identification of financial fraud in enron
TRANSCRIPT
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
5523S1531: Investment, Taxatin, an! F"a#! Examinatin
Assi$nment 3: I!enti%i&atin % %inan&ia' %"a#! in En"n (")*
S#+mitte! T: D"* -n .* N#$ent
S#+mitte! /0: A"i% A-me!
T-is )a)e" is s#+mitte! in )a"tia' %#'%i'ment % t-e "e#i"ements % &#"se n Investment,
Taxatin, an! F"a#! Examinatin
SM( Unive"sit0
Ma"&- 25, 212
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
(ntents
A+st"a&t*********************************************************************************************************************************************3
/a&$"#n! 4 Rise an! %a'' % En"n***********************************************************************************************
Finan&ia' %"a#!s********************************************************************************************************************************5
F"a#! an! A#!it********************************************************************************************************************************6
Dete&tin$ %inan&ia' !ist"ess***************************************************************************************************************6
Dete&tin$ %inan&ia' %"a#!****************************************************************************************************************1
St#!0 % %inan&ia' )e"%"man&e % En"n***************************************************************************************17
St#!0 % in&m)'ete !is&'s#"es % En"n**************************************************************************************3
(n&'#sins************************************************************************************************************************************31
Re%e"en&e****************************************************************************************************************************************32
Ta+'e I: (mmn Si8e Statement 4 /a'an&e S-eet************************************************************************35
Ta+'e II: Statement % (as- F'9***************************************************************************************************3
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Abstract
F"a#! !ete&tin is ne % ma;" &-a''en$es t %inan&ia' &mm#nit0* Fai'#"es % 'a"$e
&")"atin 'ie En"n n'0 -i$-'i$-te! t-e a+i'it0 % t-e 'a"$e &")"ate t mis$#i!e investin$
&mm#nit0 an! %inan&e )"%essina's* T-e"e is n s-"ta$e % a))")"iate t's t-at &an i!enti%0
s#&- %"a#! +e%"e t-e0 "ea&- a'a"min$ )")"tin* T-is st#!0 "evie9e! va"i#s t's avai'a+'e %"
%"a#! !ete&tin an! em)'0e! t-em n En"n* T-e st#!0 %#n! t-at ma;"it0 % t-e t's &#'!
-ave easi'0 i!enti%ie! t-e 9"n$ !in$ % En"n at ea"'0 sta$es % s#&- &mmitment*
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
Background – Rise and fall of Enron
On 2n! O&t+e", 22, An!"e9 Fast9, %"me" (-ie% Finan&e O%%i&e" % En"n v'#nta"i'0
s#""en!e"e! t F/I* .e 9as &-a"$e! 9it- se"ities %"a#!, mai' %"a#!, 9i"e %"a#!, mne0
'a#n!e"in$, an! &ns)i"a&0 #sin$ )a"tne"s-i)s t-at 9e"e e)t %% %"m t-e +s % En"n* T-is
ma"e! t-e 'ast 'e$ % t-e ;#"ne0 % En"n %"m a sma'' &m)an0 t a )at-* T-e
En"n st"0 &mmen&es in 1?5 an! $"e9 in next %i%teen 0ea"s %"m a 'a"$e nat#"a' $as )i)e 'ine
&m)an0 t an ene"$0 t"a!in$ %i"m !ea'in$ 9it- $as an! e'e&t"i&it0* In %a&t En"n -a! %"a0e! int
nn* A'' t-ese "e#i"e! a!!itina' 'ines % &"e!it 9-i&- 9as
!i%%i't t &me +0 in vie9 % existin$ -i$- !e+t an! ass&iate! )"+'em % se"vi&in$ t-em*
T-ese &m)e''e! En"n t "es"t t %inan&ia' an! 'e$a' s-enani$ans in&'#!in$ "e&$nisin$
"even#e a-ea! % !e'ive"0 % ene"$0 as 9e'' as !ivestin$ '9 "et#"n investments t entities 9it-in
t-e same $"#) t-#$- 'e$a''0 se)a"ate*
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
It 9as 'ate" +se"ve! t-at +e-in! t-e "ema"a+'e $"9t- t-e"e 9e"e m"+i! ta'es % #sin$
)a"tne"s-i)s t -i!e 'sses an! !e+ts* T-e !is&ve"0 &a#se! s-a"e )"i&es % En"n &me !9n
%"m a -i$- % US@? t 37 &ents*
T-e %a'' % En"n 9as &a#se! +0 seve"a' %a&t"s in&'#!in$ t-e %''9in$ =M0e",
M&G#i$an, B C"et'9, 25>:
1* " )"%it ma"$in %"m t-e &"e ene"$0 +#siness 9-i&- 9as t-e"9ise $"9in$ at a ve"0
%ast )a&e*
2* A n#m+e" % #n)"%ita+'e investments 9e"e ma!e +0 En"n in&'#!in$ settin$ #) %i+"e<
)ti& &a)a&it0 an! t"a!in$ %a&i'ities, )9e" )'ant in In!ia, 9ate" +#siness in En$'an!, an!
