Off-Balance-Sheet Financing

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After evolving over the last quarter-century into one of the most popular corporate finance tools in the United States - taking such forms as securitizations, synthetic leases, and unconsolidated entities - it seems that off-balance-sheet financing is being deconstructed in a hurry.

The Securities and Exchange Commission and the Financial Accounting Standards Board have handed down new rules and guidance aimed at improving the transparency of financial statements. The SEC is rewriting its guidance on MD&A disclosure, introducing Regulation G, and rewriting its rules governing Form 8-K. FASB is trained on consolidation of variable interest entities, or VIEs (formerly known as special-purpose entities, or SPEs) and on loan guarantees.

Collectively, the new mandates are intended to help investors view companies through the ''eyes of management''; detractors say that these initiatives only cloud the issues.

At right, you'll find features from senior editor Marie Leone that will give you a clearer picture of the developing situation. Below, you'll find earlier CFO articles on off-balance-sheet financing, as well as our ''Enron archive'' - where you can read about how we got here, and what your colleagues feel we should do about it.

And if you missed our webcast on the future of off-balance-sheet financing, you can register to view the archive of this exclusive presentation - see the box below, right.

FEATURE ARTICLES
New SEC Rules Right On Time
The SEC pushed through new rules to meet the Sarbanes-Oxley deadline; FASB added some guidance of its own. For the rulemakers, it's a case of ''give a little, get a little.''
Off-Balance-Sheet Deals: C'est la Vie?
In the eyes of the investing public, off-balance-sheet financing has fallen into disgrace. Will it deserve another look after the SEC and FASB have their say?
Off the Balance Sheet, in a Nutshell
What a difference a few words can make, especially when those words change financial reporting requirements.
A New Security Blanket?
The SEC and FASB may soon eliminate many of the benefits of off-balance-sheet deals. Two alternatives: Optimize working capital, or set up a joint venture.


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RECOMMENDED READING ON OFF-BALANCE-SHEET FINANCING
Reporting: See-Through Finance
The market's distaste for complex financing could raise your company's cost of capital, even if you comply with new reporting rules.
The Fear of All Sums
To restore investor trust, many companies are disclosing more information, according to a CFO survey. But it may not be enough.
Corporations Supersize Annual Reports
Companies pump up the volume -- but will investors be satisfied?
Commercial Paper Chase
If banks have to come clean about their off-balance-sheet leverage, get ready to pay more for money.
Reining In SPEs
New rules for special-purpose entities may result in bigger corporate balance sheets.
Double Whammy
As real estate markets sag, companies with synthetic leases could face a costly dilemma.
New Life for Synthetic Leases
The synthetic lease, a form of off-balance-sheet financing, boasts a relatively long history of use by companies for acquiring such items as heavy equipment, or such assets as vehicles with a shorter economic life.
Virtual Ownership
Synthetic real estate leases may be ready to move from Wall Street to Main.

ENRON ARCHIVE
Beyond Enron
The fate of Andrew Fastow and company casts a harsh light on off-balance-sheet financing.
After the Fall
The experts weigh in on how to prevent future Enrons.
The Amazing Disintegrating Firm
The tragedy of one company's rise and fall.
What Andrew Fastow Knew
Here's what the former Enron finance chief told CFO in 1999 about those now-infamous third-party investments.
Partners to the End?
Attorney argues that limited partners in Enron's special purpose entities had fiduciary responsibilities, too. But exactly who were those partners?
Enron's SPEs: Can Banks Have It Both Ways?
According to court records, JP MorganChase was apparently skilled at having its cake and eating it, too -- that is, keeping special purpose entities independent, yet exercising control.

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MISSED OUR WEBCAST?
Find out about the future of off-balance-sheet financing register to view the archive of our exclusive presentation.

The expert panel included Teresa Iannaconi, CPA, a partner with KPMG; Herbert Birman, vice president of finance and operations with MIS AG North America; Leonard Hyman, a senior associate at R.J. Rudden Associates; and Marie Leone, the moderator, a senior editor at CFO.com.

Access the webcast archive


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