What is a non-current liability?

Within the liability of balance sheet of a company, distinguishes between current liabilities and non-current liabilities. Non-current or non-current liabilities are those constituted by those debts and obligations of the company, which have a maturity of more than one year. In other words, these are medium and long-term debts. According to the type of credits, it is possible that although it is not necessary to return the amount of the borrowed capital corresponding to the debts that make up the non-current liabilities, in the short term, the payment of interest will be.

Precisely because of its short-term immobility, non-current liabilities are also called fixed liabilities. The function of non-current liabilities is to satisfy the financing need of the company in the medium and long term. It is important to keep in mind that, for good company management, non-current liabilities must finance non-current assets, and current liabilities must finance current assets. In addition, there must be a working capital, or difference between current assets and current liabilities.

What are the accounts that make up non-current liabilities?

Current liabilities are made up of accounts such as:

  • Medium and long-term debts,
  • Debts with associates and group companies in the medium and long term,
  • Provisions maturing in the medium and long term,
  • Medium and long-term accruals, and
  • Tax deferred beyond the annuity.

The advantages of non-current liabilities include the possibility of having capital for improvements, investments or growth plans of the company. However, it is important not to make the mistake of using long-term debt to obtain liquidity, that is, to have current assets. In critical situations, it may be necessary to restructure the company's liabilities, so that some short-term debts become medium and long-term debts. With this, time is gained to be able to solve the problems, but more money is paid, as the total interest on the debts increases.

Leave a Comment