2. How does one distinguish between an off-balance-sheet asset and an off-balance-sheet liability?

Expert Solution

2. an off balance sheet is as a result of a contingent event, which becomes an on balance sheet when the event actually take splace.

a operating lease is a off- balance sheet financing of asset, where the lessor retains the leased asset on it's balance sheet rather than listing the asset and a corresponding liability on it's own balance sheet. it allows for the use of an asset but do not actually take ownership of the asset.

the lease payments which are the liability is not acounted for, and the ownership of the asset is not accounted for are are treated as off balance sheet.

off balance sheet asset, happens when a company purchases an equipment which is for it's own use and then uses an SPV( special purpose vehicle) to purchase the equipment and then leasing it to the company through the SPV. in this way the compnay doesn't take ownership of the asset,and records the asset as an off balance sheet asset and only the lease payments are recorded.

partnership/joint venture is a form of an off balance sheet liability, when a company does not account the debt on it's own balance sheet but transfers it to the partner's balance sheet.

jeff jeffy answered 2 years ago

Discuss how an OBS activity moves onto the balance sheet as an asset or liability and...

Discuss how an OBS activity moves onto the balance sheet as an asset or liability and discuss the risks and benefits of OBS activities to a bank.

what is off balance sheet financing and how does that relate to capital (or operating) leases?

The balance sheet for Bank A is as follows: Assets/Liabilities and Asset/Liability Rates Included Assets Floating...

The balance sheet for Bank A is as follows: *Assets/Liabilities and Asset/Liability Rates Included* Assets Floating Rate: $700 @ 7% Fixed Rate: $350 @ 10% Non-Earning: $150 Liabilities Floating Rate: $600 @ 5% Fixed Rate: $420 @ 6% Equity $180 A) What is the repricing gap? B) Calculate the net interest income. C) Calculate the net interest margin. D) If rates go up by 50 basis points, was the bank hedged accurately in anticipation of the rate change? Why or...

Discuss the causes of balance sheet or translation exposure to foreign exchange risk. Distinguish between balance...

Discuss the causes of balance sheet or translation exposure to foreign exchange risk. Distinguish between balance sheet exposure and transaction exposure. Provide examples to illustrate your points.

in 200 words or more How does one distinguish between the different types of ratios and...

in 200 words or more How does one distinguish between the different types of ratios and their purposes? Give an example

7 Balance sheet preparation Adam and Arin Adams have collected their personal asset and liability information and...

7 Balance sheet preparation Adam and Arin Adams have collected their personal asset and liability information and have asked you to put together a balance sheet as of December 31, 2015. The following information is received from the Adams family. Cash $ 300 Retirement funds, IRA $ 2,000 Checking 3,000 2014 Sebring 15,000 Savings 1,200 2010 Jeep 8,000 IBM stock 2,000 Money market funds 1,200 Auto loan 8,000 Jewelry and artwork 3,000 Mortgage 100,000 Net worth 76,500 Medical bills payable 250...

Discuss ONE advantage and ONE disadvantage of supporting to include off-balance sheet activities

Explain how to determine a liability. Distinguish between current and long-term liabilities as well as the...

Explain how to determine a liability. Distinguish between current and long-term liabilities as well as the reporting requirements for each. Evaluate business events for classification as a contingency in the financial statements. Record journal entries needed for bonds issued and sold at a premium and discount.

It is common to distinguish between whether an asset acquisition is “capitalized” versus “expensed”. What does...

It is common to distinguish between whether an asset acquisition is “capitalized” versus “expensed”. What does this mean, i.e. what does “capitalized” mean and what does “expensed” mean? From a value perspective, given that value is fundamentally the present value of future cash flows, given the choice, which alternative would be preferred? When an asset is capitalized, this is generally an application of which of the 4 basic principles underlying GAAP? Explain.

1. What is the balance sheet equation and how does it relate to the balance sheet...

1. What is the balance sheet equation and how does it relate to the balance sheet of a business? (Minimum 50 words) 2. You have been studying the most recent financial statements of Auckland International Airport Limited. The equity section of Auckland International Airport Limited contains two main accounts: share capital and retained earnings. Explain how these two accounts are different from each other. (Minimum 60 words) 3. From the scenario described below, indicate (giving your reasons) the most appropriate...

Question