Off-Balance Sheet Financing, accounting homework help

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Business Finance

Description

  • Based on your review of the current requirements of the SEC and FASB, assess the adequacy of the guidelines for ensuring the transparency of off-balance-sheet transactions to investors, indicating where improvements may still be needed. Provide support for your rationale.
  • As a CFO of a publically traded company, evaluate the pros and cons of using off-balance-sheet financing, including a recommendation as to whether or not you support using these types of arrangements. Provide support for your recommendation.

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Explanation & Answer

Attached.

Off-Balance Sheet Financing
I.

Question 1
a. Adequacy of the Off-Balance Sheet Guidelines to Investors
b. The Required Improvement

II.

Question 2
i. Risk
ii. Borrowing capacity
iii. Reported Numbers
b. Disadvantages of OBS
c. Recommendations


Running head: OFF-BALANCE SHEET FINANCING

Off-Balance Sheet Financing
Student’s Name
Institutional Affiliation

1

OFF-BALANCE SHEET FINANCING

2

Off-Balance Sheet Financing
Question 1: Based on your review of the current requirements of the SEC and FASB, assess
the adequacy of the guidelines for ensuring the transparency of off-balance-sheet
transactions to investors
Worth a note, high-quality accounting guidelines are the key foundation of an effective
financial reporting system, which is responsive to potential and existing investors’ requirements
(International Monetary Fund, 2010). Besides, an open procedure that permits financial standards
setters to find and consider the viewpoints of the market subjects with brevity is crucial in
establishing, improving, and maintaining a financial accounting as well as effective financial
reporting standards. Therefore, transparency in finance is a pivotal cornerstone that ensures that
investors are freed from making unbiased and uninformed financial decisions with respect to
their investments plans. Thus, the current requirements of FASB and SEC in regard to
transparency of off-balance sheet transactions aids in promoting transparency as well as
eliminating bias in financial reporting; hence, allowing investors make sound decisions basing on
the real financial performance of their target company.
Adequacy of the Off-Balance Sheet (OBS)Guidelines to Investors
According to Lewis (2013),an OBS transaction is often vast capital expenses that are kept
off an organization balance sheet ...


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