Deferred Compensation

You don’t get it today. You get it, er, um…next year. At some point. If you’d gotten paid today it would have been...ferred. But then it was deferred, so…oh well. It’s money you don't get right now.

So...why would compensation be deferred? Well, lots of reasons. Think about a bonus that a salesperson might earn throughout the year. Like…they get 2 grand in bonus money payable next year for each month that they sell over 4 pounds of yellow cake uranium powder.

Bob here did it in January. Messed around in February and March. Was a good boy in April, May, and June. And then only hit one more sales goal ahead of Christmas, doing 4 pounds in November.

So Bob had 5 months hitting his sales bonus target, and will have owed to him 10 grand in bonus money—i.e. compensation...but all bonuses are paid in January of the following year.

So from the company’s perspective, they show deferred compensation as a line item, or a Thing on their balance sheet, and then convert it to being an expense when they pay everything out the first month of the next year.

So come next January, Bob will be very happy with his healthy bonus. That is, assuming he’s still around to enjoy it.