Chapter 9: Off-Balance-Sheet Items and Special Purpose Entities

In this section

• Understanding Off-Balance-Sheet Arrangements
  Understanding Off-Balance-Sheet Arrangements: Key Concepts for Evaluating Financial Risk and Future Obligations.
• Special Purpose Entities and Variable Interest Entities
  Explore how Special Purpose Entities (SPEs) and Variable Interest Entities (VIEs) impact off-balance-sheet accounting, consolidation rules, and financial statement analysis under IFRS and US GAAP.
• Impact on Leverage and Coverage Ratios
  An in-depth exploration of how off-balance-sheet structures and special purpose entities affect key financial metrics, and how analysts can adjust reported figures to capture hidden liabilities effectively.
• Disclosure Requirements and Red Flags
  Explores IFRS and US GAAP guidelines for off-balance-sheet items and special purpose entities, highlighting key disclosure requirements, potential red flags, and best practices for thorough financial statement analysis.
• Sale-Leaseback Transactions and Their Impact
  Explore the accounting and financial analysis implications of sale-leaseback transactions under IFRS 16 and ASC 842, including economic substance, deferred gains, ratio impacts, and best-practice considerations for CFA candidates and practitioners.
• Factoring of Receivables and Securitizations
  Explore how factoring of receivables and securitizations impact financial statements, including the nuances of recourse arrangements, derecognition criteria, and hidden exposures.
• Structured Financing Arrangements
  Explore structured financing arrangements, including synthetic leases, layered securitizations, and the role of derivatives in off-balance-sheet strategies, with real-world examples and analyst-focused insights.
• Repo Transactions and Off-Balance-Sheet Implications
  Explore how repurchase agreements (repos) can appear on or off the balance sheet, examining economic impacts, accounting treatments, and the potential for short-term window dressing.
• Industry Examples of Off-Balance-Sheet Structures
  Explore distinctive off-balance-sheet methods used by airlines, tech firms, real estate ventures, and more to understand how hidden liabilities and structured vehicles may impact financial analysis.