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Off-balance-sheet arrangements

The MD&A heading for unrecorded commitments, and what large-company 10-Ks actually say there, with Costco, Home Depot, IBM and AbbVie.

The short answer

Off-balance-sheet arrangements are commitments or other relationships that can create risk or funding needs without being recorded, in full, as a liability on the balance sheet. The MD&A has a heading for them because readers used to miss items that sat only in the notes. In current 10-Ks of large non-financial companies, the section is often short: many state that they have no material off-balance-sheet arrangements, and then point to contractual commitments and other notes for the obligations they do have.

The MD&A heading

Regulation S-K asks companies to discuss, in the MD&A, off-balance-sheet arrangements that have, or are reasonably likely to have, a material current or future effect on financial condition, revenues, expenses, results, liquidity, capital expenditures or capital resources. The heading still appears even when the answer is that there are none that meet that test. Costco's 10-K for the year ended August 30, 2026 says that, in the opinion of management, it has no off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on its financial condition or financial statements. Home Depot's 10-K for the year ended February 1, 2026 states, more briefly, that it has no material off-balance sheet arrangements.

Source: Costco 10-K for fiscal 2026, filed Oct 7, 2026 · Home Depot 10-K for fiscal 2025, filed Mar 18, 2026

IBM's 2025 10-K uses the same materiality test: at December 31, 2025, it had no off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on its financial condition, and it points readers to a contractual-obligations table and a commitments note for the items it does have. AbbVie's 2025 10-K says it has no material exposures to off-balance sheet arrangements and no special-purpose entities.

Source: IBM 10-K for fiscal 2025, filed Feb 24, 2026 · AbbVie 10-K for fiscal 2025, filed Feb 20, 2026

Where the obligations actually sit

A statement of no material off-balance-sheet arrangements does not mean the company has no future payments. Leases are now recorded on the balance sheet. Many purchase obligations, debt payments and other signed commitments appear in a contractual-obligations table and in the commitments note. Some residual items still live primarily in a note. The useful reading is to take the MD&A sentence together with those tables, not as a claim that nothing is owed.

The heading matters more when a company does describe an arrangement here: for example, a financing commitment, a variable-interest entity it does not consolidate, or another structure that could require funding without being fully reflected as debt. If the section is more than a short negative statement, the related note is the next place to look. The MD&A and leases on the balance sheet cover adjacent pieces of the same picture.

Common questions

What is an off-balance-sheet arrangement?

A commitment or relationship that can affect liquidity or risk without being recorded, in full, as a liability. The MD&A has to discuss those that are reasonably likely to have a material effect.

Why do so many 10-Ks say they have none?

After leases moved onto the balance sheet, many ordinary obligations are recorded there or are listed as contractual commitments. Costco, Home Depot, IBM and AbbVie each state that they have no material off-balance-sheet arrangements under the MD&A test.

If the section says none, can I skip the notes?

No. Purchase obligations, debt maturities and other signed payments still appear in a commitments table or note. The MD&A sentence answers a specific question about unrecorded arrangements, not about every future payment.

Are leases still off-balance-sheet?

Under current U.S. GAAP, most leases are recorded as a right-of-use asset and a lease liability. That is why older discussions of operating leases as off-balance-sheet items are out of date. See Leases on the balance sheet.

When should this section get more attention?

When it describes a structure rather than saying there is nothing material: a financing commitment, an unconsolidated entity or another arrangement that could require funding. In those cases the related note usually has the terms and amounts.

Disclosures

Editor holdings: The editor holds no position in any company named on this page. As of Nov 11, 2026.
Compensation: Nobody paid for this page. No affiliate links on this page.
Sources: Each company's own SEC filings, linked next to each number.
Last updated: Nov 10, 2026

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