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Finance: What is Deferred Compensation? 8 Views
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Description:
What is Deferred Compensation? The process of a company taking a portion of wages due and paying it out at a later date is referred to as `deferred compensation’. This is often done for tax reasons, and are usually a part of pension or retirement plans. Another kind of deferred compensation that has been more recently developed in the digital era is for startup tech companies to pay a portion of compensation in warrants that are equivalent to equity shares of a company that will have market value in the future.
- Social Studies / Finance
- Finance / Financial Responsibility
- College and Career / Personal Finance
- Life Skills / Personal Finance
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Personal Finance
- Courses / Finance Concepts
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Accounting
- Terms and Concepts / Tax
- Terms and Concepts / Trusts and Estates
Transcript
- 00:00
Finance allah shmoop what is deferred compensation Well you don't
- 00:07
get it today You get it next year at some
- 00:11
point you know differed If you've gotten paid today it
- 00:15
would have binford but then it was deford's so well
- 00:20
yeah it's money you don't get right now Yeah so
Full Transcript
- 00:22
whywould compensation be deferred Well lotsa reasons think about a
- 00:27
bonus that a sales person might earn through out the
- 00:29
year like they get two grand in bonus money payable
- 00:33
next year for each month that they sell over four
- 00:36
pounds of yellowcake uranium powder Bob here did it in
- 00:40
january messed around in february and march and was a
- 00:43
good boy in april may and june and then on
- 00:45
lee hit one more sales goal ahead of christmas doing
- 00:48
four pounds in uzbekistanian november So bob had five months
- 00:53
hitting his sales bonus target and we'll have owed to
- 00:57
him ten grand in bonus money e compensation that was
- 01:02
deferred and noting that all bonuses are paid in january
- 01:05
of the following year like it's deferred to the following
- 01:08
year So from the company's perspective they show deferred compensation
- 01:13
as a line item or a thing on their balance
- 01:17
Sheet is a liability And then they converted to being
- 01:19
an expense when they pay everything out the first month
- 01:22
of the next year so come january Bob will be
- 01:26
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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