Off-balance sheet financing is an accounting practice in which companies withhold certain assets and liabilities from being shown on their balance sheets.
This practice helps companies maintain low debt-to-equity and leverage ratios, resulting in cheaper borrowing and preventing covenant violations.
Off-balance sheet financing is not illegal if companies comply with accounting rules and regulations.
Regulators seek to crack down on questionable OBSF.
Stricter reporting rules have been introduced to ensure greater transparency in disputed operating leases.