I was viewing through the SUTL enterprise financial report. I came across a term ‘deferred membership income’ under non-current liabilities. My questions are:
(a) what is ‘deferred membership income’
(b) is it considered long-term liability? How would it different from long term loan or bond?
(c) what is the implication if the value is going up? Would it affect the company cash flow?
1.SUTL is in the marina business which means that they are managing private yacht and they have members who pay them membership fee. Some members may pay upfront 10 years membership fees. The amount collected cannot be record as revenue as the amount is not being used yet. Hence, they place it under deferred membership income.
2.Deferred membership income is not a long term liability, it is a float for the business just like insurance company. If the management know how to use the money well, it will create a lot of value for the shareholders.
3.There will not be any implication on this and it will not affect the cash flow.
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