financing that does not add debt on a balance sheet and hence does not affect borrowing capacity as it would be determined by financial ratios. The most common example would be a lease structured as an operating lease rather than a capital lease. Generally Accepted Accounting Principles (GAAP) require that information be provided in financial statements about offbalance- sheet financing involving credit, market, and liquidity risk.
financing that does not add debt on a balance sheet and thus does not affect borrowing capacity as it would be determined by financial ratios. The most common example would be a lease structured as an operating lease rather than a capital lease and where management's intent is, in fact, to acquire an asset and corresponding liability without reflecting either on its balance sheet. Other examples include the sale of receivables with recourse, take-or-pay contracts, and bank financial instruments such as guarantees, letters of credit, and loan commitments. Generally Accepted Accounting Principles (GAAP) require that information be provided in financial statements about off-balance-sheet financing involving credit, market, and liquidity risk.
