolidations, and Other costs associated with restructuring and separation, respectively, are $15 million, $80 million, and $95 million.
(3)
Other costs associated with the Restructuring Plan include primarily those to separate the Divested Business, as well as moving costs and consulting and legal fees. These costs are generally recognized when incurred.
The changes in the Company’s liabilities for the Restructuring Plan as of December 31, 2018 are as follows (in millions):
 
 
Restructuring Plan
Balance at December 31, 2017
 
$
186

Expensed
 
448

Cash payments
 
(425
)
Foreign currency translation and other
 
(8
)
Balance at December 31, 2018
 
$
201

v3.10.0.1
Acquisitions and Dispositions of Businesses
12 Months Ended
Dec. 31, 2018
Business Combinations and Discontinued Operations and Disposal Groups [Abstract]  
Acquisitions and Dispositions of Businesses
Acquisitions and Dispositions of Businesses
Acquisitions
The Company completed eight acquisitions during the year ended December 31, 2018 and seventeen acquisitions during the year ended December 31, 2017. The following table includes the preliminary fair values of consideration transferred, assets acquired, and liabilities assumed as a result of the Company’s acquisitions (in millions):
 
For the year ended December 31, 2018
Consideration transferred
 
Cash
$
55

Deferred and contingent consideration
18

Aggregate consideration transferred
$
73

 
 
Assets acquired
 
Cash and cash equivalents
$
1

Receivables, net
4

Goodwill
38

Intangible assets, net
34

Other assets
4

Total assets acquired
81

Liabilities assumed
 
Current liabilities
6

Other liabilities
2

Total liabilities assumed
8

Net assets acquired
$
73


Intangible assets are primarily customer-related and contract-based assets. Those intangible assets acquired as part of a business acquisition in 2018 had a weighted average useful economic life of 7 years. Acquisition related costs incurred and recognized within Other general expenses for the year ended December 31, 2018 were $2 million. Total revenue for these acquisitions included in the Company’s Consolidated Statement of Income for the year ended December 31, 2018 was approximately $17 million.
The results of operations of these acquisitions are included in the Consolidated Financial Statements as of the respective acquisition dates. The results of operations of the Company would not have been materially different if these acquisitions had been reported from the beginning of the period in which they were acquired.
2018 Acquisitions
On December 31, 2018, the Company completed the transaction to acquire certain assets of Bill Beatty Insurance Agency, Inc. based in the United States.
On November 15, 2018, the Company completed the transaction to acquire certain business and assets of North Harbour Insurance Services (1985) Limited, a New Zealand-based firm.
On October 25, 2018, the Company completed the transaction to acquire 100% capital of GEFASS S.R.L and GE.F.IT S.R.L., Italy-based firms specialized in Bancassurance schemes.
On May 9, 2018, the Company completed the transaction to acquire certain assets of 601West, a division of Lee & Hayes, P.L.L.C. based in the United States.
On April 24, 2018, the Company completed the transaction to acquire Inspiring Benefits, S.L., a Spain-based firm specialized in employee loyalty, wellbeing, and rewards programs.
On March 1, 2018, the Company completed the transaction to acquire the business and assets of the trade credit business of Niche International Business Proprietary Limited, a trade credit brokerage based in Johannesburg, South Africa.
On March 1, 2018, the Company completed the transaction to acquire Affinity Risk Partners (Brokers) Pty. Ltd., an insurance broker in Victoria, Australia.
On January 19, 2018, the Company completed the transaction to acquire substantially all of the assets of The Burchfield Group, a provider in pharmacy benefit consulting, auditing, and health plan compliance services based in the United States.
2017 Acquisitions
On December 29, 2017, the Company completed the transaction to acquire the Townsend Group, a U.S.-based provider of global investment management and advisory services primarily focused on real estate.
 
On December 29, 2017, the Company completed the transaction to acquire Baltolink UADBB, a regional broker based in Lithuania.
 
On December 19, 2017, the Company completed the transaction to acquire a client register of Grant Liddell Financial Advisor Services Pty Ltd in Australia.
 
On December 1, 2017, the Company completed the transaction to acquire Henderson Insurance Brokers Limited, an independent insurance broking firm based in the United Kingdom.
 
