# Distinguishing between Current and Non-current liabilities?



## simon_says (19 August 2018)

I'm currently going through AMP Limited's financial statements and their balance sheet does not distinguish between current and non-current liabilities.  This is allowed under the IFRS.

With these balance sheets, the assets and liabilities *are listed in order of liquidity*.  The problem is, I can't seem to distinguish where Current Liabilities starts and ends!

How do I determine this?

I have uploaded the liabilities section of AMP's balance sheet.  I've also read all the notes to the financial statements but cannot determine whether the liability is current or non-current?

I know Insurance companies aren't easy.

Can anyone help?


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## luutzu (19 August 2018)

simon_says said:


> I'm currently going through AMP Limited's financial statements and their balance sheet does not distinguish between current and non-current liabilities.  This is allowed under the IFRS.
> 
> With these balance sheets, the assets and liabilities *are listed in order of liquidity*.  The problem is, I can't seem to distinguish where Current Liabilities starts and ends!
> 
> ...




The notes seem to break it down.


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## simon_says (19 August 2018)

They break down one entry.. Maybe a couple.  
But what I'm confused with is all the others such as 'other liabilities' etc?


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## luutzu (19 August 2018)

simon_says said:


> They break down one entry.. Maybe a couple.
> But what I'm confused with is all the others such as 'other liabilities' etc?




I guess you'd have to read the notes to try and figure out what's what best you can. As long as it's not too big, and taken over a period of years, probably doesn't matter much as long as they sheet balanced. But that could be just me being lazy and have no idea 

Let see... the "other liabilities" was $591M. $102M of which are collateral deposit to be repaid... that's probably current, if so, the derivatives will also have to be current. Collateral deposit, as described there, seem like one of those those "good debt", free money people hand over as collateral. So in and of itself, that's an asset really. I mean, AMP will have to repay it eventually, but til then it's good stuff to have.

Deferred Tax Liabilities at 1.3... From what I know, there's "current tax liabilities" due within 12 months; then there's "Deferred" to after that, i.e. non-current. 

Life Insurance at 4.2... I guess that if their insured customer all falls dead within next year, it's current. 

But if you look at note (e)... starts the year off at $24B, paid out $1.146B in claim. Similar claim amount previous year... so a mixture but mainly non-current.

Seems you'd need to read all the notes, make your best guess estimates and assumption. Redefine certain quoted assets and liabilities etc. etc. 

For example, lots of investment assets they have... what are those? Crypto or property CDOs?


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## simon_says (20 August 2018)

Thanks for your help luutzu and thanks for taking the time to answer this.  I think you are right, the process is very subjective. 

I just thought I might be missing some kind of convention, but it seems that I will have to make some assumptions based on the notes.  It's not always definite. 

I noticed that on Yahoo finance and Morningstar, the Balance sheet data is different.  They have classed current and non-current liabilities differently, different amounts etc.  This makes me think that it's possible that for an insurance company, distinguishing between current and non-current assets and liabilities is so full of guess work that other measures of performance may be relied on instead.


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## luutzu (20 August 2018)

simon_says said:


> Thanks for your help luutzu and thanks for taking the time to answer this.  I think you are right, the process is very subjective.
> 
> I just thought I might be missing some kind of convention, but it seems that I will have to make some assumptions based on the notes.  It's not always definite.
> 
> I noticed that on Yahoo finance and Morningstar, the Balance sheet data is different.  They have classed current and non-current liabilities differently, different amounts etc.  This makes me think that it's possible that for an insurance company, distinguishing between current and non-current assets and liabilities is so full of guess work that other measures of performance may be relied on instead.




With insurance, well with anything but particularly with insurance, I think you'd have to really do your homework on what they're insuring, what kind of investment they're putting that float into. 

If you don't know, it's going to be almost impossible to put your money on it and sleep well. Unless you're just like the professional money manager playing with other people's money and have to put some here and some there no matter what.

From memory, and I could be wrong on this as it's some 15 years ago... but I remember that AMP bought GIO. 

GIO insured flooding and other risky stuff that didn't need to be paid until about a year or two after AMP bought it. 

That's when AMP goes from some $20s down to $5 in a real hurry. 

With the impact of climate change, a bunch of crazy financial products, the Royal commission... better know AMP really, really well.

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The financial statements need to be read in context with the business and other measures. So yea, certain ratios and metrics might not be relevant or appropriate to understand the business performance. 

That not only apply to different industry etc., but also apply to companies within the same industry... it could depends on the size and nature of the business.

For example. Say a small retailer at the corner has "current liabilities", money that's due to be paid in a year. Compare to, say... Sigma or Woolies... they also have "current liabilities". But the two might be technically the same, accounting wise... but could mean something very different economic wise.

That is, the mom and pop operator around the corner isn't likely going to get any favours from their supplier. So the terms of pay are pretty short, and a day late could mean trouble.

For the big boys... they can churn their inventory over real quick; they can set the payment term to months... That's free money, not really debt. 

That's one reason why retailers can make money on low margin. WEll, some don't but you get the point.


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## simon_says (25 August 2018)

I agree with your view on Insurance and financial companies.  Thanks again for making the effort to explain the above!


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## luutzu (26 August 2018)

simon_says said:


> I agree with your view on Insurance and financial companies.  Thanks again for making the effort to explain the above!




When Simon says, you follow my friend.


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