AON PLC, 10-K filed on 2/14/2020
Annual Report
v3.19.3.a.u2
Cover - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 13, 2020
Jun. 28, 2019
Cover page.      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2019    
Document Transition Report false    
Entity File Number 1-7933    
Entity Registrant Name Aon plc    
Entity Incorporation, State or Country Code X0    
Entity Tax Identification Number 98-1030901    
Entity Address, Address Line One 122 LEADENHALL STREET    
Entity Address, City or Town LONDON    
Entity Address, Country GB    
Entity Address, Postal Zip Code EC3V 4AN    
City Area Code 20    
Local Phone Number 7623 5500    
Title of 12(b) Security Class A Ordinary Shares, $0.01 nominal value    
Trading Symbol AON    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 45,489,377,212
Entity Common Stock, Shares Outstanding   231,582,094  
Documents Incorporated by Reference Aon plc has announced a transaction that, if completed, would result in an Irish public limited company becoming a successor issuer to Aon plc for purposes of Rule 12g-3 under the Securities Exchange Act of 1934, as amended. The proxy statement for the 2020 annual general meeting of shareholders of Aon plc, or if the transaction is completed, of such successor issuer, which meetings are in either case scheduled to be held on June 19, 2020, are incorporated by reference in this report in response to Part III, Items 10, 11, 12, 13 and 14.    
Entity Central Index Key 0000315293    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
v3.19.3.a.u2
Consolidated Statements of Income - USD ($)
shares in Millions, $ in Millions
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Revenue                      
Total revenue $ 2,885 $ 2,379 $ 2,606 $ 3,143 $ 2,770 $ 2,349 $ 2,561 $ 3,090 $ 11,013 $ 10,770 $ 9,998
Expenses                      
Compensation and benefits                 6,054 6,103 6,003
Information technology                 494 484 419
Premises                 339 370 348
Depreciation of fixed assets                 172 176 187
Amortization and impairment of intangible assets                 392 593 704
Other general expense                 1,393 1,500 1,272
Total operating expenses                 8,844 9,226 8,933
Operating income 524 360 413 872 499 262 (16) 799 2,169 1,544 1,065
Interest income                 8 5 27
Interest expense                 (307) (278) (282)
Other income (expense)                 1 (25) (125)
Income from continuing operations before income taxes                 1,871 1,246 685
Income tax expense                 297 146 250
Net income from continuing operations 382 229 287 676 284 155 57 604 1,574 1,100 435
Net income (loss) from discontinued operations 0 (1) 0 0 69 (2) 1 6 (1) 74 828
Net income 382 228 287 676 353 153 58 610 1,573 1,174 1,263
Less: Net income attributable to noncontrolling interests 8 6 10 17 8 6 10 16 41 40 37
Net income attributable to Aon shareholders $ 374 $ 222 $ 277 $ 659 $ 345 $ 147 $ 48 $ 594 $ 1,532 $ 1,134 $ 1,226
Basic net income per share attributable to Aon shareholders                      
Basic net income per share attributable to Aon shareholders, continuing operations (in dollars per share) $ 1.59 $ 0.94 $ 1.15 $ 2.72 $ 1.14 $ 0.61 $ 0.19 $ 2.37 $ 6.42 $ 4.32 $ 1.54
Basic net income per share attributable to Aon shareholders, discontinued operations (in dollars per share) 0 0 0 0 0.28 (0.01) 0.01 0.02 0 0.30 3.20
Basic net income per share attributable to Aon shareholders (in dollars per share) 1.59 0.94 1.15 2.72 1.42 0.60 0.20 2.39 6.42 4.62 4.74
Diluted net income per share attributable to Aon shareholders                      
Diluted net income per share attributable to Aon shareholders, continuing operations (in dollars per share) 1.58 0.93 1.14 2.70 1.13 0.61 0.19 2.35 6.37 4.29 1.53
Diluted net income per share attributable to Aon shareholders, discontinued operations (in dollars per share) 0 0 0 0 0.28 (0.01) 0 0.02 0 0.30 3.17
Diluted net income per share attributable to Aon shareholders (in dollars per share) $ 1.58 $ 0.93 $ 1.14 $ 2.70 $ 1.41 $ 0.60 $ 0.19 $ 2.37 $ 6.37 $ 4.59 $ 4.70
Weighted average ordinary shares outstanding - basic (in shares)                 238.6 245.2 258.5
Weighted average ordinary shares outstanding - diluted (in shares)                 240.6 247.0 260.7
v3.19.3.a.u2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]                      
Net income $ 382 $ 228 $ 287 $ 676 $ 353 $ 153 $ 58 $ 610 $ 1,573 $ 1,174 $ 1,263
Less: Net income attributable to noncontrolling interests 8 6 10 17 8 6 10 16 41 40 37
Net income attributable to Aon shareholders $ 374 $ 222 $ 277 $ 659 $ 345 $ 147 $ 48 $ 594 1,532 1,134 1,226
Other comprehensive income (loss), net of tax:                      
Change in fair value of financial instruments                 3 11 12
Foreign currency translation adjustments                 14 (444) 390
Postretirement benefit obligation                 (141) 17 19
Total other comprehensive income (loss)                 (124) (416) 421
Less: Other comprehensive income (loss) attributable to noncontrolling interests                 0 (4) 5
Total other comprehensive income (loss) attributable to Aon shareholders                 (124) (412) 416
Comprehensive income attributable to Aon shareholders                 $ 1,408 $ 722 $ 1,642
v3.19.3.a.u2
Consolidated Statements of Financial Position - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Current assets    
Cash and cash equivalents $ 790 $ 656
Short-term investments 138 172
Receivables, net 3,112 2,760
Fiduciary assets 11,834 10,166
Other current assets 602 618
Total current assets 16,476 14,372
Goodwill 8,165 8,171
Intangible assets, net 783 1,149
Fixed assets, net 621 588
Operating lease right-of-use assets 929  
Deferred tax assets 645 561
Prepaid pension 1,216 1,133
Other non-current assets 570 448
Total assets 29,405 26,422
Current liabilities    
Accounts payable and accrued liabilities 1,939 1,943
Short-term debt and current portion of long-term debt 712 251
Fiduciary liabilities 11,834 10,166
Other current liabilities 1,086 936
Total current liabilities 15,571 13,296
Long-term debt 6,627 5,993
Non-current operating lease liabilities 944  
Deferred tax liabilities 199 181
Pension, other postretirement, and postemployment liabilities 1,738 1,636
Other non-current liabilities 877 1,097
Total liabilities 25,956 22,203
Equity    
Ordinary shares - $0.01 nominal value Authorized: 750 shares (issued: 2019 - 232.1; 2018 - 240.1) 2 2
Additional paid-in capital 6,152 5,965
Retained earnings 1,254 2,093
Accumulated other comprehensive loss (4,033) (3,909)
Total Aon shareholders' equity 3,375 4,151
Noncontrolling interests 74 68
Total equity 3,449 4,219
Total liabilities and equity $ 29,405 $ 26,422
v3.19.3.a.u2
Consolidated Statements of Financial Position (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Ordinary shares, nominal value (in dollars per share) $ 0.01 $ 0.01
Ordinary shares, authorized shares (in Shares) 750,000,000 750,000,000
Ordinary shares, issued shares (in Shares) 232,100,000.0 240,100,000.0
v3.19.3.a.u2
Consolidated Statements of Shareholders' Equity - USD ($)
$ 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, 2016   262,000,000.0      
Beginning Balance at Dec. 31, 2016 $ 5,581 $ 5,580 $ 3,856 $ (3,912) $ 57
Increase (Decrease) in Shareholders' Equity          
Net income 1,263   1,226   37
