Otis Worldwide Corp Fair Value Disclosure
| December 31, 2025 | ||||||||||||||||||||||||||
| (dollars in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Recurring fair value measurements: | ||||||||||||||||||||||||||
| Marketable securities | $ | 55 | $ | 55 | $ | — | $ | — | ||||||||||||||||||
| 20 | — | 20 | — | |||||||||||||||||||||||
| (32) | — | (32) | — | |||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| (dollars in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Recurring fair value measurements: | ||||||||||||||||||||||||||
| Marketable securities | $ | 44 | $ | 44 | $ | — | $ | — | ||||||||||||||||||
| 68 | — | 68 | — | |||||||||||||||||||||||
| (50) | — | (50) | — | |||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (dollars in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||||
| Long-term receivables, net | $ | 49 | $ | 48 | $ | 47 | $ | 46 | ||||||||||||||||||
| Customer financing notes receivable, net | 16 | 14 | 21 | 19 | ||||||||||||||||||||||
| Short-term borrowings | (214) | (214) | (51) | (51) | ||||||||||||||||||||||
| Long-term debt, including current portion (excluding leases and other) | (7,779) | (7,269) | (8,316) | (7,600) | ||||||||||||||||||||||
| Long-term liabilities, including current portion | (84) | (81) | (132) | (123) | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| (dollars in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Long-term receivables, net | $ | 48 | $ | — | $ | 48 | $ | — | ||||||||||||||||||
| Customer financing notes receivable, net | 14 | — | 14 | — | ||||||||||||||||||||||
| Short-term borrowings | (214) | — | (214) | — | ||||||||||||||||||||||
| Long-term debt, including current portion (excluding leases and other) | (7,269) | — | (7,269) | — | ||||||||||||||||||||||
| Long-term liabilities, including current portion | (81) | — | (81) | — | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| (dollars in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Long-term receivables, net | $ | 46 | $ | — | $ | 46 | $ | — | ||||||||||||||||||
| Customer financing notes receivable, net | 19 | — | 19 | — | ||||||||||||||||||||||
| Short-term borrowings | (51) | — | (51) | — | ||||||||||||||||||||||
| Long-term debt, including current portion (excluding leases and other) | (7,600) | — | (7,600) | — | ||||||||||||||||||||||
| Long-term liabilities, including current portion | (123) | — | (123) | — | ||||||||||||||||||||||
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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.