Non-current liabilities, also called fixed liabilities, are made up of all the debts and obligations that a company has in the long term, that is, debts whose maturity is greater than one year and therefore must not return the principal during the year. in progress, although if the interests.
In the balance sheet , used to keep the accounting of the company, we find the liabilities , and within the liabilities we can differentiate the current liabilities and the non-current liabilities. They are born from the need for financing of the company, necessary for the acquisition of non-current assets, cancellation of bonds and redemption of preferred shares among others, among other things.
A fundamental difference between non-current liabilities and current liabilities is that with higher non-current liabilities relative to current liabilities, the possibility of negotiating with shareholders with greater force, obtaining capital from a more advantageous source of financing than if they requested it from entities banking.
When we talk about non-current liabilities we are referring to long-term financing credits. In this way, by differentiating current (short-term) liabilities from non-current (long-term) liabilities, we can organize the company’s finances and thus prepare a payment schedule that adjusts to economic forecasts and the business model.
Composition of non-current liabilities
The elements that make up the non-current liability can be differentiated by their nature:
- Long-term provisions
- Long term debts
- Long-term debts with group companies and associates
- Deferred tax liabilities:
- Long-term accruals
Use of non-current liabilities
Among the benefits of non-current liabilities we find the liquidity that it contributes to the company, being able to use this capital for new investments and to accelerate growth plans. From the financial accounting approach, it is essential to create a working capital and for this the current assets must be greater than the current liabilities. This will allow a margin of action in the event that there are mismatches in the collection and payment schedule.
However, in a critical situation, companies may be forced to carry out a debt restructuring process to be able to settle short-term debts and avoid bankruptcy situations . This restructuring involves transforming short-term debt into long-term debt, thereby saving time to solve the company’s financial problems.
