Date of Defense

Summer 1986




OBS, net worth, fraud


The balance sheet is one of the financial statements issued by many firms annually. It is sometimes known as a statement of financial position and contains "...a formalized listing of the accounting equation's components: assets, liabilities, and owner's equity."1 The balance sheet shows the amounts of resources, obligations and capital a company has as of a particular point in time. It is used by many investors, who base their investment decisions on and regard this statement as an indicator of the actual financial position of a firm. What happens to these decisions when they are based on financial statements that are not truly representative of all rights and obligations held by that company? The investor may be misled into making an investment he/she otherwise would not have made if all the facts had been available. When a company engages in a practice widely known as "creative financing," many items that represent assets that the company has claim to, or liabilities the company has an obligation to pay, are left off of the balance sheet. This technique has also been appropriately labeled "off-balance sheet financing" and appears to be a growing practice. This paper discusses the history of off-balance sheet accounting and its problems.

Access Setting

Honors Thesis-Campus Only