Non-current liabilities

When reviewing a company's statement of financial position or balance sheet, liabilities are classified as current and non current. Current liabilities are due within one year, while noncurrent liabilities, also called long term liabilities are obligations not expected to be settled in the next 12 months. Non current liabilities show long term financial commitments, such as loans, bonds payable or finance lease liabilities. In the UK, these are called noncurrent liabilities. In the US, long term liabilities is used, though the principles are the same. Noncurrent liabilities arise from various sources, each with unique accounting considerations. A five year bank loan is a straightforward example. Bonds payable or debentures used to raise funds from investors also fall into this category. Finance lease liabilities, where a business controls an asset through a long term lease are classified as non current if payment obligations extend beyond a year. Provisions for future costs like environmental cleanup or pensions, represent obligations from past events that require future settlement and often need estimated disclosure. The presence and size of noncurrent liabilities have major implications for stakeholders assessing a business's health and future prospects. High levels of non current liabilities can suggest ambitious expansion or investment, but also increase financial risk through fixed obligations. Key ratios like debt to equity and times interest earned,