Question

As part of the disclosures relating to long-term liabilities, companies should disclose the aggregate amounts payable for each of the next:

a. Five years
b. Ten years
c. Two years
d. Three years

Answer 1

Companies must disclose the aggregate amounts payable for each of the next five years as part of the disclosures relating to long-term liabilities. This information helps in assessing the company's future financial commitments.

Step-by-step explanation:

As part of the disclosures relating to long-term liabilities, companies are required to disclose the aggregate amounts payable in detail for each of the next five years. This is important for users of financial statements as it provides a clear understanding of the company's future commitments and the timeline of these payments. For example, let's assume a company expects the following payments from the firm:

• $15 million in present
• $20 million in one year
• $25 million in two years

To understand the future value received years in the future, this amount would have to be projected out at an appropriate interest rate, applying the formula:

Future Value = Present Value × (1 + Interest rate)number of years t

For example, mortgages typically last either 15 or 30 years, and knowing these terms helps in understanding the credit implications that long-term liabilities have on a company's financial health.