Financial Accounting: An Integrated Statements Approach, 2nd Edition

REPORTING LIABILITIES

Liabilities are reported on the balance sheet in the order of liquidity, that is, in the or-

der in which cash is going to be required to make payment for the liability. In addi-

tion to the amounts reported on the balance sheet, additional information on liabilities

may be included in the financial statement notes. Examples of liability disclosures that

are often found in the notes to the financial statements are current maturities of long-

term debt, long-term liability disclosures, and contingent liabilities. These are each dis-

cussed briefly below.

Current Maturities of Long-Term Debt

Long-term liability maturities that are due within the coming year must be classified

as a current liability. The total amount of the loan due after the coming year is classi-

fied as a long-term liability. To illustrate, Starbucks Corporationreported the follow-

ing scheduled debt payments in the notes to its annual report for the fiscal year ending

October 3, 2004:

Fiscal Year Ending (in thousands)

2005 $ 735

2006 748

2007 762

2008 775

2009 790

Thereafter 543

Total principal payments $4,353

The debt of $735 due in 2005 would be reported as a current liability on the October

3, 2004, balance sheet. The remaining debt of $3,618 ($4,353 $735) would be reported

as a long-term liability on the balance sheet.

Long-Term Liability Disclosures

The carrying value, interest rate, and maturity of long-term liabilities must also be dis-

closed on the financial statements or in the notes to the financial statements. To

illustrate,The Coca-Cola Companydisclosed the following long-term debt in the notes

to its financial statements:

(in millions)

December 31, 2004 2003

Variable rate euro notes due 2004 $ 0 $ 296

57 – 8 % euro notes due 2005 663 591

4% U.S. dollar notes due 2005 750 749

53 – 4 % U.S. dollar notes due 2009 399 399

53 – 4 % U.S. dollar notes due 2011 499 498

7 –^38 % U.S. dollar notes due 2093 116 116

Other, due through 2013 220 191

$2,647 $2,840

Less current portion 1,490 323

$1,157 $2,517

462 Chapter 10 Liabilities

Illustrate the reporting of

liabilities on the balance

sheet.

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