Deferred Charge

A prepaid expense that is recognized on the balance sheet as an asset until it is used.

Investopedia Says:
Recording deferred charges in this manner ensures that a company is adhering to Generally Accepted Accounting Principles (GAAP) by matching revenues with expenses.

A prime example of a deferred charge is rent. Consider the case where a company pays a lump sum to its landlord to cover six months' rent. As each month approaches, the company will use a portion of the funds from its deferred charges account and recognize this portion as an expense on its financial statements. This process ensures that revenues for the month are matched with the expenses incurred for that month.

Related Links:
Learn about the components of the statement of financial position and how they relate to each other. Reading The Balance Sheet
Asset performance shows how what a company owes and owns affects its investment quality. Testing Balance Sheet Strength

Nontangible costs that are expected to provide value over a number of years. For accounting or tax purposes, these are to be Amortized over the life to which they are expected to provide value.
Examples:

• Commissions paid upon Lease negotiation of a lengthy lease.

• Mortgage placement fee for a Permanent Mortgage.

Cost already incurred that is deferred to the future. The deferral is made because of anticipated future benefit or because the charge constitutes an appropriate allocation of costs to future operations. The basic accounting convention applicable is the matching of costs and revenues. Deferred charges are classified as noncurrent assets because their life extends beyond one year. Deferred charges have no physical substance. Examples of deferred charges are: (1) start-up costs in putting into operation new, better, or more efficient facilities; (2) plant rearrangement and reinstallation costs; (3) moving costs from one location to another; and (4) deferred income tax charges resulting from Interperiod Income Tax Allocation. Note that a company sometimes has discretion of whether to defer a cost and amortize or immediately expense it. An example is advertising expense, which is capitalized when the benefits to be gained will affect future years' income. Since deferred charges lack cash realizability and cannot be used to meet creditor claims, they are (when material) subtracted from assets in most ratio calculations. See also Prepaid Expense.