Non-current liabilities are obligations which are not classified as current liabilities. Current liabilities are liabilities which are due within 12 months or within one operating cycle.

Non-current liabilities include long-term financial liabilities and deferred tax liabilities.

Long-term financial liabilities

Typical long-term financial liabilities include loans, bonds payable, etc. These are reflected on the balance sheet typically at their amortized cost. It means that any discount or premium initially recognized on the issuance of bonds is periodically adjusted. However, certain financial liabilities may be carried at fair value, such as derivatives or financial liabilities held for trading, etc.

Deferred tax liabilities

Deferred tax liabilities arise when an income recognized in the income statement is not included by tax authorities in taxable income or a deduction is allowed for tax purposes of an expense which is not yet recognized in the income statement. These cause the future taxable profit of a company to exceed its accounting profit. Hence, deferred tax liabilities are recognized to increase income tax expense in the current period for better matching of revenues and expenses.

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