An off-balance sheet arrangement might include:

A Cash on hand

B Operating leases (pre-ASC 842), SPEs, or joint ventures not consolidated

C Inventory

D Accounts receivable

✓ Correct Answer: Option B

Historically, operating leases and unconsolidated SPEs kept liabilities off the balance sheet. New standards (ASC 842) changed lease treatment.

💡 Why is B) the correct answer?

The correct answer to the question "An off-balance sheet arrangement might include:" is Option B: Operating leases (pre-ASC 842), SPEs, or joint ventures not consolidated.

The other options — A) Cash on hand, C) Inventory, D) Accounts receivable — are incorrect for this CFA Exam Prep question. As explained above: Historically, operating leases and unconsolidated SPEs kept liabilities off the balance sheet. New standards (ASC 842) changed lease treatment.

📚 About This CFA Exam Prep Practice Question

This 2-level CFA Exam Prep question from the Financial Reporting topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

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An off-balance sheet arrangement might include:

✓ Correct Answer: Option B

📚 About This CFA Exam Prep Practice Question

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