Enron Case Anaysis

Enron

There were many problems in the Enron case.  First, when the gas bank was created, they should have thought twice about this since many of the natural gas producers needed cash, which Enron did not have.   Second, Enron created SPE's which caused more problems because they were providing money and keeping the money off the books so that investors could not see what was actually going on.  These SPE's only created complicated issues for Enron and its investors.

The government should have seen red flags when Enron and other corporations wanted the deregulation of the energy business.  Since the government lifted the restrictions, they should had been some sort of monitoring practices in place to oversee how companies were handling matters after the deregulation occurred.  The government should have created governmental regulations that would look into the practices of Enron and other companies like Enron from the very beginning.  

If the government had appropriate regulations in place, as they have now, the fraud into the SPE's could have been detected.  The FASB seeks to "prohibit an entity from being a QSPE if a company that transfers assets to the entity enters into a commitment (such as a financial guarantee, liquidity commitment or total return swap) to provide additional cash or other assets to fulfill the QSPE's obligations to its beneficial interest holders. Second, if an entity can reissue beneficial interests, the proposed Statement would prohibit that entity from being a QSPE if any party involved with the entity has certain risks or combination of risks and decision-making abilities. Third, the proposed Statement would prohibit an entity from being a QSPE if it holds equity instruments, such as shares or partnership interests. Finally, the proposed Statement would clarify certain of the requirements in Statement 140 related to legally isolating assets and surrendering control of assets" (Financial Accounting Standards Board, 2003). If these...