On November 30, 2017, the Company completed the transaction to acquire Unidelta AG, an insurance broker located in Switzerland.
 
On October 31, 2017, the Company completed the transaction to acquire Unirobe Meeùs Groep, an insurance broker based in the Netherlands.
 
On October 31, 2017, the Company completed the transaction to acquire Lenzi Paolo Broker di Assicurazioni S.r.l., an insurance broker based in Italy.
 
On October 26, 2017, the Company completed the transaction to acquire Nauman Insurance Brokers Limited, an insurance broker based in New Zealand.
 
On October 2, 2017, the Company completed the transaction to acquire Portus Consulting, an independent employee benefits firm based in the United Kingdom.
On August 31, 2017, the Company completed the transaction to acquire Mark Kelly Insurance and Financial Services PTY LTD, an Australia-based broker servicing the insurance needs of commercial clients in and around the Townsville regional center.
On August 28, 2017, the Company completed the transaction to acquire a certain portfolio in the Charlotte office of The Hays Group, Inc. d/b/a Hays Companies.
On July 27, 2017, the Company completed the transaction to acquire Grupo Innovac Sociedad de Correduría de Seguros, S.A, an insurance broker based in Valencia, Spain.
On July 3, 2017, the Company completed the transaction to acquire PWZ AG, an independent insurance broker based in Zurich, Switzerland.
On May 31, 2017, the Company completed the transaction to acquire SchneiderGolling IFFOXX Assekuranzmakler AG and SchneiderGolling Industrie Assekuranzmaklergesellschaft mbH from SchneiderGolling Gruppe, a property and casualty broker based in Southern Germany.
On May 2, 2017, the Company completed the transaction to acquire cut-e Assessment Global Holdings Limited, a high-volume online psychometric assessments provider based in Ireland.
On March 3, 2017, the Company completed the transaction to acquire Finaccord Limited, a market research, publishing and consulting company based in the United Kingdom.
On January 19, 2017, the Company completed the transaction to acquire VERO Management AG, an insurance broker and risk advisor based in Austria.
Dispositions
The Company completed four dispositions during the year ended December 31, 2018. The Company completed nine dispositions during the year ended December 31, 2017, excluding the sale of the Divested Business, and five dispositions during the year ended December 31, 2016.
Total pretax losses, net of gains, for the year ended December 31, 2018 was $6 million. Total pretax gains, net of losses, for the years ended December 31, 2017, and 2016, were $16 million and $39 million, respectively. Gains and losses recognized as a result of a disposition are included in Other income (expense) in the Consolidated Statements of Income.
During the third quarter of 2018, Aon disposed of certain assets and liabilities that were previously classified as held for sale due to management’s decision to exit certain operations. In the second quarter of 2018, a non-cash impairment charge of $176 million was recognized to write down the assets and liabilities to a fair value less cost-to-sell of $47 million and $41 million, respectively. The impairment charge was recognized in Amortization and impairment of intangible assets on the Consolidated Statement of Income. Adjustments to the non-cash impairment charge in the third and fourth quarters were insignificant.
v3.10.0.1
Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
The changes in the net carrying amount of goodwill for the years ended December 31, 2018 and 2017, respectively, are as follows (in millions):
Balance as of January 1, 2017
$
7,410

Goodwill related to current year acquisitions
619

Goodwill related to disposals
(5
)
Goodwill related to prior year acquisitions
(13
)
Foreign currency translation
347

Balance as of December 31, 2017
$
8,358

Goodwill related to current year acquisitions
38

Goodwill related to disposals
(2
)
Goodwill related to prior year acquisitions
4

Foreign currency translation
(227
)
Balance as of December 31, 2018
$
8,171


Other intangible assets by asset class are as follows (in millions):
 
As of December 31
 
2018
 
2017
 
Gross
Carrying
Amount
 
Accumulated Amortization and Impairment
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated Amortization and Impairment
 
Net
Carrying
Amount
Customer related and contract based
2,240

 
1,444

 
796

 
2,550

 
1,415

 
1,135

Tradenames
1,027

 
740

 
287

 
1,047

 
533

 
514

Technology and other
391

 
325

 
66

 
416

 
332

 
84

Total
$
3,658

 
$
2,509

 
$
1,149

 
$
4,013

 
$
2,280

 
$
1,733