Introduction to Other Current Liabilities

What you will learn to do: Identify other current liabilities

So far in this module, we’ve covered trade accounts payable and payroll, as well as a few smaller items such as income taxes and sales taxes payable. Although there are many potential categories of current liabilities, most of them follow the same rules and concepts as the ones you’ve seen so far and fall into one of the two major categories:

  • Accrued expenses
  • Deferred revenues

In this section, we’ll focus on a few more kinds of current liabilities that involve estimation and some extra judgment.

Let’s take a look at the consolidated balance sheet for Macy’s, Inc. as of February 1, 2020:

Description February 1, 2020 February 1, 2019
Subcategory, ASSETS
Subcategory, Current Assets:
     Cash and cash equivalents $     685 $     1,162
     Receivables 409 400
     Merchandise inventories 5,188 5,263
     Prepaid expenses and other current assets 528 620
          Total Current Assets Single line6,810 Single line7,445
Property and Equipment – net 6,633 6,637
Right of Use Assets 2,668
Goodwill 3,908 3,908
Other Intangible Assets – net 439 478
Other Assets 714 726
          Total Assets Single line21,172Double line Single line19,194Double line
Subcategory, Current Liabilities:
     Short-term debt $     539 $     43
     Mechandise accounts payable 1,682 1,655
     Accounts payable and accrued liabilities 3,448 3,366
     Income Taxes 81 168
          Total Current Liabilities Single line5,750 Single line5,232
Long-Term Debt 3,621 4,708
Long-Term Lease Liabilities 2,918
Deferred Income Taxes 1,169 1,238
Other Liabilities 1,337 1,580
Subcategory, Shareholders’ Equity
          Total Macy’s Inc. Shareholders’ Equity 6,377 6,436
     Noncontrolling Interest
          Total Shareholders’ Equity Single line
Single line
          Total Liabilities and Sharesholders’ Equity Single line
$     21,172
Double line
Single line
$     19,194
Double line
The accompanying notes are an intergral part of these Consolidated Financial Statements.


Current assets were $6.810 billion and current liabilities were $5.750 billion. Of the current liabilities, short-term debt and trade (merchandise) accounts payable are predictably at the top of the list. For a breakdown of the other accounts payable and accrued liabilities in the amount of 3.448 billion, we would explore the notes, and find this:

7. Accounts Payable and Accrued Liabilities
Description February 1, 2020 February 1, 2019
Description (millions)
Accounts Payable $     977 $     983
Gift cards and customer rewards 839 856
Lease related liabilities(a) 399 180
Allowance for future sales returns 213 269
Accrued wages and vacation 194 268
Current portion of post employment and postretirement benefits 180 194
Taxes other than income taxes 145 134
Current portion of workers’ compensation and general liability reserves 105 112
Restructuring accruals, including severance 113 67
Accrued interest 41 51
Deferred real estate gains 23
Other 242 229
Total Single line
$     3,448
Double line
Single line
$     3,366
Double line
(a) As of February 1, 2020, the balance includes the current portion of operatin leases and finance leases accounted for under ASU 2016-02. As of February 1, 2019, lease related liabilities were accounted for under ASC Subtopic 840, Leases. See Note 4 for information on leases.


We see some accounts payable that are separate from the merchandise accounts payable, probably utilities, rent, and other non-inventory payables. We also see a deferred/unearned revenue account for gift card balances outstanding. Next is a line item for short-term and current lease obligations, followed by an allowance for future sales returns.

In an earlier section, you studied briefly, accrued wages. Notice that the company has also accrued vacation pay that has been earned by the employee and therefore incurred by the company, but that will be paid out in the future, as well as an accrual for retirees’ health and pension payments that are currently due.

Recall that FASB’s Concept Statement No. 6 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.”

Also recall that 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.

Therefore, when preparing financial statements or auditing a company’s books, accountants must actively seek out any financial obligations that the company has committed to. You’ve seen this in action with things like gift cards and salaries and wages earned, as well as income tax due and of course trade accounts payable.

Other current liabilities include the income taxes due, interest due on loans, and some other liabilities that are less common, such as current obligations that arose from some restructuring and some gains on the sale of real estate in the prior year that were not recognized until the current year.

Some other common current liabilities include product warranties and contingent liabilities, such as pending lawsuits. These both require some estimating and judgment, as you’ll see on the following pages.