Off-Balance-Sheet Arrangements

Definition:

Under certain accounting rules, a form of financing where certain assets and debts are not included on a company’s Balance Sheet in an effort to keep Leverage Ratios low. GAAP sets guidelines for classifying which expenses may qualify for this form of treatment. Operating leases are a form of Off-Balance-Sheet Arrangement. Banks and asset management firms often record financial securities and other products they hold on behalf of clients using Off-Balance-Sheet Arrangements. These became highly regulated under Sarbanes-Oxley.

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