Off-balance sheet debt is debt not listed on the balance sheet. For example, it can be a contingent liability such as guarantee obligation. In the case of small and medium-sized enterprises, there are cases where only the maximum limit on the corporate income tax provision is recorded, there are cases where no retirement benefit obligations, allowance for doubtful accounts, and accrued bonuses are not recorded, and these are also off-balance sheet obligations. Furthermore, as important point to keep in mind, since off-balance sheet debt become obligations not listed in the ordinary books, it may be evidence that companies are doing accounting declarations. In the beginning, listed companies need to submit accurate disclosure information to shareholders. Investors will invest funds to companies using the disclosed information as a judgment material. Therefore, if accurate information disclosure is not done, it may be difficult to build a relationship of trust, and in some cases it may be regarded as a trustworthy investor. It is possible that measures to be delisted will be taken due to the perception of off-balance sheet debt.
Damage caused by off-book debt
It is very important to disclose accurately information between listed companies and investors. What will happen to the company when it comes to delisting measures? In some cases, you may be going to sell the company and M & A to other companies. There are also cases where voluntary discontinuance will result if extraordinary debt becomes large. This is no exception in Japan. Although it took place a bit since the collapse of the bubble era, there was a case that a large amount of off-balance sheet debt was discovered by a securities company that had been a part of the major four large securities in the past, leading to voluntary discontinuance. After voluntary closure, the employee of the major securities company was dismissed. Many people struggled to find a new employment place. Events have also occurred that other businesses that have not yet been listed may be found delinquent accounts and delisted. These events can lead to loss of investor confidence. Therefore, the company must strive to submit accurate disclosure information without having a debt that can not be placed on the usual books.