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What are Noncurrent Liabilities?

Justin Riche
Justin Riche

Generally, noncurrent liabilities, also referred to as long-term liabilities, are financial obligations with a term longer than a year from the present date. That is, noncurrent liabilities are what individuals or organizations owe but do not have to repay during the upcoming 12 months. For example, two-year loans would be included in the noncurrent liabilities section of a balance sheet or financial statement. Noncurrent liabilities might include bonds, notes, time deposits, mortgage loans, car loans and others.

Typically, noncurrent liabilities are featured on a financial statement such as a balance sheet, along with other items such as noncurrent assets, current liabilities, current assets and others. Current assets represent things such as cash that will flow in within a one-year period. Noncurrent assets are things such as a property that is not expected to be sold within a year.

Man climbing a rope
Man climbing a rope

Time deposits with a maturity longer than a year are treated as noncurrent liabilities on the bank's side. This is because time deposits normally involve depositing money in a bank account for a fixed period, which becomes more or less like a loan to the bank. A time deposit is like a loan to the bank because, in general, banks will use the deposited money to finance some of their own activities, and the depositors will reclaim their money at a later date. Although time deposits usually offer higher interest rates compared to normal savings accounts, they do impose certain conditions. One of these conditions might be that the depositor can withdraw the money only after two years, for example, and this transaction will be entered in the noncurrent liabilities side of the bank's balance sheet.

Noncurrent liabilities are found on the balance sheet of any entity that uses debt to fund its projects. Governments and all sorts of organizations borrow money by issuing bonds, notes and other types of debt instruments. Any one of these instruments that do not have to be repaid within a year will occupy the noncurrent liabilities side of the balance sheet together with other necessary items. Moreover, not all individuals or businesses are obligated to keep a formal balance sheet. Whether one is kept or not, however, the concept of noncurrent liabilities remains the same if the individuals and businesses have long-term liabilities, which will be found in other relevant documents, such as bank loan statements.

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