A Condolence Note In Spanish

off-balance sheet financing refers to transactions which obligations arising not covered in the corporate balance sheets, for example, a company may decide to grant its top executives a number of company cars and can decide to finance these costs through an operating lease (Operating leasing) and promising, therefore, a series of future payments, but without that commitment to appear as debt on the balance of society ( yes, however, memory ... which of course almost no one reads ...)

The existence of this debt off balance is a result of the slow evolution of accounting standards to the development of IFRS and the growing importance of assets intangibles and related forms of financing bank to buy assets, not home too with traditional concepts of assets and debt. Most of these contracts separate the legal ownership (which remains the financial institution) of economic (that is, to some extent, who is exposed to fluctuations in the price of an asset and who always supports share final) and this fact is readily usable for altering a balance, for example, if the previous company, the cars, is committed to maintaining the lease of these over the next five years and also to purchase them after the fifth by agreed residual value, the economic owner of the property is the company that uses and should be considered as liable for what is signed, in essence, a lease and not operational.

If the first economic substance of transactions on the legal form, the corporate balance sheets appear more credible and clear but it would require deeper work the auditor based his interpretation . The need for change in net debt balance often be determined by the appropriateness of content suppliers and lenders to, among other things, ensure that the company CIRBE not leave mother ... and to "fight" the next loan ...

there are several ways to hide it: Altering the current before the close of the annual accounts via billing late or forcing the heavily discounted fee, to cover the credit facilities on 31 and return to empty them on 1, not factoring the account customers to bank debt does not appear (or do so through factoring to use ...) or grow via operating lease assets and not do it by loan or lease (as we have seen ...).

Other options are more exquisite: Many hotel operators sell part of its assets to third parties productive and I rented these immediately to continue operating. Accounting, strengthen its liquidity and it may proceed to cancel their debt ratios improved immediately, but in many cases the obligations created by this lease long term are not recognized immediately as a liability. The absolute specialist in this area is the hotel chain Accord, which has excellent credit ratings on its balance sheet strength to sell nearly all its resorts and give no answer to payment obligations, in cases where, extend for forty years or more ...

So how we detect the presence of a strong balance sheet debt is not recognized as such? Well common sense, reading and looking for contingencies in the memory, looking for the maturity of operating leases and purchase options, reviewing the asset turnover ratios to verify that correspond to the evolution of income and, especially, capitalizing interest expense accounts to bring out the total amount that should be considered as debt.

Greetings!

www.NLSasesores.com