When an entity adopts the “On Balance Sheet” accounting method for its lease arrangements, there is usually:

When an entity adopts the "On Balance Sheet" accounting method for its lease arrangements, it means that the entity recognizes both the rights and obligations arising from the lease on its balance sheet. Here's what usually happens:

1. Recognition of a Right-of-Use Asset: The entity recognizes a right-of-use (ROU) asset, which represents its right to use the leased asset for the lease term. The ROU asset is initially measured at cost, which includes the initial amount of the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received, plus any initial direct costs incurred by the lessee.

2. Recognition of a Lease Liability: The entity also recognizes a lease liability, which represents its obligation to make lease payments. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee’s incremental borrowing rate.

3. Subsequent Measurement: After the commencement date, the entity measures the ROU asset using a cost model (less any accumulated depreciation and any accumulated impairment losses) and measures the lease liability by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made, and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.

4. Impact on Financial Statements: This method can significantly impact an entity's financial statements. It can increase the entity's assets and liabilities, and can also affect the entity's financial ratios, such as the debt-to-equity ratio or the return on assets ratio.

So, when an entity adopts the "On Balance Sheet" accounting method for its lease arrangements, there is usually an increase in both assets and liabilities on its balance sheet, and potential impacts on its financial ratios.