What is the definition of off balance?

Off-balance means that an investment or financial obligation is not recorded on the company’s balance sheet. This situation most commonly occurs with an Operational Lease.

With an Operational Lease, the leasing company (the lessor) remains both the legal and economic owner of the vehicle. Because the business does not activate the vehicle on its balance sheet, this form of leasing is often referred to as off-balance financing.

What Does This Mean in Practice?

• The vehicle is not listed as an asset on the company’s balance sheet

• The lease obligation is not recorded as a loan

• The monthly lease payment is treated as an operational expense

• The company’s solvency ratio often remains more favorable

Please note: the exact accounting treatment depends on the applicable financial reporting standards (such as RJ or IFRS) and the specific lease structure.

Would you like to know whether an Operational Lease can remain off-balance in your situation and what this means for your business?

Contact one of our advisors today and request free, no-obligation advice.

Would you like to know what on-balance means and when a lease is recorded on the balance sheet? Read our FAQ about on-balance financing.