In the accounting and reporting sense,long term generally implies a duration of more than a year. It can refer to obligations or assets. Long term obligations mean those that come due or need to be paid in more than a year from now. Long term fixed assets mean those that will have economic value for more than a year from now. In business, long term is defined by more than a year or more than one operating cycle, whichever is longer. For example, in a business, a manufacturing process may take much longer than a year. In such a case, long term could be greater than a year. The year period is used in government because the budget is generally an annual document. Thus, a year or less is current; more than a year is long term. Some exceptions exist in governmental funds. Sometimes items lapsing into the next sixty days after the end of year are considered current if they are paid for with dollars from the budget of that year..
Actual impact can be significant on the government and the jurisdiction. For instance, long term obligations can be used to purchase major assets, place considerable future financial burdens on the government, or be seen as a way to provide money for much needed projects, programs, or promises. A transportation project is an example. It will require sizable infusions of money, probably most from borrowing. The borrowing not only means repaying the principal , but also regular interest payments. If a jurisdiction has numerous loans outstanding, interest expenditures can become substantial. Of course, the government can gain enormously from the capital project or projects derived from borrowing. The locality or area can become a haven for economic growth and people might be able to move about more quickly because of improvements such as new transportation arteries. Retirement benefits, another long term item, offer similar but more subtle demands or impacts on government. The obligations can be huge since the promises are made well before payment is due. However, the government may gain from attractive retirement packages by attracting and retaining skilled employees.
The impact or effect of long term items on the governmental funds can be small. If a million dollars is borrowed and payable five years from now, the liability does not appear in fund responsible for the borrowing. The borrowed money simply increases the inflow of money to that fund. The debt is placed "off balance" sheet. In all likelihood, the debt is backed by the full faith and credit of the government. In the year the debt comes due, some fund most have the money to pay the principal. The fixed assets that might be purchased are also placed "off balance" sheet. They are simply listed at historical cost. As a result, if they are sold or retired, even at signficant loss, no recognition is given to the loss.
Long term fixed assets can also be diverse. Typically, one thinks of buildings, vehicles, and machinery. Government is also a major owner of infrastructure. Governments own streets, utilities, and bridges. These assets can have sizable historical cost.
Nonfixed, or intangible, long term assets extend to investments . A government may be holding U.S. government treasury notes of a long term nature as a form of investment. In fact, in this era of enterprising government, the government may have invested in revenue producing activities such as sports facilities, electrical generation, and training endeavors. While it is not likely for the government to hold stock (i.e., stock certificates or ownership) in governmental joint ventures, the government may have agreements to have excess revenue from a joint venture transferred back to the jurisdiction. Governments can be involved in holding stocks, but these holdings would likely be part of a pension trust fund.
Thus, among the long term assets, including fixed and intangible assets, are: