Lessons from Enron for British Business Essay Example | Topics and Well Written Essays - 2750 words

Lessons from Enron for British Business - Essay characterAnother accounting gap, which was discovered from the Enrons balance sheet, was the recording of the note receivable as an asset. These were the promises to pay the righteousness claim in the limited partnerships, which Enron recorded as assets even though GAAP requires subscribed integrity to be communicateed as a contra-stockholders equity account, rather than as a note receivable. at a time it was accused of GAAP violations, Enron announced it would restate the previous 4 As years of financial statements by recording a $1.2 billion reduction in stockholders equity, adjusting its income statements and balance sheets for the unconsolidated SPEs, and making prior-period proposed audit adjustments and reclassifications that had in the beginning been considered as immaterial. Enrons restatement reduced previously reported net income by $569 million and reduced shareholders equity by $1.2 billion. before long after these ann ouncements, several rating agencies lowered Enrons long-term debt to below-investment grade, and Dynegy terminated its proposed merger agreement with Enron. In declination 2001, Enron filed for Chapter 11 bankruptcy protection.Charles Mulford, co-author of The pecuniary Numbers Game, says, the accounting model isnt broken, financial reportage just needs some tweaks. The Enron used the close common off balance sheet backing technique. ... Enrons restatement reduced previously reported net income by $569 million and reduced shareholders equity by $1.2 billion.Shortly after these announcements, several rating agencies lowered Enrons long-term debt to below-investment grade, and Dynegy terminated its proposed merger agreement with Enron. In December 2001, Enron filed for Chapter 11 bankruptcy protection. Off Balance Sheet Financing2nd aspect Charles Mulford, co-author of The Financial Numbers Game, says, the accounting model isnt broken, financial reporting just needs some tweaks. T he Enron used the most common off balance sheet financing technique. Enron conducted much of its business in these entities that they controlled. They transacted with themselves. That kind of self-dealing allowed them to report profits when they werent traditionally making a profit. (Cited in Kelcher, 2002)Definition Off balance sheet ordinarily means an asset or debt or financing activity not on the companys balance sheet. It could embarrass a lease or a separate subsidiary or a contingent indebtedness such as a letter of credit. (Wikipedia, 2005)Can be explained as the different methods of acquiring capital by a company, which is not stated, on the financial statement of the company. The most commonly used methods of elevation money which does not appear on the balance sheet is in the shape of the research and outgrowth partnerships, different kinds of lease, and Joint ventures etc. are the common methods used. Most of the companies obtain funds by using their product idea o n intelligence and knowledge about any specific field and acquiring the capital from the partner. Since the partner who is providing