What are non-current liabilities?
Also called long-term liabilities, these are amounts owed beyond the next year. They're shown separately from current liabilities on the [balance sheet](/glossary/balance-sheet) so readers can judge both short-term [liquidity](/glossary/liquidity) and long-term [solvency](/glossary/solvency).
Common examples
- [Long-term debt](/glossary/long-term-debt): bank loans, mortgages, bonds
- Lease liabilities under IFRS 16
- Deferred tax liabilities (see [accounting for income taxes](/glossary/accounting-for-income-taxes))
- Long-term [provisions](/glossary/provision), such as decommissioning or warranties
- Pension obligations
- Long-term deferred revenue
Classification rules
Under IAS 1, a liability is current if it's due within 12 months or the business doesn't have the right at the reporting date to defer settlement for at least 12 months. A breached loan covenant can make long-term debt immediately current.
Example
A company has a $200,000 loan repayable over four years ($50,000 a year). On the balance sheet, $50,000 is current and $150,000 is non-current.
Key ratios
- Debt-to-equity
- Long-term debt to total capitalisation
- [Interest coverage ratio](/glossary/interest-coverage-ratio)