03-31-2008, 06:03 PM
Dear Idrees,
You have given good detail. It's useful for all members.
Off balance sheet financing could also be arranged even without creating SPEs or controlled entities. Modarabas are widely providing Operating Lease facilities in Pakistan. Even companies are having such arrangements with group companies, associates and sposnors etc that need not to be consolidated. People do it here in Pakistan using so many techniques either by using off balance sheet instruments or on-balance sheet instruments. You know Pakistanis are known for finding out the solutions of their own choices that's why our titanic prima facie appears to sink. God save us.
For example, all the black money of sponsors / owners (that is created by under-invoicing or taking out money from operations through so many malpractices and fictitious transactions)is un-officially sent out of the country without using banking channel in the form of foreign currency purchased from open market and then it's sent back to such sponsors/owners through T.Ts. using proper cross banking channel. The Pakistani tax laws give relief and protection to all such moneys remitted from abroad through banking channel. The receipt of such white money by sponsors create "SOURCE" in their wealth statements and they lend such white money to their companies (from which it was actually taken out by malpractices) thus creating sponsors loan to the company. Money laundering measures have not so far controlled such situations entirely.
For bank financing purpose, as per prudential regulations, these sponsor loans don't affect the gearing / leverage and are treated the part of equity when calculating D/E ratio.
Further, import L/Cs and banks facilities there-against are typically off balance sheet items. That's why certain disclosures are required to enumerate the details of such arranagements that have to remain off the balance sheet.
In my view, off balance sheet items are the most criticl areas for auditors and regulators.
Regards,
KAMRAN.
You have given good detail. It's useful for all members.
Off balance sheet financing could also be arranged even without creating SPEs or controlled entities. Modarabas are widely providing Operating Lease facilities in Pakistan. Even companies are having such arrangements with group companies, associates and sposnors etc that need not to be consolidated. People do it here in Pakistan using so many techniques either by using off balance sheet instruments or on-balance sheet instruments. You know Pakistanis are known for finding out the solutions of their own choices that's why our titanic prima facie appears to sink. God save us.
For example, all the black money of sponsors / owners (that is created by under-invoicing or taking out money from operations through so many malpractices and fictitious transactions)is un-officially sent out of the country without using banking channel in the form of foreign currency purchased from open market and then it's sent back to such sponsors/owners through T.Ts. using proper cross banking channel. The Pakistani tax laws give relief and protection to all such moneys remitted from abroad through banking channel. The receipt of such white money by sponsors create "SOURCE" in their wealth statements and they lend such white money to their companies (from which it was actually taken out by malpractices) thus creating sponsors loan to the company. Money laundering measures have not so far controlled such situations entirely.
For bank financing purpose, as per prudential regulations, these sponsor loans don't affect the gearing / leverage and are treated the part of equity when calculating D/E ratio.
Further, import L/Cs and banks facilities there-against are typically off balance sheet items. That's why certain disclosures are required to enumerate the details of such arranagements that have to remain off the balance sheet.
In my view, off balance sheet items are the most criticl areas for auditors and regulators.
Regards,
KAMRAN.