Shares issued - employee stock compensation plans (in shares)   3,600,000      
Shares issued - employee stock compensation plans (121) $ (120) (1)    
Shares purchased (in shares)   (18,000,000.0)      
Shares purchased (2,415)   (2,415)    
Share-based compensation expense 321 $ 321      
Dividends to shareholders (364)   (364)    
Net change in fair value of financial instruments 12     12  
Net foreign currency translation adjustments 390     385 5
Net postretirement benefit obligation 19     19  
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   247,600,000      
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)   2,500,000      
Shares issued - employee stock compensation plans (148) $ (148)      
Shares purchased (in shares)   (10,000,000.0)      
Shares purchased (1,454)   (1,454)    
Share-based compensation expense 338 $ 338      
Dividends to shareholders (382)   (382)    
Net change in fair value of financial instruments 11     11  
Net foreign currency translation adjustments (444)     (440) (4)
Net postretirement benefit obligation 17     17  
Purchases of shares from noncontrolling interests (1)       (1)
Dividends paid to noncontrolling interests on subsidiary common stock $ (32)       (32)
Ending Balance (in shares) at Dec. 31, 2018 240,100,000.0 240,100,000      
Ending Balance at Dec. 31, 2018 $ 4,219 $ 5,967 2,093 (3,909) 68
Increase (Decrease) in Shareholders' Equity          
Net income 1,573   1,532   41
Shares issued - employee stock compensation plans (in shares)   2,500,000      
Shares issued - employee stock compensation plans (131) $ (130) (1)    
Shares purchased (in shares)   (10,500,000)      
Shares purchased (1,960)   (1,960)    
Share-based compensation expense 317 $ 317      
Dividends to shareholders (410)   (410)    
Net change in fair value of financial instruments 3     3  
Net foreign currency translation adjustments 14     14  
Net postretirement benefit obligation (141)     (141)  
Dividends paid to noncontrolling interests on subsidiary common stock $ (35)       (35)
Ending Balance (in shares) at Dec. 31, 2019 232,100,000.0 232,100,000      
Ending Balance at Dec. 31, 2019 $ 3,449 $ 6,154 $ 1,254 $ (4,033) $ 74
v3.19.3.a.u2
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]      
Dividends (in dollars per share) $ 1.72 $ 1.56 $ 1.41
v3.19.3.a.u2
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities      
Net income $ 1,573 $ 1,174 $ 1,263
Net income (loss) from discontinued operations (1) 74 828
Adjustments to reconcile net income to cash provided by operating activities:      
Loss (gain) from sales of businesses and investments, net (13) 6 16
Depreciation of fixed assets 172 176 187
Amortization and impairment of intangible assets 392 593 704
Share-based compensation expense 317 338 319
Deferred income taxes (36) (225) (18)
Change in assets and liabilities:      
Fiduciary receivables (409) (679) 171
Short-term investments — funds held on behalf of clients (1,246) (320) (135)
Fiduciary liabilities 1,655 999 (36)
Receivables, net (371) (127) (254)
Accounts payable and accrued liabilities (28) 25 96
Restructuring reserves 3 23 172
Current income taxes (20) 34 (914)
Pension, other postretirement and postemployment liabilities (156) (259) (66)
Other assets and liabilities 1 2 (8)
Cash provided by operating activities - continuing operations 1,835 1,686 669
Cash provided by operating activities - discontinued operations 0 0 65
Cash provided by (used for) operating activities 1,835 1,686 734
Cash flows from investing activities      
Proceeds from investments 61 71 68
Payments for investments (113) (80) (64)
Net sales (purchases) of short-term investments — non-fiduciary 35 348 (232)
Acquisition of businesses, net of cash acquired (39) (58) (1,029)
Sale of businesses, net of cash sold 52 (10) 4,246
Capital expenditures (225) (240) (183)
Cash provided by (used for) investing activities - continuing operations (229) 31 2,806
Cash used for investing activities - discontinued operations 0 0 (19)
Cash provided by (used for) investing activities (229) 31 2,787
Cash flows from financing activities      
Share repurchase (1,960) (1,470) (2,399)
Issuance of shares for employee benefit plans (131) (149) (121)
Issuance of debt 6,052 5,754 1,654
Repayment of debt (4,941) (5,417) (1,999)
Cash dividends to shareholders (410) (382) (364)
Noncontrolling interests and other financing activities (103) (35) (36)
Cash provided by (used for) financing activities - continuing operations (1,493) (1,699) (3,265)
Cash used for financing activities - discontinued operations 0 0 0
Cash used for financing activities (1,493) (1,699) (3,265)
Effect of exchange rates on cash and cash equivalents 21 (118) 69
Net increase (decrease) in cash and cash equivalents 134 (100) 325
Cash and cash equivalents at beginning of period 656 756 431
Cash and cash equivalents at end of period 790 656 756
Supplemental disclosures:      
Interest paid 289 266 272
Income taxes paid, net of refunds $ 353 $ 337 $ 1,182
v3.19.3.a.u2
Basis of Presentation
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The Consolidated Financial Statements include the accounts of Aon plc and all of its controlled subsidiaries (“Aon” or the “Company”). Intercompany accounts and transactions have been eliminated. The Consolidated 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 Consolidated 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 Consolidated 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 Consolidated Financial Statements in future periods.
v3.19.3.a.u2
Summary of Significant Accounting Principles and Practices
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Principles and Practices Summary of Significant Accounting Principles and Practices
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 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 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 human capital. 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 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 Expense
Share-based payments to employees, including grants of restricted share units and performance share awards, are measured based on 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 as reflected in Other income (expense) within the Consolidated Statements of Income. 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, 2019, Cash and cash equivalents and Short-term investments totaled $928 million compared to $828 million at December 31, 2018. Of the total balance, $110 million and $91 million was restricted as to its use at December 31, 2019 and 2018, respectively. Included within the December 31, 2019 and 2018 balances, respectively, were £42.7 million ($55.5 million at December 31, 2019 exchanges rates) and £42.7 million ($53.9 million at December 31, 2018 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 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 $5.2 billion and $3.9 billion at December 31, 2019 and 2018, 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 $70 million and $62 million at December 31, 2019 and 2018, respectively.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Included in this category are certain capitalized costs incurred during the application development stage related to directly obtaining, developing, or enhancing internal use software. 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
 
