On December 2, 2001, Enron Corporation of Houston, Texas, one of the largest corporations in the world,.
filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. With assets of $63.4 billion, it is.
the largest US corporate bankruptcy. As the fog surrounding Enron gradually being lifted, an insight into this.
corporate debacle becomes possible. Among all the factors that have led to the fall of this energy giant, the.
accounting issue related to Enron's collapse is of particular interest to this article.
The restatement to its previous profits announced on November 8 by Enron gave some early warning signs.
of the collapse of the company. As shown in the table, the misstatements of financial performance for the.
period of 1997-2000 were so great that under materiality consideration, it is undoubtedly that the financial.
reality of Enron was severely distorted in those years. Then, how could Enron created an image of a.
dynamic company with bigger profits than its performance justifies? What reasons could be used to explain.
the difference of the reported profit of Enron and the real financial situation of it? To answer these questions,.
this article concentrates on three accounting issues which played the most important roles in fiddling the.
company's accounts, including non-consolidation of Special Purpose Entities (SPEs), revenue recognition,.
and fair value restatements. Most part of this article would be devoted to the description of transactions and.
accounting treatments with the aim of analysing the creative accounting techniques employed by Enron in.
these three accounting areas. The legitimacy and impact of such treatments would also be discussed when.
applicable thereby, the essential characteristic of creative accounting, aggressive but not necessarily illegal,.
could be reflected.