Definition of Long-Term Liabilities

Long-term liabilities are financial obligations and debts that an organization must pay within a period exceeding one year. These liabilities represent financial obligations due for payment in the long term and are classified as non-current liabilities on the balance sheet.

Items and Types of Long-Term Liabilities

Long-term liabilities that appear on the balance sheet vary and include:

• Long-Term Loans - Bank loans and credit facilities that are due for repayment in more than one year
• Bonds Issued - Debt instruments issued to the public or institutional investors for long periods
• Government Loans - Financing obtained from government agencies or quasi-governmental institutions
• Lease Financing - Long-term finance lease contract obligations
• End-of-Service Benefits Provision - Accruals owed to employees upon termination of their service
• Pension Provision - Retirement system and pension obligations for employees
• Long-Term Creditors - Amounts owed to suppliers or creditors with long-term payment terms
• Deferred Tax Liabilities - Taxes owed but deferred for payment over long periods

Importance of Long-Term Liabilities in Financial Analysis

Long-term liabilities are important in financial analysis because they show the company's financing structure and financial leverage in the long term. They help calculate debt ratios that measure the extent to which the company relies on external financing versus internal financing. They are also used to evaluate the company's ability to service its debts and pay interest, helping analysts and investors assess financial risks and make long-term investment decisions.

Difference Between Long-Term Liabilities and Non-Current Liabilities

In accounting practice, non-current liabilities and long-term liabilities are the same concept - both refer to obligations due in more than one year.

Where Long-Term Liabilities Appear

Long-term liabilities appear on the balance sheet under the liabilities section under the item "Non-Current Liabilities." They also appear in the cash flow statement under financing activities when obtaining new financing or repaying part of them, where obtaining new loans means cash inflow and loan repayment means cash outflow.