NORTHROP GRUMMAN CORP /DE/NOC

NORTHROP GRUMMAN CORP /DE/ Fair Value Disclosure

10-KFiled Jan 27, 20262 min read
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the financial assets and liabilities the company records at fair value on a recurring basis identified by the level of inputs used to determine fair value. See Note 1 for the definitions of these levels and for further information on our financial instruments.
 December 31, 2025December 31, 2024
$ in millionsLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Financial Assets
Marketable securities$454 $— $24 $478 $325 $— $14 $339 
Marketable securities valued using NAV5 8 
Total marketable securities454 — 24 483 325 — 14 347 
Derivatives— 2 — 2 — (11)— (11)
During the third quarter of 2025, the company transferred $50 million of securities from Level 3 to Level 1 in connection with the initial public offering (“IPO”) of a company in which we hold an investment. As of December 31, 2025, the company’s investment was valued at $68 million. The company is prohibited from selling this investment until the first quarter of 2026. There were no other transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2025 and 2024.
Unrealized gains and losses from marketable securities, which are reflected in Other, net on the consolidated statement of earnings and comprehensive income, were $45 million for the year ended December 31, 2025. Unrealized gains and losses from marketable securities were not material for the years ended December 31, 2024 and 2023.
The notional value of the company’s foreign currency forward contracts at December 31, 2025 and 2024 was $308 million and $399 million, respectively. The portion of notional value designated as a cash flow hedge at December 31, 2025 and 2024 was $167 million and $273 million, respectively.
The derivative fair values and related unrealized gains/losses at December 31, 2025 and 2024 were not material.
The carrying value of cash and cash equivalents approximates fair value.

Historical Timeline

Fiscal YearFiled
2025Jan 27, 2026Showing above
2024Jan 30, 2025
2023Jan 25, 2024
2022Jan 26, 2023
2021Jan 27, 2022
2020Jan 28, 2021
2018Jan 31, 2019
2017Jan 29, 2018
2016Jan 30, 2017
2015Feb 1, 2016

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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