Question

Please briefly discuss what is off-balance sheet financing.

Answer 1

OBS or Off Balance Sheet Fiancing is a commonly used method to record certain assets or liabilities in way to keep them apart fom other items.
This is manly used in operating leases agrrement where the lessee can use the asset as his own and at the end of the lease period tthe asset comes in to the
legal ownership of lessee. In course of lease period the lessee need to record everything he incurs as expenses on income statemet and not recoded as incrase in assets.
This can be treated one Off Balance Sheet Financing.
Apart from operating leases, partnership is another one common item considred as OBS financing item.
If a company engage in partnership, even if the company is having controlling interest,it doesnt need to show the partnership's liabilities on its balancesheet.