5.3 Non-current Liabilities

1. Definition of Non-current Liability

Non-current liability represent obligations of the firm that generally are due more than one year after the balance sheet date.

The typical non-current liabilities are term loans, mortgage payable, bond payable and financing lease.

2. Types of Non-current Liability

1. Bond Payable

(1) Definition of bond

Bond is a certificate promising to pay its holder a specified sum of money plus interest at a stated rate．The principal of each bond, also called the face value.

(2) Types of bonds

①Bonds issued at face amount

②Bonds issued at a discount

③Bonds issued at premium

(3) Accounting for bonds payable

When a corporation issues bonds, it usually incurs two distinct obligations：

① To pay the face amount of the bonds at a specified maturity date;

② To pay periodic interest at the specified interest at a specified percentage of the face value．

2.Financing Lease

(1) The Definition of Lease

A lease is a rental agreement in which the lessee obtains from the lessor the right to use property for a stated period of time in return for a series of rental payment.

In practice, many entities lease much of their equipment rather than purchase it., for one or more of the following reasons:

① The full lease payment is deductible for tax purpose.

② lease contracts may be more flexible and contain fewer restrictions than most debt agreement.

③ The risk of obsolescence is shift to lessor.

(2) The Types of Lease

operation lease and financing lease