Please ensure Javascript is enabled for purposes of website accessibility
November 30, 2022

Off-Balance Sheet Liabilities: Still Got It!

If you were worried that the heyday of companies using accounting rules to stash gazillions of dollars in debt out of sight was over, you can rest easy, friend. The Wall Street Journal reports on a Moody’s analysis by Trevor Pijper that found that defunct U.K. contractor Carillion used loose rules to keep about half a billion pounds it owed lenders for “reverse factoring” arrangements tucked away where most people didn’t see it.

“Carillion’s approach to its reverse factoring arrangement had two key shortcomings: the scale of the liability to banks was not evident from the balance sheet, and a key source of the cash generated by the business was not clear from the cash flow statement,” Mr. Pijper said. The company’s 2016 balance sheet didn’t give a clear picture of the full scale of its liabilities to banks, he added.

The bummer for Carillion, of course, is that their lenders had a clear picture of their liabilities the whole time. Banks are such sticklers about the whole “you owe us money” thing.

[WSJ]

Image: iStock/solar22

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Related articles

concept photo of a KPMG auditor searching for material misstatements

Carillion Liquidators Roast KPMG: “A Competent Auditor Would Have Detected the Misstatements”

The Carillion failure is still working its way through the courts and now KPMG is accused by Carillion’s liquidators of missing multiple red flags, the likes of which should not have been missed had KPMG had any clue what it is doing. So say the liquidators. WSJ: KPMG received £29 million from Carillion without qualifying […]

dumpster fire

The Guy Who Saw Enron Through Bankruptcy Calls FTX the Worst He’s Ever Seen

If you aren’t familiar with him, John J. Ray III oversaw Enron’s liquidation many years back and now he’s stuck with the monumental task of unraveling FTX after the crypto exchange collapsed last week. @jonwu_ dug through FTX’s Chapter 11 First Day Affidavit so you don’t have to and in it, Mr. Ray has given […]