e'e&t"i&it0 !ist"i+#tin in /"a8i'* Ea&- -avin$ si$ni%i&ant investment, t-e m#'ative
im)a&t 9as seve"e*
3* En"n &"eate! a &m)'ex se"ies % )a"tne"s-i) t ee) assets an! !e+t +'i$atins #t %
t-ei" 9n +a'an&e s-eet* T-e !e+t +'i$atins "e#i"e! "e)a0ment % sme %% "e&$nises %"a#! t +e a 'e$a' &n&e)t an! 'imits t-e a#!it"s
%s n a&ts t-at -ave &a#se! mate"ia' %inan&ia' misstatement* T-e 'ine % !istin&tin +et9een
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
%"a#! an! e""" "emains intent* F"a#! is an intentina' a&t 9-i'e e""" in #nintentina'* F"a#! -as
+een &'assi%ie! in t-e %''9in$ t9 $"#)s:
1* Misstatements arising from fraudulent financial reporting: T-ese a"e !e'i+e"ate
misstatements " missins &mmitte! 9it- an intentin t !e&eive t-e #se"s % %inan&ia'
statement* T-ese a"e #s#a''0 &mmitte! +0 &m)"misin$ a&&#ntin$ "e&"!s, %a'si%0in$
" mittin$ im)a&t % si$ni%i&ant events, an! misa))'i&atin % a&&#ntin$ )"in&i)'e*
2* Misstatement arising from misappropriation of assets: T-ese a"e &ases %
misa))")"iatin % assets % t-e entit0 an! -i!in$ t-e im)a&t t-e"e% in t-e %inan&ia'
statements*
SAS ?? i!enti%ies t-"ee &n!itins as &n!#&ive %" a %"a#!* T-ese a"e as %''9s:
1* Incentive: T-e mana$ement an! em)'0ees -ave an in&entive " a"e #n!e" )"ess#"e t
&mmit %"a#!
