Enron case

1. Adsteam [e-mail], [e-mail] was a very model of conglomerate(jujie). In the eyes of the outside, it was a successful company. But it's not true. It’s far from other companies in its complex structure. Adsteam group comprised numerous less-than-majority-owned companies. It acquired major share-holdings in numerous companies throughout the 1980's. The acquisition strategy resulted in an extremely complicated cross-shareholding-based structure. It was noting that the maximum amount of shareholdings of any company in other group entities was all kept below 50 per cent. For example, more than 90% of Tooth & Co Ltd was owned by the group, but the big shareholding were split into three parts each of which is under 50%. In this way, Tooth was consolidated by none of them. It could be said that Splavins, the head of the company, was intentionally to do that in that he could utilize the Accounting Standards, according to which, only parent holding more than 50 per cent of its subsidiaries should make both consolidated and separated financial statement. In fact, although the percentage owed by Adsteam was under 50%, Spalvins was totally in charge of its associated companies by controlling their management human resources. At the same time, Adsteam tried to mask its financial structure and made them more like financially independent companies. A trend was that these group companies penetrated each other further. Why did they do that? The reason was that this kind of complicated structure could give great influences on themselves in several ways.
There are three major influences on its accounting and commerce exerted by the company’s complex structure.
The first was on balance sheet. While Adsteam owned only less-majority shares of its associates, it did not need to consolidate these associates