Off-balance-sheet amounts are in the trillions of dollars, not including all transactions with off-balance-sheet implications. Financial managers and consultants intentionally structure transactions that are abusive of off-balance sheet accounting rules, which leads to a lack of transparency in financial reporting. This paper explores several ways in which companies manipulate off-balance sheet transactions to satisfy personal and business objectives as well as the impact of such manipulations. It is time for regulatory bodies to close the loopholes, eliminate overly rules-based standards, clearly state the economic objective of each standard, and require firms to disclose the economic motivations for the accounting practices they adopt.
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Lander, G.H., Auger, K.A. The Economic Impact of the Lack of Transparency in Financial Reporting. Atl Econ J 36, 105–116 (2008). https://doi.org/10.1007/s11293-007-9107-5
- Financial transparency
- Corporate governance
- Economic reality
- Ethical awareness