Estimated Useful 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 acquired in the acquisition of a business. Goodwill is allocated to applicable 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
 
Estimated Useful Life
Tradenames
 
Straight-line

1 to 3 years
Customer-related and contract-based
 
In line with underlying cash flows
 
7 to 20 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, and the method for assessing the effectiveness of the hedge. 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 quarterly 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 change in fair value of a hedging instrument is recognized in Accumulated other comprehensive income (“AOCI”) and subsequently reclassified to earnings in the same period the hedged item impacts earnings. For a net investment hedge, the change in fair value of the hedging instrument is recognized in AOCI as part of the cumulative translation adjustment.
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 in the period of change.
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, 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. 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.
Leases
The Company leases office facilities, equipment, and automobiles under non-cancelable operating and finance leases. The Company’s lease obligations are primarily for the use of office facilities. The Company evaluates if a leasing arrangement exists upon inception of a contract. A contract contains a lease if the contract conveys the right to control the use of identified tangible assets for a period of time in exchange for consideration. Identified property, plant, or equipment may include a physically distinct portion of a larger asset, or a portion of an asset that represents substantially all of the capacity of the asset but is not physically distinct. The Company assesses whether a contract implicitly contains the right to control the use of a tangible asset that is not already owned. In addition, the Company subleases certain real estate properties to third parties, which are classified as operating leases.
The Company’s leases expire at various dates and may contain renewal and expansion options. The exercise of lease renewal and expansion options are typically at the Company’s sole discretion and are only included in the determination of the lease term if the Company is reasonably certain to exercise the option. The Company’s leases do not typically contain termination options. In addition, the Company’s lease agreements typically do not contain any material residual value guarantees or restrictive covenants.
ROU assets and lease liabilities are based on the present value of the minimum lease payments over the lease term. The Company has elected 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 received in a contract as a single lease component.
The Company made a policy election to not recognize ROU assets and lease liabilities that arise from leases with an initial term of twelve months or less on the Consolidated Statements of Financial Position. However, the Company recognized these lease payments in the Consolidated Statements of Income on a straight-line basis over the lease term and variable lease payments in the period in which the expense was incurred. The Company chose to apply this accounting policy across all classes of underlying assets.
A portion of the Company’s lease agreements include variable lease payments that are not recorded in the initial measurement of the lease liability and ROU asset balances. For real estate arrangements, base rental payments may be escalated according to annual changes in the Consumer Price Index (“CPI”) or other indices. The escalated rental payments based on the estimated CPI at the lease commencement date are included within minimum rental payments; however, changes in CPI are considered variable in nature and are recognized as variable lease costs in the period in which the obligation is incurred. Additionally, real estate lease agreements may include other variable payments related to operating expenses charged by the landlord based on actual expenditures. Information technology equipment agreements may include variable payments based on usage of the equipment. These expenses are also recognized as variable lease costs in the period in which the expense is incurred.
The Company utilizes discount rates to determine the present value of the lease payments based on information available at the commencement date of the lease. As the rate implicit in each lease is not typically readily available, the Company uses an incremental borrowing rate based on factors such as the lease term and the economic environment where the lease exists to determine the appropriate present value of future lease payments. When determining the incremental borrowing rate, the Company considers the rate of interest it would pay on a secured borrowing in an amount equal to the lease payments for the underlying asset under similar terms.
Operating leases are included in Operating lease ROU assets, Other current liabilities, and Non-current operating lease liabilities on the Consolidated Statements of Financial Position. Finance leases are included in Other non-current assets, Other current liabilities, and Other non-current liabilities on the Consolidated Statements of Financial Position.
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.
New Accounting Pronouncements
Adoption of New Accounting Standards
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
In February 2018, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance related to reclassification of certain tax effects from accumulated other comprehensive income. The guidance allowed a reclassification from accumulated comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The guidance was effective for the Company in the first quarter of 2019. Aon did not elect to reclassify stranded tax effects on the Consolidated Statement of Financial Position; therefore, for the three and twelve months ended December 31, 2019, there was no impact on the net income of the Company. It is the Company’s policy to release income tax effects from accumulated other comprehensive loss using the portfolio approach.
Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB issued new accounting guidance related to targeted improvements to accounting for hedging activities. The new guidance amended its hedge accounting model to enable entities to better portray their risk management activities in the financial statements. The guidance eliminated the requirement to separately measure and report hedge ineffectiveness and required the effect of a hedging instrument to be presented in the same income statement line as the hedged item. The new guidance was effective for Aon in the first quarter of 2019 and the Company adopted it on a modified retrospective basis with no cumulative effect adjustment to Accumulated other comprehensive income (loss) or corresponding adjustment to Retained earnings. Changes
to the Consolidated Statement of Income and financial statement disclosures were applied prospectively. Under the new guidance, gains or losses on certain derivative hedging instruments are recognized in Revenue, as opposed to Other income (expense) under the previous guidance. For the three and twelve months ended December 31, 2019, the adoption of this guidance had no impact on the net income and an insignificant impact on the operating income of the Company.
Leases
In February 2016, the FASB issued a new accounting standard related to leases, which required lessees to recognize assets and liabilities for most leases. Under the new standard, a lessee is required to recognize in the Consolidated Statements of Financial Position, liabilities to make future lease payments and ROU 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 did not significantly changed from previous U.S. GAAP. Under previous U.S. GAAP, leases classified as operating were not required to be recognized as assets and liabilities on the Consolidated Statements of Financial Position, and expense for minimum lease payments would be recognized on a straight-line basis over the term of the lease in the Consolidated Statements of Income. Leases classified as capital leases under previous U.S. GAAP were initially recorded using the present value of the minimum lease payments, with an associated capital lease liability, classified as short-term or long-term, as appropriate in the Consolidated Statements of Financial Position.
The Company adopted the new standard as of January 1, 2019 using the modified retrospective approach for all leases existing at, or entered into after, the period of adoption. Under this approach, prior periods were not restated. Rather, lease balances and other disclosures for prior periods were provided in the Notes to Consolidate Financial Statements as previously reported, and the cumulative effect of initially applying the guidance was recognized in the Consolidated Statement of Financial Position as of December 31, 2019.
The modified retrospective approach included several optional practical expedients available that entities could elect to apply upon transition. These practical expedients related to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed a lessee to carry forward 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 elected the practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allowed a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease component. Lastly, the Company did not elect the practical expedient related to hindsight analysis which allowed a lessee to use hindsight in determining the lease term and in assessing impairment of the entity’s ROU assets.
The Company made a policy election to not recognize ROU assets and lease liabilities that arise from leases with an initial term of twelve months or less on the Consolidated Statement of Financial Position. However, the Company recognized these lease payments in the Consolidated Statement of Income on a straight-line basis over the lease term and variable lease payments in the period in which the expense was incurred. The Company chose to apply this accounting policy across all classes of underlying assets. Additionally, upon adoption, the Company utilized a discount rate to determine the present value of the lease payments based on information available as of January 1, 2019.
Beginning January 1, 2019, operating ROU assets and operating lease liabilities were recognized based on the present value of lease payments over the lease term at the commencement date. Operating leases in effect prior to January 1, 2019 were recognized at the present value of the remaining payments for the remaining lease term as of January 1, 2019. Upon adoption, the Company recognized ROU assets and lease liabilities of $1.1 billion and $1.3 billion, respectively. The standard had an insignificant impact on the Consolidated Statement of Income and no impact on the Consolidated Statement of Cash Flows. Refer to Note 10 “Lease Commitments” for further information including significant assumptions and judgments made.

As a result of applying the modified retrospective approach to adopt the new leasing standard, the following adjustments were made to the Consolidated Statement of Financial Position as of January 1, 2019 (in millions):
 
December 31,
2018
 
 
 
January 1,
2019
 
As Reported
 
Adjustments
 
As Adjusted
Assets
 
 
 
 
 
Operating lease right-of-use assets
$

 
$
1,021

 
$
1,021

Other non-current assets
$
448

 
$
78

 
$
526

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Other current liabilities
$
936

 
$
219

 
$
1,155

Non-current operating lease liabilities
$

 
$
1,014

 
$
1,014

Other non-current liabilities
$
1,097

 
$
(134
)
 
$
963


Revenue Recognition
In May 2014, the FASB issued a new accounting standard on revenue from contracts with customers (the “Standard” or “ASC 606”), which superseded 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 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 Consolidated Financial Statements as previous reported under ASC 605, and the cumulative effect of initially applying the standard was recognized as an adjustment to Retained earnings for approximately $507 million.

