Bond market can't take it anymore? Moody's warns: US tech giants use accounting standards to "hide tens of billions of dollars in potential liabilities"

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The "gray area" of U.S. Generally Accepted Accounting Principles is enabling tech giants to make hundreds of billions of dollars in potential debt "disappear" from their balance sheets, even as they build AI data centers at a frenzied pace.

According to the Financial Times (UK) report on February 23, international ratings agency Moody’s has issued a warning that the current U.S. accounting standards have "limitations," allowing large tech firms to hide tens of billions in potential liabilities amid the AI data center construction boom. This loophole could make it difficult for investors to see the true financial health of these tech giants.

Moody’s analysts have pointed out that due to regulatory restrictions, AI companies may neither need to account for the cost of renewing data center leases in their statements, nor the costs incurred for not renewing, even though both figures could be extremely large. Moody’s warns, "Disclosure may not show the full picture," and that the current accounting liability figures are "unlikely to reflect certain reasonable future scenarios."

The “blind spot” of accounting standards

As companies such as Meta and Oracle increasingly use special purpose vehicles (SPVs) funded primarily by external investors to build data centers, this mode of 'off-balance-sheet financing' is attracting close attention in the credit markets. In the eyes of ratings agencies and many bond investors, the long-term cost of leasing data centers back from these entities is essentially equivalent to debt.

However, Moody’s found that companies cleverly design lease terms so that these liabilities become "invisible" on the books.

The specific operation is: companies sign relatively short leases while promising to pay compensation (i.e., residual value guarantees, RVGs) if non-renewal leads to a drop in data center value.

According to U.S. GAAP:

Criteria for recording renewal costs: Renewal must be "reasonably certain," which is usually considered to mean at least a 70% probability.Criteria for recording compensation: If a residual value guarantee triggered by non-renewal, only needs to be recorded if it is "probable," meaning probability over 50%.

This creates a perfect "vacuum zone." Analysts David Gonzales and Alastair Drake explain:

"Deciding whether to extend a lease partly depends on whether hyperscale enterprises are willing to invest further in hardware... Strict application of this guidance could result in many lease renewals falling short of the 'reasonably certain' threshold."

Because key technology components in data centers usually have a lifespan of only 4 to 6 years, companies can argue that renewal is not "reasonably certain," while also stating that triggering compensation is not "probable." The result: neither potential huge expenditure needs to be booked as a liability.

Meta’s $28 Billion Hidden Guarantee

Moody’s exemplifies this risk using the largest private credit data center deal currently as a case.

Meta’s planned Hyperion facility in Louisiana is housed in a special purpose vehicle called Beignet Investor, financed by Blue Owl Capital. Meta will lease this facility from the entity with an initial lease term of only 4 years, but has options to renew for up to 20 years.

Crucially, Meta also has provided up to $28 billion in guarantees, promising compensation if the property value declines.

However, these astonishing figures only appear in the footnotes of Meta's latest annual report, with no relevant liabilities recorded on the company’s balance sheet. Meta wrote in the report: "As of December 31, 2025, payment of residual value guarantees (RVGs) is not 'probable,' so no liabilities have been recorded."

This allows tens of billions of potential cash outflow to be "hidden" in statements, despite their major impact on the company’s future financial flexibility.

Moody’s Fight Back: We’ll Adjust Manually

Faced with increasingly common off-balance-sheet financing strategies, Moody’s says it will adopt stricter assessment standards.

The agency made clear that, when deciding on what credit rating to assign tech companies, it will make its own probability evaluations to determine which future liabilities should be considered.

Moody’s says: "If we believe the reported lease liabilities underestimate possible cash outflows, we may make quantitative debt adjustments." The agency adds that these adjustments will "consider possible renewal terms and/or the likely exercise of residual value guarantees (RVGs), or both."

This means even if tech giants compliantly hide debt from their accounting statements, when seeking funding in the bond markets, they may still have to face ratings agencies treating them as real liabilities — which could affect their credit ratings or financing costs.

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