0001781335-23-000009 | 10-K | XBRL Viewer

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Cover Page - USD ($)	12 Months Ended
Cover Page - USD ($)	Dec. 31, 2022	Jan. 20, 2023	Jun. 30, 2022
Document Information [Line Items]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2022
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity File Number	001-39221
Entity Registrant Name	OTIS WORLDWIDE CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	83-3789412
Entity Address, Address Line One	One Carrier Place
Entity Address, City or Town	Farmington
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06032
City Area Code	860
Local Phone Number	674-3000
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
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Entity Public Float			$ 29,680,794,287
Entity Common Stock, Shares Outstanding		414,869,461
Documents Incorporated by Reference	Part III hereof incorporates by reference portions of the Otis Worldwide Corporation Proxy Statement for the 2023 Annual Meeting of Shareholders (the "2023 Proxy Statement"). The 2023 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Central Index Key	0001781335
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock ($0.01 par value)
Trading Symbol	OTIS
Security Exchange Name	NYSE
0.000% Notes due 2023
Document Information [Line Items]
Title of 12(b) Security	0.000% Notes due 2023
Trading Symbol	OTIS/23
Security Exchange Name	NYSE
0.318% Notes due 2026
Document Information [Line Items]
Title of 12(b) Security	0.318% Notes due 2026
Trading Symbol	OTIS/26
Security Exchange Name	NYSE
0.934% Notes due 2031
Document Information [Line Items]
Title of 12(b) Security	0.934% Notes due 2031
Trading Symbol	OTIS/31
Security Exchange Name	NYSE

Audit Information	12 Months Ended
Audit Information	Dec. 31, 2022
Audit Information [Abstract]
Auditor Name	PricewaterhouseCoopers LLP
Auditor Firm ID	238
Auditor Location	Hartford, Connecticut

Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Net sales:
Revenues	$ 13,685	$ 14,298	$ 12,756
Costs and expenses:
Research and development	150	159	152
Selling, general and administrative	1,763	1,948	1,924
Costs and expenses	11,678	12,212	11,053
Other income (expense), net	26	22	(64)
Operating profit	2,033	2,108	1,639
Non-service pension cost (benefit)	2	11	6
Interest expense (income), net	143	136	122
Net income before income taxes	1,888	1,961	1,511
Income tax expense	519	541	455
Net income	1,369	1,420	1,056
Less: Noncontrolling interest in subsidiaries' earnings	116	174	150
Net income attributable to Otis Worldwide Corporation	$ 1,253	$ 1,246	$ 906
Earnings per share (Note 3):
Basic (in usd per share)	$ 2.98	$ 2.91	$ 2.09
Diluted (in usd per share)	$ 2.96	$ 2.89	$ 2.08
Weighted average number of shares outstanding
Basic shares (in shares)	420.0	427.7	433.2
Diluted shares (in shares)	423.0	431.4	434.6
Product sales
Net sales:
Revenues	$ 5,864	$ 6,428	$ 5,371
Costs and expenses:
Cost of products and services sold	4,949	5,293	4,439
Service sales
Net sales:
Revenues	7,821	7,870	7,385
Costs and expenses:
Cost of products and services sold	$ 4,816	$ 4,812	$ 4,538

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 1,369	$ 1,420	$ 1,056
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	(55)	(53)	8
Pension and postretirement benefit plan adjustments:
Net actuarial gain (loss)	146	71	(43)
Amortization of actuarial loss and prior service credit	10	18	15
Other	11	13	(19)
Total recognized in other comprehensive loss	167	102	(47)
Tax benefit (expense)	(47)	(27)	11
Pension and postretirement benefit plan adjustments, net of tax	120	75	(36)
Change in unrealized cash flow hedging:
Unrealized cash flow hedging gain (loss)	(3)	(1)	10
Adjustment for net (gain) loss realized and included in net income	(1)	4	(3)
Change in unrealized cash flow hedging, net of tax	(4)	3	7
Other comprehensive income (loss), net of tax	61	25	(21)
Comprehensive income (loss), net of tax	1,430	1,445	1,035
Less: Comprehensive (income) loss attributable to noncontrolling interest	(6)	(147)	(186)
Comprehensive income attributable to Otis Worldwide Corporation	$ 1,424	$ 1,298	$ 849

Consolidated Balance Sheet - USD ($) $ in Millions	Dec. 31, 2022	Dec. 31, 2021
Assets
Cash and cash equivalents	$ 1,189	$ 1,565
Restricted cash	5	1,910
Accounts receivable (net of allowance for expected credit losses of $152 and $175)	3,357	3,232
Contract assets	664	550
Inventories	617	622
Other current assets	311	382
Total Current Assets	6,143	8,261
Future income tax benefits	285	335
Fixed assets, net	719	774
Operating lease right-of-use assets	449	526
Intangible assets, net	369	419
Goodwill	1,567	1,667
Other assets	287	297
Total Assets	9,819	12,279
Liabilities and Equity (Deficit)
Short-term borrowings and current portion of long-term debt	670	24
Accounts payable	1,717	1,556
Accrued liabilities	1,794	1,993
Contract liabilities	2,662	2,674
Total Current Liabilities	6,843	6,247
Long-term debt	6,098	7,249
Future pension and postretirement benefit obligations	392	558
Operating lease liabilities	315	336
Future income tax obligations	279	267
Other long-term liabilities	556	606
Total Liabilities	14,483	15,263
Commitments and contingent liabilities (Note 22)
Redeemable noncontrolling interest	135	160
Shareholders' (Deficit) Equity:
Common Stock and additional paid-in-capital	162	119
Treasury Stock	(1,575)	(725)
Accumulated deficit	(2,865)	(2,256)
Accumulated other comprehensive income (loss)	(592)	(763)
Total Shareholders' Equity (Deficit)	(4,870)	(3,625)
Noncontrolling interest	71	481
Total Equity (Deficit)	(4,799)	(3,144)
Total Liabilities and Equity (Deficit)	$ 9,819	$ 12,279

Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Accounts receivable, allowance for credit loss	$ 152	$ 175	$ 161

Consolidated Statements of Changes in Equity - USD ($) $ in Millions	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock and Additional Paid-In Capital	Treasury Stock	Accumulated Deficit	UTC Net Investment (Deficit)	UTC Net Investment (Deficit) Cumulative Effect, Period of Adoption, Adjustment	Accumulated Other Comprehensive Income (Loss)	Total Shareholders' (Deficit) Equity	Total Shareholders' (Deficit) Equity Cumulative Effect, Period of Adoption, Adjustment	Noncontrolling Interest
Beginning balance at Dec. 31, 2019	$ 2,128	$ (25)	$ 0	$ 0	$ 0	$ 2,430	$ (25)	$ (758)	$ 1,672	$ (25)	$ 456
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net transfers to UTC and Separation-related transactions	(6,150)					(6,150)			(6,150)		0
Issuance of Common Stock and reclassification of deficit			4		(3,584)	3,580
Net income	1,044				741	165			906		138
Other comprehensive income (loss), net of tax	(23)							(57)	(57)		34
Stock-based compensation and Common Stock issued under employer plans	55		55						55
Cash dividends declared	(260)				(260)				(260)
Dividends attributable to noncontrolling interest	(138)										(138)
Acquisitions, disposals and other changes	(26)				(3)				(3)		(23)
Ending balance at Dec. 31, 2020	(3,395)		59	0	(3,106)	0		(815)	(3,862)		467
Beginning balance at Dec. 31, 2019	198
Increase (Decrease) in Temporary Equity [Roll Forward]
Net income	12
Other comprehensive income (loss), net of tax	2
Dividends attributable to noncontrolling interest	(9)
Acquisitions, disposals and other changes	(9)
Ending balance at Dec. 31, 2020	194
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	1,409				1,246	0			1,246		163
Other comprehensive income (loss), net of tax	37							52	52		(15)
Stock-based compensation and Common Stock issued under employer plans	60		62		(2)				60
Cash dividends declared	(393)				(393)				(393)
Dividends attributable to noncontrolling interest	(145)										(145)
Acquisitions, disposals and other changes	8		(2)		(1)				(3)		11
Repurchase of Common Shares	(725)			(725)					(725)
Ending balance at Dec. 31, 2021	(3,144)		119	(725)	(2,256)	0		(763)	(3,625)		481
Increase (Decrease) in Temporary Equity [Roll Forward]
Net income	11
Other comprehensive income (loss), net of tax	(12)
Dividends attributable to noncontrolling interest	(11)
Acquisitions, disposals and other changes	(22)
Ending balance at Dec. 31, 2021	160
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	1,354				1,253				1,253		101
Other comprehensive income (loss), net of tax	159							171	171		(12)
Stock-based compensation and Common Stock issued under employer plans	59		61		(2)				59
Cash dividends declared	(465)				(465)				(465)
Dividends attributable to noncontrolling interest	(86)										(86)
Acquisitions, disposals and other changes	59		(18)		87				69		(10)
Repurchase of Common Shares	(850)			(850)					(850)
Reclassification of noncontrolling interest to forward purchase agreement and redeemable noncontrolling interest (Note 1)	(1,885)				(1,482)				(1,482)		(403)
Ending balance at Dec. 31, 2022	(4,799)		$ 162	$ (1,575)	$ (2,865)	$ 0		$ (592)	$ (4,870)		$ 71
Increase (Decrease) in Temporary Equity [Roll Forward]
Net income	15
Other comprehensive income (loss), net of tax	(98)
Dividends attributable to noncontrolling interest	(14)
Acquisitions, disposals and other changes	(1,404)
Reclassification of noncontrolling interest to forward purchase agreement and redeemable noncontrolling interest (Note 1)	1,476
Ending balance at Dec. 31, 2022	$ 135

Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Stockholders' Equity [Abstract]
Cash dividends declared (in usd per share)	$ 1.11	$ 0.92	$ 0.60

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Operating Activities:
Net income	$ 1,369	$ 1,420	$ 1,056
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions and dispositions:
Depreciation and amortization	191	203	191
Deferred income tax expense (benefit)	(16)	(92)	(51)
Stock compensation cost	67	65	63
Loss on fixed asset impairment	0	0	71
Change in:
Accounts receivable, net	(309)	(152)	(163)
Contract assets and liabilities, current	38	53	282
Inventories	(65)	14	(76)
Other current assets	52	43	28
Accounts payable	272	130	20
Accrued liabilities	(84)	72	(14)
Pension and postretirement contributions	(34)	(37)	(64)
Other operating activities, net	79	31	137
Net cash flows provided by operating activities	1,560	1,750	1,480
Investing Activities:
Capital expenditures	(115)	(156)	(183)
Acquisitions of businesses and intangible assets, net of cash (Note 9)	(46)	(80)	(53)
Dispositions of businesses, net of cash (Note 9)	61	0	0
Proceeds from sale of (investments in) marketable securities		40
Proceeds from sale of (investments in) marketable securities	(7)		(51)
Receipts (payments) on settlements of derivative contracts	65	73	(69)
Other investing activities, net	9	34	3
Net cash flows provided by (used in) investing activities	(33)	(89)	(353)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)	113	(304)	647
Proceeds from borrowings (maturities longer than 90 days)	0	152	0
Repayments of borrowings (maturities longer than 90 days)	0	(503)	0
Proceeds from issuance of long-term debt	0	2,030	6,300
Payment of debt issuance costs	0	(25)	(43)
Repayment of long-term debt	(500)	0	(1,000)
Dividends paid on Common Stock	(465)	(393)	(260)
Repurchases of Common Stock	(850)	(725)	0
Dividends paid to noncontrolling interest	(118)	(155)	(149)
Acquisition of Zardoya Otis shares (Note 1)	(1,802)	0	0
Net transfers to UTC	0	0	(6,330)
Other financing activities, net	(30)	(19)	(9)
Net cash flows provided by (used in) financing activities	(3,652)	58	(844)
Effect of foreign exchange rate changes on cash and cash equivalents	(157)	(43)	59
Net increase (decrease) in cash and cash equivalents	(2,282)	1,676	342
Cash, cash equivalents and restricted cash, beginning of year	3,477	1,801	1,459
Cash, cash equivalents and restricted cash, end of year	1,195	3,477	1,801
Less: Restricted cash	6	1,912	19
Cash and cash equivalents	1,189	1,565	1,782
Supplemental cash flow information:
Interest Paid, Excluding Capitalized Interest, Operating Activities	134	129	81
Income Taxes Paid, Net	$ 562	$ 552	$ 561

Consolidated Statements of Cash Flows (Parenthetical) $ in Millions	12 Months Ended
	Dec. 31, 2020 USD ($)
Interest paid	$ 81
Income taxes paid	561
UTC
Income taxes paid	$ (15)

Business Overview	12 Months Ended
Business Overview	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Business Overview	Business Overview Otis (as defined below) is the world’s largest elevator and escalator manufacturing, installation and service company. Our operations are classified into two segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways, for residential, commercial and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators. On November 26, 2018, United Technologies Corporation, subsequently renamed to Raytheon Technologies Corporation on April 3, 2020 ("UTC" or "RTX", as applicable), announced its intention to spin-off its Otis reportable segment and its Carrier reportable segment into two separate publicly-traded companies (the "Separation"). On April 3, 2020, the Company became an independent publicly-traded company through a pro-rata distribution of 0.5 shares of Common Stock for every share of UTC common stock held at the close of business on the record date of March 19, 2020 ("Distribution"). Otis began to trade as a separate public company (New York Stock Exchange ("NYSE"): OTIS) on April 3, 2020. Unless the context otherwise requires, references to "Otis", "we", "us", "our" and "the Company" refer to (i) Otis Worldwide Corporation's business prior to the Separation and (ii) Otis Worldwide Corporation and its subsidiaries following the Separation, as applicable. References to "UTC" relate to pre-Separation matters, and references to "RTX" relate to post-Separation matters. Sale of Russia Business The Company sold its business in Russia during 2022. See Note 9, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the sale of our Russia business. Zardoya Otis Tender Offer The Company previously announced its Tender Offer to acquire all of the issued and outstanding shares of Zardoya Otis not owned by the Company in cash, and its intention to delist the shares of Zardoya Otis from the Spanish stock exchanges subsequent to the Tender Offer (the "Tender Offer"). The price per share of the Tender Offer was €7.07 in cash as of March 31, 2022, after adjustments for dividends paid. The Tender Offer was approved by the Spanish regulator on February 28, 2022. As a result of the Tender Offer approval, the issued and outstanding shares of Zardoya Otis owned by Euro Syns, S.A. ("Euro Syns") were reclassified to current liabilities as Forward purchase agreement, and the remaining shares not owned by the Company were deemed redeemable at the option of the other shareholders and were reclassified from Noncontrolling interest to Redeemable noncontrolling interest on our Consolidated Financial Statements. The difference between the historical noncontrolling interest carrying value in the balance sheet and the fair value of the Tender Offer was recorded to Accumulated deficit. The results of the Tender Offer were announced on April 7, 2022, with tenders, including Euro Syns' shares, of 45.49% of the shares outstanding accepted, resulting in the Company owning 95.51% of Zardoya Otis. The shares tendered to the Company were settled in cash on April 12, 2022 for approximately €1.5 billion from the Company's restricted cash held in escrow. The acquisition and settlement of the remaining issued and outstanding shares of Zardoya Otis not owned by the Company occurred in the second quarter for approximately €150 million. The automatic delisting of Zardoya Otis shares occurred on May 9, 2022. Zardoya Otis was then renamed Otis Mobility S.A. ("Otis Mobility"). The Company owned a controlling interest and had operational control of Otis Mobility (formerly Zardoya Otis) as of and for the years ended December 31, 2022, 2021 and 2020, and therefore its financial results are included in our Consolidated Financial Statements. The Company owned 50.02% of Otis Mobility prior to the Tender Offer and 100% after completion of the Tender Offer. See Note 10, "Borrowings and Lines of Credit" for additional information regarding financing agreements entered into by the Company and its subsidiaries in connection with the Tender Offer.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation. Prior to the Separation on April 3, 2020, our historical financial statements were prepared on a standalone combined basis and were derived from the consolidated financial statements and accounting records of our former parent, UTC. For the period subsequent to April 3, 2020, our financial statements are presented on a consolidated basis as the Company became a standalone public company (collectively, the financial statements for all periods presented, including the historical results of the Company prior to April 3, 2020, are now referred to as "Consolidated Financial Statements" to reflect this change). They have been prepared in accordance with the instructions to Form 10-K.

