Glossary
L
57 terms
Land Development Costs
Land improvement and development costs generally fall within two broad classifications, permanent and limited-life, described as follows: Permanent land development costs include the costs of initial land surveys, titles, initial clearing, and initial leveling. Limited-life land development costs are those that will lose value as time passes or as the land and its improvements are used. Costs identified as limited-life improvements include water distribution systems, fencing, and drainage tile. The useful lives of those improvements are reasonably determinable.
Used in 1 subtopic:360-905
Lapse rate
The rate at which insurance contracts terminate through failure of the insureds to continue required premium payments. The lapse rate may also be considered a rate of nonpersistence. It is usually expressed as a ratio of the number of contracts that terminated by reason of failure of insureds to make premium payments during a given period, to the total number of contracts at the beginning of the period from which those lapses occurred.
Used in 1 subtopic:944-40
lattice model
A model that produces an estimated fair value based on the assumed changes in prices of a financial instrument over successive periods of time. The binomial model is an example of a lattice model. In each time period, the model assumes that at least two price movements are possible. The lattice represents the evolution of the value of either a financial instrument or a market variable for the purpose of valuing a financial instrument. In this context, a lattice model is based on risk-neutral valuation and a contingent claims framework. See Closed-Form Model for an explanation of the terms risk-neutral valuation and contingent claims framework.
Lead Interest
The right to the benefits (cash flows or use) of assets during the term of a split-interest agreement, which generally starts upon the signing of the agreement and terminates at either of the following times: After a specified number of years (period-certain) Upon the occurrence of a certain event, commonly either the death of the donor or the death of the lead interest beneficiary (life-contingent).
Lease
A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.
Used in 37 subtopics:210-20220-40230-10255-10270-740310-10+6 more
lease inception
The date of the lease agreement or commitment, if earlier. For purposes of this definition, a commitment shall be in writing, signed by the parties in interest to the transaction, and shall specifically set forth the principal provisions of the transaction. If any of the principal provisions are yet to be negotiated, such a preliminary agreement or commitment does not qualify for purposes of this definition.
Lease Liability
A lessee's obligation to make the lease payments arising from a lease, measured on a discounted basis.
Lease Modification
A change to the terms and conditions of a contract that results in a change in the scope of or the consideration for a lease (for example, a change to the terms and conditions of the contract that adds or terminates the right to use one or more underlying assets or extends or shortens the contractual lease term).
Lease Payments
See paragraph 842-10-30-5 for what constitutes lease payments from the perspective of a lessee and a lessor.
Used in 15 subtopics:230-10255-10310-10410-20440-10460-10+6 more
Lease Receivable
A lessor's right to receive lease payments arising from a sales-type lease or a direct financing lease plus any amount that a lessor expects to derive from the underlying asset following the end of the lease term to the extent that it is guaranteed by the lessee or any other third party unrelated to the lessor, measured on a discounted basis.
Lease Term
The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.
Used in 17 subtopics:220-40230-10255-10310-10326-20340-970+6 more
Legal Entity
Any legal structure used to conduct activities or to hold assets. Some examples of such structures are corporations, partnerships, limited liability companies, grantor trusts, and other trusts.
Used in 9 subtopics:220-40610-20805-60810-10810-954810-958+3 more
legal notification period
The notification period that an entity is required to provide to employees in advance of a specified termination event as a result of an existing law, statute, or contract.
Used in 1 subtopic:420-10
Legal obligations
An obligation that a party is required to settle as a result of an existing or enacted law, statute, ordinance, or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel.
lending activities
Lending, committing to lend, refinancing or restructuring loans, arranging standby letters of credit, syndicating loans, and leasing activities are lending activities.
Used in 1 subtopic:310-20
Lessee
An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in exchange for consideration.
Used in 30 subtopics:210-20220-40230-10255-10270-740310-10+6 more
Lessor
An entity that enters into a contract to provide the right to use an underlying asset for a period of time in exchange for consideration.
Used in 29 subtopics:210-20220-40230-10255-10270-10270-740+6 more
Level 1 Inputs
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2 Inputs
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Used in 1 subtopic:820-10
Leveraged Lease
From the perspective of a lessor, a lease that was classified as a leveraged lease in accordance with the leases guidance in effect before the effective date and for which the commencement date is before the effective date.
Used in 8 subtopics:210-20255-10270-740310-10740-10740-805+2 more
liability for claim adjustment expenses
The amount needed to provide for the estimated ultimate cost required to investigate and settle claims relating to insured events that have occurred on or before a particular date (ordinarily, the balance sheet date), whether or not reported to the insurer at that date.
