Otis Worldwide CorpOTIS
Otis Worldwide Corp Leases Disclosure
Leases
ASU 2016-02, Leases (Topic 842) and its related amendments (collectively, "Lease Accounting Standard") establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability in the Consolidated Balance Sheets for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statements of Operations.
We enter into lease agreements for the use of real estate space, vehicles and certain other equipment under operating and finance leases. We determine if an arrangement contains a lease at inception. Operating leases are included in Operating lease ROU assets, Accrued liabilities, and Operating lease liabilities in our Consolidated Balance Sheets. Finance leases are not considered significant to our Consolidated Balance Sheets or Consolidated Statements of Operations. We apply the practical expedient for short-term leases, whereby a lease ROU asset and liability is not recognized and the expense is recognized in a straight-line basis over the lease term.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, and use the implicit rate when readily determinable. We determine our incremental borrowing rate through market sources including relevant industry rates. Our lease ROU assets also include any lease pre-payments and exclude lease incentives. Certain of our leases include variable payments, which may vary based upon changes in facts or circumstances after the start of the lease. We exclude variable payments from lease ROU assets and lease liabilities, to the extent not considered fixed, and instead, expense variable payments as incurred. Variable lease expense and lease expense for short duration contracts is not a material component of lease expense. Our leases generally have remaining lease terms of 1 to 20 years, some of which include options to extend leases. The majority of our leases with options to extend are up to five years with the ability to terminate the lease within one year. The exercise of lease renewal options is at our sole discretion and our lease ROU assets and liabilities reflect only the options we are reasonably certain that we will exercise. Lease expense is recognized on a straight-line basis over the lease term.
Operating lease cost for 2025, 2024 and 2023 was $206 million, $166 million and $153 million, respectively.
Supplemental cash flow information related to operating leases for 2025, 2024 and 2023 was as follows:
| (dollars in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities: | ||||||||||||||||||||
| Operating cash outflows from operating leases | $ | (188) | $ | (129) | $ | (129) | ||||||||||||||
| Non-cash operating lease activity: | ||||||||||||||||||||
| ROU assets obtained in exchange for operating lease liabilities | 323 | 150 | 93 | |||||||||||||||||
Operating lease ROU assets and liabilities are reflected on our Consolidated Balance Sheets as of December 31, 2025 and 2024 are as follows:
| (dollars in millions) | 2025 | 2024 | ||||||||||||
| Operating lease ROU assets | $ | 554 | $ | 422 | ||||||||||
| $ | 158 | $ | 120 | |||||||||||
| Operating lease liabilities | 397 | 298 | ||||||||||||
| Total operating lease liabilities | $ | 555 | $ | 418 | ||||||||||
Supplemental information related to operating leases as of December 31, 2025 and 2024 are as follows:
| 2025 | 2024 | |||||||||||||||||||
| Weighted Average Remaining Lease Term (in years) | 3.9 | 4.1 | ||||||||||||||||||
| Weighted Average Discount Rate | 4.2 | % | 4.0 | % | ||||||||||||||||
Undiscounted maturities of operating lease liabilities, including options to extend lease terms that are reasonably certain of being exercised, as of December 31, 2025 are as follows:
| (dollars in millions) | Total | |||||||
| 2026 | $ | 178 | ||||||
| 2027 | 153 | |||||||
| 2028 | 116 | |||||||
| 2029 | 73 | |||||||
| 2030 | 38 | |||||||
| Thereafter | 47 | |||||||
| Total undiscounted lease payments | 605 | |||||||
| Less: imputed interest | (50) | |||||||
| Total discounted lease payments | $ | 555 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 5, 2026 | Showing above |
| 2024 | Feb 4, 2025 | |
| 2023 | Feb 2, 2024 | |
| 2022 | Feb 3, 2023 | |
| 2021 | Feb 4, 2022 | |
| 2020 | Feb 5, 2021 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.