Big is not the guy in question this time.
We went to dinner. Had a bottle of wine. I pulled out my notebook, and he went freaking berserk writing notes about Mark to Market.
I think this is just brilliant; it should be framed and sold as modern art. Such a beautiful mind.
The “M2M potential to cheat” is mine, “John Arnold, Whalley, Lou Pai” and that incomprehensible scribble is mine, and the “present value” at the bottom is mine. Everything else is his.
All this is his. Still talking about forward contracts.
All his. Notice the “VAR” – value at risk. See, it was important, something Enron took seriously.
Good times.
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“The “M2M potential to cheat” is mine,”
I would love for the Enron to expound as to what he was talking about here. What is the motivation to “cheat”? Are we talking about inflating (overstating) the best estimates of Fair Value of Assets to report Gains as Revenues? Like Enron?
And what about the basic accounting principles of Reliability (verifiability, representational faithfulness, free of error and bias) and Conservatism (when in doubt choose the solution that will be least likely to overstate assets and income)?
Granted, Fair Value Accounting, MTM as you term it, in some cases has the potential to give unsrupulous, unethical company executives carte blance to value assets at their whim, pretty much. But looking at all the accounting principles as a whole, which I believe is what FASB had in mind when creating the Fair Value Standards, those standards are balanced or checked by the other principles I mentioned.
I wonder why the Enron Executive only focused on FASB’s Fair Value Standards and didn’t consider the others?
You may try to cheat, but if you do you may not pass “GO”, you may not collect $200. You may go directly to jail.
I have no sympathy for those who push the envelope, as Skilling, Lay, Fastow, Causey, Duncan and others did. They all knew, were told a number of times, that what they were doing could be viewed by an outside party as breakng the law. Yet they chose to ignore the warnings. Then their deeds were brought into the light and they were brought up on charges. No surprise.