CHAPTER 12

NONCURRENT (LONG-TERM) LIABILITIES

Elizabeth A. Gordon

Philadelphia, PA, U.S.A.

Elaine Henry, CFA

Coral Gables, FL, U.S.A.

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

  • Determine the initial recognition and measurement and subsequent measurement of bonds.
  • Discuss the effective interest method and calculate interest expense, amortization of bond discounts/premiums, and interest payments.
  • Discuss the derecognition of debt.
  • Explain the role of debt covenants in protecting creditors.
  • Discuss the financial statement presentation of and disclosures relating to debt.
  • Discuss the motivations for leasing assets instead of purchasing them.
  • Distinguish between a finance lease and an operating lease from the perspectives of the lessor and the lessee.
  • Determine the initial recognition and measurement and subsequent measurement of finance leases.
  • Compare and contrast the disclosures relating to finance and operating leases.
  • Describe defined contribution and defined benefit pension plans.
  • Compare and contrast the presentation and disclosure of defined contribution and defined benefit pension plans.
  • Calculate and interpret leverage and coverage ratios.

1. INTRODUCTION

A noncurrent (long-term) liability broadly represents a probable sacrifice of economic benefits in periods generally greater than one year in the future. Common types of noncurrent liabilities reported in a company’s financial statements include long-term debt (e.g., bonds payable, ...

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