Non-current liabilities
Learn what non-current liabilities are, with examples and how they appear on your balance sheet.
Published Thursday 6 August 2026
Table of contents
Key takeaways
- Non-current liabilities are debts a business does not have to settle for at least 12 months, though regular payments such as loan repayments may still be made during the year.
- They appear separately from current liabilities on the balance sheet and affect long-term cash flow planning, gearing, and solvency.
- Common examples include long-term loans, finance leases, bonds payable, deferred tax liabilities, and pension obligations.
- In Hong Kong, classification follows Hong Kong Accounting Standard (HKAS) 1, aligned with IAS 1, with amendments applying for reporting periods beginning on or after 1 January 2024.
Understanding what your business owes over the long term helps you plan cash flow and make confident decisions about growth.
What are non-current liabilities?
Non-current liabilities are debts or obligations a business does not have to settle for at least 12 months. They're also called long-term liabilities.
The 12-month rule draws the line between what's due soon and what can wait. Even so, you may still make regular payments during the year (for example, monthly loan repayments) while the principal balance remains classified as non-current. Comparing these obligations to your projected cash flow shows whether your business can meet its future debts comfortably.
Knowing which debts fall into the non-current category helps you see the full picture of what your business owes.
Examples of non-current liabilities
Non-current liabilities take many forms depending on your business structure and financing arrangements. Here are common examples:
- Long-term loans (for example, a five-year bank loan)
- Long-term finance leases
- Bonds payable
- Deferred tax liabilities
- Long-term provisions (for example, for restoration costs)
- Pension or retirement obligations
- Deferred revenue extending beyond 12 months
The distinction between current and non-current liabilities affects how you manage day-to-day cash and plan for the future.
Current vs non-current liabilities
The dividing line is the 12-month settlement test. Current liabilities are obligations you expect to settle within 12 months of the reporting date. Non-current liabilities are those you won't need to settle until after 12 months. This separation helps you, your accountant, and potential lenders see what's due soon versus what stretches further ahead.
Where these liabilities sit on your financial statements matters for understanding your overall position.
Where non-current liabilities appear on the balance sheet
Non-current liabilities sit under the liabilities section of the balance sheet, listed separately from current liabilities. Businesses typically group them into major line items (such as long-term borrowings and lease liabilities) plus an "other non-current liabilities" line for smaller amounts. This layout gives a clear view of obligations due beyond the next year.
Beyond their placement on the balance sheet, these long-term obligations influence how lenders and investors assess your business.
Why non-current liabilities matter
Non-current liabilities shape your cash flow planning and affect your gearing (also called leverage) and solvency. Lenders and investors look at ratios such as debt-to-equity (total debt divided by shareholders' equity) and interest coverage (operating profit divided by interest expense) to judge risk. A high level of long-term debt relative to equity can signal higher financial risk, while healthy interest coverage shows you're generating enough profit to service your debt.
Managing working capital well gives you the short-term cushion you need, while monitoring liquidity ratios helps you stay on top of both immediate and long-term commitments.
In Hong Kong, specific accounting standards guide how you classify these obligations.
How non-current liabilities are classified in Hong Kong
In Hong Kong, classifying a liability as current or non-current follows Hong Kong Accounting Standard (HKAS) 1, which is aligned with International Accounting Standard (IAS) 1. A liability is classified as non-current only if the business has a substantive right to defer settlement for at least 12 months, and that right exists at the end of the reporting period.
Amendments issued in 2020 and 2022 clarify these requirements and apply for annual reporting periods beginning on or after 1 January 2024. If you're unsure how specific transactions affect your classification, consult your accountant or bookkeeper for guidance tailored to your situation.
With a clear view of your long-term obligations, accounting software can help you stay organised and plan ahead.
Manage your liabilities with Xero
Xero's accounting and reporting tools help you track what your business owes, see your financial position in real time, and share data with your accountant or bookkeeper. With clear reports at your fingertips, you can plan for upcoming payments and make informed decisions. To try it for yourself, get one month free.
Below are answers to common questions about non-current liabilities.
FAQs on non-current liabilities
Here are answers to questions small business owners often ask about non-current liabilities.
Are non-current liabilities the same as long-term liabilities?
Yes. "Non-current liabilities" and "long-term liabilities" mean the same thing: obligations not due for settlement within 12 months.
Is deferred tax a current or non-current liability?
Deferred tax liabilities are typically classified as non-current because they relate to timing differences that reverse over more than 12 months. However, classification depends on the specific circumstances and applicable accounting standards.
Are non-current liabilities debt?
Some non-current liabilities are debt (such as long-term loans and bonds), but others represent obligations that aren't borrowings (such as deferred revenue or pension liabilities).
How are non-current liabilities different from current liabilities?
The key difference is timing. Current liabilities must be settled within 12 months, while non-current liabilities give you longer before payment is due.
Do non-current liabilities affect cash flow?
Yes. Although the principal isn't due immediately, you may still make regular interest or instalment payments that affect your operating cash flow throughout the year.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.