2* Opportunity: T-e"e a"e &i"mstan&es in&'#!in$ 'a& % ine%%e&tive &nt"' t-at )"vi!es
an ))"t#nit0 t &mmit %"a#!*
3* Rationalise: T-e exetives inv've! in %"a#! &an "atina'ise t-ei" %"a#!#'ent a&t +0
as&"i+in$ it t &m)#'sin % sme in! " t-e"*
One ma;" stae-'!e" in t-e )"&ess % %"a#! )"eventin is t-e )"ess* M#&- as t-e )"ess
&an a&t as a 9at&-!$ %" %inan&ia' %"a#!s t-e0 t-emse'ves %a&e a t"a!e
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
Fraud and Audit
One % t-e ma;" "easns +e-in! %ai'#"e % a#!it"s t i!enti%0 %"a#! is t-e ve"t attentin
t %inan&ia' meas#"es* It -as +een +se"ve! =/"a8en, nes, B im+e'man, 2?> t-at i% t-e
a#!it"s an! t-e" stae-'!e"s i!enti%0 nn a#!it"s a"e "e#i"e! t assess t-e )"esen&e an! im)a&t % )ssi+'e %"a#!s
n t-e a#!it* In a ma;" !e)a"t#"e %"m &nventina' a#!it )-i's)-0 % )"es#min$ t-e a#!it
+;e&t t +e %"ee %"m e"""s an! %"a#!s #n'ess t-e"e a"e evi!en&e t t-e &nt"a"0 =T-e Cin$stn
(ttn Mi'' (m)an0 imite!, 1?7>, SAS ?? "e#i"es t-e a#!it"s t exe"&ise )"%essina'
s&e)ti&ism 9-en &nsi!e"in$ t-e )ssi+i'it0 t-at a mate"ia' misstatement !#e t %"a#! &#'! +e
)"esent* SAS ?? &'ea"'0 states t-at a#!it"s -ave "es)nsi+i'it0 t )'an an! )e"%"m t-e a#!it in a
9a0 t-at &an )"vi!e "easna+'e ass#"an&e t-at t-e %inan&ia' statements a"e %"ee %"m mate"ia'
statement &a#se! e""ne#s'0 " %"a#!#'ent'0*
/"ainst"min$ +0 a#!it"s t $ene"ate i!eas % )ssi+'e %"a#! is a #se%#' 9a0 % +ein$
sensitise! t %"a#! "iss =(a")ente", 26>* It 9as a's +se"ve! t-at t-#$- +"ainst"min$
"e!#&es ve"a'' i!eas $ene"ate!, +#t im)"ves n t-e #a'it0 % t-e %"a#! i!ea* It -as a's +een
+se"ve! t-at a#!it"s 9- %in! m"e %"a#! i!eas em)'0 a#!it )"&e!#"es t-at +ette" ta"$ets
)ssi+'e %"a#!s =Simn, 2>*
Detecting financial distress
Ea"'0 !ete&tin % %inan&ia' !ist"ess -as +een a &-a''en$e t )"%essina's an!
a&a!emi&ians a'ie* S#&- !ete&tin e%%"ts -ave $ene"a''0 %se! n i!enti%0in$ va"ia+'es t-at
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
&an )"e!i&t a %inan&ia' &''a)se* It ma0 +e nte! t-at %"a#! &an +e ne % t-e "easns %" !ist"ess
as m#&- as )" +#siness )e"%"man&e* One % t-e )inee"in$ 9"s in t-is a"ea is n9n as
A'tman s&"e =A'tman, 1?7>* T-e m!e' is +ase! n m#'tiva"iate ana'0sis as&"i+in$ 9ei$-ts t
%a&t"s t-at &an )"e!i&t %inan&ia' s'ven&0 % a &m)an0* T-e %a&t"s t-at 9e"e &nsi!e"e! %" t-is
)#")se "e)"esente! 'i#i!it0, )ast )"%ita+i'it0, )"esent )"%ita+i'it0, 'eve"a$e, an! sa'es t#"nve"
% t-e "$anisatin* T-e +asi& m!e' +se"ve! t-e %''9in$:
ariable !omputation
Mean of
Bankrupt "roup
Mean of non#
bankrupt group
F#ratio
X1 "in$ &a)ita' H Tta' assets * T-e EM s&"e is &m)#te! as #n!e":
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
