DEFERRAL Meaning and
Definition
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Deferral refers to the act of postponing or delaying something to a later time or date. It is the process of deferring or putting off an action or obligation until a more suitable or convenient moment.
In the context of finance and accounting, deferral commonly refers to the practice of postponing the recognition of certain expenses or revenues on a company's financial statements. This is done to align the recognition of these items with the period in which they are incurred or earned, as per the accrual accounting principle.
In the case of expenses, deferral involves recording an expense as an asset initially, and then gradually recognizing it as an expense over time or when certain criteria are met. This can occur with expenditures that relate to prepaid services or products that will be consumed or used up over a period of time, such as insurance premiums or rent payments.
On the other hand, deferral of revenues involves receiving payment from a customer or client, but postponing its recognition as revenue until the goods or services are delivered or performed. This is often the case with advance payments or deposits for products or services that will be provided in the future.
Overall, deferral is a strategic accounting practice used to match expenses and revenues with the period in which they are incurred or earned. It allows for a more accurate representation of a company's financial performance and helps in providing useful information for decision-making.
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Etymology of DEFERRAL
The word deferral originates from the verb defer, which emerged in the late 15th century. Defer comes from the Latin word differre, which can be broken down into two parts: di meaning apart or away, and ferre meaning to bear or to carry. Differre has the sense of to carry away or to put off. Over time, defer transformed into a noun form with the suffix -al, resulting in deferral.
Similar spelling word for DEFERRAL
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