04-02-2008, 09:31 PM
Dear,
I did not say sponsors' loans are off balance sheet financing. I only told how people camouflage the things. this was just an example. These are on balance sheet loans and for bank financing purpose are considered part of equity. However, in balance sheet these are shown as non-current or current liability.
IAS 39 requires to state such financial liabilities initially on fair value. This may have huge impact and resulting adjustments in respect of such loans. However, in most of cases, it is mentioned that terms and repayment period of such loan is not decided. That's why fair valuation remains impracticable and no adjustments are made by the companies in financial statements regarding such loans which are typically interest free loans.
There could be number of facets of off balance sheet financing and products/methodologies have to be evoluted for such purposes like SPE discussed in above posts. Common examples of such financing are operating lease and facilities of letters of credit for import purposes. However, after the payment of imported material by the relevant banks such liabilities have to be taken on balance sheet.
Regards,
KAMRAN.
I did not say sponsors' loans are off balance sheet financing. I only told how people camouflage the things. this was just an example. These are on balance sheet loans and for bank financing purpose are considered part of equity. However, in balance sheet these are shown as non-current or current liability.
IAS 39 requires to state such financial liabilities initially on fair value. This may have huge impact and resulting adjustments in respect of such loans. However, in most of cases, it is mentioned that terms and repayment period of such loan is not decided. That's why fair valuation remains impracticable and no adjustments are made by the companies in financial statements regarding such loans which are typically interest free loans.
There could be number of facets of off balance sheet financing and products/methodologies have to be evoluted for such purposes like SPE discussed in above posts. Common examples of such financing are operating lease and facilities of letters of credit for import purposes. However, after the payment of imported material by the relevant banks such liabilities have to be taken on balance sheet.
Regards,
KAMRAN.