EM S&"e 7*57X1 J 3*27X2 J 7*62X3 J 1*5XJ 3*25 9-e"e
X1 "in$ &a)ita' H Tta' assets
X2 Retaine! ea"nin$s H Tta' assets
X3 O)e"atin$ in&me H Tta' assets
X / va'#e % e#it0 H Tta' 'ia+i'it0
T-e EM s&"e is &m)#te! an! t-e e#iva'ent "atin$ is +taine! +0 mat&-in$ t-e s&"e 9it- US
+n! "atin$ e#iva'en&e s-9n +e'9 =(aette, A'tman, Na"a0anan, B Nimm, 2>:
$one $#score Bound Rating $one $ %core Bound Rating
% a f e $ o n e
*15 K*15 AAA
" r e y $ o n e
5*75 5*5 ///<
6*7 *15 AAJ 5*25 5*75 //J
6*3 6*7 AA *?5 5*25 //
6* 6*3 AA< *65 *?5 //<
7*5 6* AJ *5 *65 /L
7*75 7*5 A
D i s t r e s s $ o n e
*15 *5 /
7* 7*75 A< 3*65 *15 /<
7*25 7* ///J 3*2 3*65 (((J
5*5 7*25 /// 2*5 3*2 (((
1*65 2*5 (((<
1*65 1*65 D
A
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
3* "%ita+i'it0: E/ITDA H Tta' assets
* (ve"a$e: Retaine! Ea"nin$s H Tta' assets
5* A&&#nt: E/ITDA H Inte"est ex)enses
Ant-e" va"iatin % t-e * T-is m!e' s#$$ests t-at %" :
1*2X1 J 1*X2 J 3*3 X3 J *7X J 1X5 9-e"e
X1 S-a"e-'!e"s e#it0 H Tta' assets
X2 Retaine! ea"nin$s H Tta' assets
X3 E/IT H Tta' assets
X Ma"et va'#e % e#it0 H / Va'#e % !e+t
X5 Reven#e H Tta' assets
Ant-e" ma;" t' % %"e&astin$ %inan&ia' %ai'#"e is (
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
"in$ &a)ita' =(#""ent Assets> J Retaine! ea"nin$s J T"ai'in$ E/IT % 12 mnt-s J T"ai'in$
"even#e % 12 mnt-s H Ave"a$e t tta' asset % 12 mnt-* It -as +een +se"ve! t-at (-ans
s&"e t"en! in t-e same !i"e&tin as A'tman " #st0'ni& s&"e*
A )"+it m!e' %" i!enti%0in$ %inan&ia' &-a"a&te"isti&s % %i"ms t-at a"e 'ie'0 t
mani)#'ate ea"nin$s #se! ei$-t "atis n9n as /eneis- "atis =ames, Sti&ne0, /"9n,
/a$insi, B /"a!s-a9, 21>* T-ese a"e !issse! +e'9:
1* Days sales in receivables inde& 'D%RI(: T-is is &m)#te! +0 "e'atin$ t-e "ati %
a&&#nts "e&eiva+'es 9it- sa'es at ""ent 0ea" en! 9it- t-e same "ati % 'ast 0ea" en!*
O%ten a -i$- %i&titi#s in&"ease in sa'es is &m)'emente! +0 an in&"ease in a&&#nts
"e&eiva+'e*
2* "ross margin inde& '"MI() T-is "e'ates $"ss ma"$in as a )e"&enta$e % sa'es % 'ast
0ea" 9it- t-e simi'a" )e"&enta$es % 'ast 0ea"* A !e&'ine in $"ss ma"$in 9i'' &a#se a "ati
t +e 'ess t-an 1*
3* Asset *uality inde& 'A+I() T-is &m)#tes t-e s-a"e % assets t-e" t-an ""ent assets,
)")e"t0, )'ant an! e#i)ment, an! se"it0 investments in tta' assets* Remainin$ assets
a"e mst'0 intan$i+'e 9it- 'ess &e"tain %#t#"e +ene%its* An in&"ease in t-e in!ex va'#e ma0
+e &a#se! +0 an in&"ease! &a)ita'isatin % a "i$-t%#''0 "even#e ex)ense*
* %ales gro,t- inde& '%"I() T-is "e'ates t-e sa'es % &nsetive t9 0ea"s* T-#$- s#&-
$"9t- is nt ne&essa"i'0 mani)#'ative +#t in&'#!es s#&- )ssi+i'it0 t att"a&t %inan&e*