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. 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. 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.
Accounting Standards Issued but Not Yet Adopted
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued new accounting guidance that simplifies the accounting for income taxes by eliminating some exceptions to the general approach in the existing guidance. It also clarifies certain aspects of the existing guidance to promote more consistent application. The new guidance is effective for Aon in the first quarter of 2021, with early adoption permitted. The Company is currently evaluating the impact that the guidance will have on the Consolidated Financial Statements and the period of adoption.

Cloud Computing Arrangements
In August 2018, the FASB issued new accounting guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The new guidance aligns capitalization requirements for certain implementation costs incurred in cloud computing arrangements with existing requirements for capitalizing implementation costs for internal-use software. These costs will be deferred over the term of the hosting arrangement, including any optional renewal periods the entity is reasonably certain to exercise. An entity may apply the new guidance on either a prospective or retrospective basis. The new guidance is effective for Aon in the first quarter of 2020. The Company will adopt the new guidance on a prospective basis for all implementation costs incurred after the date of initial adoption. The Company does not expect adoption to have a significant impact on the Consolidated Financial Statements.
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 new 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 Consolidated Financial Statements and the period of adoption.
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. An entity will apply a one-step quantitative test and 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. The Company will adopt the new guidance in the first quarter of 2020 on a prospective basis. The Company does not expect adoption to have a significant impact on the Consolidated Financial Statements.
Credit Losses
In June 2016, the FASB issued a new accounting standard on the measurement of credit losses on financial instruments. The new standard 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 standard through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the standard is effective. The new standard is effective for Aon in the first quarter of 2020. The Company has executed a comprehensive approach to assess the impact of the new accounting standard. Further, control activities and operational processes have been designed and are being implemented to ensure compliance with the new standard. The Company will adopt this standard on January 1, 2020 using a modified retrospective adoption approach. Under this approach, prior periods will not be restated, rather, the cumulative effect of initially applying the new standard will be recognized as a decrease to Retained earnings as of January 1, 2020. The Company expects this adjustment to be less than $10 million.
v3.19.3.a.u2
Revenue from Contracts with Customers
12 Months Ended
Dec. 31, 2019
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
 
 
2019
 
2018
 
2017
Commercial Risk Solutions
 
$
4,673

 
$
4,652

 
$
4,169

Reinsurance Solutions
 
1,686

 
1,563

 
1,429

Retirement Solutions
 
1,817

 
1,865

 
1,755

Health Solutions
 
1,667

 
1,596

 
1,515

Data & Analytic Services
 
1,184

 
1,105

 
1,140

Elimination
 
(14
)
 
(11
)
 
(10
)
Total revenue
 
$
11,013

 
$
10,770

 
$
9,998


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
 
 
2019
 
2018
 
2017
United States
 
$
5,016

 
$
4,677

 
$
4,425

Americas other than United States
 
919

 
940

 
976

United Kingdom
 
1,502

 
1,555

 
1,436

Europe, Middle East, & Africa other than United Kingdom
 
2,338

 
2,413

 
2,025

Asia Pacific
 
1,238

 
1,185

 
1,136

Total revenue
 
$
11,013

 
$
10,770

 
$
9,998



Contract Costs

Changes in the net carrying amount of costs to fulfill contracts with customers are as follows (in millions):
 
 
2019
 
2018
Balance at beginning of period
 
$
329

 
$
298

Additions
 
1,453

 
1,504

Amortization
 
(1,447
)
 
(1,465
)
Impairment
 

 

Foreign currency translation and other
 

 
(8
)
Balance at end of period
 
$
335

 
$
329



Changes in the net carrying amount of costs to obtain contracts with customers are as follows (in millions):
 
 
2019
 
2018
Balance at beginning of period
 
$
156

 
$
145

Additions
 
58

 
53

Amortization
 
(44
)
 
(41
)
Impairment
 

 

Foreign currency translation and other
 
1

 
(1
)
Balance at end of period
 
$
171

 
$
156


v3.19.3.a.u2
Other Financial Data
12 Months Ended
Dec. 31, 2019
Other Financial Data [Abstract]  
Other Financial Data Other Financial Data
Consolidated Statements of Income Information
Other Income (Expense)
The components of Other income (expense) are as follows (in millions):
 
Years ended December 31
 
2019
 
2018
 
2017
Foreign currency remeasurement
$
9

 
$
25

 
$
(37
)
Disposal of businesses
13

 
(6
)
 
(16
)
Pension and other postretirement
9

 
1

 
(86
)
Equity earnings
4

 
4

 
12

Financial instruments
(34
)
 
(49
)
 
2

Total
$
1

 
$
(25
)
 
$
(125
)

Consolidated Statements of Financial Position Information
Allowance for Doubtful Accounts
Changes in the net carrying amount of allowance for doubtful accounts are as follows (in millions):
 
2019
 
2018
 
2017
Balance at beginning of period
$
62

 
$
59

 
$
56

Provision
27

 
24

 
18

Accounts written off, net of recoveries
(19
)
 
(25
)
 
(18
)
Foreign currency translation and other

 
4

 
3

Balance at end of period
$
70

 
$
62

 
$
59


Other Current Assets
The components of Other current assets are as follows (in millions):
As of December 31
2019
 
2018
Costs to fulfill contracts with customers
$
335

 
$
329

Taxes receivable
88

 
113

Prepaid expenses
97

 
97

Receivables from the Divested Business (1)
4

 
12

Other
78

 
67

Total
$
602

 
$
618


(1)
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
2019
 
2018
Software
$
727

 
$
693

Leasehold improvements
358

 
334

Computer equipment
250

 
279

Furniture, fixtures and equipment
225

 
228

Construction in progress
183

 
154

Other
37

 
45

Fixed assets, gross
1,780

 
1,733

Less: Accumulated depreciation
1,159

 
1,145

Fixed assets, net
$
621

 
$
588


Depreciation expense, which includes software amortization, was $172 million, $176 million, and $187 million for the years ended December 31, 2019, 2018, and 2017, respectively.
Other Non-current Assets
The components of Other non-current assets are as follows (in millions):
As of December 31
2019
 
