Long-term

Examples of Long-term in the following topics:

• Current Maturities of Long-Term Debt

  • The portion of long-term liabilities that must be paid in the coming 12-month period are classified as current liabilities.
  • Long-term liabilities are liabilities with a due date that extends over one year, such as a notes payable that matures in 2 years.
  • Examples of long-term liabilities are debentures, bonds, mortgage loans and other bank loans (it should be noted that not all bank loans are long term since not all are paid over a period greater than one year. ) Also long-term liabilities are a way for a company to show the existence of debt that can be paid in a time period longer than one year, a sign that the company is able to obtain long-term financing .
  • Bonds are a form of long-term debt because they typically mature several years after their original issue date.
  • Explain the reporting of the current portion of a long-term debt

• Reporting Long-Term Liabilities

  • Debts that become due more than one year into the future are reported as long-term liabilities on the balance sheet.
  • This is an example of a long-term liability.
  • "Notes Payable" and "Bonds Payable" are also examples of long-term liabilities, and they often introduce an interesting distinction between current liabilities and long-term liabilities presented on a classified balance sheet.
  • What this example presents is the distinction between current liabilities and long-term liabilities.
  • Despite a Note Payable, Bonds Payable, etc., starting out as a long-term liability, the portion of that debt that is due within a year has to be backed out of the long-term liability and reported as a current liability.

• Analyzing Long-Term Liabilities

  • Analyzing long-term liabilities combines debt ratio analysis, credit analysis and market analysis to assess a company's financial strength.
  • Analyzing long-term liabilities is done for assessing the likelihood the long-term liability's terms will be met by the borrower.
  • After analyzing long-term liabilities, an analyst should have a reasonable basis for a determining a company's financial strength.
  • $\frac { Long-Term\quad Debt\quad +\quad Value\quad of\quad Leases }{ Average\quad Shareholders\quad Equity }$
  • When gathering information, an analyst should always read the footnotes contained in financial statements to determine if there are any disclosures related to long-term liabilities or other factors that may impact the company's ability to pay it's long-term obligations.

• Classifying Liabilities

  • The two main categories of these are current liabilities and long-term liabilities.
  • Other long-term obligations, such as bonds, can be classified as current because they are callable by the creditor.
  • Long-term liabilities are reasonably expected not to be liquidated or paid off within the span of a single year.
  • These usually include issued long-term bonds, notes payables, long-term leases, pension obligations, and long-term product warranties.
  • Contingent liabilities can be current or long-term.

• Types of Long-Lived Assets

  • There are two major types of long-term assets: tangible and non-tangible.
  • Long-term investments are often referred to simply as "investments. " Long-term investments are meant to be held for many years and are not intended to be disposed of in the near future.
  • They usually consist of three possible types of investments: investments in securities (such as bonds), common stock, or long-term notes.
  • Fixed assets-- also referred to as property, plant, and equipment-- are purchased for continued and long-term use in generating profit for a business.
  • Property, plant, and equipment are tangible, long-lived assets used in the operations of the business.

• Reporting Current Liabilities

  • Liabilities are disclosed in a separate section that distinguishes between short-term and long-term liabilities.
  • Short-term, or current liabilities, are listed first in the liability section of the statement because they have first claim on company assets.
  • In addition to current liabilities, long-term liabilities are listed in a separate section after current debt.
  • Long-term liabilities can include bonds, mortgages, and loans that are payable over a term exceeding one year.
  • However, for all long-term liabilities, any amounts due in the current fiscal year are reported under the current liability section.

• Debt-to-Equity Ratio

  • Debt is typically a long-term liability that represents a company's obligation to pay both principal and interest to purchasers of that debt.
  • Equity represents ownership of a company, and does not include any agreed upon repayment terms.
  • Returns to purchasers of debt are limited to agreed- upon terms (i.e., interest rates), however, they have greater legal protection in the event of a bankruptcy.
  • When used to calculate a company's financial leverage , the debt-to-equity ratio includes only long-term liabilities in the numerator and can even go a step further to exclude the current portion of the long-term liabilities.
  • This means that other short-term liabilities, such as accounts payable, are excluded when calculating the debt-to-equity ratio.

• Types of Receivables

  • Receivables can be classified as accounts receivables, notes receivable and other receivables ( loans, settlement amounts due for non-current asset sales, rent receivable, term deposits).
  • Accounts receivable usually appear on balance sheets below short-term investments and above inventory.
  • The maturity date of a note determines whether it is placed with current assets or long-term assets on the balance sheet.
  • Notes that are due in one year or less are considered current assets, while notes that are due in more than one year are considered long-term assets.

• Current Obligations Expected to Be Refinanced

  • Per FASB 6, current obligations that an enterprise intends and is able to refinance with long term debt have different reporting requirements.
  • Refinancing may refer to the replacement of an existing debt obligation with a debt obligation under different terms.
  • To take advantage of a better interest rate or loan terms (a reduced monthly payment or a reduced term)
  • To reduce the monthly repayment amount (often for a longer term, contingent on interest rate differential and fees)
  • To free up cash (often for a longer term, contingent on interest rate differential and fees)

• Defining Long-Lived Assets

  • Long-lived assets are those that provide a company with a future economic benefit beyond the current year or operating period.
  • Long-lived assets provide a company with a future economic benefit beyond the current year or operating period.
  • Since non-current, or long-lived, assets are expected to last for longer than one year, accounting treats long-lived assets differently according to their useful life.
  • When assets are expected to contribute to earnings for multiple years, such assets are referred to as long-lived, non-current or long-term assets.
  • In general terms, it is "long-lived" because it is going to be around for some time and not quickly consumed.