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Off balance sheet finance

Off balance sheet finance can be describes as a way of accounting items in the financial statements where assets, debts and other financing activities are found to be excluded from the balance sheet.

language english
wordcount 2965 (cca 8 pages)
contextual quality N/A
language level N/A
price free
sources 7
Table of contents

Introduction 2
Off balance sheet Items 2
Regulation of companies for the use off balance sheet entries 3
Advantages of having off balance sheet entries 5
Disadvantages of using off balance sheet entities 5
Critical evaluation 6
Disclosure of off balance sheet arrangements and Standards in the UK 6
Other regulatory bodies 7
Conclusions 9
Bibliography/reference list 11

Preview of the essay: Off balance sheet finance

Financial analysis has stopped using the traditional balance sheet in assessing the risks and returns of a firm because many companies today are using off balance sheet finance (Finnerty 1998, p. 16). For example, financial institutions give asset management services or brokerage services often to their customers. The customers are granted ownership of the securities directly or in trust. The financial institution only provides management and depository services to the customer. The company does not have any claim on the assets and may report the assets under management to increase the value of assets in the balance sheet. The institutions will report such items wrongly in the balance sheet to reduce ...

... advantage of rules based accounting. Hence there is need for having rules that govern the way in which certain entities are handled. This will reduce the difficulties that may occur when trying to stop it.
It is important that the transactions of a company to present the economic importance of the entity. There should be availability of much prudent analysis for better reflection in the regulatory frameworks. Here a global regulator is required to be better equipped to resist the political interference to which many regulators have been subject in many years. Regulatory bodies have failed to address the issue of political contamination in international co-operation among regulators. This has brought a problem in strengthening of international standards as well as information sharing across authorities. The idea for recognizing arguments for the creation of a global regulatory body has been dismissed by a number of regulatory agencies.
Essay is in categories


Financial Reporting


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