Enron : The Financial Statement

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Enron was one of the biggest scandals in accounting history. Enron covered all their troubled assets in complex SPE 's which then made their financial statements look appealing to potential investors. The auditor was also pressured into providing a complex financial statement that was very hard to read.
Nearing the end, Enron used SPE 's to cover troubled assets that were falling in value, transferring these assets meant their losses would be kept off the financial statement.
The general guideline at the time of FASB was that only 3% of SPE 's could be owned by an outside investor. Enron used many SPE 's to increase capital and to park troubled assets, so they do not appear in the financial statement. This in turn increased the cash flow and profit on the financial statements, making it look like a low risk investment for investors.
Enron incorporated mark-to-market accounting for their business in 1995 and used it for their trading transactions. As stated in (Journal of Accountancy, 2015) "Under mark-to-market rules, whenever companies have outstanding energy-related or other derivative contracts (either assets or liabilities) on their balance sheets at the end of a particular quarter, they must adjust them to fair market value, booking unrealised gains or losses to the income statement of the period. A difficulty with application of these rules in accounting for long-term futures contracts in commodities such as gas is that there are often no quoted prices upon which to

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