Prior to the Separation on April 3, 2020, the Consolidated Statements of Operations included all revenues and costs directly attributable to Otis, including costs for facilities, functions and services used by Otis. Costs for certain functions and services performed by centralized UTC organizations were directly charged to Otis based on specific identification when possible or based on a reasonable allocation driver such as net sales, headcount, usage or other allocation methods. All charges and allocations for facilities, functions and services performed by UTC organizations have been deemed settled in cash by Otis to UTC in the period in which the cost was recorded on the Consolidated Statements of Operations. Current and deferred income taxes were determined based on the standalone results of Otis. However, because the Company was included in our former parent UTC’s tax group in certain jurisdictions, the Company's actual tax balances may differ from those reported. The Company's portion of its domestic income taxes and certain income taxes for jurisdictions outside the U.S. are deemed to have been settled in the period the related tax expense was recorded prior to the Separation.

The Consolidated Financial Statements include the accounts of Otis and its controlled subsidiaries, as well as entities where Otis has a variable interest and is the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation. The factors we use to determine the primary beneficiary of a variable interest entity ("VIE") may include decision authority, control over management of day-to-day operations and the amount of our equity investment in relation to others' investments.

All significant intracompany accounts and transactions within the Company have been eliminated in the preparation of the Consolidated Financial Statements.

Certain amounts for prior years have been reclassified to conform to the current year presentation, which are immaterial.

Use of Estimates. The preparation of the 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. In addition, estimates and assumptions may impact the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We assessed certain accounting matters that generally require consideration of forecasted financial information in the context of the information reasonably available to us and the unknown future impacts of coronavirus ("COVID-19") as of December 31, 2022 and 2021, and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for credit losses, the carrying value of our goodwill and other long-lived assets, financial assets and revenue recognition. While there was not a material impact to our Consolidated Financial Statements as of and for the years ended December 31, 2022, 2021 and 2020 resulting from our assessments of these matters, future assessment of our current expectations at that time of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to our Consolidated Financial Statements in future reporting periods.

Cash and Cash Equivalents. Cash and cash equivalents includes cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities of three months or less.

Restricted Cash. In certain circumstances we are required to maintain cash deposits with certain banks with respect to contractual or other legal obligations, and therefore the use of these cash deposits for general operational purposes is restricted. Restricted cash as of December 31, 2022 and 2021 was approximately $6 million and $1.9 billion, respectively, including cash held in escrow to fund the Tender Offer as of December 31, 2021. The non-current portion of restricted cash is $1 million and $2 million as of December 31, 2022 and 2021, respectively, and is included in Other assets on the Consolidated Balance Sheets.

Accounts Receivable. The Company records accounts receivables when the right to consideration becomes unconditional. We regularly evaluate the collectability of our accounts receivable and maintain reserves for expected credit losses. See Note 6, "Accounts Receivable, Net" for additional information on the Company's policy for evaluation of expected credit losses. We do not believe that accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographic areas.

Retainage and Unbilled Receivables. Current and long-term accounts receivable as of December 31, 2022 and 2021 include retainage of $60 million and $75 million, respectively, and unbilled receivables of $103 million and $109 million, respectively. Retainage represents amounts that, pursuant to the applicable contract, are not due until after project completion and acceptance by the customer. Unbilled receivables represent revenues that are earned but may not be currently billable to the customer under the terms of the contract. These items are expected to be billed and collected in the ordinary course of business. Unbilled receivables where we have an unconditional right to payment are included in Accounts receivable, net as of December 31, 2022 and 2021.

Customer Financing Notes Receivable. Through financing arrangements with our customers, we extend payment terms, which are generally not more than one year in duration.

Factoring. The Company may sell certain trade accounts and notes receivable to lending institutions to manage credit risk. Financial assets sold under these arrangements are excluded from Accounts receivable, net in the Company’s Consolidated Balance Sheets at the time of sale if the Company has surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred. Gains and losses stemming from transfers reported as sales are included in Interest expense (income), net in the accompanying Consolidated Statements of Operations.

Contract Assets and Liabilities. Contract assets and liabilities represent the difference in the timing of revenue recognition from receipt of cash from our customers and billings.

Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Performance obligations partially satisfied in advance of customer billings are included in Contract assets, current. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. See Note 4, "Contract Assets and Liabilities" for further discussion of contract assets and liabilities.

Inventories. Inventories are stated at the lower of cost or estimated realizable value and are primarily based on a first-in, first-out method. Valuation write-downs for excess, obsolete and slow-moving inventory are estimated by comparing the inventory levels of individual parts to both future sales forecasts or production requirements and historical usage rates in order to identify inventory where the resale value or replacement value is less than inventoriable cost. See Note 7, "Inventories" for further details of the inventories by classification.

Fixed Assets. Fixed assets, including software capitalized for internal-use, are recorded at cost. Depreciation of fixed assets is computed over the fixed assets' useful lives on a straight-line basis, unless another systematic and rational basis is more representative of the fixed asset's pattern of use. See Note 8, "Fixed Assets" for further details of useful lives.

Internal Use Software. The Company capitalizes direct costs of services used in the development of, and external software acquired for use as, internal-use software. Amounts capitalized are amortized over a period ranging from three to five years, on a straight-line basis, unless another systematic and rational basis is more representative of the software's use. Amounts are reported as a component of Machinery and equipment.

Asset Retirement Obligations. The Company records the fair value of legal obligations associated with the retirement of tangible long-lived assets in the period in which the legal obligations are determined to exist. Upon initial recognition of a liability, the Company capitalizes the cost of the asset retirement obligation by increasing the carrying amount of the related long-lived asset. Over time, the liability is adjusted for changes in its present value and the capitalized cost is depreciated over the useful life of the related asset.

Fair Value of Financial Instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

Level I – Quoted prices for identical instruments in active markets.

Level II – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level III – Instruments whose significant value drivers are unobservable.

The carrying amount of current trade receivables, accounts payable and accrued expenses approximates fair value due to the short maturity (less than one year) of the instruments.

Equity Method Investments. Entities in which we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in Other assets on the Consolidated Balance Sheets. Under this method of accounting, our share of the net earnings or losses of the investee entity is included in Other income (expense), net in the Consolidated Statements of Operations since the activities of the investee entity are closely aligned with the operations of the Company. We evaluate our equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

Business Combinations. We account for transactions that are classified as business combinations in accordance with the FASB ASC Topic 805: Business Combinations. Once a business is acquired, the fair values of the identifiable assets acquired and liabilities assumed are determined with the excess cost recorded to goodwill. As required, preliminary fair values are determined once a business is acquired, with the final determination of the fair values being completed within the one-year measurement period from the date of acquisition.

Goodwill, Intangible Assets and Long-Lived Assets. Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Intangible assets consist of service portfolios, patents, trademarks/trade names, customer relationships and other intangible assets. Acquired intangible assets are recognized at fair value during acquisition accounting and then amortized to Cost of products and services sold and Selling, general and administrative over the applicable useful lives.

Goodwill and Indefinite-Lived Intangible Assets. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Goodwill and indefinite-lived intangible assets are subject to impairment testing annually or when a triggering event occurs using the guidance and criteria described in FASB ASC Topic 350: Intangibles – Goodwill and Other. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value.

