Read the followingResearch Case prompt:
EnronCorporation was a darling in the energy-provider arena,and in January 2001 its stock price rose above $100 per share. Acollapse of investor confidence in 2001 and revelations ofaccounting fraud led to one of the largest bankruptcies in U.S.history. By the end of the year, Enron's stock price had plummetedto less than $1 per share. Investigations and lawsuits followed.One problem area concerned transactions with related parties thatwere not adequately disclosed in the company's financialstatements. Critics stated that the lack of information about thesetransactions made it difficult for analysts following Enron toidentify problems the company was experiencing.
After reading theabove prompt, respond to the following questions:
Obtain therelevant authoritative literature on related-party transactionsusing the FASB Accounting Standards Codificationat the FASB website( asc.fasb.org ). What is the specific citation that outlines therequired information on related-party disclosures that must beincluded in the notes to the financial statements?
Describe thedisclosures required for related-party transactions.
Use EDGAR (www.sec.gov ) or another method to locate the December 31, 2000,financial statements of Enron. Search for the related-partydisclosure. Briefly describe the relationship central to thevarious transactions described.
Why is itimportant that companies disclose related-party transactions? Usethe Enron disclosure of the sale of dark fiber inventory in youranswer.
Read the followingResearch Case prompt:
EnronCorporation was a darling in the energy-provider arena,and in January 2001 its stock price rose above $100 per share. Acollapse of investor confidence in 2001 and revelations ofaccounting fraud led to one of the largest bankruptcies in U.S.history. By the end of the year, Enron's stock price had plummetedto less than $1 per share. Investigations and lawsuits followed.One problem area concerned transactions with related parties thatwere not adequately disclosed in the company's financialstatements. Critics stated that the lack of information about thesetransactions made it difficult for analysts following Enron toidentify problems the company was experiencing.
After reading theabove prompt, respond to the following questions:
Obtain therelevant authoritative literature on related-party transactionsusing the FASB Accounting Standards Codificationat the FASB website( asc.fasb.org ). What is the specific citation that outlines therequired information on related-party disclosures that must beincluded in the notes to the financial statements?
Describe thedisclosures required for related-party transactions.
Use EDGAR (www.sec.gov ) or another method to locate the December 31, 2000,financial statements of Enron. Search for the related-partydisclosure. Briefly describe the relationship central to thevarious transactions described.
Why is itimportant that companies disclose related-party transactions? Usethe Enron disclosure of the sale of dark fiber inventory in youranswer.
