OFF BALANCE SHEET OBS
An asset or debt that does not appear on a company's balance sheet. Items that are considered off balance sheet are generally ones in which the company does not have legal claim or responsibility for.
For example, loans issued by a bank are typically kept on the bank's books. If those loans are securitized and sold off as investments, however, the securitized debt is not kept on the bank's books. One of the most common off-balance sheet items is an operating lease.
Off balance sheet items are of particular interest to investors trying to determine the financial health of a company. These items are harder to track, and can become hidden liabilities. Collateralized debt obligations, for instance, may become a toxic asset before investors realize a company's exposure.