You don’t get it today. You get it, er, um…next year. At some point. If you’d gotten paid today it would have been...ferred. But then it was deferred, so…oh well. It’s money you don't get right now.
So...why would compensation be deferred? Well, lots of reasons. Think about a bonus that a salesperson might earn throughout the year. Like…they get 2 grand in bonus money payable next year for each month that they sell over 4 pounds of yellow cake uranium powder.
Bob here did it in January. Messed around in February and March. Was a good boy in April, May, and June. And then only hit one more sales goal ahead of Christmas, doing 4 pounds in November.
So Bob had 5 months hitting his sales bonus target, and will have owed to him 10 grand in bonus money—i.e. compensation...but all bonuses are paid in January of the following year.
So from the company’s perspective, they show deferred compensation as a line item, or a Thing on their balance sheet, and then convert it to being an expense when they pay everything out the first month of the next year.
So come next January, Bob will be very happy with his healthy bonus. That is, assuming he’s still around to enjoy it.
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Finance: What is Deferred Compensation?8 Views
Finance allah shmoop what is deferred compensation Well you don't
get it today You get it next year at some
point you know differed If you've gotten paid today it
would have binford but then it was deford's so well
yeah it's money you don't get right now Yeah so
whywould compensation be deferred Well lotsa reasons think about a
bonus that a sales person might earn through out the
year like they get two grand in bonus money payable
next year for each month that they sell over four
pounds of yellowcake uranium powder Bob here did it in
january messed around in february and march and was a
good boy in april may and june and then on
lee hit one more sales goal ahead of christmas doing
four pounds in uzbekistanian november So bob had five months
hitting his sales bonus target and we'll have owed to
him ten grand in bonus money e compensation that was
deferred and noting that all bonuses are paid in january
of the following year like it's deferred to the following
year So from the company's perspective they show deferred compensation
as a line item or a thing on their balance
Sheet is a liability And then they converted to being
an expense when they pay everything out the first month
of the next year so come january Bob will be
very happy with his healthy bonus That is you know 00:01:29.357 --> [endTime] assuming he's still around to enjoy it there No
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