2018
Costs to obtain contracts with customers
$
171

 
$
156

Investments
53

 
54

Leases (1)
100

 

Taxes receivable
102

 
100

Other
144

 
138

Total
$
570

 
$
448


(1)
In the first quarter of 2019, Aon adopted new accounting guidance related to the treatment of leases which was applied under the modified retrospective approach. The Other non-current asset balances related to leasing under the legacy accounting standard are reflected in Other as reported in December 31, 2018. Refer to Note 2 “Summary of Significant Accounting Principles and Practices” for further information.
Other Current Liabilities
The components of Other current liabilities are as follows (in millions):
As of December 31
2019
 
2018
Deferred revenue (1)
$
270

 
$
251

Taxes payable
93

 
83

Leases (2)
210

 

Other
513

 
602

Total
$
1,086

 
$
936


(1)
$532 million and $487 million was recognized in the Consolidated Statements of Income during the twelve months ended December 31, 2019 and December 31, 2018, respectively.
(2)
In the first quarter of 2019, Aon adopted new accounting guidance related to the treatment of leases which was applied under the modified retrospective approach. The Other current liability balances related to leasing under the legacy accounting standard are reflected in Other as reported in December 31, 2018. Refer to Note 2 “Summary of Significant Accounting Principles and Practices” for further information.
Other Non-current Liabilities
The components of Other non-current liabilities are as follows (in millions):
As of December 31
2019
 
2018
Taxes payable (1)
$
525

 
$
585

Leases (2)
76

 
169

Compensation and benefits
49

 
56

Deferred revenue
62

 
65

Other
165

 
222

Total
$
877

 
$
1,097


(1)
Includes $145 million and $240 million for the non-current portion of the Transition Tax, as of December 31, 2019 and December 31, 2018, respectively. Refer to Note 11 “Income Taxes” for further information on the Transition Tax.
(2)
In the first quarter of 2019, Aon adopted new accounting guidance related to the treatment of leases which was applied under the modified retrospective approach. The comparable period presented reflects balances under the legacy accounting standard. Refer to Note 2 “Summary of Significant Accounting Principles and Practices” for further information.
v3.19.3.a.u2
Discontinued Operations
12 Months Ended
Dec. 31, 2019
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 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, subleases, 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, 2019, 2018, and 2017 are presented as Net income (loss) 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
 
 
2019
 
2018
 
2017
Revenue
 
 
 
 
 
 
Total revenue
 
$

 
$

 
$
698

Expenses
 
 
 
 
 
 
Total operating expenses
 
2

 
12

 
656

Operating income from discontinued operations
 
(2
)
 
(12
)
 
42

Other income
 

 

 
10

Income (loss) from discontinued operations before income taxes
 
(2
)
 
(12
)
 
52

Income tax expense (benefit)
 
(1
)
 
(4
)
 
3

Net income (loss) from discontinued operations, excluding gain
 
(1
)
 
(8
)
 
49

Gain on sale of discontinued operations, net of tax
 

 
82

 
779

Net income (loss) from discontinued operations
 
$
(1
)
 
$
74

 
$
828


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 year ended December 31, 2017, include $8 million of depreciation of fixed assets and $11 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 or thereafter. 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 for the period ended December 31, 2017.
v3.19.3.a.u2
Restructuring
12 Months Ended
Dec. 31, 2019
Restructuring and Related Activities [Abstract]  
Restructuring Restructuring
In 2017, Aon initiated the Restructuring Plan in connection with the sale of the Divested Business. The Restructuring Plan was intended to streamline operations across the organization and deliver greater efficiency, insight, and connectivity. The Company has incurred all remaining costs for the Restructuring Plan and the plan was closed in the fourth quarter of 2019.
The Restructuring Plan resulted in cumulative charges of $1,433 million, consisting of $619 million in workforce reduction, $119 million in technology rationalization costs, $69 million in lease consolidation costs, $53 million in non-cash asset impairments, and $573 million in other costs, including certain separation costs associated with the sale of the Divested Business. These charges are included in Compensation and benefits, Information technology, Premises, Depreciation of fixed assets, and Other general expense in the accompanying Consolidated Statements of Income. The Company eliminated 5,832 positions under the Restructuring Program.
The following table summarizes restructuring and related expenses by type that were incurred through the end of the Restructuring Plan (in millions):
 
 
2019
 
2018
 
2017
 
Completed Plan Total
Workforce reduction
 
$
205

 
$
115

 
$
299

 
$
619

Technology rationalization (1)
 
39

 
47

 
33

 
119

Lease consolidation (1)
 
33

 
28

 
8

 
69

Asset impairments
 
14

 
13

 
26

 
53

Other costs associated with restructuring and separation (1) (2)
 
160

 
282

 
131

 
573

Total restructuring and related expenses
 
$
451

 
$
485

 
$
497

 
$
1,433

(1)
Total contract termination costs incurred under the Restructuring Plan associated with technology rationalizations, lease consolidations, and other costs associated with restructuring and separation for the twelve months ended December 31, 2019 were $0 million, $33 million, and $13 million, respectively; for the twelve months ended December 31, 2018 were $5 million, $25 million, and $85 million, respectively; and for the twelve months ended December 31, 2017 were $1 million, $8 million, and $3 million, respectively.
(2)
Other costs associated with the Restructuring Plan include those to separate the Divested Business, as well as moving costs, and consulting and legal fees. These costs are typically recognized when incurred.
The changes in the Company’s liabilities for the Restructuring Plan as of December 31, 2019 are as follows (in millions):
 
