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Financial Modeling

Long-term Items

There are several long-term items both on the asset & liability side of a company's balance sheet. In this unit, we will discuss the same. 

 

Other Long-Term Items Overview

  • Use as a ‘catch-all’ for remaining balance sheet items
    - Long-term items without drivers
  • Create line items
  • Reference historical balances
  • Forecast balances
    ​- Keep balances constant if drivers are not easily recognizable

 

 

Long-Term Items

 

Asset side 

  • Long-term loans and advances
  • Other non-current assets
  • Deferred tax assets

Liability side

  • Deferred tax liability
  • Long-term provisions
  • Other non-current liabilities
  • Forecasting Future Balances

Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL) are for temporary differences between your taxable income as per the Companies Act and taxable income as per the Income Tax Act. If you are paying more tax today but pay less tax in future, then you will build Deferred Tax Assets. If you are paying less tax today but have to pay more in future, then you will build Deferred Tax Liabilities.

 

  • Keep long term items constant for projected years if you have no drivers.
  • Usually, these items will have no drivers.
  • When projecting, never input the numbers – always link to historical numbers. These are also called flat lined references. It is just linked to the actual historical financials.

Linking Other Long-Term Items

  • Once the schedule is set- calculate cash flows on the basis of changes in long-term items.
  • Link the change to the cash flow statement.
  • Link the ending amount of forecasted other long terms items to the balance sheet.

Other Long-Term Items & Cash-Flow 

 

 

Other Long Term Items & Balance Sheet 

 

 

Other Long Term Items & Balance Sheet 

 

Things to Remember

Other Long-Term Items Schedule is just a catch all category.

 

There’s very little that an analyst can know or forecast about other long-term items and hence usually it is flat-lined and kept constant.

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Units 9/14