Assessment Task Part A (10 Marks) In addition, to other relevant articles, for assessment task part...

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Assessment Task Part A (10 Marks) In addition, to other relevant articles, for assessment task part A, please read the following article written by Paul M. Healy and Krishna G. Palepu, the fall of Enron case study by Paul M. Healy and Krishna G and write a report that addresses the following issues: The Article is on Bb. a) Define and explain mark-to-market accounting approach and give examples where Enron’s management / accountants perhaps misused this approach to portray a rosy picture of its performance / profitability? b) What are special purpose entities and how Enron’s management used them to fund contracts or achieve financial reporting objectives? c) Enron’s top management enjoyed high compensation/ remuneration including stock options, what was the main purpose of the stock options compensation scheme provided to top management. Your explanation, discussion and argument should principally be based on the assumption of the agency theory. Assessment Task Part B (10 Marks) Describe and analyse the different ways that the five elements of financial elements, as defined in the International FRS conceptual framework, can be measured by listed companies. You are not constrained in this analysis to any one country or set of national accounting standards. Of course Australia is under International Financial Reporting Standards but your research could identify examples of companies operating under U.S. GAAP or some other regulations/guidelines that illustrate what you want to discuss. In completing this assignment, you are required to: Required: a) Quote examples of measurement methodologies from company’s annual reports and clearly reference your sources. b) In explaining how a company has measured an element, explain how the measurement method provided decision-useful information and what you understand decision-useful information to be. c) Provide a critical analysis of the techniques the selected company has used and why a technique deployed may be more useful or practical than another method.  As an example, two (2) techniques have been appended that show how bond liabilities and interest expense are reported and measured in Australia and the USA. The first technique is called The Effective Interest Method and the other is called the Straight Line Method. The Effective Interest Method is permitted under both IFRS and US GAAP. The Straight Line method is only permitted under US GAAP. If you were writing on example on bond liabilities you could get into a discussion on these different techniques and whether one provides more decision useful information than the other. Or you may conclude that neither technique is very satisfactory and the bond liability should be reported in the balance sheet at market value because if the company wanted to redeem the debt by buying back the securities in the open market it would have to pay fair value (and that would be based on a current trading price for the bond).

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STUDENT NAME –	STUDENT ID –	LECTURER NAME –	WORDS – 2020	REFERENCE – HARVARD
EXECUTIVE SUMMARY:
A report has been presented on two different topics. At first brief introductions has been given on both the topics. Then the two topics have been discussed in detail. The first topic is the case study on Enron. A journal article has been chosen by Paul M. Healy and Krishna G. Palepu for the case study. Enron was a very big company but its sudden fall was shock for a lot of people, which has been discussed in detail and a few reasons which led to the fall of this company. 
The next topic of discussion has been five elements of financial elements. The set of accounting standards related to it both under International Financial Reporting Standards (IFRS) and U.S. GAAP has been discussed. The different financial elements have been discussed, the related rules under the International standards has been discussed along with their applicability. Analysis has been made as to the methods applied by a company. The discussion has been extended to if those rules are actually relevant and can be applied or some different rule needs to be applied. At the end, conclusions have been drawn based on the study, research and analysis done for this report. 
Contents
EXECUTIVE SUMMARY:	1
INTRODUCTION:	2
PART A: FALL OF ENRON:	3
PART B: FINANCIAL ELEMENTS	5
CONCLUSIONS:	8
REFERENCES:	8
INTRODUCTION:
	Enron was an Energy company based in Houston, Texas, America. Enron was suddenly bankrupted in October, 2001. It was the case of biggest audit failure. Jeffrey Skilling, then CEO of Enron was able to use accounting loopholes and hidden debts of billion dollars resulted from failed deals and projects, accounting reporting was very poor. Andrew Fastow, then CFO of Enron and few other executives were supporting Jeffrey. Surprisingly, the Board of Directors and Audit Committee of the company, failed to recognize the accounting issues (Cullinan, 2004). Arthur Andersen LLP was the auditor of the company and it was then one of the biggest five audit companies, was also going with the executives of the company and audited the financial statement. Arthur Andersen LLP was charged in court and was closed later. Enron paid compensation to its shareholders and employees, executives went to jail, the company adopted a turnaround strategy. 
	The five elements of financial statement are assets, liabilities, equity, revenue and expenses. There are different standards, rules, measures and different type of financial reporting suggested under US GAAP, IFRS (Van der Meulen, Gaeremynck and Willekens, 2007). These are two major international organizations setting financial standards to be followed at international level.
PART A: FALL OF ENRON:
(a) Mark to market approach reveals that at the end of the fiscal year, the items in financial statement should be valued at the current market price. This approach actually measures the assets and liabilities at the fair value and can be changed over time. It tries to give more of a realistic approach. Assets should not just give the realization value if the company liquidates but it should also give the earning capacity of the asset in the future here arises the necessity of valuation at market price (Allen and Carletti, 2008). Even valuing the trading securities whose benefits will be derived in the future, at market price can be beneficial. 
	Enron used mark to market approach in a totally wrong way to misguide people in believing its financial condition were sound. The company had some complex long term contracts. As per mark to market approach, all the future values related to those contracts were required to be valued at current market price. All the future cash flows and future costs were to be valued so. Some contracts were almost 20 years old, and valuing such long term returns in current market value was difficult. So, the management ultimately made some unrealistic forecasts of future energy prices and interest rates. 
Two examples of misuse of mark to market approach were mentioned by Healy and Palepu, 2003, in their article. The first example was in July 2000,

Assessment Task Part A (10 Marks) In addition, to other relevant articles, for assessment task part A, please read the following article written by Paul M. Healy and Krishna G. Palepu, the fall of...

Answer To: Assessment Task Part A (10 Marks) In addition, to other relevant articles, for assessment task part...

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