Used in 1 subtopic:944-40
Liability for Future Policy Benefits
An accrued obligation to policyholders that relates to insured events, such as death or disability.
liability for unpaid claims
The amount needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before a particular date (ordinarily, the balance sheet date).
Used in 1 subtopic:944-40
Liability Issued with an Inseparable Third-Party Credit Enhancement
A liability that is issued with a credit enhancement obtained from a third party, such as debt that is issued with a financial guarantee from a third party that guarantees the issuer's payment obligation.
License Agreement
A typical license agreement for program material (for example, features, specials, series, or cartoons) covers several programs (a package) and grants a television station, group of stations, network, pay television, or cable television system (licensee) the right to broadcast either a specified number or an unlimited number of showings over a maximum period of time (license period) for a specified fee.
Used in 6 subtopics:220-40230-920350-920405-920440-920926-20
licensing agreement
Contractual arrangements entered into by an owner (licensor) of a record master or music copyright with a licensee granting the licensee the right to sell or distribute records or music for a fixed fee paid to the licensor or for a fee based on sales of records or music. License agreements are modifications of the compulsory provisions of the copyright law.
life insurance entity
An entity that can issue annuity, endowment, and accident and health insurance contracts as well as life insurance contracts. Life insurance entities may be either stock or mutual entities.
life settlement contract
A life settlement contract is a contract between the owner of a life insurance policy (the policy owner) and a third-party investor (investor), and has all of the following characteristics: The investor does not have an insurable interest (an interest in the survival of the insured, which is required to support the issuance of an insurance policy). The investor provides consideration to the policy owner of an amount in excess of the current cash surrender value of the life insurance policy. The contract pays the face value of the life insurance policy to an investor when the insured dies.
Used in 1 subtopic:325-30
life-contingent payments
Payments that are made if the beneficiary is alive when the payments are due.
Used in 1 subtopic:944-20
life, annuity, and health insurance entities
An entity that may issue annuity, endowment, and accident and health insurance contracts as well as life insurance contracts. Life and health insurance entities may be either stock or mutual entities.
Used in 1 subtopic:405-30
limited partnership
An association in which one or more general partners have unlimited liability and one or more partners have limited liability. A limited partnership is usually managed by the general partner or partners, subject to limitations, if any, imposed by the partnership agreement.
Limited-payment contracts
Long-duration insurance contracts with terms that are fixed and guaranteed, and for which premiums are paid over a period shorter than the period over which benefits are provided. Limited-payment contracts subject the insurer to risks arising from policyholder mortality and morbidity over a period that extends beyond the period or periods in which premiums are collected.
Line of Credit Arrangement
A line-of-credit or revolving-debt arrangement is an agreement that provides the borrower with the option to make multiple borrowings up to a specified maximum amount, to repay portions of previous borrowings, and to then reborrow under the same contract. Line-of-credit and revolving-debt arrangements may include both amounts drawn by the debtor (a debt instrument) and a commitment by the creditor to make additional amounts available to the debtor under predefined terms (a loan commitment).
liquidating bank
A bank with a substantial amount of nonperforming assets may transfer some or all of those assets to a newly created bank whose stock will be distributed to existing shareholders or to new investors. The newly created bank will be a liquidating bank; that is, it will manage the assets it receives and collect cash from loan repayments or dispositions of assets. All cash remaining after paying expenses and debt service, if any, will be distributed to the shareholders of the liquidating bank. The liquidating bank will likely be in the process of liquidation for several years.
Used in 1 subtopic:852-10
Liquidation
The process by which an entity converts its assets to cash or other assets and settles its obligations with creditors in anticipation of the entity ceasing all activities. Upon cessation of the entity's activities, any remaining cash or other assets are distributed to the entity's investors or other claimants (albeit sometimes indirectly). Liquidation may be compulsory or voluntary. Dissolution of an entity as a result of that entity being acquired by another entity or merged into another entity in its entirety and with the expectation of continuing its business does not qualify as liquidation.
liquidation method
The method used to allocate the principal payments on the receivables in a trust to the investors.
