Deferred assets

A deferred asset is known as that good or service for which a payment has already been made but whose use has not been enjoyed. It is an important way not to alter the accounting reality of a company in each period.

Deferred assets

Individuals and companies around the world resort to the use of a deferred asset to acquire different goods and services that they will use later. Thus they are included in the assets of the company in the form of assets.

The main motivation for the existence of this type of operation is the accounting or financial interest. By making these payments in this way, it is possible not to affect the accounts of a certain period, since the use of these assets can be accounted for as expenses.

In this way, each deferred asset can be considered as one that is paid in advance for later use. This use will be the element that will give rise to the corresponding amortizations and depreciations.

It is the way that exists, from the accounting point of view, of not greatly altering the accounting or financial reality, specifically for the periods of time in which the resource is not used.

Main examples of a deferred asset

The supplies of material for the development of an entrepreneurial work are usually the most prominent examples, in the form of components for production, resources such as stationery or packaging.

In the same way, the insurance policies that are contracted or the rental of real estate or industrial machinery are also considered deferred assets. Often that the corresponding periodic accounting payments are made, the understandable expense will be taken into account.

This modality is also common in the field of investments and the purchase and sale of financial securities. In other words, different investments are made at any given time and that over time will become a series of future expenses (for example, hiring a pension plan or participating in an investment fund).

Difference between deferred assets and deferred liabilities

The figure of deferred assets is completely opposite to that of deferred liabilities. If we take the example of a full amount lease, the deferred asset is created by paying the amount to the lessor at the beginning of the period in a single payment to progressively discounting the rental expenses per period in our balance sheet.

From the lessor’s point of view, that amount at the beginning of the period would be considered a deferred liability. You receive the total amount of the lease at first, but your balance will progressively accrue the income by monthly payments by providing this rental service.