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Enron Case
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OUTLINE
Introduction
Background
Financial Reporting Issues
Mark-to-Market Accounting
Off-the-Books Entities
Relatives and Doing Business
Discussion
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INTRODUCTION
Incorporated in Oregon in 1985
World¡¯s largest energy company (2001)
In Fortune Magazine¡¯s 100 best companies to work for
Downgraded company¡¯s debt to ¡®junk¡¯ grade and Enron files for bankruptcy (2001) Enron Scandal
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OUTLINE
Introduction
Background
Financial Reporting Issues
Mark-to-Market Accounting
Off-the-Books Entities
Relatives and Doing Business
Discussion
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BACKGROUND
Kenneth Lay merged two gas pipelines, Houston Natural Gas and Internorth and formed Enron
Became the largest energy trader in the world
Online trading of energy a Wall Street for energy ¡¦(»ý·«)
ies
Relatives and Doing Business
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Off-the-Books Entities
HOW
Created limited partnerships; companies offshore
Avoidance of taxes and anonymity
Disclosed minimum details of the SPE
Transferred its assets to SPE
SPEs used loans by bank
Enron successfully hid its debt
Recognized imaginary profit
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Off-the-Books Entities
HOW
The 3% rule
Non-consolidation of SPE
WHEN
Transactions timed or illegally back-dated (just near end of quarters)
IN THE END
Hundreds of SPEs to hide debt
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OUTLINE
Introduction
Background
Financial Reporting Issues
Mark-to-Market Accounting
Off-the-Books Entities
Relatives and Doing Business
Discussion
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Relatives and Doing Business
Hired Mr. Lay¡¯s son, Mark Lay, as Enron executive
Half Revenue of Houston Travel Agency owned by Mr. Lay¡¯s sister, Sharon Lay
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OUTLINE
Introduction
Background
Financial Reporting Issues
Mark-to-Market Accounting
Off-the-Books Entities
Relatives and Doing