Moon's friend is correct that an off-balance-sheet activity is a transaction, contract, or commitment that a bank
Question:
Moon's friend is correct that an off-balance-sheet activity is a transaction, contract, or commitment that a bank enters but is not directly accounted for on the bank's balance sheet. They are often reported in the notes to the financial statement or on a separate schedule. Examples of these are letters of credit, lines of credit, options, forwards, and swaps. Their rise is due to increasing competition from other financial institutions, as well as other regulatory and risk management incentives to take certain operations off the balance sheet. More liquid instruments that are utilized to fund lesser liquid instruments make up the liability structure of the balance sheet regarding bank risks. Assets and liabilities of a corporation must be included in its financial statements. Total assets must equal the sum of liabilities and shareholders' equity for the balance sheet to be correct. There are some items, nevertheless, that do not show up on a corporation's balance sheet but are nonetheless assets and liabilities of the company.
Do you agree with this statement ?Why or why not?
Auditing An International Approach
ISBN: 978-0071051415
6th edition
Authors: Wally J. Smieliauskas, Kathryn Bewley