Counter reporting abuses

Pennsylvania CPA Journal, July, 2003 by Fleming, John M

FASB Interpretations 45 and 46

The Financial Accounting Standards Board's Interpretations 45 and 46 were issued to provide additional guidance in the areas of guarantees and accounting for variable interest entities - a newly defined category of entities, including special purpose entities (SPEs). Both of these FASB interpretations address financial reporting areas that were manipulated by Enron management to misrepresent their financial position and results of operations.

Among other abuses, Enron used unconsolidated, off-balance sheet special purpose entities to hide debt and overstate reported revenue. The energy company also guaranteed any potential losses that the SPEs might incur in the future, without disclosing these guarantees or recording the amounts of these...

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