Off-Balance Sheet Financing

Definition

Structuring transactions so debt or liabilities don't appear on your balance sheet—the accounting equivalent of hiding stuff in a closet.

Example Usage

Enron used special purpose entities for off-balance sheet financing to hide their massive debt.

Origin

Corporate finance technique popularized in the 1980s-90s

Fun Fact

Off-balance sheet financing was legal and common before Enron made regulators actually pay attention

Source: Corporate finance practice; heavily regulated post-Enron

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