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Enron Scandal

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by

Jayne Pilachowski

on 29 October 2012

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Transcript of Enron Scandal

What is the Enron Scandle By: Bryce Macomber,
Shane Wright,
Jayne Pilachowski, and Tianna Habosian The Enron Scandal
and Mark to Market Accounting CEO was Kenneth Lay
Company counted interested buyers as sold products and debited the cash
Company increased drastically, crashed from fraud, false report of revenue, shoddy account practices and general disregard for virtually every tenet of business ethics Reaction Mark to Market Accounting The process of recording accounting transactions before they actually occur. IE. You say you'll buy 1.2 million dollars worth of stock. Enron records it in there books before its official. Even if the transaction never happens they still claim the money. In their books there's no accounts receivables. All money is claimed before any is received. Benefits of Mark to Market Accounting This allowed Enron to claim more money from sales.
Claimed all sales talked about even if they didn't come through
No Act. Rec. claimed all money from sales outright Enron's Scandal Only company every approved to use this type of accounting Mark To Market
“Applying MTM accounting has forced banks to recognize billions of dollars in losses on mortgage-related securities”
Shareholder’s Equity = Assets of Business - Liabilities of the Business
MTM sets assets - if assets increase, the shareholder’s equity increases Level 3 assets = assumptions need to be made about the market price b/c there are no financial statements
“The problem with MTM accounting is that it relies on the notion that the market is an asset's best arbiter of value”
Assume people are going to buy when they are talking about it, so people increase the assets, increasing the value - not true, based on suspicion shredded lots of papers immediately
tried to have less information
Nancy Temple led others stray
C.E. Andrews was facing up to $500,000 in crime
leaves the company forever tarnished
before the verdict was made, 21,000 of the 26,000 employees had already left
Full transcript