A Guide to the New Language of Accounting and Finance

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Off-Balance Sheet Debt is a method for funding an organization’s activities without revealing all the finance and corresponding assets on the balance sheet. This results in accounting ratios, such as the leverage ratio, giving a more optimistic picture of finances than may be the true position. One common method of such financing was to create a subsidiary that was so structured that its results were not included in the consolidated accounts. Most regulatory regimes have introduced legislation to prevent, or at least reduce the practice. Sengupta and Wang (2011) examined whether the public debt market prices information on off-balance sheet debt arising from operating leases and postretirement plans, and a study by Kraft (2015) examined a dataset ...