world’s largest power companies
Enron was one of the world’s largest power companies before it went bankrupt in one of the most spectacular financial frauds in history. One aspect of the fraud involved the creation of a separate entity that borrowed a large amount of money and then used the money to acquire facilities, which were then leased and used by Enron. Because Enron owned less than 50 percent of the stock of the separate entity, Enron was not required to include the entity in its consolidated financial statements. This arrangement was attractive to Enron management because the company did not have to report the huge debt held by the entity on its consolidated balance sheet.
The arrangement was deceptive to shareholders and potential investors because they were unaware of this debt, which turned out to be the responsibility of Enron. Recently, the FASB issued standard requiring companies to include such separate entities in their consolidated financial statements.
Describe the economic entity assumption, and provide reasons why the Financial Accounting Standards Board (FASB) is requiring the consolidation of such entities. Do you think that the separate entity should have been considered part of the economic entity called Enron? Why?
Deadline: May17, 2015, please submit an individual softcopy of your paper with coversheet.
Font: 12 pt, Times New Roman; Margin: one inch from all sides, Page should be numbered. Cover page will not be numbered. Cover page will have names of all the members. Spacing: double spaced. No need for table of contents. Graphs and Tables must be nicely presented in the main body of the paper.
Length: The paper should be approximately 11-page long including cover page and references. It may be little larger or smaller so concentrate on quality than on quantity.
Plagiarism: cut and paste will not be allowed at all. If you want to use other authors’ ideas word for word, do it properly by putting those under quotations. Otherwise, write in your words. Do not use too many quotations because it will reduce your own input.
References should be consistent. That is, only one type will be followed. You cannot mix various styles when giving references.
Grading: the writing assignment will be evaluated based on cleanliness, originality, effort, depth of discussion, and format/organization.