off-balance-sheet finance

= OBSF
A method of financing a company's activities so that some or all of the finance and the corresponding assets do not appear on the balance sheet of the company. By making use of OBSF a company can enhance its accounting ratios, such as the gearing ratio and return on capital employed, and also avoid breaking any agreements it has made with the banks in respect of the total amount it may borrow. It has been possible for companies, by drawing up complex legal agreements, to conduct off-balance-sheet finance and thus mislead the user of the accounts. The accounting profession has attempted to counter these practices by emphasizing that accounting should reflect the commercial reality of transactions and not simply their legal form. Financial Reporting Standard 5, Reporting the Substance of Transactions, provides specific guidance for certain transactions, such as factoring and consignment stock, for which companies have previously used off-balance-sheet finance.
In the USA, off-balance-sheet finance was identified as a major factor in the scandal surrounding the collapse of the energy-trading giant Enron in 2002 – the largest business scandal in US history.

Accounting dictionary. 2014.

Look at other dictionaries:

  • off-balance-sheet finance — OBSF A method of financing a company s activities so that some or all of the finance and the corresponding assets do not appear on the balance sheet of the company. By making use of OBSF a company can enhance its accounting ratios, such as the… …   Big dictionary of business and management

  • off-balance-sheet — UK US adjective [before noun] ACCOUNTING ► used to describe assets or debts that a company does not need to show on its balance sheet (= financial statement for a particular period): »The company had $4 billion in off balance sheet debt that was… …   Financial and business terms

  • off-balance sheet — A term used to describe contingent liabilities, contingent assets, and commitments that are legally binding but are not assets or liabilities shown on the balance sheet under GAAP. Examples include loan commitments and letters of credit. American …   Financial and business terms

  • Off-balance-sheet financing — Financing that is not shown as a liability in a company s balance sheet. The New York Times Financial Glossary …   Financial and business terms

  • off-balance-sheet financing — financing that is not shown as a liability on a company s balance sheet. Bloomberg Financial Dictionary …   Financial and business terms

  • off-balance-sheet financing — /ɒf ˌbæləns ʃi:t faɪnænsɪŋ/ noun financing by leasing equipment instead of buying it, so that it does not appear in the balance sheet as an asset …   Dictionary of banking and finance

  • Stock And Warrant Off-Balance Sheet R&D - SWORD — A financing option developed to help biotechnology companies access capital that could be used to finance new or ongoing research and development projects by establishing a separate entity. The financing received through outside investors… …   Investment dictionary

  • balance sheet — an important business document that shows what a business owns and owes as of the date shown. Essentially a balance sheet is a list of business assets and their cost on one side and a list of liabilities and owners equity (investment in the… …   Financial and business terms

  • Balance sheet — Also called the statement of financial condition, it is a summary of the assets, liabilities, and owners equity. The New York Times Financial Glossary * * * balance sheet ˈbalance ˌsheet noun [countable] ACCOUNTING a document showing a company s… …   Financial and business terms

  • off — /ɒf/ adverb 1. taken away from a price ● We give 5% off for quick settlement. 2. lower than a previous price ● The shares closed 2% off. ■ preposition 1. subtracted from ● to take £25 off the price ● We give 10% off our normal prices. 2. not… …   Dictionary of banking and finance


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.