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Hold Fast To the Revenue Recognition Method and GAAP Princip
USINFO | 2013-08-13 14:52
Enron’s scandal was the largest of its kind when it broke in 2001. The company’s executives put a lot of effort into creating one of the most complex accounting scandals of all time. The company, which was once the seventh largest in the nation, eventually declared bankruptcy and cost its shareholders $74 billion.
The Enron collapse is the biggest scandal in the history of US capitalism. Exposed are the systemic lying, cheating and theft at the heart of the 1990s bubble economy. Not just a corporate failure, Enron is a symptom of the structural rottenness of capitalism. LYNN WALSH analyses the Enron crisis and its consequences.
ACCORDING TO FORTUNEmagazine in 2000, Enron was the USseventh-largest company, based on its claimed sales of over $100bn. Enron reported profits of over $1bn. Its stock rose to $90 a share, its total market capitalisation to $70bn.
Fortune labelled it the country most innovative company; it was widely praised as the usiness modelfor the new economy. By December 2001 the company had crashed, US capitalism biggest corporate bankruptcy. Its shares were only worth pennies, most of its 25,000 workers were out of a job. Americafoolest company (so Enron claimed) was exposed as a speculative shell camouflaged by fraudulent accounting a virtual company producing virtual profits. Preliminary investigations have revealed that Enronbosses had reported profits the company have never really made (at least $1bn between July 2000 and October 2001), and covered up staggering debts and losses.
During the summer of last year a number of second-line Enron executives began to raise serious allegations about the companymethods.
Vice-president Sherron Watkins wrote to Enronchair, Kenneth Lay: "I am incredibly nervous that we will implode in a wave of accountancy scandals". Another manager noted: "We are such a crooked company". Enron bosses, assisted by their prestigious lawyers and accountants, reviewed the allegations and brushed them aside. Lay and other bosses, however, rapidly began selling off their own Enron shares, between them pocketing over $1bn. Meanwhile, in an on-line chat session, Lay told workers that the company shares were an "incredible bargain" urging them to "talk positively about Enron to your family and friends". On Wall Street, the stock-broking arm of Citigroup, which had made big loans to Enron and was well aware of the company mounting difficulties, was still urging investors to buy Enron shares.
The Enron collapse is the biggest scandal in the history of US capitalism. Exposed are the systemic lying, cheating and theft at the heart of the 1990s bubble economy. Not just a corporate failure, Enron is a symptom of the structural rottenness of capitalism. LYNN WALSH analyses the Enron crisis and its consequences.
ACCORDING TO FORTUNEmagazine in 2000, Enron was the USseventh-largest company, based on its claimed sales of over $100bn. Enron reported profits of over $1bn. Its stock rose to $90 a share, its total market capitalisation to $70bn.
Fortune labelled it the country most innovative company; it was widely praised as the usiness modelfor the new economy. By December 2001 the company had crashed, US capitalism biggest corporate bankruptcy. Its shares were only worth pennies, most of its 25,000 workers were out of a job. Americafoolest company (so Enron claimed) was exposed as a speculative shell camouflaged by fraudulent accounting a virtual company producing virtual profits. Preliminary investigations have revealed that Enronbosses had reported profits the company have never really made (at least $1bn between July 2000 and October 2001), and covered up staggering debts and losses.
During the summer of last year a number of second-line Enron executives began to raise serious allegations about the companymethods.
Vice-president Sherron Watkins wrote to Enronchair, Kenneth Lay: "I am incredibly nervous that we will implode in a wave of accountancy scandals". Another manager noted: "We are such a crooked company". Enron bosses, assisted by their prestigious lawyers and accountants, reviewed the allegations and brushed them aside. Lay and other bosses, however, rapidly began selling off their own Enron shares, between them pocketing over $1bn. Meanwhile, in an on-line chat session, Lay told workers that the company shares were an "incredible bargain" urging them to "talk positively about Enron to your family and friends". On Wall Street, the stock-broking arm of Citigroup, which had made big loans to Enron and was well aware of the company mounting difficulties, was still urging investors to buy Enron shares.
