Got a tricky question? Receive an answer from students like you! Try us!

Enron's Collapse and Ethical Framework - Essay Example

Only on StudentShare
Author : hubertzulauf

Summary

Running Header: Enron’s Collapse and Ethical Framework Name Module Date Mark-to-Market valuation is a way of valuing assets and liabilities at a fair market price. It is different from the tradition historical accounting as values in this method change with the market conditions…

Extract of sample
Enron's Collapse and Ethical Framework

Enron used to have a conventional accounting system where all the costs and revenues were listed down in order to arrive at the profits (Velasquez, 2005). However, when the new CFO Skilling joined the company he insisted on using the mark-to-market valuation for evaluating the value of Enron’s assets. This is where things started to go wrong for Enron. This also made Enron the very first company in such volatile business climate to use this kind of accounting system. Enron started cruising on a wrong track. They decided to value all their future contracts using the system promulgated by CFO Skilling (Benston, 2003). However, there were large discrepancies in the system as it was very difficult to assess the future costs and income streams from contracts that were to be implemented in the future. The new system required to value all investments to be written as a present value of future cash flows. This created a big problem for accountant. They decided that they cannot match the future cash flows with profits as it was humanly impossible task in a gas company. Hence, they started giving misleading information to the investors, shareholders and creditors. This was an eerie accounting policy that Enron came up with. ...
Download paper

Related Essays

Ethical issues surrounding children advertising.
The organization tends to do those activities that could earn them maximum returns but doing marketing ethics would earn them a competitive advantage for a longer period of time (Kotler and Armstrong 1999). A business does well when they are focused in satisfying the needs of the customers then their competitors as per the requirement of their target market. As the world are getting more savvy about their rights in getting a desired product, the company has to adhere ethical values rather than just providing the products. Customers develop a positive attitude towards the organization when it…
15 pages (3765 words)
Framework for Assessing the UK Toy and Game Industry.
The paper will describe the uses of a framework for penetrating in the retail toy segment of the United Kingdom. The company chosen for the paper is Mattel which is one of the biggest toy-producing companies internationally. The objective of the paper is to illustrate the opportunities served by the foreign market and measure the market efficiency for Mattel to launch its own retail outlet in the UK. …
12 pages (3012 words)
Ethical Considerations in Leadership
His message was that, I should keep down my head and avoid drawing any attention concerning the problems that the company was facing in performance. The fact that the control purpose of the meeting was to be affected by the manager’s demand made me very uncomfortable. Covering up the problems that led to poor company performance worried me because this was very unethical. I was also concerned of being accused of things that the manager could not have told me, which could also be affecting the company. Despite these misgivings, I went ahead to attend the meeting, just to avoid being at…
4 pages (1004 words)
UK Regulatory Framework for Corporate Governance
They have to rely on the directors’ judgement in running the company. If the information were freely available to all the firm’s stakeholders at the same time, there wouldn’t have been a need for corporate governance. Therefore, the need of corporate governance has arisen in order to facilitate an effective, prudent and entrepreneurial management, which can deliver long run success of the firm (FRC, 2010, p.1). It is a mechanism as to how the vision and values of the firm are set by the board of the firm distinguished from the regular operational management of the firm by its executives.…
8 pages (2008 words)
Ethical Issues Supporting Children Advertising
Ethical Issues Surrounding Children Advertising Introduction Advertising to children has long been the point of extensive debate about the impacts such advertisements could have on young, vulnerable, and easily influenced consumers. One issue with children advertising is that kids are not capable of differentiating between the programme and the advertisement. Hence, youngsters do not have the same critical thought as grown-ups do and more apt to believe ads (Buijzen & Valkenburg 2005). Ads may take advantage of children’s irresistible desires for bodily gratification, attachment, play,…
4 pages (1004 words)
(Corporate Collapse)- Essay on analysing the spanish company "CAM bank" which is in insolvency administration.
The Balance Sheet Test assesses the value of the assets possessed by a company. If assets are lesser than liabilities, then the company is considered to be in the process of collapsing. For most companies, the insolvency process is considered the last resort. Therefore companies do all they can to avoid the process. The insolvency process is used to rescue companies that have been operating for quite some time but are facing liquidity problems. Moreover, companies with large debts and have lesser liquid assets than the loan are considered incapable of paying their debts. Caja de Ahorros del…
8 pages (2008 words)
Report: Critically evaluate the role of accounting in the collapse or failure of your company
However, the most cited reason for the collapse of the bank is the application of Creative accounting by the top management of the bank, seeking to serve their own interests and deny the general public an opportunity to get a true glimpse of the nature of the bank’s financial situation (ANCODEESPANA 2012, p7). This has led to the recent CEOs of the bank being removed from their position, owing to the culpability in the accounting irregularity. In addition to the contributions of the top management in the collapse of the CAM Bank, the auditors of the bank’s books of accounts participated in…
7 pages (1757 words)