Lessons from Enron for British Business - Essay Example

Only on StudentShare

Extract of sample
Lessons from Enron for British Business

Another accounting gap, which was discovered from the Enron's balance sheet, was the recording of the note receivable as an asset. These were the promises to pay the equity claim in the limited partnerships, which Enron recorded as assets even though GAAP requires subscribed equity to be reported as a contra-stockholders' equity account, rather than as a note receivable. Once it was accused of GAAP violations, Enron announced it would restate the previous 4 As years of financial statements by recording a $1.2 billion reduction in stockholders' equity, adjusting its income statements and balance sheets for the unconsolidated SPEs, and making prior-period proposed audit adjustments and reclassifications that had originally been considered as immaterial. Enron's restatement reduced previously reported net income by $569 million and reduced shareholders' equity by $1.2 billion.
Shortly after these announcements, several rating agencies lowered Enron's long-term debt to below-investment grade, and Dynegy terminated its proposed merger agreement with Enron. In December 2001, Enron filed for Chapter 11 bankruptcy protection.
Charles Mulford, co-author of The Financial Numbers Game, says, "the accounting model isn't broken, financial reporting just needs some tweaks." The Enron used the most common off balance sheet financing technique. ...
Download paper


The Enron scandal has given a new dimension to the corporate scandals in the history of United States. Due to the collapse of the Enron Corporation the notion of the off-balance financing or external funding not recognised on the issuing company's financial statements has gained much importance…
Author : davonte32

Related Essays

Business Strategy of Associated British Foods
In relation to the study the company which has been selected is Associated British Foods, an international public limited company that has its headquarters in London. The company was established in 1935 and is the leading British supermarket chain as far as production of sugar and baker’s yeast is concerned. The company has five strategic business units: Sugar, Agriculture, Retail, Grocery and Ingredients. The grocery division stocks both branded and own label products. Brands that fall under its grocery division include Mazola, Ovaltine, Ryvita, Jordans and Twinings, Silver Spoon, Tip Top...
11 pages (2761 words) Assignment
Enron Corporation Assignment
Its CEO Ken Lay was one of President George W. Bush’s personal friends. Both Ken Lay and CFO Jeff Skilling and later Andrew Fastow were regarded as leaders to emulate. Smart, suave and ambitious, they were regarded as the embodiment of corporate success. But a series of events quickly turned the tables on the fortunes of this billion dollar company and its management. In fact, even its auditors Arthur Andersen were considered culpable and not only removed as incompetent, but the fallout of the entire debacle caused them to close down their businesses all across the world. In hindsight and as...
3 pages (753 words) Assignment
Enron Corporation
Executive Summary Some stories are so unbelievable that they become Hollywood movies. One of those stories is the Enron scandal. The movie called Enron the Smartest Guys in the Room was created based on the Enron story. Enron was once the biggest company in the energy industry, but a complex fraudulent scheme that began many years prior to the revelation of the fraud led to its demise. The corporate executives of the company were the primary agents that designed one the biggest accounting scandals in United States history. Two of the accounting tools that were used by Enron to cook up the...
6 pages (1506 words) Case Study
Business Ethics Enron case
It has dominated the business world in many divisions such as; natural resources, plastics, power, steel, broadband and principal investments. The men who were responsible of Enron’s demise were Kenneth Lay, Jeffrey Skilling, and Andrew Fastow. According to the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs Enron commited high risk accounting, and disclose too many information about their cashflow. They hid their loss to attract investors for them to keep investing in the company. No one in the company reveal the truth until the social analyst starts to do...
5 pages (1255 words) Essay
Business Failure: Enron
Furthermore, the role of leadership, management and organizational structure has also been discussed in the report. Business Failure at Enron Numerous causes are liable for the business failure of Enron. Serious economic, social as well as political factors had negatively affected the business of Enron. Numerous people believe that politicians as well as market regulators are responsible for the failure of Enron. However, expertise group think that the irresponsible and inefficient management group as well as the incompetent auditors are liable for the failure of Enron. It has been observed...
3 pages (753 words) Research Paper
What Were the Consequences of the Enron Scandal?
This case study represents a bold attempt to answer the question stated in the work's title: What Were the Consequences of the Enron Scandal?
15 pages (3765 words) Case Study
Got a tricky question? Receive an answer from students like you! Try us!