We test goodwill for impairment at a level within the Company referred to as the reporting unit, which is one level below the operating segment level. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identified that it is more likely than not that the fair value of a reporting unit is less than its carrying value, additional quantitative testing is performed. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, an impairment charge is recognized based on the difference between the reporting unit's carrying value and its fair value. When it is determined that a quantitative analysis is required, the Company primarily utilizes a discounted cash flow methodology to calculate the fair value of its reporting units. The Company completed its most recent annual impairment testing as of July 1, 2022, and determined in the qualitative assessment that quantitative testing is not necessary. There were no triggering events since the annual impairment test.

Finite-Lived Intangible Assets and Long-Lived Assets. Useful lives of finite-lived intangible assets are estimated based upon the nature of the intangible asset. These intangible assets are amortized based on the pattern in which the economic benefits of the intangible assets are consumed or if straight-line amortization approximates the pattern of economic benefit, a straight-line amortization method may be used. The range of estimated useful lives is as follows:


Purchased service portfolios						5 to 25 years
Patents, trademarks/trade names						4 to 40 years
Customer relationships and other						1 to 20 years

The Company evaluates the potential impairment of long-lived assets, including finite-lived intangible assets whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. If the carrying value of other long-lived assets held and used exceeds the sum of the undiscounted expected future cash flows, the carrying value is written down to fair value. See Note 8, "Fixed Assets" and Note 9, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding intangible assets and other long-lived assets.

Income Taxes. In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated interest expense has also been recognized. We recognize accrued interest related to unrecognized tax benefits in Interest expense (income), net. Penalties, if incurred, would be recognized as a component of Income tax expense.

The U.S. Tax Cuts and Jobs Act ("TCJA") subjects the Company to a tax on Global Intangible Low-Taxed Income (“GILTI”). GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. We account for GILTI as a period cost as incurred.

Income taxes as presented in the Consolidated Financial Statements of the Company for periods prior to the Separation attribute current and deferred income taxes of our former parent, UTC, to the Company's stand-alone financial statements in a manner that is systematic, rational and consistent with the asset and liability method prescribed by FASB ASC Topic 740: Income Taxes (“ASC 740”). Accordingly, the Company's income tax provision for periods prior to the Separation was prepared following the separate return method. The separate return method applies ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group members were a separate taxpayer and a stand-alone enterprise. The calculation of our income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations. As a result, actual transactions included in the consolidated financial statements of UTC may not be included in the Consolidated Financial Statements of the Company. Similarly, the tax treatment of certain items reflected in the Consolidated Financial Statements of the Company may not be reflected in the consolidated financial statements and tax returns of UTC. Therefore, such items as net operating losses, credit carry-forwards and valuation allowances may exist in the stand-alone financial statements that may or may not exist in UTC’s consolidated financial statements. As such, the income taxes of the Company as presented in the Consolidated Financial Statements prior to the Separation may not be indicative of the income taxes that the Company will report in the future.

See Note 5, "Related Parties" and Note 16, "Income Taxes" for additional information.

Revenue Recognition. We recognize revenue in accordance with FASB ASC Topic 606: Revenue from Contracts with Customers and its related amendments, (referred to, collectively, as "ASC 606”). The Company's revenue streams include new equipment, maintenance and repair, and modernization. New equipment, modernization and repair services revenue are recognized over time as we are enhancing an asset the customer controls. Maintenance revenue is recognized on a straight-line basis over the life of the maintenance contract.

New Equipment, Modernization and Repair Services. For new equipment and modernization transactions, equipment and installation are typically procured in a single contract providing the customer with a complete installed elevator or escalator unit. The combination of equipment and installation promises are typically a single performance obligation. For repair services, the customer typically contracts for specific short-term services which form a single performance obligation.

For these performance obligations, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which corresponds with and best depicts transfer of control or the enhancement of the customer’s assets. Contract costs included in the calculation are comprised of labor, materials, subcontractors’ costs or other direct costs and indirect costs, which include indirect labor costs. Specific to new equipment and modernization arrangements, the Company, based on project progression, reviews cost estimates on significant contracts on a quarterly basis, and for others, no less frequently than annually or when circumstances change and warrant a modification to a previous estimate. These estimates form the basis for the amount of revenue to be recognized and include the latest updated total transaction price, costs and risks for each contract. These estimates for our ongoing contracts may materially change due to the change and completions of the contract scopes, cost estimates and customers' plans, among other factors.

For performance obligations recognized under the cost to cost method, we record changes in contract estimates using the cumulative catch-up method. Modifications are recognized as a cumulative catch-up or treated as a separate accounting contract if the modification adds distinct goods or services and the modification is priced at its stand-alone selling price.

Maintenance. Our customers purchase maintenance contracts which include services such as required periodic maintenance procedures, preventive services and stand ready obligations to remediate issues with the elevator/escalator when and if they arise. Given the continuous nature of these services throughout the year, we recognize revenue on maintenance contracts on a straight-line basis which aligns with the cost profile of these services. Contractual changes are typically recognized prospectively as most modifications are extensions of the existing arrangement.

Transaction Price Considerations. Our contracts typically include fixed payments which are generally received as we progress under our contracts. As a result, we have not identified any significant financing elements in our contract, and our contracts do not have significant estimates related to variable consideration except in the case of a project having an underlying performance issue, which is rare. In situations where multiple performance obligations in a single contract (e.g., new equipment and maintenance) exist, the transaction price is allocated to each performance obligation in proportion to its stand-alone selling price. Estimates are made to account for changes in transaction prices attributable to pricing disputes that occur subsequent to the inception of contracts, based upon historical experience and the status of contracts.

Certain Costs to Obtain or Fulfill Contracts. Certain costs to obtain or fulfill a contract with a customer must be capitalized, to the extent recoverable from the associated contract margin, and subsequently amortized as the products or services are delivered to the customer. Sales commissions related to new equipment, modernization and maintenance contracts, excluding renewals, are capitalized as contract fulfillment costs and are amortized consistent with the pattern of transfer of the goods or services. Customer contract costs, which do not qualify for capitalization as contract fulfillment costs, are expensed as incurred.

Loss Contracts. Loss provisions on contracts are recognized to the extent that estimated contract costs exceed the estimated consideration from the products contemplated under the contractual arrangement. For new commitments, we generally record loss provisions at contract inception. For existing commitments, anticipated losses on contractual arrangements are recognized in the period in which losses become probable.

Remaining Performance Obligations ("RPO"). RPO represents the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. As of December 31, 2022, our total RPO was approximately $17.2 billion. Of the total RPO as of December 31, 2022, we expect approximately 91% will be recognized as sales over the following 24 months.

Additional disclosure required by ASC 606 is provided in Note 23, "Segment Financial Data", including disaggregation of revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Self-Insurance. The Company is primarily self-insured for a number of risks including, but not limited to, workers’ compensation, general liability, automobile liability and employee-related healthcare benefits. The Company has obtained insurance coverage for amounts exceeding individual and aggregate loss limits. The Company accrues for known future claims and incurred but not reported losses within Accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets, totaling $270 million and $287 million as of December 31, 2022 and 2021, respectively.

Derivatives and Hedging Activity. We have used derivative instruments, principally forward contracts, to help manage certain foreign currency and commodity price exposures. Derivative instruments are viewed as risk management tools by us and are not used for trading or speculative purposes. By their nature, all financial instruments involve market and credit risks. We enter into derivative and other financial instruments with major investment grade financial institutions and have policies to monitor

the credit risk of those counterparties. We limit counterparty exposure and concentration of risk by diversifying counterparties. While there can be no assurance, we do not anticipate any material non-performance by any of these counterparties.

