Financial Statement Fraud.Enron.AICPA

Valuable if unconsolidated 1977 synthetic lease rules

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Unformatted text preview: ion of false income To hide debt (Borrowed money was not put on financial To statements of Enron) statements To manipulate cash flows, especially in 4th quarters Many SPE transactions were timed (or illegally backdated) just near end of quarters so that income could be dated) booked just in time and in amounts needed, to meet © 2investor by the 003, 2005 investor expectations AICPA Accounting License to Cheat Accounting Major issue is whether SPEs should be consolidated*— SPEs are only valuable if unconsolidated. 1977--”Synthetic lease” rules (Off-balance sheet 1977--”Synthetic financing) (Allowed even though owned more than 50%) financing) 1984—”EITF 84-15” Grantor Trust Consolidations 1984—”EITF (Permitted non-consolidation if owned more than 50%) (Permitted 1990—”EITF 90-15” (The 3% rule) Allowed corporations 1990—”EITF such as Enron to “not consolidate” if outsiders contributed even 3% of the capital (the other 97% could come from the company.) 90-15 was a license to create imaginary profits and hide genuine losses. FAS 57 requires disclosure of these types of relationships. requires 3% rule was formalized with FAS 125 and FAS 140, 3% issued in September 2000. issued *Usually by the © 2003, 2005 entities must be consolidated if company owns 50% or more AICPA Mark-to-Market Accounting Mark-to-Market Accounting and reporting standards for marketable securities, Accounting derivatives and financial contracts are found in FAS 115 and FAS 133...
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This document was uploaded on 03/29/2014.

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