Long-term liabilities: Difference between revisions
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{{Short description|Liabilities that are due beyond a year or the normal operation period of the company}} |
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'''Long-term liabilities''' are [[liability (accounting)|liabilities]] with a future benefit over one year, such as notes payable that mature longer than one year. |
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{{More citations needed|date=October 2017}}{{accounting}} |
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'''Long-term liabilities''', or non-current liabilities, are [[liability (accounting)|liabilities]] that are due beyond a year or the normal operation period of the company.<ref name=":0">{{Cite web|url=https://www.accountingcoach.com/blog/what-is-a-long-term-liability|title=What is a long-term liability?|website=AccountingCoach|language=en|access-date=2017-10-30}}</ref>{{Better source|date=October 2017}} The normal operation period is the amount of time it takes for a company to turn inventory into cash.<ref name=":1">{{Cite news|url=http://www.investopedia.com/terms/l/longtermliabilities.asp|title=Long-Term Liabilities|date=2003-11-23|work=Investopedia|access-date=2017-10-30|language=en-US}}</ref> On a classified [[balance sheet]], liabilities are separated between current and long-term liabilities to help users assess the company's financial standing in short-term and long-term periods. Long-term liabilities give users more information about the long-term prosperity of the company,<ref>{{Cite web|url=https://accountingexplained.com/financial/lt-liabilities/|title=Long-term Liabilities|website=Accounting Explained|language=en|access-date=2017-10-30}}</ref>{{Better source|date=October 2017}} while current liabilities inform the user of debt that the company owes in the current period. On a balance sheet, accounts are listed in order of liquidity, so long-term liabilities come after current liabilities. In addition, the specific long-term liability accounts are listed on the balance sheet in order of liquidity. Therefore, an account due within eighteen months would be listed before an account due within twenty-four months. |
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==Examples== |
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Examples of long-term liabilities are [[bonds payable]], long-term loans, [[capital lease]]s, pension liabilities, post-retirement healthcare liabilities, [[deferred compensation]], [[deferred revenue]]s, deferred income taxes, and derivative liabilities.<ref name=":0" />{{Better source|date=October 2017}} |
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== Exceptions == |
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In accounting, the long-term liabilities are shown on the right wing of the balance-sheet representing the sources of funds, which are generally bounded in form of capital assets. |
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If a liability is currently due in fewer than twelve months and is in the process of being [[refinance]]d so that it is due after a year, then a company can record this debt in long-term investments.<ref name=":1" /> Additionally, if a liability is to be covered by a long-term investment, it can be recorded as a long-term liability even if it is due in the current period. Still, the long-term investment must be sufficient to cover the debt.<ref name=":1" /> |
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Examples of long-term liabilities are [[debentures]], [[mortgage loan]]s and other bank [[loan]]s. (Note: Not all bank loans are long term as not all are paid over a period greater than a year, an example of this is a [[bridging loan]].) |
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By convention, the portion of long-term liabilities that must be paid in the coming 12-month period are classified as [[current liabilities]]. For example, a loan for which two payments of $1000 are due, one in the next twelve months and the other after that date, would be 'split' into two: the first $1000 would be classified as a current liability, and the second $1000 as a long-term liability (note this example is simplified, and does not take into account any interest or discounting effects, which may be required depending on the accounting rules). |
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Also "long-term liabilities" are a way to show that you have to pay something off in a time period longer than one year. |
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==See also== |
==See also== |
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* [[Creditor]] falling due after more than one year |
* [[Creditor]] falling due after more than one year |
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== References == |
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[[Category:Generally Accepted Accounting Principles]] |
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{{Reflist}} |
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[[Category:Liability (financial accounting)]] |
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{{accounting-stub}} |
{{accounting-stub}} |
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[[fa:بدهی بلندمدت]] |
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[[ja:長期負債]] |
[[ja:長期負債]] |
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[[zh:長期負債]] |
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Latest revision as of 10:44, 28 March 2024
 | This article needs additional citations for verification. (October 2017) |
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Long-term liabilities, or non-current liabilities, are liabilities that are due beyond a year or the normal operation period of the company.[1][better source needed] The normal operation period is the amount of time it takes for a company to turn inventory into cash.[2] On a classified balance sheet, liabilities are separated between current and long-term liabilities to help users assess the company's financial standing in short-term and long-term periods. Long-term liabilities give users more information about the long-term prosperity of the company,[3][better source needed] while current liabilities inform the user of debt that the company owes in the current period. On a balance sheet, accounts are listed in order of liquidity, so long-term liabilities come after current liabilities. In addition, the specific long-term liability accounts are listed on the balance sheet in order of liquidity. Therefore, an account due within eighteen months would be listed before an account due within twenty-four months.
Examples
[edit]Examples of long-term liabilities are bonds payable, long-term loans, capital leases, pension liabilities, post-retirement healthcare liabilities, deferred compensation, deferred revenues, deferred income taxes, and derivative liabilities.[1][better source needed]
Exceptions
[edit]If a liability is currently due in fewer than twelve months and is in the process of being refinanced so that it is due after a year, then a company can record this debt in long-term investments.[2] Additionally, if a liability is to be covered by a long-term investment, it can be recorded as a long-term liability even if it is due in the current period. Still, the long-term investment must be sufficient to cover the debt.[2]
See also
[edit]- Fixed liability
- Creditor falling due after more than one year
References
[edit]- ^ a b "What is a long-term liability?". AccountingCoach. Retrieved 2017-10-30.
- ^ a b c "Long-Term Liabilities". Investopedia. 2003-11-23. Retrieved 2017-10-30.
- ^ "Long-term Liabilities". Accounting Explained. Retrieved 2017-10-30.
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