Change In Other Current Liabilities
A cash flow statement adjustment representing the net change in a company's miscellaneous short-term obligations.
On the cash flow statement (using the indirect method), āChange in Other Current Liabilitiesā refers to the net increase or decrease in short-term obligations that are not listed under major categories like accounts payable or short-term debt. It functions as a catch-all line for miscellaneous liabilities due within one year that are too small or diverse to be shown separately. These are often grouped as āOther Current Liabilitiesā on the balance sheet.
What's Included in Other Current Liabilities?
This category aggregates various short-term obligations that a company has incurred but not yet settled. Common examples include:
- Accrued expenses: Obligations for goods or services already received but not yet paid (e.g., wages payable, interest payable, taxes payable).
- Customer deposits / deferred revenue: Cash received from customers before the delivery of goods or services (e.g., unearned revenue, gift card balances, advance payments).
- Dividends or distributions payable: Dividends that have been declared by the company but not yet paid to shareholders.
- Other short-term obligations: This can include items like payroll tax liabilities, product warranty reserves, or provisions for pending legal liabilities.
Companies typically provide more detail about what constitutes their 'other current liabilities' in the footnotes to their financial statements.
How It Impacts Cash Flow
The impact on cash flow is straightforward and follows the standard logic for liabilities. An increase in other current liabilities during a period is treated as a source of cash (a cash inflow), while a decrease is treated as a use of cash (a cash outflow).
The Core Rule
If the company owes more in miscellaneous liabilities at the end of the year than it did at the beginning, it has effectively held onto cash. If it paid down these obligations, it used cash. In short: Increase in liabilities = + cash inflow; Decrease in liabilities = - cash outflow.
Location and Purpose on the Cash Flow Statement
You will find this line item in the Operating Activities section when a company uses the indirect method to prepare its cash flow statement. It is one of the adjustments to working capital used to reconcile net income to net cash from operations.
Companies group these liabilities to keep the financial statements from becoming cluttered. Major liabilities like accounts payable and short-term debt get their own lines. Everything else is bundled into this 'other' category for simplicity. In a typical cash flow reconciliation, you might see:
- Net Income
- Add back: Depreciation
- Change in accounts receivable (-)
- Change in inventory (-)
- Change in accounts payable (+)
- Change in other current liabilities (+)
Calculation and Example
The calculation is a simple period-over-period comparison. You take the ending balance of 'Other Current Liabilities' from the current periodās balance sheet and subtract the beginning balance from the prior periodās balance sheet.
Example Scenario
Key Takeaways
This is a catch-all line item for short-term obligations not individually listed, such as accrued expenses and deferred revenue.
It is presented in the Operating Activities section of the cash flow statement to adjust net income for changes in working capital.
An increase in 'Other Current Liabilities' is a source of cash (inflow) because the company has delayed payments.
A decrease in 'Other Current Liabilities' is a use of cash (outflow) because the company has settled its obligations.
The line item's purpose is to simplify the cash flow statement by grouping smaller, miscellaneous liabilities together.
Change In Other Current Liabilities
A cash flow statement adjustment representing the net change in a company's miscellaneous short-term obligations.
On the cash flow statement (using the indirect method), āChange in Other Current Liabilitiesā refers to the net increase or decrease in short-term obligations that are not listed under major categories like accounts payable or short-term debt. It functions as a catch-all line for miscellaneous liabilities due within one year that are too small or diverse to be shown separately. These are often grouped as āOther Current Liabilitiesā on the balance sheet.
Table of Contents
What's Included in Other Current Liabilities?
This category aggregates various short-term obligations that a company has incurred but not yet settled. Common examples include:
- Accrued expenses: Obligations for goods or services already received but not yet paid (e.g., wages payable, interest payable, taxes payable).
- Customer deposits / deferred revenue: Cash received from customers before the delivery of goods or services (e.g., unearned revenue, gift card balances, advance payments).
- Dividends or distributions payable: Dividends that have been declared by the company but not yet paid to shareholders.
- Other short-term obligations: This can include items like payroll tax liabilities, product warranty reserves, or provisions for pending legal liabilities.
Companies typically provide more detail about what constitutes their 'other current liabilities' in the footnotes to their financial statements.
How It Impacts Cash Flow
The impact on cash flow is straightforward and follows the standard logic for liabilities. An increase in other current liabilities during a period is treated as a source of cash (a cash inflow), while a decrease is treated as a use of cash (a cash outflow).
The Core Rule
If the company owes more in miscellaneous liabilities at the end of the year than it did at the beginning, it has effectively held onto cash. If it paid down these obligations, it used cash. In short: Increase in liabilities = + cash inflow; Decrease in liabilities = - cash outflow.
Location and Purpose on the Cash Flow Statement
You will find this line item in the Operating Activities section when a company uses the indirect method to prepare its cash flow statement. It is one of the adjustments to working capital used to reconcile net income to net cash from operations.
Companies group these liabilities to keep the financial statements from becoming cluttered. Major liabilities like accounts payable and short-term debt get their own lines. Everything else is bundled into this 'other' category for simplicity. In a typical cash flow reconciliation, you might see:
- Net Income
- Add back: Depreciation
- Change in accounts receivable (-)
- Change in inventory (-)
- Change in accounts payable (+)
- Change in other current liabilities (+)
Calculation and Example
The calculation is a simple period-over-period comparison. You take the ending balance of 'Other Current Liabilities' from the current periodās balance sheet and subtract the beginning balance from the prior periodās balance sheet.
Example Scenario
Key Takeaways
This is a catch-all line item for short-term obligations not individually listed, such as accrued expenses and deferred revenue.
It is presented in the Operating Activities section of the cash flow statement to adjust net income for changes in working capital.
An increase in 'Other Current Liabilities' is a source of cash (inflow) because the company has delayed payments.
A decrease in 'Other Current Liabilities' is a use of cash (outflow) because the company has settled its obligations.
The line item's purpose is to simplify the cash flow statement by grouping smaller, miscellaneous liabilities together.
Related Terms
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