Trade and other payables

Trade and other payables are liabilities (in general payable short term i.e. within one year) showing separately amounts payable to trade suppliers, payable to related parties, deferred income and accruals (with for example corporate income tax and social securities as separate reporting lines based on local GAAP or reporting habits).

A trade payable is an amount billed to a company by its suppliers for goods delivered to or services consumed by the company in the ordinary course of business. These billed amounts, if paid on credit, are called trade (accounts) payable. Any amounts owed to suppliers that are immediately paid in cash are not considered to be trade payables, since they are no longer a liability.

In the accounting system, trade payables are recorded in a separate accounts payable account, with a credit to the accounts payable (control) account in the general ledger and a debit to whichever account most closely represents the nature of the payment, such as an expense to profit or loss or an addition to an asset (for example property, plant and equipment or inventories).

Trade payables are nearly always classified as current liabilities, since they are usually payable within one year. If that is not the case, then such payables can be classified as long-term liabilities. A longer-term liability typically has an interest payment associated with it, and so is more likely to be classified as long-term debt.

Other types of payables, such as accrued expenses, dividends payable, or wages and social securities payable, are recorded in other accounts in order to more easily identify them.

A key difference between trade payables and non-trade payables is that trade payables are typically part of the purchase process of an operation activity, whereas non-trade payables are typically entered a part of the payroll process or monthly, quarterly or annual financial close process.

Example disclosure

Trade and other payables

IFRS References: IAS 1 77, IFRS 15 105	2019	2018 Restated
Current liabilities	CU ‘000	CU ‘000
Trade payables	10,000	8,231
Payroll tax and other statutory liabilities	1,570	1,207
Refund liabilities (i)	490	235
Other payables	3,700	2,050
	15,760	11,723

Trade payables are unsecured and are usually paid within 30 days of recognition.

The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. [IFRS 7 29(a), IFRS 13 97, IFRS 13 93(b),(d)]

(i) Refund liabilities [IAS 1 117]

Where a customer has a right to return a product within a given period, the group recognises a refund liability for the amount of consideration received for which the entity does not expect to be entitled (CU221,000; 2018 – CU110,000). The group also recognises a right to the returned goods measured by reference to the former carrying amount of the goods (CU76,000 as at 31 December 2019 and CU38,000 as at 31 December 2018; see note 8(g)). The costs to recover the products are not material because the customers usually return them in a saleable condition. [IFRS 15 55, IFRS 15 B20-B27]

Refund liabilities are further recognised for volume discounts payable to wholesale customers (CU269,000; 2018 – CU125,000). Note 3(c) has further explanations about both types of refund liabilities.

Trade and other payables    Trade and other payables

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