Enron Case Flashcards
What type of earnings management did Enron partake in?
Mark-to-Market Accounting
What is mark-to-market accounting?
It’s when you base your numbers on what you expect your future earnings to be
How many off-the-book entities did Enron create?
3,000
Why did Enron create 3,000 off-the-book entities?
To conceal their debt
Why did Enron acquire major tax breaks?
Most of their off-the-book entities were based out of the Cayman Islands
What year did Enron started to experience a decline in share prices?
2000
What happened to Enron in 2001?
Their CEO Jeffrey Skilling left the company and sold 500,000 of his Enron shares
What did Skilling’s actions do to Enron?
It caused them to file for the largest bankruptcy in US history
What was created in response to the Enron accounting scandal?
The Sarbanes-Oxley Act of 2002
What is the ethical dilemma in the Enron Case?
Should Enron be using accounting rules to overstate their earnings and understate their debt?