5* Depreciation inde& 'DE.I() T-is is ex)"esse! as t-e "ati % !e)"e&iatin t )"e<
!e)"e&iatin net )")e"t0, )'ant, an! e#i)ment va'#e % ""ent 0ea" 9it- simi'a" "ati %
)"evi#s 0ea"* A 'ess t-an 1 "ati ma0 +e )"m)te! +0 a "e!#&e! "ate % !e)"e&iatin
e%%e&te! +0 'en$t-enin$ #se%#' 'i%e*
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
7* %elling and administrative e&pense inde& '%AI() T-is is &m)#te! as a "ati % s#&-
ex)enses 9it- sa'es va'#e % ""ent 0ea" 9it- simi'a" "ati % )ast 0ea"* An in!ex va'#e %
$"eate" t-an 1 9#'! s#$$est -i$-e" ma"etin$ ex)ense in anti&i)atin % %#t#"e sa'es* I%
t-e %i"m %ai's t in&"ease sa'es, &-an&es % ea"nin$ mani)#'atin in&"eases*
6* /everage inde& '/"I() T-is in!ex is &m)#te! +0 "e'atin$ "atis % ""ent 'ia+i'ities
an! 'n$ te"m !e+t t tta' %inan&in$ in t9 &nsetive 0ea"s* An in&"ease! !e+t
en-an&es t-e &-an&es % %ai'in$ !e+t &venants an! &nse#ent'0 "es"ts t mani)#'atins*
* 0otal accruals to total assets '0A0A() T-is "ati is a""ive! +0 !ivi!in$ tta' a&&"#a' +0
tta' asset 9-e"e tta' a&&"#a' is t-e !i%%e"en&e +et9een in&me %"m &ntin#in$ )e"atin
an! &as- %'9 %"m )e"atins* A -i$- "ati in!i&ates #n"ea'ise! "even#e t-at -as +een
"e&$nise! in t-e %inan&ia' statements*
/eneis- -as )")se! a &m)site in!ex &m)#tatin %"ame9", name! M
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
!* "i&e t (as- F'9
2* "%ita+i'it0
a* "%it ma"$in
+* T) 'ine $"9t- =>
&* /ttm 'ine $"9t- =>
3* Mana$ement E%%e&tiveness
a* Ret#"n n Assets =>
+* Ret#"n n E#it0 =>
* Finan&ia' St"en$t-
a* (#""ent Rati
+* De+t e#it0 "ati
Detecting financial fraud
In a!!itin t !esi$nin$ % t's %se! n i!enti%0in$ %inan&ia' !ist"ess, e%%"ts -ave a's
+een ma!e t i!enti%0 %inan&ia' %"a#!s* It -as +een a!mitte! ea"'ie" t-at %inan&ia' %"a#! &an 'ea! t
%inan&ia' !ist"ess m#&- as )" +#siness )e"%"man&e &an* A %"a#! )"e!i&tin m!e' 9as
&nst"#&te! #sin$ %a&t"s "e'atin$ t )"ess#"e an! ))"t#nit0 4 t-e )"ima"0 ena+'e"s % %"a#!
=S#sen B "i$-t, 27>* T-is m!e' is &nst"#&te! as %''9in$:
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
FRAUD i α J 1 NI(FOTAi J 2SGROi J 3AGROi J SAARi J 5SATAi J
7FREE(i J 6EVERAGEi J ONERS.Ii J ?5ONi J 1ROAi J 11FOROSi J
12/OUTi J 13AUD(OMMi J 1AUD(SIEi J 15INDi J 17AUDMEETi J 16(EOi J
1AUD(.ANGi J 1?AUDREORTi J 2TATAi J iƐ
T-e %''9in$ ta+'e ex)'ains t-e "is %a&t"s #se! a'n$ 9it- t-ei" &'assi%i&atin #n!e"
SAS ?? =AI(A, 212> an! +asis % &m)#tin$ va'#es % ea&- % t-ese "is %a&t"s*
%A% 11 Factors !ategory /egend Definition
"ess#"e %a&t"s
Finan&ia'
sta+i'it0
NI(FOTA=O)e"atin$ in&me 4 (as- %'9 %"m
)e"atins> H Tta' assets
SGRO(-an$e in sa'es 4 In!#st"0 ave"a$e
&-an$e in sa'es
AGROAve"a$e &-an$e in tta' assets %"
t9 0ea"s +e%"e t-e 0ea" % %"a#!
