Non-Current Liability

Non-current liabilities, also called long-term liabilities, represent financing and obligations stretching beyond twelve months. They often fund long-term assets, such as buildings and equipment.

Common examples include long-term bank loans, bonds issued by the company, lease liabilities, pension obligations to employees and deferred tax liabilities. The portion of a long-term loan due within the next year is moved to current liabilities, and the rest stays in non-current liabilities.

For example, if a company has a 1 million loan repayable at 100,000 a year for ten years, at the start of the loan it shows 100,000 as a current liability and 900,000 as a non-current liability.

Investors look at non-current liabilities to understand a company's debt burden and long-term commitments. High long-term debt increases interest costs and financial risk, especially if profits fall or interest rates rise. Comparing total debt with equity or with earnings helps judge whether a company is borrowing sensibly.