Noncurrent liabilities definition
/What are Noncurrent Liabilities?
Noncurrent liabilities are those obligations not due for settlement within one year. Examples of noncurrent liabilities are the long-term portion of debt payable and the long-term portion of bonds payable.
The aggregate amount of noncurrent liabilities is routinely compared to the cash flows of a business, to see if it has the financial resources to fulfill its obligations over the long term. If not, creditors will be less likely to do business with the organization, and investors will not be inclined to invest in it. A factor to be considered in this evaluation is the stability of an organization's cash flows, since stable flows can support a higher debt load with a reduced risk of default.
Types of Noncurrent Liabilities
The main types of noncurrent liabilities are as follows:
Long-term debt. Includes loans and bonds payable that are due beyond one year, such as bank loans, debentures, and corporate bonds.
Lease liabilities (noncurrent portion). Represents the portion of lease obligations that is not due within the next 12 months, under finance or operating lease agreements.
Deferred tax liabilities. Arise from temporary differences between accounting and tax treatment of income and expenses, expected to reverse in future periods.
Pension and post-employment benefit obligations. Includes long-term commitments to provide pensions or other benefits to employees after retirement.
Asset retirement obligations. Liabilities associated with the future costs of dismantling or restoring assets, such as environmental cleanup costs for industrial sites.
Contingent liabilities. Includes legal claims or other potential obligations that are likely to result in a future outflow of resources, and are disclosed if estimable.
Notes payable (noncurrent portion). Formal written promises to pay a specified amount in the future, beyond the current operating cycle.
Presentation of Noncurrent Liabilities
These liabilities are separately classified in an entity's balance sheet, after current liabilities but before the equity section. A sample presentation appears in the following exhibit.
Terms Similar to Noncurrent Liabilities
Noncurrent liabilities are also known as long-term debts or long-term liabilities.