Like all liabilities, or creditors, long-term liabilities represent sums that a reporting entity will have to settle in cash in future periods that arise as a consequence of transactions that have taken place before its accounting reference date.
Unlike short term liabilities, in the case of long term liabilities the cash settlement of the sums owing as a consequence of the transactions taking place before the accounting reference date are expected to be paid more than twelve months after that date.
A wide variety of descriptions of long term liabilities might be included in any accounts (financial statements), but those that are more commonplace include:
- Trade creditors owing after more than twelve months.
- Borrowing or loans due for repayment after more than 12 months.
- A deferred tax liability.
- Liabilities owing to a pension fund.
- A provision.
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