DEFERRED ANNUITY

DEFERRED ANNUITY
 annuity whose first payment or receipt does not

begin until sometime after the first period; for example, an annuity of $1000 that is not paid for the first three years, then commences payments at the end of each year from the fourth and continues through the end of that annuity.

DEFERRED ANNUITY CONTRACT agreement in which payments to

the annuitant are postponed until a specified number of periods have elapsed. An example is when annuity payments begin at the age of 60.

DEFERRED CHARGE cost already incurred that is deferred to the future. The deferral is made because of anticipated future benefit or because the charge constitutes an appropriate allocation of costs to future operations. The basic accounting convention applicable is the matching of costs and revenues. Deferred charges are classified as noncurrent assets because their life extends beyond one year. Deferred charges have no physical substance. Examples of deferred charges are: (1) start-up costs in putting into operation new, better, or more efficient facilities; (2) plant rearrangement and reinstallation costs; (3) moving costs from one location to another; and (4) deferred income tax charges resulting from INTERPERIOD INCOME TAX ALLOCATION. Note that a company sometimes has discretion of whether to defer a cost and amortize or immediately expense it. An example is advertising expense, which is capitalized when the benefits to be gained will affect future years' income. Since deferred charges lack cash realizability and cannot be used to meet creditor claims, they are (when material) subtracted from assets in most ratio calculations. See also PREPAID EXPENSE.

DEFERRED COMPENSATION see STOCK OPTION.

DEFERRED COST expenditure incurred having future benefit in excess of

one year that is capitalized to an asset account. An example is interest incurred on borrowed funds for the self-construction of an asset that is capitalized,

DEFERRED CREDIT income items received by a business, but not yet reported as income; also called deferred revenue and deferred income.

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