Exxon Mobil is taking heat for reporting “record profits” of $8.4 billion for the first quarter of 2006. This was up 7% from the same quarter last year.
While this is a record-breaking figure dollar-wise, the media is scarcely reporting that this profit was earned on gross revenue of $88.98 billion. That makes the net profits 9.4% of revenue. Is that an unreasonable profit level?
Enron had a history of trying to elicit favorable opinions on accounting issues from Arthur Andersen. The executives were aggressive in their reporting of income and expenses, always seeming to find a way to report things in the way that had the best effect on earnings.
As a part of Enron’s merger with Portland General, the company was acquiring a supply contract worth millions. Enron had a history of reporting income as soon as a contract was signed (which is a very aggressive and maybe incorrect accounting treatment), so naturally the executives wanted to book this contract as income immediately. Continue reading
Two existing companies came together to form the company that would later be known as Enron. The original companies were Houston Natural Gas (HNG) and InterNorth. The new company was called HNG/InterNorth, but constant power struggles between the two sides lead management to believe they needed one name to help unify the company. Continue reading
I have recently begun reading the true story of the rise and fall of Enron. The book is Conspiracy of Fools: A True Story by Kurt Eichenwald. It is fascinating so far, so I thought I’d post here about it every so often. You’ll be able to find the posts under the Enron category, and I’ll start all of them with “Book:”, just so you can find them easily.
My first comment… Continue reading
The board of directors of General Motors Corp is asking for an investigation into newly revealed accounting errors which have delayed the filing of its annual report. The SEC filing of its 10-K will be delayed because of accounting errors found in the residential mortgage business of GM’s finance arm, General Motors Acceptance Corp. In addition, other accounting mistakes have been found, and these will cause the company to restate earnings from 2000 to 2005. Continue reading
Wesley Colwell, the former head of accounting of Enron’s wholesale energy unit testified that in July 2000, he shifted $14 million from reserve accounts to pump up earnings. He also testified that neither Kenneth Lay nor Jeffrey Skilling directly told him to manipulate earnings.
Colwell testified that Enron’s wholesale unit delayed financial reports for the fourth quarter of 2000 until they were instructed on how much profit the company wanted to report. Continue reading