Non Current Liabilities Notes for the UGC-NET Commerce Exams

Non-current liabilities are the debts a company owes, but isn't due to pay for at least a year. They're also referred to as long-term liabilities. Also, payment may not be due within a year, it's vital a business doesn't overlook its non-current liabilities. Non-current liabilities are a vital component of a company's financial structure, representing obligations that are not due for settlement within the current operating cycle or one year, whichever is longer. Understanding non-current liabilities is crucial for investors, creditors, and analysts to assess a company's long-term financial health and ability to meet its long-term obligations.

Non current liabilities is a vital topic to be studied for the commerce related topics such as the UGC-NET Commerce Examination.

In this article the readers will be able to know about non current liabilities in detail along with other related topics.

What are Non Current Liabilities?

Non-current liabilities are financial obligations that are not expected to be settled within the current operating cycle or one year, whichever is longer. These liabilities represent long-term commitments that a company owes to external parties and are typically due for settlement beyond the next twelve months. Non-current liabilities play a crucial role in a company's long-term financial structure and include items such as:

Long-Term Debt: This comprises borrowings or loans that are scheduled for repayment over an extended period, usually beyond one year. Long-term debt may include bonds payable, long-term bank loans, and mortgages.
Deferred Tax Liabilities: These arise from temporary differences between the accounting and tax treatment of certain items, resulting in future tax obligations. Deferred tax liabilities represent taxes payable on income that has been recognized in financial statements but not yet taxed by tax authorities.
Long-Term Lease Obligations: Lease agreements that extend beyond one year are classified as non-current liabilities. Companies with long-term lease agreements for equipment, machinery, or real estate must recognize the present value of future lease payments as a non-current liability.
Pension Liabilities: Companies that provide pension plans or other post-employment benefits to employees may have non-current liabilities associated with future pension obligations. These liabilities represent the estimated present value of future pension payments to employees.
Deferred Revenue: Also known as unearned revenue, deferred revenue arises when a company receives advance payments from customers for goods or services that will be delivered in the future. The portion of deferred revenue expected to be recognized as revenue beyond one year is classified as a non-current liability.
Other Long-Term Liabilities: This category may include various long-term obligations, such as long-term provisions for warranties, environmental liabilities, legal settlements, or restructuring costs

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Difference Between Current and Non Current Liabilities

Current Liabilities and Non Current Liabilities are stated below.

Criteria	Current Liabilities	Non-Current Liabilities
Definition	Obligations due for settlement within one year or the operating cycle, whichever is longer.	Obligations due for settlement beyond one year or the operating cycle.
Timing of Settlement	Due within the current operating cycle or one year.	Due beyond the current operating cycle or one year.
Examples	Accounts payable, short-term loans, accrued expenses, current portion of long-term debt.	Long-term debt, deferred tax liabilities, long-term lease obligations, pension liabilities.
Reporting on Balance Sheet	Reported separately from non-current liabilities under the liabilities section.	Reported separately from current liabilities under the liabilities section.
Nature of Obligations	Typically represent short-term obligations requiring imminent payment.	Generally represent long-term commitments requiring payment beyond the next twelve months.
Risk Assessment	Often used to assess short-term liquidity and ability to meet current obligations.	Often used to assess long-term solvency and ability to manage long-term obligations.

Current and Non Current Liabilities Examples

Here are examples of current and non-current liabilities:

Current Liabilities

Accounts Payable: Amounts owed to suppliers or vendors for goods or services purchased on credit.
Short-Term Loans: Borrowings from banks or financial institutions that are due for repayment within one year.
Accrued Expenses: Expenses that have been incurred but not yet paid, such as salaries, utilities, and taxes.
Notes Payable: Short-term promissory notes issued to creditors for borrowing money.
Current Portion of Long-Term Debt: The portion of long-term debt that is due for repayment within the next twelve months.