What you will learn to do: Define current liabilities
Liabilities are obligations to pay cash, provide services, or deliver goods at some future time.
FASB’s Concept Statement No. 6, in place for more than 20 years, defines liabilities as “probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.”
Most balance sheets divide liabilities into current liabilities and long-term liabilities.
Let’s zoom in on The Home Depot balance sheet for the fiscal year ended February 2, 2020:
| in millions, except per share data | February 2, 2020 | February 3, 2019 |
|---|---|---|
| Category, Liabilities and Stockholders’ Equity | ||
| Subcategory, Current liabilities: | ||
| Short term debt | $ 974 | $ 1,339 |
| Accounts payable | 7,787 | 7,755 |
| Accured salaries and related expenses | 1,494 | 1,506 |
| Total current liabilities | Single line 18,375 |
Single line 16,716 |
| Long-term debt, excluding current installments | Single line28,670 | Single line26,807 |
| Long-term operating lease liabilities | 5,066 | — |
| Deferred income taxes | 706 | 491 |
| Other long-term liabilities | 1,535 | 1,867 |
| Total liabilities | Single line 54,352 |
Single line 45,881 |
| Single line | Single line | |
Current liabilities are obligations that (1) are payable within one year or one operating cycle, whichever is longer, or (2) will be paid out of current assets or create other current liabilities.
Long-term liabilities are obligations that do not qualify as current liabilities.