LONG TERM LIABILITIES

Long Term Liabilities

Ø  Understanding

Long-term liabilities are debts with maturities of more than one year. Long-term debt typically arises because of the need for additional funds for the purchase of fixed assets, increasing the number of permanent working capital, buying another company or perhaps to pay off other debts.

Ø  Debt Bonds

Bond is a type of the most common long-term debt reported on its balance sheet. The main aim of the bonds is to borrow in the long term if the amount of capital needed is too large to be provided by a lender. A bond arising from a contract known as the indenture (a contract) and a promise to pay.

Bonds may be sold if the company's reputation is quite good and were seen as able to remain standing during the circulation period of the bonds. Selling price of bonds depends on bond interest rates. The greater the interest, the bond prices will be higher, and conversely the lower the interest rates will lower the selling price.

Ø  Types of Bonds

1. Bonds guaranteed and not guaranteed

2. Bond futures, serial bonds, and bonds can be redeemed

3. Konventibel bonds backed goods and big discount

4. Registered bonds and fiat (coupon)

5. Profit and revenue bonds

Ø  Accounting for Bond Issuance

There are several terms in accounting for the listing of bonds:

·         Face value is the value of the printed bonds or bonds listed on the letter. This value indicates the amount to be paid when the bond matures.

·         The maturity date is the date on which bonds have been issued to be paid.

·         The interest is a fee to be paid in addition to payment for the bonds' nominal value. This interest can be paid monthly, or can be paid each year. Interest on the bonds is calculated based on a certain percentage of the nominal value of bonds.

·         Date interest is the bond interest payment date, usually within one year paid twice.

Ø  Recording of Bond Expenditures

Bonds issued are recorded in the accounts at nominal value. The sale price is not equal to nominal bonds, the difference is accounted for separately which if sold at the nominal difference is noted in the bond premium account, if the selling price is below the nominal value, the difference is recorded in the account of a discount bond.

Bond expenditures may be recorded in two ways:

a. Which accounted for only bonds that were sold or

b. Bonds are sold and unsold recorded

Ø  Length of Wesel libertine

Difference between notes payable and notes payable lancer is a long term maturity date. Accounting for notes and bonds are very similar. Such as bonds, notes valued at the present value of cash flows of future interest and principal by any premiums or discounts are amortized equally over the life of the note.

Ø  Reporting of Long-Term Debt

Companies that have a lot of long-term debt issue in large numbers is often just reported an estimate of the balance sheet and supporting comments and sekedul in the accompanying notes. If the company has long-term obligations without conditions, it should be disclosed if the following conditions:

1.      Obligations can not be canceled, or can be canceled only in the unlikely occurrence of a contingency or with the permission of other parties.

2.      It is the obligation of the supplier of the project funding agreement for the facility that will provide goods and services dikontrolkan.

3.      It has a remaining term liabilities are more than one year