 
Restructuring Plan
Balance at December 31, 2018
 
$
201

Expensed
 
418

Cash payments
 
(415
)
Foreign currency translation and other
 

Balance at December 31, 2019
 
$
204


The Company’s unpaid liabilities for the Restructuring Plan are included in both Accounts payable and accrued liabilities and Other non-current liabilities in the Consolidated Statement of Financial Position.
v3.19.3.a.u2
Acquisitions and Dispositions of Businesses
12 Months Ended
Dec. 31, 2019
Business Combinations and Discontinued Operations and Disposal Groups [Abstract]  
Acquisitions and Dispositions of Businesses Acquisitions and Dispositions of Businesses
Completed Acquisitions
The Company completed three acquisitions during the year ended December 31, 2019 and eight acquisitions during the year ended December 31, 2018. 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, 2019
Consideration transferred
 
Cash
$
42

Deferred and contingent consideration
8

Aggregate consideration transferred
$
50

 
 
Assets acquired
 
Cash and cash equivalents
$
4

Receivables, net

Goodwill
34

Intangible assets, net
22

Fixed assets, net
1

Other assets
13

Total assets acquired
74

Liabilities assumed
 
Current liabilities
18

Other non-current liabilities
6

Total liabilities assumed
24

Net assets acquired
$
50


Intangible assets are primarily customer-related and contract-based assets. Those intangible assets acquired as part of a business acquisition in 2019 had a weighted average useful economic life of 7 years. Acquisition related costs incurred and recognized within Other general expense for the year ended December 31, 2019 were $1 million. Total revenue for these acquisitions included in the Company’s Consolidated Statement of Income for the year ended December 31, 2019 was approximately $7 million.
The results of operations of these acquisitions are included in the Consolidated Financial Statements as of the respective acquisition dates. The Company’s results of operations would not have been materially different if these acquisitions had been reported from the beginning of the period in which they were acquired.
2019 Acquisitions
On July 31, 2019, the Company completed the transaction to acquire Ovatio Courtage SAS, an insurance broker based in France.
On July 31, 2019, the Company completed the transaction to acquire Zalba-Caldu Correduria de Seguros, S.A., a Spanish insurance broker.
On January 1, 2019, the Company completed the transaction to acquire Chapka Assurances SAS based in France.
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.
Completed Dispositions
The Company completed eight dispositions during the year ended December 31, 2019. The Company completed four dispositions during the year ended December 31, 2018 and nine dispositions during the year ended December 31, 2017, excluding the sale of the Divested Business.
Total pretax gains, net of losses, for the year ended December 31, 2019 was $13 million. Total pretax losses, net of gains, for the years ended December 31, 2018, and 2017, were $6 million and $16 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 2018, the Company recorded a non-cash impairment charge of $176 million related to certain assets and liabilities held for sale. The impairment charge was recognized in Amortization and impairment of intangible assets on the Consolidated Statement of Income. During 2017, the Company recorded a non-cash impairment charge of $380 million to its tradenames associated with the Divested Business as these assets were not sold to the Buyer.
v3.19.3.a.u2
Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2019
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, 2019 and 2018, respectively, are as follows (in millions):
Balance as of January 1, 2018
$
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

Goodwill related to current year acquisitions
34

Goodwill related to disposals
(11
)
Goodwill related to prior year acquisitions
2

Foreign currency translation
(31
)
Balance as of December 31, 2019
$
8,165


Other intangible assets by asset class are as follows (in millions):
 
As of December 31
 
2019
 
2018
 
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
$
2,264

 
$
1,600

 
$
664

 
$
2,240

 
$
1,444

 
$
796

Tradenames
1,029

 
956

 
73

 
1,027

 
740

 
287

Technology and other
380

 
334

 
46

 
391

 
325

 
66

Total
$
3,673

 
$
2,890

 
$
783

 
$
3,658

 
$
2,509

 
$
1,149

Amortization expense and impairment charges from finite lived intangible assets were $392 million, $593 million, and $704 million for the years ended December 31, 2019, 2018, and 2017, respectively.
The estimated future amortization for finite-lived intangible assets as of December 31, 2019 is as follows (in millions):
 
 
Estimated Future Amortization
For the years ended
 
2020
 
$
223

2021
 
127

2022
 
86

2023
 
76

2024
 
59

Thereafter
 
212

Total
 
$
783


v3.19.3.a.u2
Debt
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Debt Debt
The following is a summary of outstanding debt (in millions):
As of December 31
2019

2018
Commercial paper
$
112

 
$
250

5.00% Senior Notes due September 2020
600

 
599

2.80% Senior Notes due March 2021
399

 
398

2.20% Senior Notes due November 2022
497

 

4.00% Senior Notes due November 2023
348

 
348

3.50% Senior Notes due June 2024
597

 
596

3.875% Senior Notes due December 2025
746

 
746

2.875% Senior Notes due May 2026 (EUR 500M)
550

 
562

8.205% Junior Subordinated Notes due January 2027
521

 
521

4.50% Senior Notes due December 2028
346

 
347

3.75% Senior Notes due May 2029
744

 

