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International Financial Statement Analysis, 3rd Edition by Anthony T. Cope, Michael A. Broihahn, Wendy L. Pirie, Elaine Henry, Thomas R. Robinson

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CHAPTER 10

NON-CURRENT (LONG-TERM) LIABILITIES

Elizabeth A. Gordon

Elaine Henry, CFA

LEARNING OUTCOMES

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

  • determine the initial recognition, initial measurement, and subsequent measurement of bonds;
  • describe the effective interest method and calculate interest expense, amortisation of bond discounts/premiums, and interest payments;
  • explain the derecognition of debt;
  • describe the role of debt covenants in protecting creditors;
  • describe the financial statement presentation of and disclosures relating to debt;
  • explain 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, initial measurement, and subsequent measurement of finance leases;
  • compare the disclosures relating to finance and operating leases;
  • compare the presentation and disclosure of defined contribution and defined benefit pension plans;
  • calculate and interpret leverage and coverage ratios.

1. INTRODUCTION

A non-current liability (long-term liability) broadly represents a probable sacrifice of economic benefits in periods generally greater than one year in the future. Common types of non-current liabilities reported in a company's financial statements include long-term debt (e.g., bonds payable, long-term notes payable), finance leases, pension liabilities, and deferred tax liabilities. This chapter focuses ...

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