An analyst is assessing a company that entered int

Ans: C.
The existence of take-or-pay contracts and operating leases does not necessarily increase the business risk of a company when compared to companies that do not use off-balance seet financing techniques, although the existence of the obligations must be considered when analyzing business risk.
A is incorrect. When companies make use of off-balance sheet financing techniques, the financial statements must be adjusted before the company’s financing position and operating results can be analyzed and compared to other companies.
C is incorrect. It is not difficult to determine the true financial position of companies that use off-balance sheet financing techniques because both IFRS and U.S.GAAP require extensive footnote disclosures regarding off-balance sheet financing. The information in the disclosures can be used to adjust the financial statements for the off-balance sheet items.