The Collapse of Enron Seemed to Be a Thumb in the Nose to...

The collapse of Enron was entirely related to the accounting practices adopted by the company. It is a number of these questionable, and in some cases straight out fraudulent, accounting practices that pertained to the most dramatic collapse of a major company in years. An analysis of some of these accounting practices brings to light the problems with the use of concepts such as mark-to-market accounting and the use of special purpose entity’s (SPE’s). To say that the collapse â€Å"seemed to be a thumb in the nose of the efficient market hypothesis (EMH)† is a statement misguided in the understanding of this concept. One can explain this through the fact that a number of the basic principals of the EMH were satisfied during the time of the†¦show more content†¦The balance sheet of Enron included a number of current and noncurrent accounts called â€Å"Price risk management assets† (Haldeman, 2006), these accounts were the fair value accounts that related to Enron’s assets. â€Å"In January 1992 Skilling and Enron persuaded the SEC to allow them to use mark-to-market accounting to value there long term gas contracts and derivatives† (Haldeman, 2006) this gave Enron the â€Å"Potential to book future profits on the day the deal was signed† (Enron: The Smartest Guys in The Room) and in turn allowed â€Å"Enron’s profits to be what ever they said they were† (Enron: The Smartest Guys in The Room). An example of the use of these â€Å"fair† value accounting methods is Enron’s building of a power plant in India. India could not pay for the energy that Enron produced which led to a loss of 1 billion dollars, however multi-million dollar bonuses were paid to executives based on â€Å"imaginary profits† developed from the fair-value accounting approach (Enron: The Smartest Guys in The Room). From the evidence above, we can see that the information that was produced from mark-to-market accounting did not allow for the true and fair view of the companies performance. The application of the efficient market hypothesis flows onward from theShow MoreRelatedManagement Course: Mba−10 General Management215330 Words   |  862 Pagesthese driving factors be influenced by the brutally competitive global economy in which organizations do not have any particular geographic identity or travel under any particular national passport? What will be the effect of the rapid gyrations in markets that emphasize the difficulties that accounting practices face in determining true performance costs and that forecasting programs confront in establishing the economic determinants of corporate planning? In addition to these challenges, many analyticalRead MoreFundamentals of Hrm263904 Words   |  1056 PagesEnvironments 4 The Changing World of Technology What Is a Knowledge Worker? 6 How Technology Affects HRM Practices 6 Recruiting 7 Employee Selection 7 Training and Development 7 Ethics and Employee Rights 7 Motivating Knowledge Workers 7 Paying Employees Market Value 8 Communications 8 Decentralized Work Sites 8 Skill Levels 8 A Legal Concern 8 Employee Involvement 20 How Organizations Involve Employees 20 Employee Involvement Implications for HRM 20 Other HRM Challenges 21 Recession 21 Off Shoring 21Read MoreStephen P. Robbins Timothy A. Judge (2011) Organizational Behaviour 15th Edition New Jersey: Prentice Hall393164 Words   |  1573 Pages91 4 Emotions and Moods 97 What Are Emotions and Moods? 98 The Basic Emotions 100 †¢ The Basic Moods: Positive and Negative Affect 100 †¢ The Function of Emotions 102 †¢ Sources of Emotions and Moods 103 Emotional Labor 108 Affective Events Theory 110 Emotional Intelligence 112 The Case for EI 113 †¢ The Case Against EI 114 †¢ Emotion Regulation 115 OB Applications of Emotions and Moods 115 Selection 116 †¢ Decision Making 116 †¢ Creativity 116 †¢ Motivation 117 †¢ Leadership 117 †¢ Negotiation 117Read MoreExploring Corporate Strategy - Case164366 Words   |  658 Pageswhich have been chosen to enlarge speciï ¬ c issues in the text and/or provide practical examples of how business and public sector organisations are managing strategic issues. The case studies which follow allow the reader to extend this linking of theory and practice further by analysing the strategic issues of speciï ¬ c organisations in much greater depth – and often providing â €˜solutions’ to some of the problems or difï ¬ culties identiï ¬ ed in the case. There are also over 33 classic cases on the Companion