Introduction
Non-Current Liabilities are obligations that mature after 12 months: long-term debt, deferred tax liabilities, pensions, non-current deferred revenue.
Explanation
Non-Current Liabilities include: 1) Long Term Debt (bonds, LP loans), 2) Deferred Tax Liabilities (deferred taxes into the future), 3) Pension Liabilities (obligations with retired employees), 4) Deferred Income Non-Current (deferred income >12 months).
Formula
Total Non-Current Liabilities = Long Term Debt + Deferred Tax Liabilities + Pension Liabilities + Others
Example
General Electric (GE): - Long Term Debt: $80B - Pension Liabilities: $40B (huge legacy from retired employees) - Deferred Tax Liabilities: $10B - Total Non-Current Liabilities: $130B+
How to read it
High Non-Current Liabilities are not immediately problematic (they do not expire soon), but indicate future obligations. High Pension Liabilities are worrying (legacy industrial companies like GE, Ford). High Deferred Tax Liabilities indicate taxes that will eventually be paid. High Total Liabilities / Equity Ratio = highly leveraged company. Red flag: Non-Current Liabilities growing faster than assets = company taking on more liabilities without value growth.
Key takeaways
- Non-Current Liabilities = obligations >12 months
- Include: LP debt, pensions, deferred taxes
- They don't expire soon, but they are future obligations
- High Pension Liabilities = industrial legacy
- Deferred Tax Liabilities = future taxes
- Growing faster than assets = red flag