Used in 1 subtopic:860-10
liquidity
An asset's or liability's nearness to cash. Donor-imposed restrictions may influence the liquidity or cash flow patterns of certain assets. For example, a donor stipulation that donated cash be used to acquire land and buildings limits an entity's ability to take effective actions to respond to unexpected opportunities or needs, such as emergency disaster relief. On the other hand, some donor-imposed restrictions have little or no influence on cash flow patterns or an entity's financial flexibility. For example, a gift of cash with a donor stipulation that it be used for emergency-relief efforts has a negligible impact on an entity if emergency relief is one of its major ongoing programs.
livestock
Registered and commercial cattle, sheep, hogs, horses, poultry, and small animals bred and raised by agricultural producers.
loan
A contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in the creditor's statement of financial position. Examples include but are not limited to accounts receivable (with terms exceeding one year) and notes receivable.
Loan Commitment
Loan commitments are legally binding commitments to extend credit to a counterparty under certain prespecified terms and conditions. They have fixed expiration dates and may either be fixed-rate or variable-rate. Loan commitments can be either of the following: Revolving (in which the amount of the overall commitment is reestablished upon repayment of previously drawn amounts) Nonrevolving (in which the amount of the overall commitment is not reestablished upon repayment of previously drawn amounts).
loan origination fees
Origination fees consist of all of the following: Fees that are being charged to the borrower as prepaid interest or to reduce the loan's nominal interest rate, such as interest buy-downs (explicit yield adjustments) Fees to reimburse the lender for origination activities Other fees charged to the borrower that relate directly to making the loan (for example, fees that are paid to the lender as compensation for granting a complex loan or agreeing to lend quickly) Fees that are not conditional on a loan being granted by the lender that receives the fee but are, in substance, implicit yield adjustments because a loan is granted at rates or terms that would not have otherwise been considered absent the fee (for example, certain syndication fees addressed in paragraph 310-20-25-19) Fees charged to the borrower in connection with the process of originating, refinancing, or restructuring a loan. This term includes, but is not limited to, points, management, arrangement, placement, application, underwriting, and other fees pursuant to a lending or leasing transaction and also includes syndication and participation fees to the extent they are associated with the portion of the loan retained by the lender.
loan participation
A transaction in which a single lender makes a large loan to a borrower and subsequently transfers undivided interests in the loan to groups of banks or other entities.
local currency
The currency of a particular country being referred to.
lock-box arrangement
An arrangement with a lender whereby the borrower's customers are required to remit payments directly to the lender and amounts received are applied to reduce the debt outstanding. A lock-box arrangement refers to any situation in which the borrower does not have the ability to avoid using working capital to repay the amounts outstanding. That is, the contractual provisions of a loan arrangement require that, in the ordinary course of business and without another event occurring, the cash receipts of a debtor are used to repay the existing obligation.
Used in 1 subtopic:470-10
Lock-up options
Contingently exercisable options to purchase equity securities of another party to a business combination, at favorable prices, to encourage successful completion of that combination. If the merger is consummated as proposed, the options expire unexercised. If, however, a specified event occurs that interferes with the planned business combination, the options become exercisable.
Used in 1 subtopic:815-40
London Interbank Offered Rate (LIBOR)
The fixed rate on a single-currency, constant-notional interest rate swap that has its variable-rate leg referenced to the London Interbank Offered Rate (LIBOR) with no additional spread over LIBOR on that variable-rate leg. That fixed rate is the derived rate that would result in the swap having a zero fair value at inception because the present value of fixed cash flows, based on that rate, equate to the present value of the variable cash flows. (P) December 16, 2018; (N) December 16, 2020815-20-65-4Glossary term superseded by Accounting Standards Update No. 2018-16.
London Interbank Offered Rate (LIBOR) Swap Rate
The fixed rate on a single-currency, constant-notional interest rate swap that has its variable-rate leg referenced to the London Interbank Offered Rate (LIBOR) with no additional spread over LIBOR on that variable-rate leg. That fixed rate is the derived rate that would result in the swap having a zero fair value at inception because the present value of fixed cash flows, based on that rate, equate to the present value of the variable cash flows.
long-term care benefit
A feature of a deferred annuity in which, if during the accumulation phase, the contract holder has an insurable event (for example, disability, loss of activities of daily living) that meets the criteria specified in the contract, additional benefits in excess of the account balance will be available.
Used in 1 subtopic:944-20
long-term contracts
See paragraph 210-10-S99-1, Regulation S-X Rule 5-02.6(d), for a definition of long-term contracts or programs.
Used in 1 subtopic:210-10
long-term obligations
Long-term obligations are those scheduled to mature beyond one year (or the operating cycle, if applicable) from the date of an entity's balance sheet.
Used in 1 subtopic:470-10
Loss Contingency
An existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur. The term loss is used for convenience to include many charges against income that are commonly referred to as expenses and others that are commonly referred to as losses.