Other liabilities
Other liabilities are the debts of a company other than current liabilities and non-current liabilities. It includes some uncommon debts such as long-term financing lease liabilities, deferred income tax liabilities, other long-term borrowings, other accounts payable, etc.
Definition: Other liabilities refer to a company's debts that are not classified as current liabilities or non-current liabilities. These liabilities are less common but still significant in financial statements. Common examples include long-term finance lease liabilities, deferred tax liabilities, other long-term borrowings, and other payable debts.
Origin: The concept of other liabilities emerged as corporate financial management became more complex. With the diversification of corporate financing methods and business models, traditional classifications of current and non-current liabilities could no longer cover all types of debts, leading to the introduction of the 'other liabilities' category.
Categories and Characteristics: Other liabilities can be divided into the following categories:
- Long-term Finance Lease Liabilities: These are liabilities arising from the long-term leasing of assets, granting the company the right to use the asset over an extended period.
- Deferred Tax Liabilities: These arise due to differences between accounting standards and tax laws, requiring the company to pay taxes in the future.
- Other Long-term Borrowings: These are long-term loans obtained from banks or other financial institutions, typically used for capital expenditures.
- Other Payable Debts: These include various other amounts payable by the company, such as employee compensation payable, dividends payable, etc.
Specific Cases:
- Case One: A manufacturing company acquires a piece of production equipment through a long-term finance lease with a lease term of 10 years. According to the lease agreement, the company must pay a certain amount of rent annually, which is recorded as a long-term finance lease liability in the financial statements.
- Case Two: A company incurs deferred tax liabilities due to differences between accounting standards and tax laws. Specifically, the company's accounting profit in a particular year exceeds the taxable profit as per tax laws, requiring additional tax payments in future years. This liability is recorded as a deferred tax liability.
Common Questions:
- Question One: What is the difference between other liabilities and current/non-current liabilities?
Answer: Current liabilities are debts that need to be repaid within one year, non-current liabilities are debts with a repayment period exceeding one year, while other liabilities are those that do not fall into either of these categories. - Question Two: How can other liabilities be identified in financial statements?
Answer: Other liabilities are usually listed separately in the liabilities section of the balance sheet, with specific item names such as long-term finance lease liabilities, deferred tax liabilities, etc.
