During 1900s, balance sheets were not able to present a clear financial position of many of the firms. There was an idea to present a balance sheet in financial reporting without considering assets and liabilities sides of the organisation. This is why, using off balance sheet method in financial reporting was considered ineffective source of financial status from markets, analysts, investors and regulators point of view. It further resulted in default of loan or credit, securitizations, and derivative transactions making financial system in a fall down situation. Thus, the off-balance sheet accounting method was considered as a main reason for financial crisis in US and other developed economies. Even banks started the use of off-balance sheet accounting by narrowing the size of their balance sheets. The reason behind banks using this technique was that balance sheets are used by the investors and regulators for the assessment of risk. To hide their real position and present themselves as better capitalised and less risky, banks used financial engineering. There have been regular problems occurring in the off balance sheet accounting. Most importantly, banks were in a powerful position to use off-balance sheet reporting for their investors and regulators by manipulating assets and liabilities. Banks were often not disclosing their liabilities. This is where financial institutions could not discipline the banks which have focused on derivatives and complex financial system to take excessive risks.