off-balance-sheet financing business definition

An accounting technique in which a debt for which a company is obligated does not appear on the company's balance sheet as a liability. Keeping debt off the balance sheet allows a company to appear more creditworthy, but misrepresents the firm's financial structure to creditors, shareholders, and the public. The sudden collapse of energy-trading giant Enron Corporation has been attributed in large part to the firm's off-balance-sheet financing through multiple partnerships.