The accounting for leases is often misapplied in order to achieve off-balance sheet financing.

Question

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Off-balance sheet financing allows companies to keep liabilities and assets off of their balance sheets, making their financial statements look stronger than they actually are. Accounting for leases can be manipulated to achieve off-balance sheet financing, which is why it is important for companies to accurately and transparently report their lease obligations.

The Accounting for Leases Is Often Misapplied in Order to Achieve