Deferral (deferred Charge)
Deferred charge(or deferral) is cost that is accounted-for in latter accounting period for its anticipated future benefit, or to comply with the requirement of matching costs with revenues. Deferred charges include costs of starting up, obtaining long-term debt, advertising campaigns, etc., and are carried as a non-current asset on the balance sheet pending amortization. Deferred charges often extend over five years or more and occur infrequently unlike prepaid expenses, e.g. insurance, interest, rent. Financial ratios are based on the total assets excluding deferred charges since they have no physical substance (cash realization) and cannot be used in reducing total liabilities.
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