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1. • CommentAuthorluz106
   • CommentTimeMay 29th 2008

    
   What exactly are off-balance sheet arrangements? Are these liabilities that a company is incurring at the moment? If so how can they be off balance sheet?
   
   For instance a company reports one number on balance sheet for interest expense and reports another number for off balance sheet interest expense. Should the two numbers be added together to get the real interest expense?
2. • CommentAuthorramesh
   • CommentTimeJun 17th 2008

    
   Off balance sheet items represent potential assets or liabilities. They are not actual, at the moment, but can become actual if contingent events happen.
   
   As there is no number on this it is off the balance sheet and appear either off, or below the below sheet.
   
   In the specific example you state, Contingent interest expense or off balance sheet represents expenses which have been value dated. Until the value date is reached, these will be contingent. On reaching the value date, the contingent entry will be reversed, and an actual or non contingent entry will be passed.
   
   You should not add the contingent and non contingent items, as you have suggested.
   
   The real interest expense as on the balance sheet date is the one which appears on the balance sheet. The off balance sheet is not real.
   
   Hope this clarifies.
3. • CommentAuthorluz106
   • CommentTimeJun 17th 2008

    
   If this is so, then is it not possible to keep most liabilities off balance sheet, by making them contingent on almost certain events?
   
   Or for instance take a huge loan. Back load all payments to later years. Make everything contingent on an almost certain qualifiers. Use cash to expand income while not recognizing the liability. Sell the company before liabilities need to be recognized?
4. • CommentAuthorramesh
   • CommentTimeJun 19th 2008

    
   That's creating accounting. And that's what Chartered Accountants get paid for. But it is not that easy. You need to conform to accounting stanadards. Only certain types of contracts can be recognised as contingent. Such as a liability under bank guarantee, or a commitment under letter of credit. Unless you are a small timer, there is no way you can put out such balance sheets. Even then, people who will be dealing with you will prefer to look beyond the book into the actuals. And double entry has enough checks for that.
5. • CommentAuthorluz106
   • CommentTimeJun 19th 2008

    
   well if you are a public company i don't get to see your ledgers. All i get to see is the book. So getting back to the issue how do i adjust for these creative deals?
6. • CommentAuthorramesh
   • CommentTimeJun 23rd 2008

    
   You dont seem to understand. When you raise a source in the form of a loan you need to raise a use. Source will always have a use in double entry - could be investment, working capital including cash or fixed assets.
   You cannot recognise a use while showing the loan (in your example) as a contingent liability.