Taking a Look at the Enron Scandal - 1270 Words

With the complex system where there were wide ranges of product which include physical assets, it had reached the limits of accounting. The company had taken fully advantage of this to make balance sheet become a perfect picture of company’s performance. They used mark-to-market method of accounting, which state that â€Å"once a long-term contract was signed, the present value of the stream of future inflows under the contract was recognized as revenues and the present value of the expected cost of fulfilling the contract were expensed†. (Pauls, 2003) Therefore, the future profit had been account even the real cash flow had not come to the company yet. Moreover, cause when Enron come to the long term contract, they would assumed that there were long term declines in spot prices (Page 6, journal of economics), there would be the risk of loss if there were the increase in the price of gas in the future and it does not recognize in the financial statement; therefore, to make the income statement made more sense in economics term, Enron had created an accounting structure that help the company to stable their income fluctuation. (ISDA, 2002) In additional, Enron used special purpose entities to fund or manage risk as well as achieve financial reporting objective (page 11, Paul, 2003). For example, when they wanted to remove a significant investment in their financial statement, they used one of its entities which were joint venture with them to acquire it (Chewco case, ISDA, pageShow MoreRelatedTaking a Look at the Enron Scandal545 Words   |  2 Pageswere shocked when one of the hottest companies of the booming nineties, Enron, pulled out a huge scam which affected the thousands of people. Enron scandal tells a story of greed, over confidence and self-delusion. The business failed but the management cheated and kicked the problems down the road. They inflated its income figures by $586 million over a four-year period. Less than a month later, Enron filed for bankruptcy. Enron had started as a gas pipeline company, it soon expanded into the world’sRead MoreUnethical Behaviors And Situations Of Conflict Within The Workplace1572 Words   |  7 Pagescritically about a particular dilemma and whether or not it is ethically wrong takes time and critical thinking. 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When moreRead MoreEssay about Phar Mor Inc Case Study1184 Words   |  5 PagesSean Russi The Case of Phar-Mor Inc ACCT-525 October 31, 2012 Case Summary The case of Phar-Mor Inc was one of the biggest pre-Enron frauds that have been uncovered. Phar-Mor Inc established in 1982 Phar-Mor was a small little known discount drugstore. Phar-Mor became well known for offering medications at a 25-40% discount rate compared to your normal pharmacy store prices. Phar-Mor’s first six years of existence seemingly wereRead MoreEnron And The Enron Scandal1387 Words   |  6 PagesEnron, The Shadiest Guys In the Room When you ask young people about the Enron scandal today, most of them have not even heard of it. The fact of the matter is, it is very relevant to young professionals today. Enron is the most recent story of classic Wall Street greed and fraud. However it is still argued today by different stakeholders who are is responsible. 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At the top of its game, Enron was a successful multi-billion dollar company that marketed electricity and natural gas. Enron also provided financial and risk management services to consumers around the globe. Because of its success, Enron left many people astonished when it declared bankruptcy in December 2001. Twenty thousand employees were left without jobs and most had lost their entire