The term off-balance sheet (OBSF) financing refers to an accounting practice that involves recording corporate assets or liabilities in such a way that doesn't make them appear on a company's balance sheet. The practice is used to keep debt-to-equity (D/E) and leverage ratios low, especially if the inclusion of a large expenditure would break negative debt covenants. Off-balance sheet financing is a legal practice as long as companies follow accounting rules and regulations. It becomes illegal if corporate heads use it to hide assets or liabilities from investors and financial regulators.