Designated Derivative Instruments. Derivatives used for hedging purposes may be designated and effective as a hedge of the identified risk exposure at the inception of the contract. All derivative instruments are recorded on the Consolidated Balance Sheets at fair value. Derivatives are used to hedge foreign currency denominated balance sheet items and commodity prices for materials recognized in cost of sales, and are reported directly in earnings along with offsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments or forecasted commodity purchases may be accounted for as cash flow hedges, as deemed appropriate. Gains and losses on derivatives designated as cash flow hedges are recorded in Other comprehensive income (loss), net of tax and reclassified to earnings as a component of product sales or expenses, as applicable, when the hedged transaction occurs. Gains and losses on derivatives designated as cash flow hedges are recorded in Other operating activities, net within the Consolidated Statement of Cash Flows until reclassification to earnings. To the extent that a previously designated hedging transaction is no longer an effective hedge, any ineffectiveness measured in the hedging relationship is recorded currently in earnings in the period it occurs.

Additional information pertaining to net investment hedging is included in Note 18, "Financial Instruments".

Non-Designated Derivative Instruments. To the extent the hedge accounting criteria are not applied, the foreign currency forward contracts and commodity price contracts are utilized as economic hedges and changes in the fair value of these contracts are recorded currently in earnings in the period in which they occur. Additional information pertaining to these contracts is included in Note 18, "Financial Instruments".

In addition, the Company periodically enters into sales contracts denominated in currencies other than the functional currency of the parties to the transaction. The Company accounts for these transactions separately valuing the embedded derivative component of these contracts. The changes in the fair value of these embedded derivatives are immaterial for the years ended December 31, 2022, 2021 and 2020.

Environmental. Environmental investigatory, remediation, operating and maintenance costs are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to each individual site, including current laws, regulations and prior remediation experience. Where no amount within a range of estimates is more likely, the minimum is accrued. Liabilities with fixed or reliably determinable future cash payments are discounted. Accrued environmental liabilities are not reduced by potential insurance reimbursements. See Note 22, "Contingent Liabilities" for additional details on the environmental remediation activities.

Research and Development. These costs are expensed in the period incurred and are shown on a separate line of the Consolidated Statements of Operations. Research and development expenses, covering research and the advancement of potential new and improved products and their uses, primarily include salaries and other employment costs.

Other Income (Expense), Net. Other income (expense), net includes the impact of changes in the fair value and settlement of derivatives, gains or losses on sale of businesses and fixed assets, earnings from equity method investments, fair value changes on marketable securities, impairments, non-recurring Separation-related expenses, gains on insurance recoveries and certain other infrequent operating income and expense items.

Foreign Exchange. We conduct business in many different currencies and, accordingly, are subject to the inherent risks associated with foreign exchange rate movements. The financial position and results of operations of substantially all of our foreign subsidiaries are measured using the local currency as the functional currency. Foreign currency denominated assets and liabilities are translated into U.S. Dollars at the exchange rates existing at the respective balance sheet dates, and income and expense items are translated at the average exchange rates during the respective periods. The aggregate effects of translating the balance sheets of these subsidiaries are deferred within Accumulated other comprehensive income (loss).

Pension and Postretirement Obligations. Guidance under FASB ASC Topic 715: Compensation – Retirement Benefits requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under this guidance, actuarial gains and losses, prior service costs or credits and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized in Other comprehensive income (loss), net of tax effects, until they are amortized as a component of net periodic benefit cost. Pension and postretirement obligation balances and related costs reflected within the Consolidated Financial Statements include both costs directly attributable to

plans dedicated to Otis, as well as an allocation of costs for Otis employees’ participation in our former parent, UTC’s plans prior to Separation. See Note 13, "Employee Benefit Plans" for additional information.

Additional Paid-in Capital. Additional paid-in capital includes the value of stock-based award activity, as well as the difference between the cost of acquiring the Noncontrolling interest in consolidated subsidiaries and Otis' carrying value of the Noncontrolling interest associated with those subsidiaries.

The Company recorded $18 million and $2 million in 2022 and 2021, respectively, in Additional paid-in capital for transaction costs associated with the acquisition of shares of Otis Mobility (formerly Zardoya Otis) not owned by the Company. Refer to Note 1, "Business Overview" for additional information on the Tender Offer.

Noncontrolling Interest. Ownership interest in the Company's consolidated subsidiaries held by parties other than the Company are presented separately from Shareholders' (Deficit) Equity as “Noncontrolling interest” within equity on the Consolidated Balance Sheets. The amount of net income attributable to Otis Worldwide Corporation and the noncontrolling interest are both presented on the Consolidated Statements of Operations.

All noncontrolling interest with redemption features, such as put options or other contractual obligations to acquire the noncontrolling interest, that are not solely within our control are redeemable noncontrolling interest. Redeemable noncontrolling interest are reported in the mezzanine section of the Consolidated Balance Sheets, between Liabilities and equity (deficit), at the greater of redemption value or initial carrying value.

The activity attributable to noncontrolling interest and redeemable noncontrolling interest for the years ended December 31, 2022, 2021 and 2020 are presented in the Consolidated Statements of Changes in Equity.

UTC Net Investment. For periods prior to the Separation, UTC’s Net Investment in the Company was presented as “UTC Net Investment (Deficit)” on the Consolidated Balance Sheets. The Consolidated Statements of Changes in Equity includes activity in UTC Net Investment (Deficit) for corporate allocations, net cash transfers and other property transfers between our former parent, UTC, and the Company, as well as related party receivables, payables and long-term debt between the Company and other UTC affiliates that were settled on a current basis. Prior to the Separation, UTC performed cash management and other treasury-related functions on a centralized basis for nearly all of its legal entities, which included the Company, and, consequently, the net cash generated by the Company in legal entities that participated in UTC’s centralized cash management and financing programs was transferred to UTC through the related party accounts. See Note 5, "Related Parties" for additional information.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU and its related amendments (collectively, the "Credit Loss Standard") modifies the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments including trade receivables, contract assets, long-term receivables and off-balance sheet credit exposures. The Credit Loss Standard requires consideration of a broader range of information to estimate expected credit losses, including historical information and current conditions through a reasonable forecast period. The Credit Loss Standard requires that the income statement reflect the measurement of credit losses for newly recognized financial assets as well as the expected increase or decrease of expected credit losses that have taken place during the period, which may result in earlier recognition of certain losses. We adopted this standard effective January 1, 2020 utilizing a modified retrospective approach. A cumulative-effect non-cash after-tax adjustment to retained earnings as of January 1, 2020 of $25 million was recorded.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update remove certain exceptions of Topic 740 including: exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or gain from other items; exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. There are also additional areas of guidance in regards to: franchise and other taxes partially based on income and the interim recognition of enactment of tax laws and rate changes. The provisions of this ASU were effective for years beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard effective January 1, 2021. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements.

Future Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Additionally, in December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 ("ASU 2022-06"), which allows ASU 2020-04 to be adopted and applied prospectively to contract modifications made on or before December 31, 2024. We are currently evaluating the impact of adopting this standard but do not expect it to have a material impact on our Consolidated Financial Statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early application permitted. We are currently evaluating the impact of adopting this standard, however we do not expect it to have a material impact on our Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations, which requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We are currently evaluating the impact of adopting this standard on our Consolidated Financial Statements.

Earnings per Share

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

Earnings per Share


(dollars in millions, except per share amounts; shares in millions)	2022		2021		2020 *
Net income attributable to Otis Worldwide Corporation	$	1,253	$	1,246	$	906
Impact of redeemable noncontrolling interest	—		—		—
Net income attributable to common shareholders	$	1,253	$	1,246	$	906

Basic weighted average number of shares outstanding	420.0		427.7		433.2
Stock awards and equity units (share equivalent) 1	3.0		3.7		1.4
Diluted weighted average number of shares outstanding	423.0		431.4		434.6

Earnings Per Share of Common Stock:
Basic	$	2.98	$	2.91	$	2.09
Diluted	$	2.96	$	2.89	$	2.08

* The calculation of the basic and diluted earnings per share for all periods presented prior to the Separation on April 3, 2020 utilizes 433,079,455 shares of the Common Stock, which were the number of shares distributed to UTC shareholders of record as of March 19, 2020.

1 Includes the dilutive impact of outstanding awards granted prior to the Separation from UTC and converted upon the Separation, in accordance with the Employee Matters Agreement.

