Deferred Long-Term Liability Charges

Deferred long-term liability charges are future liabilities, such as deferred tax liabilities, that are shown as a line item on the balance sheet.

Deferred long-term liability charges are liabilities that are not due within the current accounting period. They are carried as a liability on the balance sheet, alongside other long-term debt obligations, until they are paid, and reported as a loss on the income statement.

Deferred long-term liability charges usually consist of deferred tax liabilities that are to be paid a year or more into the future. These temporary differences between taxes owed and taxes paid tend to balance out over time. Other deferred long-term liabilities include deferred compensation, deferred pension liabilities, deferred revenues and derivative liabilities.

For example, if a derivative effectively hedges an identified risk of rising or falling cash flows or fair values, then its annual fair value changes are deferred until the hedged transaction occurs or the derivative ceases to be effective. Contingent losses on a hedge will, accordingly, be booked as a deferred long-term liability, until the loss is incurred. If a derivative financial instrument does not qualify as a hedge, any change in the fair market value, both realized and unrealized, will be reported immediately on the income statement.

To get clarity on these charges, read the attached footnotes or other comments that appear in the financial statements, as filed with the SEC. This figure should stay relatively constant from year to year; and, as such, investors should be wary if this figure is rising significantly.