Why Did Enron Devise So Many So-Called Special-Purpose Entities (SPEs)

question 19

Essay

Why did Enron devise so many so-called special-purpose entities (SPEs)? What were the consequences of doing so? Why did Enron demonstrate the importance of transparency?

---

Definitions:

Accounts Receivable

Amounts owed to a business by customers for goods or services delivered but not yet paid for, represented as a current asset on the balance sheet.

Allowance Method

A method in accounting used to estimate bad debts expense by anticipating which accounts receivable may not be collected.

Balance Sheet Accounts

Accounts reported on the balance sheet, representing the company's assets, liabilities, and equity at a specific point in time.

Direct Write-off Method

An accounting method where bad debts are charged against income at the time they are determined to be uncollectible, rather than being estimated and accounted for in advance.