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Off-balance sheet financing |
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There
are many ways of financing assets that enable managers to avoid
reporting them on the balance sheet. The most common form of
off-balance sheet financing is operating
leases, whereby financing costs are
buried in the lease expense. But other, less formal installment
payment schemes can bundle financing costs into the total purchase price
as well.
Alternatively, funds can be raised against already owned assets through securitization or factoring. Such funds are raised over time, with implicit interest nowhere noted in the financial statements. Some liabilities, which look like spontaneous financing, are not incurred contractually but arise from the activities of the firm, and they may be left unrecognized on the balance sheet. |
© 2015 by Hodak Value Advisors.
