They can also finance research and development projects or fund working capital needs. Notes payable are similar to loans but typically have a shorter repayment period and may not include interest. Moreover, you can save a portion of business earnings to go toward repaying debt. This form of debt can give you the boost you need to stay afloat or grow your business.

Examples of Long-Term Liability

This financing structure allows a quick infusion of large amounts of cash. For many businesses, this debt structure allows for financial leverage to achieve their operating goals. For lease contracts of over one year, the lessee records a long-term liability equaling the present value of lease obligations. A fixed asset of equivalent value is also recorded in the lessee’s balance sheet. You repay long-term liabilities over several years, such as 15 years.

Example #3 – Deferred Tax Liability

There are several different types of liabilities that are outstanding for various periods of time. The pension liability is further detailed in the notes section (excerpt below). We will discuss each of the examples of long term liability along with additional comments as needed.

📆 Date: Aug 2-3, 2025🕛 Time: 8:30-11:30 AM EST📍 Venue: OnlineInstructor: Dheeraj Vaidya, CFA, FRM

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She examples of long term liabilities supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business. Loans are agreements between a borrower and lender in which the borrower agrees to repay the loan over a period of time, usually with interest. This is because there are fewer commitments through debt service providers.

Example #1 – Long-Term Debt

Long-term liability can help finance a company’s long-term investment. This could be through the purchase of new equipment or property. Here, the lessee agrees to make a periodic lease payment to the lessor. This is in exchange for the use of an asset, such as equipment. Companies will have a number of financial obligations and business owners know how important it is to keep a track of these obligations.

📆 Date: Aug 2-3, 2025🕛 Time: 8:30-11:30 AM EST📍 Venue: OnlineInstructor: Dheeraj Vaidya, CFA, FRM

It also shows whether the company can pay its current liabilities when they’re due. Long-term liability is sometimes referred to as non-current liability or long-term debt. These are debt instruments that require periodic interest payments. In addition, you owe principal repayments over the life of the bond. Long-term liabilities can help finance the expansion of a company’s operations or buy new equipment or property.

Such a difference leads to the creation of deferred tax liability on the company’s balance sheet. It’s important to note that there are several types of long-term liabilities. Bonds get issued by a company in order to raise capital and are typically repaid over a period of years. For example, a company can buy credit default swaps, which are insurance contracts that pay out if the borrower defaults on their debt. This type of hedging strategy can protect the company if the borrower is unable to make their required payments. Consider the example of American pharmaceutical company Pfizer Inc.

Example #1 – Long-Term Debt

• It also shows whether the company can pay its current liabilities when they’re due.
• This ensures a clearer view of the company’s current liquidity and its ability to pay current liabilities as they come due.
• This provides a better picture of a company’s current liquidity.
• Different sources of funding are available to companies, of which long-term liabilities form an important portion.
• This is because there are fewer commitments through debt service providers.
• This amount is usually listed separately on a company’s balance sheet, along with other short-term liabilities.

This is the amount of long-term debt that is due within the next year. This amount is usually listed separately on a company’s balance sheet, along with other short-term liabilities. This ensures a clearer view of the company’s current liquidity and its ability to pay current liabilities as they come due. Long-term debt’s current portion is a more accurate measure of a company’s liquid assets.

• These are debt instruments that require periodic interest payments.
• They can also finance research and development projects or fund working capital needs.
• In addition, you owe principal repayments over the life of the bond.
• Long-term liabilities refer to a company’s non current financial obligations.
• This strategy can protect the company if interest rates rise because the payments on fixed-rate debt will not increase.
• Here, the lessee agrees to make a periodic lease payment to the lessor.

At a later date, when such tax is due for payment, the deferred tax liability is reduced by the amount of income tax expense realized. Long-term liabilities are an important part of a company’s financial operations. They provide financing for operations and growth, but they also create risk. Hedging strategies can manage this risk and protect against potential losses. Keep in mind that long-term liabilities aren’t included with tax liabilities in order to provide more accurate information about a company’s debt ratios. Different sources of funding are available to companies, of which long-term liabilities form an important portion.