Long-term liabilities
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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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