Off-balance sheet financing implies that:
A)Leases would be capitalized
B)Leases would not be capitalized in financial statements
C)Leases would be amortized in a separate account not in the lessee's balance sheet
D)Leases show up in the income statement, but not the balance sheet

Question

Quizplus · Accepted Answer

Off-balance sheet financing refers to a situation where a company is able to keep certain financial obligations off its balance sheet. In the case of leases, this means that they would not be capitalized in the financial statements, but instead disclosed in the footnotes. This is typically done to improve financial ratios, such as debt-to-equity, and to make the company appear more financially stable than it actually is. However, recent accounting standards changes have made it more difficult for companies to do this.

Off-Balance Sheet Financing Implies That