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the Common Stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted earnings per share excludes the effect of the potential exercise of stock awards when the awards' assumed proceeds exceed the average market price of the common shares during the period. There were 2.3 million, 0.1 million and 4.6 million of anti-dilutive stock awards excluded from the computation for 2022, 2021 and 2020 respectively.

For the purpose of the above diluted earnings per share computation, we included only the units associated with the converted Otis share-based awards. These awards were assumed to be outstanding beginning from the Separation date.

Revenue Recognition

12 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Contract Assets and Liabilities

Contract assets reflect revenue recognized in advance of customer billing. Contract liabilities are recognized when a customer pays consideration, or we have a right to receive an amount of unconditional consideration, in advance of the satisfaction of performance obligations under the contract. We typically receive progress payments from our customers as we perform our work over time.

Total Contract assets and Contract liabilities as of December 31, 2022 and 2021 are as follows:


(dollars in millions)	2022		2021
Contract assets, current	$	664	$	550

Total contract assets	664		550

Contract liabilities, current	2,662		2,674
Contract liabilities, noncurrent (included within Other long-term liabilities)	52		52
Total contract liabilities	2,714		2,726
Net contract liabilities	$	2,050	$	2,176

Contract assets increased by $114 million during 2022 as a result of the progression of current contracts and timing of billing on customer contracts, partially offset by the impact foreign exchanges rates. Contract liabilities decreased by $12 million during 2022, due to contract billings in excess of revenue earned being more than offset by the impact of foreign exchange rates and a decrease of $102 million of contract liabilities due to the sale of our Russia business during 2022. During 2022, 2021 and 2020, we recognized revenue of $2.0 billion, $2.0 billion and $1.6 billion related to the contract liabilities as of January 1, 2022, January 1, 2021 and January 1, 2020, respectively.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
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-Subparagraph (a)
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

Related Parties

12 Months Ended

Dec. 31, 2022

Related Parties

The Separation, as further described in Note 1, "Business Overview", was completed pursuant to a Separation and Distribution Agreement ("Separation Agreement") and other agreements with our former parent, UTC, and Carrier, related to the Separation, including but not limited to a transition services agreement (the "Transition Services Agreement" or "TSA"), a tax matters agreement (the "Tax Matters Agreement" or "TMA"), an employee matters agreement (the "Employee Matters Agreement" or "EMA") and an intellectual property agreement (the "Intellectual Property Agreement"). The Separation Agreement sets forth certain agreements with UTC and Carrier regarding the principal actions to be taken in connection with the Separation, including identifying the assets transferred, the liabilities assumed and the contracts transferred to each of UTC, Carrier and Otis as part of the Separation.

Under the TSA, which was substantially completed as of December 31, 2021, RTX provided the Company certain services and we provided certain services to RTX. The EMA allocates among Otis, UTC and Carrier the liabilities and responsibilities relating to employment matters, employee compensation and benefit plans, benefit programs and other related matters.

We entered into the TMA with our former parent UTC and Carrier that governs the parties’ respective rights, responsibilities and obligations with respect to tax matters (including responsibility for taxes, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other tax matters). Subject to certain exceptions set forth in the TMA, Otis generally is responsible for federal, state and foreign taxes imposed on a separate return basis on Otis (or any of its subsidiaries) with respect to taxable periods (or portions thereof) that ended on or prior to the date of the Distribution. The TMA provides

special rules that allocate responsibility for tax liabilities arising from a failure of the Separation transactions to qualify for tax-free treatment based on the reasons for such failure. The TMA also imposed restrictions on Otis during the two-year period following the Distribution that were intended to prevent certain transactions from failing to qualify as transactions that would generally be tax-free.

Net Transfers from (to) UTC and Separation Transactions. In connection with the Separation, certain assets and liabilities were contributed to the Company by our former parent, UTC, leading up to and at the time of the Separation. During 2020 prior to the Separation, net liabilities of $43 million were contributed to the Company by our former parent, UTC, primarily consisting of deferred tax assets and liabilities and fixed assets. Prior to the Separation, these non-cash contributions were recorded as Net transfers (to) from UTC on the Consolidated Statements of Changes in Equity through UTC Net Investment.

Upon Separation in 2020, the following were recorded as Net transfers (to) from UTC and Separation-related transactions on the Consolidated Statements of Changes in Equity through UTC Net Investment:


(dollars in millions)
Cash and cash equivalents	$	220
Taxes and other	187
Total	$	407

Prior to the Separation, our former parent, UTC, paid Otis Cash and cash equivalents of $190 million in connection with the Separation Agreement, and $30 million as settlement of related party receivables due from UTC to Otis as a result of a cash overdraft as of March 31, 2020.

Additionally, the TCJA imposed a non-recurring toll charge, paid in installments over an 8-year period on deemed repatriated earnings of foreign subsidiaries as of December 31, 2017. Under the terms of the TMA, Otis will indemnify RTX for a percentage of the toll charge installment payments due after April 3, 2020. As a result, a portion of Otis' balance of Future income tax obligations corresponding to the toll charge was reclassified as a contractual indemnity obligation within Other long-term liabilities on the Consolidated Balance Sheets. The TMA also provides for RTX to indemnify Otis for certain foreign tax obligations as a result of Otis' inclusion in certain foreign consolidated tax returns prior to the Separation. As a result, Otis reflected this contractual indemnification asset within Other current assets and the related tax obligations within Accrued liabilities on the Consolidated Balance Sheets.

As a result of the Separation and the provisions of the TMA, Otis' total net tax-related liabilities on April 3, 2020 were reduced by $191 million, comprising the following impacts to the Consolidated Balance Sheets:


(dollars in millions)	Increase (Decrease)
Assets
Other current assets	$	167
Total Current Assets	167
Future income tax benefits	(4)
Total Assets	$	163

Liabilities and (Deficit) Equity
Accrued liabilities	$	110
Total Current Liabilities	110
Future income tax obligations	(377)
Other long-term liabilities	239
Total Liabilities	(28)
Total Shareholders' (Deficit) Equity	191
Total (Deficit) Equity	191
Total Liabilities and (Deficit) Equity	$	163

There were also $4 million of Other long-term liabilities recorded upon Separation on the Consolidated Balance Sheet.

In addition to Income taxes paid, net of (refunds) on the Consolidated Statements of Cash Flows, as a result of the TMA, the Company made payments of $56 million and $86 million in 2021 and 2020, respectively, for foreign tax obligations that were reimbursed by RTX.

Shared Costs. The Consolidated Financial Statements have been prepared on a standalone basis for the periods prior to the Separation on April 3, 2020, and for those periods are derived from the consolidated financial statements and accounting records of our former parent, UTC. Prior to the Separation, the Company had been managed and operated in the normal course of business with other affiliates of UTC, and UTC incurred corporate costs such as treasury, tax, accounting, human resources, audit, legal, purchasing, information technology and other such services. The costs associated with these services generally included all payroll and benefit costs, as well as overhead costs related to certain functions. All such amounts have been deemed to have been incurred and settled by the Company in the period in which the costs were recorded.

Accordingly, prior to the Separation, shared costs of $16 million were allocated to the Company for 2020, primarily reflected in Selling, general and administrative expense on the Consolidated Statements of Operations. There were no allocated centralized costs for the periods after the Separation.

Separation Costs. We have incurred non-recurring Separation costs as follows:



(dollars in millions)	2022		2021		2020
Separation costs	$	1	$	27	$	119

Separation-related costs prior to the Separation primarily consisted of employee-related costs, costs to establish certain standalone functions and information technology systems, professional services fees, costs to exit from certain services previously provided under the TSA and other transaction-related costs to transition to being a standalone public company. Costs after the Separation primarily consist of costs to exit from certain services previously provided under the TSA and other transaction-related costs to transition to being a standalone public company. Separation costs of $3 million, $16 million and $106 million, in 2022, 2021 and 2020, respectively, are recorded in Selling, general and administrative expense on the Consolidated Statements of Operations. Additional Separation-related items, which are recorded in Other income (expense), net, include adjustments to indemnification assets due from RTX related to the finalization of tax settlements in accordance with the TMA and other Separation-related costs.

