Intermediate Accounting/Liabilities

"

We could have changed the world. Now... look at us... I've become a political liability and you... You're a joke.

”

-Batman, as written by Frank Miller

Einführung

Liabilities are obligations.

Current liabilities are often defined as liabilities that must be paid within one year.

For firms having operating cycles longer than one year, current liabilities are defined as those which must be paid during that longer term.

Promissory notes

==Bonds payable

Taxes

In many countries, accounting for tax purposes is the same as accounting for financial reporting. However, the purposes of tax laws often diverge from the purposes of GAAP financial reporting. For example, a tax law may allow for accelerated depreciation of new capital equipment, which makes firms' new purchases less expensive in real terms. This is one way to implement a nation's economic policy of promoting new investment and perhaps full employment. Extremely accelerated depreciation goes against the matching principle in accounting, however. By the matching principle, the costs of use of the equipment should be matched to the time periods in which the benefits of use are enjoyed.

In the United States, specifically, accounting for income taxes is complicated by differences between GAAP accounting for financial reporting versus tax accounting for U.S. IRS tax forms.

Permanent differences

There are "permanent differences" which are relatively easy to account for. For example, a firm may invest in a tax-free municipal bond, and its total GAAP earnings would reflect interest income that is deductible from the firm's taxable income reported on its tax returns. If the firm's GAAP tax expense is computed simplistically as the firm's GAAP earnings times its marginal income rate, that would yield an incorrect, higher value for its tax expense. The firm's actual income tax rate is lower.

Temporary differences

The temporary differences are more complicated to account for. They give rise to "deferred tax liabilities" and "deferred tax assets". These are accounts needed to track the timing differences between recognition of expenses and revenues for GAAP books vs. for tax books, for events that have already occured. Most firms of any size have multiple" specific differences which need to be tracked. There are four general types:

1.) "GAAP-first revenues" is a shorthand term (coined here, not a widely used term) which describes cases where firms' GAAP accounting recognizes revenues before those revenues appear in taxable income. Installment sales is a prime example. Under GAAP accounting, the revenue associated with a sale of land or property is recorded when a firm contract is reached and the new owner takes possession of the property. So all the earnings related to a sale of land that will be paid for by installments over several years, may be recognized at the time of sale. But by U.S. IRS tax accounting, the revenue is not recognized until it is collected.

2.) "Tax return-first revenues" is a shorthand term (coined here) for cases where firms' taxable income shows revenues that are not yet recognized in GAAP accounting. The IRS counts as taxable income the advance collections of rent and other advance collections. Under GAAP accounting those collections are recorded first as unearned revenues, which are only recognized as revenues when the service or product are delivered.

3.) "GAAP-first expenses" include estimated expenses, such as bad debt expense which is recognized along with setting up a general allowance for bad debts (a.k.a. an allowance for uncollectible receivables). Tax accounting does not recognize bad debts until the specific customer accounts are written off.

4.) "Tax return-first expenses" include MACRS accelerated depreciation.

Categorization as short- vs. long-term liabilities

On the GAAP balance sheet, balances of deferred tax assets and liabilities conceivably could be reported in four places: under Current Assets, Current Liabilities, Long-term Assets, and Long-term Liabilities. GAAP allows, however, for short-term DTA to be offset by short-term DTL, and the same for longterm DTA and DTL, so the balance sheet in fact shows just one DTA or DTL in the current section, reported at net, and shows similarly just one net position in the long-term section.

Contingent liabilities

Provisions for court decisions

[[Category:Template:FULLBOOKNAME|Template:FULLCHAPTERNAME]]