6.25% Senior Notes due September 2040
296

 
296

4.25% Senior Notes due December 2042
199

 
198

4.45% Senior Notes due May 2043
246

 
246

4.60% Senior Notes due June 2044
544

 
544

4.75% Senior Notes due May 2045
593

 
592

Other
1

 
1

Total debt
7,339

 
6,244

Less: Short-term debt and current portion of long-term debt
712

 
251

Total long-term debt
$
6,627

 
$
5,993


Notes
On November 15, 2019, Aon Corporation issued $500 million 2.20% Senior Notes due November 2022. The Company used the net proceeds of the offering to pay down a portion of outstanding commercial paper and for general corporate purposes.
In September 2019, the Company’s $600 million 5.00% Senior Notes due September 2020 were classified as Short-term debt and current portion of long-term debt in the Consolidated Statement of Financial Position as the date of maturity is in less than one year.
On May 2, 2019, Aon Corporation issued $750 million 3.75% Senior Notes due May 2029. The Company used the net proceeds of the offering to pay down a portion of outstanding commercial paper and for general corporate purposes.
On December 3, 2018, Aon Corporation issued $350 million 4.50% Senior Notes due December 2028. The Company used the net proceeds of the offering to pay down a portion of outstanding commercial paper and for general corporate purposes.
Each of the notes issued by Aon plc is fully and unconditionally guaranteed by Aon Corporation, and each of the notes issued by Aon Corporation is fully and unconditionally guaranteed by Aon plc. Refer to Note 19 “Guarantee of Registered Securities” for additional information regarding guarantees of outstanding debt securities. Each of the notes described and identified in the table above contains customary representations, warranties, and covenants, and the Company was in compliance with all such covenants as of December 31, 2019.
Repayments of total debt are as follows (in millions):
2020
$
712

2021
400

2022
500

2023
350

2024
600

Thereafter
4,882

Total Repayments
7,444

Unamortized discounts, premiums, and debt issuance costs
(105
)
Total Debt
$
7,339


Revolving Credit Facilities
As of December 31, 2019, Aon plc had two primary committed credit facilities outstanding: its $900 million multi-currency U.S. credit facility expiring in February 2022 and its $400 million multi-currency U.S. credit facility expiring in October 2023.
Each of these facilities includes customary representations, warranties, and covenants, including financial covenants that require Aon to maintain specified ratios of adjusted consolidated EBITDA to consolidated interest expense and consolidated debt to adjusted consolidated EBITDA, in each case, tested quarterly. At December 31, 2019, Aon did not have borrowings under either credit facility, and was in compliance with the financial covenants and all other covenants contained therein during the twelve months ended December 31, 2019.
Commercial Paper
Aon Corporation, a wholly owned subsidiary of Aon plc, has established a U.S. commercial paper program, and Aon plc has established a European multi-currency commercial paper program. Commercial paper may be issued in aggregate principal amounts of up to $600 million under the U.S. program and €525 million under the European program, not to exceed the amount of the Company’s committed credit, which was $1.3 billion at December 31, 2019. The U.S. commercial paper program is fully and unconditionally guaranteed by Aon plc and the European multi-currency commercial paper program is fully and unconditionally guaranteed by Aon Corporation.
Commercial paper outstanding, which is included in Short-term debt and current portion of long-term debt in the Company’s Consolidated Statements of Financial Position, is as follows (in millions):
As of December 31
 
2019
 
2018
Commercial paper outstanding
 
$
112

 
$
250


The weighted average commercial paper outstanding and its related interest rates are as follows (in millions, except percentages):
Years ended December 31
 
2019
 
2018
Weighted average commercial paper outstanding
 
$
511

 
$
580

Weighted average interest rate of commercial paper outstanding
 
0.27
%
 
0.84
%

v3.19.3.a.u2
Lease Commitments
12 Months Ended
Dec. 31, 2019
Leases, Operating [Abstract]  
Lease Commitments Lease Commitments
The classification of operating and finance lease asset and liability balances within the Consolidated Statement of Financial Position is as follows (in millions):
As of
 
December 31, 2019
Assets
 
 
Operating lease assets
Operating lease right-of-use assets
$
929

Finance lease assets
Other non-current assets
100

Total lease assets
 
$
1,029

 
 
 
Liabilities
 
 
Current lease liabilities
 
 
   Operating
Other current liabilities
$
186

   Finance
Other current liabilities
24

Non-current lease liabilities
 
 
   Operating
Non-current operating lease liabilities
944

   Finance
Other non-current liabilities
76

Total lease liabilities
 
$
1,230


The components of lease costs are as follows (in millions):
 
Year Ended December 31, 2019
Operating lease cost
$
234

Finance lease costs
 
   Amortization of leased assets
26

   Interest on lease liabilities
2

Variable lease cost
60

Short-term lease cost (1)
5

Sublease income
(32
)
Net lease cost
$
295

(1) Short-term lease cost does not include expenses related to leases with a lease term of one month or less.

Weighted average remaining lease term and discount rate related to operating and finance leases are as follows:
As of
December 31, 2019
Weighted average remaining lease term (years)
 
   Operating leases
7.9

   Finance leases
4.4

Weighted average discount rate
 
   Operating leases
3.2
%
   Finance leases
2.0
%

Other cash and non-cash related activities are as follows (in millions):
 
Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
 
   Operating cash flows for operating leases
$
264

   Financing cash flows for finance leases
$
17

Non-cash related activities
 
ROU assets obtained in exchange for new operating lease liabilities
$
155

ROU assets obtained in exchange for new finance lease liabilities
$
48

Operating lease ROU asset expense (1)
$
195

Changes in Non-current operating lease liabilities (1)
$
(70
)
(1)
The Company has recorded non-cash changes in Operating lease ROU assets and Non-current operating lease liabilities through Other assets and liabilities in Cash flows from operations within the Consolidated Statement of Cash Flows.

Maturity analysis of operating and finance leases as of December 31, 2019 are as follows (in millions):
 
Operating Leases
 
Finance Leases
 
Total
2020
$
208

 
$
26

 
$
234

2021
202

 
26

 
228

2022
177

 
20

 
197

2023
141

 
18

 
159

2024
113

 
15

 
128

Thereafter
432

 

 
432

Total undiscounted future minimum lease payments
1,273

 
105