The Enron scandal Tobias Pavel Mylene Encontro 910422 850224 Chalmers University of Technology Finacial Risk‚ MVE220 Examiner: Holger Rootzén 2012-12-02 Göteborg This report has been written and analyzed by both group members jointly. Abstract From the 1990 ’s until the fall of 2001‚ Enron was famous throughout the business world and was known as an innovator‚ technology powerhouse‚ and a corporation with no fear. The sudden fall of Enron in the end of 2001 shattered not just the business
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Enron was originally a pipeline company in Houston‚ Texas in 1985. Enron became a company that was able to profit by providing deliveries of gas to utility companies and businesses. As the deregulation of electric power rose‚ Enron diversified the business and entered into an energy broker‚ which traded electricity and other types of commodities. Enron employed several highly qualified PHDs in mathematics‚ physics‚ and economics. Enron continued to enter into contracts with customers and utilized
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venture that looked promising as a new profit center. Their acquisitions were growing exponentially. Enron had also been forming off balance sheet entities to move debt off of the balance sheet and transfer risk for their other business ventures. These SPEs were also established to keep Enron’s credit rating high‚ which was very important in their fields of business. Because the executives believed Enron’s long-term stock values would remain high‚ they looked for ways to use the company’s stock to hedge
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Financial Accounting Theory and Analysis 10e Chapter 1 - The Development of Accounting Theory What is Theory? Webster defines theory as “Systematically organized knowledge‚ applicable in a relatively wide variety of circumstances; a system of assumptions‚ accepted principles and rules of procedure to analyze‚ predict or otherwise explain the nature of behavior of a specified set of phenomena.” Why is the development of a general theory of accounting important? The development of a general
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with respect to the fiber. LJM2 sold a portion of the fiber to industry participants for $40 million‚ which resulted in Enron recognizing agency fee revenue of $20.3 million. LJM2 sold the remaining dark fiber for $113 million in December 2000 to an SPE that was formed to acquire the fiber. In December 2000‚ LJM2 used a portion of the proceeds to pay in full the note and accrued interest owed to
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Wireline Tractor Techonology Ms. Metsai Chaipornkaew ID 513 10459 21 Abstract The current increasing trend in the oil and gas industry to secure future reserves drives a demand for increasingly complex well design in highly deviated‚ horizontal and even ERD with various downhole hardware. A way of optimizing mechanical inventions is the utilization of establishes downhole wireline technology in order to make it possible to perform reliable‚ economical and flexible interventions. Especially‚ it
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Competitors Financial Analysis Sony’s three large business divisions: Electronics Entertainment Financial services Profitable businesses: Financial Services Music Pictures Devices *All electronics segments are declining (too BAD) Comparison of Sce and SPE => Electronics Segment lost money in four years and had almost no profit in two other years due to
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Professional Development Article: The CPA Journal Enron Ten Years Later: Lessons to Remember Acct 4501W- Auditing Concepts Professor Feller March 11‚ 2013 Summary In the article entitled Enron Ten Years Later: Lessons to Remember‚ the authors Anthony H. Catanach Jr. and J. Edward Ketz discuss the importance of learning from the mistakes made by the senior executives of Enron. The “off-balance sheet” that Andrew Fastow‚ the CFO of Enron‚ created to funnel tens of millions of dollars into
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Enron Case The internal controls that were ignored when LJM1 was created were one‚ LJM’s books were kept separate from Enron’s. LJM1 ignored some of Enron’s entries in the books that were missing. Outsiders owned less than 3% of the Special Purpose Entities equities. There was an error made by Arthur Andersen to let LJM’s financial statement to remain unconsolidated. If the financial statements had been consolidated‚ some of the errors could have been found. They may have even had some time to correct
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Two areas stand out as ones of particular concern. First‚ the rules apparently permitted the widespread use of market-to-market (MTM) accounting in areas for which it was not originally intended. Second‚ the 3 percent rule for outside ownership of SPEs was arguably too low to maintain genuine independence. An underlying issue was that corporate practice (e.g.‚ sophisticated online
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