Separation costs in 2021 and 2020 are partially offset by income tax benefits of $15 million and $20 million, respectively. Separation costs in 2022 resulted in an income tax expense of less than $1 million.

Accounts Receivable, Net

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Accounts Receivable, Net

Accounts receivable, net consisted of the following as of December 31:


(dollars in millions)	2022		2021
Trade receivables	$	3,231	$	3,117
Unbilled receivables	103		109
Miscellaneous receivables	91		88
Customer financing notes receivable	84		93
	3,509		3,407
Less: allowance for expected credit losses	152		175
Balance	$	3,357	$	3,232

Credit Losses. We are exposed to credit losses primarily through our net sales of products and services to our customers which are recorded as Accounts Receivable, net on the Consolidated Balance Sheets. We evaluate each customer's ability to pay through assessing customer creditworthiness, historical experience and current economic conditions through a reasonable forecast period. Factors considered in our evaluation of assessing collectability and risk include: underlying value of any collateral or security interests, significant past due balances, historical losses and existing economic conditions including country and political risk. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to the allowance for credit losses. We may require collateral

or prepayment to mitigate credit risk.

We estimate expected credit losses of financial assets with similar risk characteristics. We determine an asset is impaired when our assessment identifies there is a risk that we will be unable to collect amounts due according to the contractual terms of the agreement. We monitor our ongoing credit exposure through reviews of customer balances against contract terms and due dates, current economic conditions and dispute resolution. Estimated credit losses are written off in the period in which the financial asset is no longer collectible.

The changes in allowance for credit losses related to Accounts receivable, net for 2022 and 2021 are as follows:


(dollars in millions)	2022		2021
Balance as of January 1	$	175	$	161

Provision for expected credit losses	5		37
Write-offs charged against the allowance for expected credit losses	(22)		(15)
Foreign exchange and other	(6)		(8)
Balance as of December 31	$	152	$	175

Inventories

12 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

Inventories

Inventories consisted of the following as of December 31:


(dollars in millions)	2022		2021
Raw materials and work-in-process	$	166	$	140
Finished goods	451		482
Total	$	617	$	622

Raw materials and work-in-process and Finished goods are net of valuation write-downs of $96 million and $99 million as of December 31, 2022 and 2021, respectively.

Inventories decreased during 2022, including decreases of $16 million of raw materials and work-in-process and $36 million of finished goods due to the sale of our Russia business during 2022. See Note 9, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the sale of our Russia business. These decreases were partially offset by increases to inventory in order to support backlog conversion.

Fixed Assets

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Fixed Assets

Fixed assets consisted of the following as of December 31:


(dollars in millions)	Estimated Useful Lives	2022		2021
Land		$	39	$	43
Buildings and improvements	20 - 40 Years	538		596
Machinery and equipment	3 - 12 Years	1,196		1,166
Assets under construction		97		125
		1,870		1,930
Less: Accumulated depreciation		(1,151)		(1,156)
		$	719	$	774

Depreciation expense was $118 million, $116 million and $100 million in 2022, 2021 and 2020, respectively. Fixed assets decreased during 2022 due to the impact of foreign exchange rates, as well as $20 million as a result of the sale of our Russia business during 2022. See Note 9, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the sale of our Russia business.

Fixed assets acquired during the year that are accrued within Accounts payable at year end is considered to be a non-cash investing activity and is excluded from cash used for capital expenditures in the Consolidated Statements of Cash Flows. Capital expenditures of $2 million, $2 million and $15 million were accrued within Accounts payable in the Consolidated Balance Sheets as of December 31, 2022, 2021 and 2020, respectively.

Business Acquisitions, Dispositions, Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Business Acquisitions, Dispositions, Goodwill and Intangible Assets

Business Acquisitions. Our acquisitions of businesses and intangible assets, net of cash, totaled $46 million, $80 million and $55 million (including debt assumed) in 2022, 2021 and 2020, respectively. The acquisitions consisted of a number of acquisitions primarily in our Service segment. Transaction costs incurred were not considered significant.

Goodwill. Changes in our Goodwill balances in 2022 were as follows:


(dollars in millions)	Balance as of December 31, 2021		Goodwill Resulting From Business Combinations		Business Disposals 1		Foreign Currency Translation and Other		Balance as of December 31, 2022
New Equipment	$	336	$	—	$	(26)	$	(18)	$	292
Service	1,331		18		(3)		(71)		1,275
Total	$	1,667	$	18	$	(29)	$	(89)	$	1,567

1 The sale of our Russia business included $29 million of goodwill. For additional information, refer to the subheading "Disposals and Held for Sale Assets and Liabilities" below.

Changes in our Goodwill balances in 2021 were as follows:


(dollars in millions)	Balance as of December 31, 2020		Goodwill Resulting From Business Combinations		Foreign Currency Translation and Other		Balance as of December 31, 2021
New Equipment	$	357	$	—	$	(21)	$	336
Service	1,416		2		(87)		1,331
Total	$	1,773	$	2	$	(108)	$	1,667

Intangible Assets. Identifiable intangible assets are comprised of the following:


	2022				2021
(dollars in millions)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Amortized:
Purchased service portfolios	$	1,939	$	(1,599)	$	2,025	$	(1,638)
Patents, trademarks/trade names	20		(16)		21		(17)
Customer relationships and other	61		(42)		64		(43)
	2,020		(1,657)		2,110		(1,698)
Unamortized:
Trademarks and other	6		—		7		—
Total	$	2,026	$	(1,657)	$	2,117	$	(1,698)

Amortization of intangible assets was $73 million, $87 million and $91 million in 2022, 2021 and 2020, respectively. Excluding the impact of currency translation adjustments, there were no other significant changes in our Intangible Assets during 2022, 2021 and 2020.

The estimated future amortization of intangible assets is as follows:


(dollars in millions)	2023		2024		2025		2026		2027
Future amortization	$	68	$	60	$	53	$	40	$	32

Disposals and Held for Sale Assets and Liabilities. As of December 31, 2022, assets held for sale were $9 million, and are included in Other current assets in the Consolidated Balance Sheets. There were no balances as of December 31, 2021.

In June 2022, we entered into an agreement to sell our business in Russia to a third party, which was then sold on July 27, 2022. The Company recorded the loss on sale and related charges of $21 million in 2022 in Other expense (income), net in the Consolidated Statements of Operations.

Borrowings and Lines of Credit

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Borrowings and Lines of Credit

Short-term borrowings consisted of the following as of December 31:


(dollars in millions)	2022		2021
Commercial paper	$	94	$	—
Other borrowings	45		24
Total short-term borrowings	$	139	$	24

Commercial Paper. As of December 31, 2022, there were $94 million in borrowings outstanding under the Company's $1.5 billion unsecured, unsubordinated commercial paper programs. We use our commercial paper borrowings for general corporate purposes including to finance acquisitions, pay dividends and for debt refinancing. The need for commercial paper borrowings may arise if the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S.

In September 2020, we issued €420 million of Euro denominated commercial paper. The Euro denominated commercial paper, while outstanding, qualified as a net investment hedge against our investments in European businesses. During 2021, we fully repaid the Euro denominated commercial paper and there is no longer a related net investment hedge as of December 31, 2021. Refer to Note 18, "Financial Instruments" for further details on net investment hedges.

We also issued $150 million of U.S. Dollar commercial paper in November 2020, which was fully repaid during 2021. The commercial paper issued in 2020 was used to pay down the term loan described further below under "Long-Term Debt".

Long-Term Debt. As of December 31, 2022, we have a credit agreement, as amended, with various banks providing for a $1.5 billion unsecured, unsubordinated 5-year revolving credit facility, effective as of April 3, 2020, with an interest rate of LIBOR plus 125 basis points and a commitment fee rate of 12.5 basis points. As of December 31, 2022, there were no borrowings under the revolving credit facility. The undrawn portion of the revolving credit facility serves as a backstop for the issuance of commercial paper.

