Off-balance-sheet financing refers to financial arrangements that do not appear on a company's balance sheet, thus not affecting its borrowing capacity as measured by financial ratios. It is commonly seen in operating leases rather than capital leases. GAAP requires disclosure of such financing in financial statements regarding credit, market, and liquidity risk.
A finite-life entity created by corporations for a specific, narrow purpose, such as issuing income-preferred securities. These entities are used for various financial and organizational purposes, and are also known as special-purpose vehicles (SPVs) or variable-interest entities (VIEs).
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