Corporate Accounting

watch this : https://www.youtube.com/watch?v=YH6xUQrXkOs and read the pdf to answer these questions. Enron is essentially old news however, when it comes to corporate accounting fraud the story will survive generations. Chances are you may have a tangential exposure to the complexity of the Enron fraud. Likely the first thing that comes to mind is SPE’s (special purpose entities)! The SPE’s are far from the entire story. Mark to market or Fair Value Accounting (FVA) was classically abused in ways that are still very much relevant today. For example, Mariner Energy was a private company and according to FAS 157 a level 3 input (no ready market to get pricing information). The Securities and Exchange Commission (SEC) clearly set forth the how the “clairvoyants” at Enron manipulated the models of the level 3 inputs (was not called level 3 inputs until effective date of FAS 157 11-08) to meet their targets. The value of Mariner Energy eventually increased to 367.4 million; it was purchased in 1996 for 185 million! If you consider just this transaction, how would you demonstrate in journal entry form the effect of this increase on the balance sheet and income statement? The mere mention of SPE’s and Enron seem like a platitude however, equity accounting (GAAP) certainly had a part in this drama. The two conditions of treating an entity as an SPE: 1) the 3% rule 2) the independence rule. Let’s move to the current date. Topic 810 or ASC 810 has now superseded all previous standards in this area. With that in mind, juxtapose the previous standards to topic 810: what is your opinion of the update? What are the pros and cons of these changes? If any, what changes would you make to revise ASC 810?