A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Off Balance Sheet
(Difference between revisions)
|(10 intermediate revisions not shown.)|
|-|An asset or liability of a company that is not shown on its [[Balance Sheet|balance sheet]]. For example, a company may wish to finance a project by moving the risk of doing so from its balance sheet to a subsidiary. This allows it to be financed without affecting shareholders' interests or adding to the parent company's debt burden. For some companies off balance sheet assets and liabilities may be a routine way of conducting business. For example, a financial institution may offer asset management or brokerage services to its clients. Such assets are likely to belong directly to the client and the company will have no claim on them. Off balance sheet items usually have to be referred to in the notes to a company's accounts. Items are not always moved off balance sheet for legitimate reasons. Companies have been known try to mislead or flatter their results by doing so. |+|
asset or that not shown on [[Balance Sheet|balance sheet]]. example, a company may wish to finance a project by the riskof doing so from its balance sheet a subsidiary . This allows it to be financed without affecting ' interests or adding to the parent company's debtburden. off balance sheet . a company to s. off balance sheet have been to .
Off balance sheet items are assets asset or liabilities that are not shown on a company's balance sheet. They usually have to be referred to in the notes to a company's accounts. Some companies routinely hold substantial off balance sheet items as a normal part of their operations. Investment management firms, for example, assets and investments belonging to their clients off their balance sheets. Or a company may wish to finance a project by transferring the risk of doing so from its own balance sheet onto that of a subsidiary or other separate legal entity. This allows it to be financed without affecting shareholders' interests or adding to the parent company's debt burden. This is known as off balance sheet financing. It allows a company to borrow without affecting measures of indebtedness such as gearing or without breaking debt covenants. The opportunities to mislead investors and creditors by means of off balance sheet financing have been reduced in recent years as a result of changes to accounting standards.
See also: SPV, Sarbanes-Oxley