From: tony tinker (tony.tinker@GMAIL.COM)
Date: Fri Jun 02 2006 - 15:32:25 EDT
Greetings Fred, I'm not absolutely sure whether these figures are included in the Corporate debt, but my best guess would be that such off-balance sheet items wouldn't be,as they are lodged in seperate legal entities (the SPE's) and the SPE's are not publically traded companies (sometimes partnerships). The practice of "off-balance-sheeting" is alive and well and thriving (notwithstanding Eron) as it is a major feature of bank consulting. As for the amounts, I don't think anyone has a clue. It just isn't reported.Doug Henwood's Left Business Observer is probably the best place to check the accuracy of my comments. Regards, TT On 5/30/06, Fred Moseley <fmoseley@mtholyoke.edu> wrote: > Hi Tony, > > Thanks for your interesting post on corporate accounting tricks. > > Do you have a rough idea of the extent of the debt that is kept > "off the books" by "special purpose vehicles"? > > Also, do you know if this "off the books" debt is included in the > Fed's Flow of Funds estimates of corporate debt? > > Thanks in advance for any additional information you can give us > about this important problem. > > Comradely, > Fred > > > On Tue, 30 May 2006, tony tinker wrote: > > > > *ENRON RIP?* > > > > > > Let's take a moment's silence, to mourn over the corpse of > the > > > Enron finale -- and ponder its accounting significance. > > > > > > First, many colleagues have, over the years, pleaded with > > > progressive accountants to give them a clear answer to a simple > question, > > > "How do we find the dead bodies buried in financial statements?" In > > > Enron, we see why there is not straightforward: Enron's accountants, > > > auditors and consultants (KPMG and Arthur Andersen) buried bodies > elsewhere > > > (in Special Purpose Entities called SPE's). > > > > > > Parking your problems elsewhere is a time--honored > accounting > > > ruse, which falls with a family of disappearing tricks, variously > referred > > > to "off-balance" accounting, two-sets of books, private slush funds, > etc. > > > These are devices for 'disappearing' high-risk investments, heavy > > > borrowings, substantial losses, and slush fund payments in legal > entities > > > "outside" of the financial statements of entities like Enron. Hence, > our > > > usual 'statistics of performance' for assessing firms like Enron are > > > rendered meaningless, because their financial statement have been > > > washed-clean of any trouble. The practice has been blessed by the > > > accounting firm's trade-association institutions (the Financial > Accounting > > > Standards Board, AICPA, etc) with the acquiescence of the SEC. Insider > > > investors (Lay, Skilling, et. al) who knew the "real" condition of the > firm, > > > not only had an "edge" over outside investors (who continued to be > suckered > > > with the false information) but they could profit handsomely at the > expense > > > of these victims, by continuing to balloon the deceit (with the full > > > authority of the "independent" auditing profession). > > > > > > A couple of corollaries are likely to pass unacknowledged by > > > the media: First: the court rejected the defense that the defendants > abided > > > by accounting rules (bolstered by the testimony of at least one academic > > > apologist, Professor Jerry Arnold from USC). Indeed, the court's > decision > > > showed that following the accounting firms "self-made" rules, was no > defense > > > at all. Academic apologists take note. > > > > > > Second, Enron-like disappearing tricks are not new, and are > > > alive and well. The 1977 Foreign Corrupt Practices Act, was an attempt > to > > > force the disclosure of hidden slush-funds used to bribe officials; > bribes > > > that destabilized the governments of our trading partners (Japan, > > > Netherlands, Italy, etc). Over time, the enforcement of this > legislation > > > lapsed. > -- Professor Tony Tinker Co-Editor: Critical Perspectives on Accounting Co-Editor: The Accounting Forum Fellow of the Association of Chartered Certified Accountants Baruch College at the City University of New York Box B:12:236 One Baruch Way New York, NY 10010-5585 USA Email: Tony_Tinker@baruch.cuny.edu Tel: 646 312 3175 Fax: 646 312 3161 CPA 2005 Conference: http://aux.zicklin.baruch.cuny.edu/cpa2005/ Editorial Office: http://www.baruch.cuny.edu/research/editorial_offices.htm Blog on Baruch College: http://evaluatingbaruchcollege.blogspot.com/
This archive was generated by hypermail 2.1.5 : Fri Jun 30 2006 - 00:00:03 EDT