On February 10, 2020, we entered into a term loan credit agreement, as amended, providing for a $1.0 billion unsecured, unsubordinated 3-year term loan credit facility (the "term loan"). The Company drew on the full amount of the term loan on March 27, 2020 and then prepaid the full amount during 2020, resulting in the termination of the term loan credit agreement. Additionally, on February 27, 2020, we issued $5.3 billion unsecured, unsubordinated notes. The net proceeds of the term loan and the notes of approximately $6.3 billion were distributed to our former parent, UTC, prior to the Separation.

On March 11, 2021, we issued ¥21.5 billion Japanese Yen denominated ($199 million), unsecured, unsubordinated 5-year notes due March 2026 (the "Yen Notes"). The net proceeds of the Yen Notes were used to repay a portion of our outstanding Euro denominated commercial paper. The Yen Notes qualify as a net investment hedge against our investments in Japanese businesses. As of December 31, 2022, the net investment hedge is deemed to be effective. Refer to Note 18, "Financial Instruments" for further details on net investment hedges.

On September 22, 2021, we entered into a €1.65 billion bridge loan credit agreement (the "Bridge Credit Facility") and related guarantees in connection with the Tender Offer, which was intended to be drawn only to the extent we did not obtain permanent debt financing prior to the settlement date of the Tender Offer. On November 12, 2021, we issued €1.6 billion Euro denominated ($1.8 billion), unsecured, unsubordinated notes (the "Euro Notes"). The net proceeds of the Euro Notes were used to fund the Tender Offer. Upon issuing the Euro Notes, the Bridge Credit Facility and related guarantees were terminated.

The revolving credit agreement and indentures contain affirmative and negative covenants customary for financings of these types that, among other things, limit the Company's and its subsidiaries' ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. In addition, the revolving credit agreement requires that we maintain a maximum consolidated leverage ratio, as defined in the agreement. The revolving credit agreement and indentures also contain events of default customary for financings of these types. The Company is in compliance with all covenants in the revolving credit agreement and the indentures governing all notes as of December 31, 2022.

Long-term debt, including current portion, consisted of the following as of December 31:


(dollars in millions)	2022		2021
LIBOR plus 45 bps floating rate notes due 2023 1,2,3	$	—	$	500
0.000% notes due 2023 (€500 million principal value) 2	531		565
2.056% notes due 2025 2	1,300		1,300
0.37% notes due 2026 ( ¥21.5 billion principal value) 2	163		189
0.318% notes due 2026 (€600 million principal value) 2	638		677
2.293% notes due 2027 2	500		500
2.565% notes due 2030 2	1,500		1,500
0.934% notes due 2031 (€500 million principal value) 2	531		565
3.112% notes due 2040 2	750		750
3.362% notes due 2050 2	750		750
Other (including finance leases)	8		4
Total principal long-term debt	6,671		7,300
Other (discounts and debt issuance costs)	(42)		(51)
Total long-term debt	6,629		7,249
Less: current portion	531		—
Long-term debt, net of current portion	$	6,098	$	7,249

1 The three-month LIBOR rate as of December 31, 2021 was approximately 0.21%.

2 We may redeem these notes at our option pursuant to certain terms.

3 The Company redeemed its $500 million floating rate notes due in 2023, at par, using cash on hand in January 2022.

Debt discounts and debt issuance costs are presented as a reduction of debt on the Consolidated Balance Sheets and are amortized as a component of interest expense over the term of the related debt using the effective interest method. The Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 reflects the following:


(dollars in millions)	2022		2021		2020
Debt issuance costs amortization	$	8	$	6	$	5
Total interest expense on debt	140		136		124

The unamortized debt issuance costs as of December 31, 2022 and 2021 were $42 million and $51 million, respectively. In addition to interest on debt, Interest expense (income), net on the Consolidated Statements of Operations in 2021 includes the write-off of $11 million in financing costs associated with a Bridge Credit Facility for the Tender Offer and related guarantees that were terminated.

The average maturity of our long-term debt as of December 31, 2022 is approximately 8.6 years. The average interest expense rate on our borrowings as of December 31, 2022 and 2021 was as follows:


	December 31,
	2022		2021

Short-term borrowings	4.7	%	—	%
Total long-term debt	2.0	%	1.9	%

The average interest expense rate on our borrowings for 2022, 2021 and 2020 was as follows:


	2022		2021		2020

Short-term borrowings	2.3	%	(0.3)	%	(0.2)	%
Total long-term debt	2.0	%	2.3	%	2.3	%

The schedule of principal payments required on long-term debt for the next five years and thereafter is:


(dollars in millions)	Principal Payments
2023	$	534
2024	2
2025	1,301
2026	802
2027	500
Thereafter	3,532
Total	$	6,671

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI https://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-Section 50
-Paragraph 1C
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Paragraph 1I
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 1E
-Subparagraph (b)
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section 50
-Paragraph 1B
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

Accrued Liabilities

12 Months Ended

Dec. 31, 2022

Payables and Accruals [Abstract]

Accrued Liabilities

Accrued liabilities consisted of the following as of December 31:


(dollars in millions)	2022		2021
Accrued salaries, wages and employee benefits	$	555	$	603
Accrued interest	198		221
Operating lease liabilities	127		181
VAT and other non-income tax payables	112		97
Accrued income taxes payable	103		142
Other liabilities	699		749
Total	$	1,794	$	1,993

Accrued interest primarily consists of interest accrued for uncertain tax positions and the German tax litigation as described in Note 22, "Contingent Liabilities", as well as $43 million and $46 million of interest accrued for borrowings as of December 31, 2022 and 2021, respectively, as described in Note 10, "Borrowings and Lines of Credit".

Other Long-term Liabilities

12 Months Ended

Dec. 31, 2022

Other Liabilities Disclosure [Abstract]

Other Long-term Liabilities

Other Long-Term Liabilities

Other long-term liabilities consisted of the following as of December 31:


(dollars in millions)	2022		2021
Contractual indemnity obligation	$	203	$	220
General, product and auto liability	150		154
Employee benefits	91		105
Other liabilities	112		127
Total	$	556	$	606

The Contractual indemnity obligation consists of a payable to RTX, resulting from the TMA. See Note 5, "Related Parties" for further details.

Employee Benefit Plans

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Employee Benefit Plans

The Company sponsors numerous single-employer domestic and foreign employee benefit plans and, prior to the Separation, certain of our employees participated in employee benefit plans (“Shared Plans”) sponsored by our former parent, UTC, that included participants of the other UTC businesses. We have accounted for our participation in the Shared Plans prior to the Separation as multiemployer benefit plans, as discussed below.

Employee Savings Plans. We sponsor various employee savings plans. Prior to the Separation, our former parent, UTC, also sponsored and contributed to defined contribution employee savings plans in which certain Otis employees participated. Our contributions to employer-sponsored defined contribution plans were $64 million, $62 million and $54 million for 2022, 2021, and 2020, respectively.

Pension Plans. We sponsor both funded and unfunded domestic and foreign defined benefit pension plans that cover a large number of our employees. While we sponsor domestic pension plans that provide retirement benefits to certain employees, they are not a material component of the projected benefit obligation. Our plans use a December 31 measurement date consistent with our fiscal year.


(dollars in millions)	2022		2021
Change in benefit obligation:
Beginning balance	$	1,126	$	1,225
Service cost	39		43
Interest cost	16		13
Actuarial (gain) loss	(216)		(50)
Benefits paid	(30)		(24)
Net settlement, curtailment and special termination benefits	(29)		(31)
Other	(53)		(50)
Ending balance	$	853	$	1,126

Change in plan assets:
Beginning balance	$	690	$	703
Actual return on plan assets	(46)		43
Employer contributions	33		37
Benefits paid	(30)		(24)
Settlements	(29)		(31)
Other	(29)		(38)
Ending balance	$	589	$	690

Funded status:
Fair value of plan assets	$	589	$	690
Benefit obligations