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Essay / Research Paper Abstract
A 5 page research paper that explains Special Purpose Entities (SPEs), their history, and the role they played in the Enron scandal. SPEs are the financial tool that Enron used to push many of their liabilities off the account books. Bibliography lists 5 sources.
Page Count:
5 pages (~225 words per page)
File: D0_khspes.rtf
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Unformatted sample text from the term paper:
is, of course, because of the Enron scandal, which utilized an impressive array of such techniques to move debt and losses, off its balance sheet which served to make the
company look better on paper than it actually was (Feldman, 2002). However, accounting experts agree that it was the way that SPEs were used in this case that make this
technique seem shady, not the use of SPEs per se. Nevertheless, other business experts, such as Business Week, look on the utilization of SPEs as mere camouflage for evading consolidating
reporting rules. Off-the-balance financing can be a useful corporate tool when used properly (Bottglieri, 1999). This is how airlines routinely employ complex leasing arrangements that make it possible for
these companies to finance new planes that would otherwise be unaffordable (Feldman, 2002). Nevertheless, SPEs , which are "limited-purpose vehicles into which a business can shuttle assets and liabilities"
remain a particular concern (Feldman, 2002, p. 46). A business can create a SPE with a bare minimum of outside investment, just 3 percent (Feldman, 2002). This translates into a
sponsoring company getting to retain up to 97 percent of the stake, yet still claming that this is not ownership for accounting purposes (Feldman, 2002). Kahn (2002) asserts that
while the media is referring to what Enron officers did as "off-balance-sheet" partnerships -- "those hundreds of Enron entities that were used to hide its debt and book illusory profits"
-- but, on Wall Street, these are known as "special purpose entities" (SPEs) (p. 84). While SPEs are definitely getting a great deal of bad press, Kahn (2002), like Feldman
(2002), insists that it would be difficult to find a Fortune 500 company that does not use at least one. While an SPE is a complex financial instrument, it
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