Non-current liabilities, also known as long-term liabilities<\/a>, are obligations<\/a> or debts that a company expects to settle or fulfil beyond the normal operating cycle, typically extending over a period longer than one year. <\/span><\/p>\n These liabilities play a vital role in a company’s financial structure and reflect its long-term financial commitments.<\/span><\/p>\n Types of non-current liabilities:<\/span><\/p>\n Non-current liabilities often involve the payment of interest. For instance, long-term debt incurs periodic interest payments in addition to the repayment of the principal.<\/span><\/p>\n Companies may choose to refinance or roll over their non-current liabilities by obtaining new loans or issuing new securities to repay existing ones. This is a common practice to manage long-term debt.<\/span><\/p>\n Non-current liabilities must be disclosed in a company’s financial statements<\/a>, usually in the notes to the financial statements. This includes details about the nature, terms, and conditions of these liabilities.<\/span><\/p>\n Let’s consider a manufacturing company called “ABC Manufacturing” that obtains a long-term loan from a bank to finance the purchase of new machinery. The loan term is 5 years, and the company is required to make annual payments of $20,000 to repay the loan.<\/p>\nWhat are non-current liabilities?<\/h3>\n
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Example of a non-current liability<\/h3>\n