Other Long-Term Liabilities

Other Long-Term Liabilities

Other long-term liabilities are a balance-sheet line item that groups together debts and obligations due beyond one year (or beyond the company’s operating cycle) that are not shown separately. Companies aggregate these smaller or miscellaneous long-term obligations under “other” rather than listing each item individually.

Key points

• Represent obligations not due within 12 months that management has not itemized separately.
• Often disclosed in more detail in the financial-statement footnotes or the company’s 10-K if considered material.
• Normal practice when the individual items are relatively small; large or unexplained balances may warrant further inquiry.

Why companies aggregate these items

Companies group immaterial or miscellaneous long-term obligations to keep the balance sheet concise. When an item is material, firms typically either present it separately on the face of the statements or describe its composition in the notes. Analysts can usually find the breakdown in the footnotes or annual filings if the company provides it.

Common types of items included

Other long-term liabilities may include:
* Pension and other post-retirement benefit liabilities
* Capital lease obligations
* Deferred tax liabilities
* Deferred credits
* Customer deposits and advances
* Intercompany borrowings (common in holding-company structures)
* Miscellaneous long-term accruals or contingencies

Special considerations for analysts and investors

• Aggregation itself is not a red flag if the amount is small relative to total liabilities and consistent with prior periods.
• If “other long-term liabilities” represents a large share of total liabilities and the notes do not explain the components, further investigation is warranted. Actions include reviewing the 10-K/annual report footnotes or contacting investor relations for clarification.
• Year-over-year comparisons and footnote disclosures help determine whether the composition or magnitude of these liabilities is changing.

Example

Ford Motor Company reported about $28.4 billion of other long-term liabilities for fiscal year 2020 (roughly 10% of total liabilities). The notes to its financial statements broke this amount down into items such as pension liabilities, other post-retirement employee benefits, employee benefit plans, dealers’ customer allowances and claims, and other miscellaneous obligations.

Bottom line

“Other long-term liabilities” is a catch-all for long-dated obligations that management has not itemized on the balance sheet. Review the notes to the financial statements or the company’s 10-K to understand the components; if the balance is large or unexplained, seek further disclosure from the company.