Off-balance sheet problems have recurred throughout history, with a similar progression. 1.00 Initially, balance sheets are relatively transparent and off-balance sheet liabilities are minimal or zero. Then, market participants argue that certain items should be excluded as off- balance sheet. 2.00 Complex institutions increase their use of off-shore subsidiaries and swap transactions to avoid disclosing liabilities 3.00 Over time, the exceptions eat away at the foundations of financial statements, and the perception of the riskiness of large institutions becomes disconnected from reality Transparency is one of the central pillars of a well functioning market Lacunae in the system of rules; a. There is a lack of information regarding exposures to risks accompanying derivative transactions, and the potential impact on cash inflows and outflows. b Lack of information regarding how “interconnected” companies are to one another as a result of such transactions Financial reform proposals should promote the flow of information by requiring that companies report all of their assets and liabilities, including derivatives and VIEs, in a transparent, understandable way What it needs: From the various Banks and istitutions playing in the market, had their discussions and pointed below: Companies should show their full liability in their Balance sheets so that investors can make weel aware of the particular instituitions. 1 Companies that fail to disclose material facts should face civil liability 2 Companies must report asset financings on the balance sheet 3 Implementing fair value accounting more broadly may not provide finacial statements users with more transparant and useful reporting From the KPMG discussions on the Off Balance sheet recomndations report , some are identified and tabulated below. 4 The SEC should consider reinstituting a technology -enabled process to streamline updating public company information. 5 The SEC and FASB should collaborate on standard setting to ensure an integrated set of disclosure requirements that is comprehensive and complete and avoids redundancies Solution Off-balance sheet problems have recurred throughout history, with a similar progression. 1.00 Initially, balance sheets are relatively transparent and off-balance sheet liabilities are minimal or zero. Then, market participants argue that certain items should be excluded as off- balance sheet. 2.00 Complex institutions increase their use of off-shore subsidiaries and swap transactions to avoid disclosing liabilities 3.00 Over time, the exceptions eat away at the foundations of financial statements, and the perception of the riskiness of large institutions becomes disconnected from reality Transparency is one of the central pillars of a well functioning market Lacunae in the system of rules; a. There is a lack of information regarding exposures to risks accompanying derivative transactions, and the potential impact on cash inflows and outflows. b Lack of infor.

1. Off-balance sheet problems have recurred throughout history, with a similar progression.
1.00 Initially, balance sheets are relatively transparent and off-balance sheet liabilities are
minimal or zero. Then, market participants argue that certain items should be excluded as off-
balance sheet. 2.00 Complex institutions increase their use of off-shore subsidiaries
and swap transactions to avoid disclosing liabilities 3.00 Over time, the exceptions eat away
at the foundations of financial statements, and the perception of the riskiness of large institutions
becomes disconnected from reality Transparency is one of the central
pillars of a well functioning market Lacunae in the system of rules;
a. There is a lack of information regarding exposures to risks accompanying derivative
transactions, and the potential impact on cash inflows and outflows. b Lack of information
regarding how “interconnected” companies are to one another as a result of such transactions
Financial reform proposals should promote the flow of information by requiring that
companies report all of their assets and liabilities, including derivatives and VIEs, in a
transparent, understandable way What it needs: From
the various Banks and istitutions playing in the market, had their discussions and pointed below:
Companies should show their full liability in their Balance sheets so that investors can make
weel aware of the particular instituitions. 1 Companies that fail to disclose material facts
should face civil liability 2 Companies must report asset financings on the balance sheet
3 Implementing fair value accounting more broadly may not provide finacial statements users
with more transparant and useful reporting From the KPMG discussions on the
Off Balance sheet recomndations report , some are identified and tabulated below. 4 The
SEC should consider reinstituting a technology -enabled process to streamline updating public
company information. 5 The SEC and FASB should collaborate on standard setting to ensure
an integrated set of disclosure requirements that is comprehensive and complete and avoids
redundancies
Solution
Off-balance sheet problems have recurred throughout history, with a similar progression.
1.00 Initially, balance sheets are relatively transparent and off-balance sheet liabilities are
minimal or zero. Then, market participants argue that certain items should be excluded as off-
balance sheet. 2.00 Complex institutions increase their use of off-shore subsidiaries
and swap transactions to avoid disclosing liabilities 3.00 Over time, the exceptions eat away
at the foundations of financial statements, and the perception of the riskiness of large institutions
becomes disconnected from reality Transparency is one of the central
pillars of a well functioning market Lacunae in the system of rules;
a. There is a lack of information regarding exposures to risks accompanying derivative

2. transactions, and the potential impact on cash inflows and outflows. b Lack of information
regarding how “interconnected” companies are to one another as a result of such transactions
Financial reform proposals should promote the flow of information by requiring that
companies report all of their assets and liabilities, including derivatives and VIEs, in a
transparent, understandable way What it needs: From
the various Banks and istitutions playing in the market, had their discussions and pointed below:
Companies should show their full liability in their Balance sheets so that investors can make
weel aware of the particular instituitions. 1 Companies that fail to disclose material facts
should face civil liability 2 Companies must report asset financings on the balance sheet
3 Implementing fair value accounting more broadly may not provide finacial statements users
with more transparant and useful reporting From the KPMG discussions on the
Off Balance sheet recomndations report , some are identified and tabulated below. 4 The
SEC should consider reinstituting a technology -enabled process to streamline updating public
company information. 5 The SEC and FASB should collaborate on standard setting to ensure
an integrated set of disclosure requirements that is comprehensive and complete and avoids
redundancies