A non-financial liability is a liability for which an entity (carrying it on its balance sheet) is not under obligation to settle it using financial resources (particularly monetary assets). It may also refer to all types of obligations that are not financial in nature (i.e., do not have a direct or stated monetary value) but still require the use of economic resources in the future for its settlement. Non-financial liabilities may also denote liabilities that do not arise from financial transactions.
Non-financial liabilities are typically characterized by their very nature as reflecting an obligation to deliver goods or services, rather than an obligation to deliver cash or other types of financial assets. For example, warranty obligations require the obligor- entity to provide a service to repair or restore an asset covered by the warranty obligation.
Contrary to financial liabilities, non-financial liabilities typically do not have a corresponding and offsetting asset recognized by the counterparty.
Examples of non-financial liabilities include:
- Liabilities to employees.
- Tax liabilities.
- Social security payables.
- Employers’ liability insurance premiums, etc.
- Liabilities towards employees consists of liabilities arising from accrued leave and outstanding bonus payments, etc.
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