Lesson 4 of 6 · 12 min
Non-current liabilities: long-term debt and deferred taxes
Long-term borrowings usually sit at amortised cost, drifting from issue price to face value, while deferred tax liabilities record taxes postponed because taxable income ran below reported income.
In short
- Any liability that is not current is non-current (long-term). Examples: loans, notes and bonds payable, leases, post-employment obligations, non-current unearned revenue, deferred tax liabilities.
- Non-current unearned (deferred) revenue covers goods or services to be delivered more than 12 months after the reporting date.
- Loans and bonds payable are usually at amortised cost: a discount (or premium) at issue is amortised so the carrying amount equals face value at maturity.
- Some liabilities are at fair value: those held for trading, derivative liabilities and some non-derivatives hedged with derivatives.
- A deferred tax liability arises when taxable income is below accounting pretax income because of temporary differences, e.g. accelerated tax depreciation or undistributed profits of a subsidiary.
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