What are the elements of Off-Balance-Sheet Financing?
Off-Balance-Sheet Financing is funding obtained by using sources other than debt or equity offerings. These alternate funding sources include joint ventures, operating leases and R&D partnerships. Operating leases, where the assets themselves remain on the lessor’s books, are widely used to provide Off-Balance-Sheet Financing. Companies can keep their debt-to-equity and leverage ratios low by using these non-balance-sheet financing strategies. It is important that a company follow GAAP closely in order to properly record off-balance-sheet items.