SAAR Sa'es H A&&#nts Re&eiva+'e
SATA Sa'es H Tta' assets
Exte"na'
"ess#"e
FREE( Net &as- %'9 %"m )e"atin$ a&tivities
4 &as- !ivi!en! 4 &a)ita' ex)en!it#"e
EVERAGE Tta' !e+t H Tta' assets
e"sna'
Finan&ia' Nee!
ONERS.IT-e m#'ative )e"&enta$e %
9ne"s-i) in t-e %i"m -e'! +0 insi!e"s
5 ON
e"&enta$e % s-a"es -e'! +0
mana$ement 9- -'! $"eate" t-an 5
% t-e #tstan!in$ s-a"es
Finan&ia'
Ta"$etsROA Ret#"n n assets
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
%A% 11 Factors !ategory /egend Definition
O))"t#nit0
Nat#"e %
In!#st"0
FOROS F"ei$n sa'es H Tta' sa'es
Ine%%e&tive
Mnit"in$
/OUTe"&enta$e % +a"! mem+e"s 9- a"e
#tsi!e mem+e"s
AUD(OMM
A !#mm0 va"ia+'e 9-e"e 1 mentin
% ve"si$-t +0 an inte"na' a#!it
&mmittee an! n s#&- mentin
AUDSIE
T-e si8e % a#!it &mmittee s&a'e! +0
+a"! si8e
INDe"&enta$e % a#!it &mmittee mem+e"s
9- a"e in!e)en!ent % t-e &m)an0
AUDMEETT-e n#m+e" % a#!it &mmittee meetin$
-e'!
(EO
/ina"0 va'#e 9it- 9-e"e va'#e is 1 i%
&-ai")e"sn -'!s mana$e"ia' )sitinan! t-e"9ise
Ratina'isatin Ratina'isatin
AUD(.ANG
A !#mm0 va"ia+'e %" &-an$e in
a#!it": 1 &-an$e in a#!it" in 2 0ea"s
)"i" t %"a#! &""en&e an! n
&-an$e
AUDREORT
A !#mm0 va"ia+'e %" an a#!it: 1
#n#a'i%ie! )inin an! #n#a'i%ie!
)inin 9it- a!!itina' 'an$#a$e
TATA Tta' a&&"#a's H tta' assets
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
In an inte"estin$ st#!0 % assessin$ )e"%"man&e % a &m)an0 +ase! n #sa$e % ne$ative
9"!s in t-e text % %inan&ia' "e)"ts, it 9as +se"ve! text#a' ana'0sis &nt"i+#tes t im)"ve!
)"e!i&tive a+i'it0 a'n$ 9it- t"a!itina' %inan&ia' va"ia+'es =#$-"am B M&Dna'!, 211>* It
9as a's +se"ve! t-at mst % 9"!s t-at -ave ne$ative im)'i&atin is &mmn )a"'an&e a"e nt
&nsi!e"e! ne$ative is %inan&ia' #sa$e*
%tudy of financial performance of Enron
A "evie9 % t-e %inan&ia' )e"%"man&e % En"n +et9een 1??7 an! 2 +"in$s #t t-at
t-e %s 9as mst'0 n $"9t- % +a'an&e s-eet "at-e" t-an n )"%ita+i'it0 " sta+i'it0* T-e
%''9in$ se&tin !es&"i+es va"i#s as)e&ts % t-e ana'0sis*
Poor profitability
T-e )"%ita+i'it0 % En"n in t-e 0ea"s % st#!0 s-9s a ve"0 '9 )e"&enta$e 9-en
ex)"esse! a$ainst tta' "even#e* In %a&t, t-e" in&me -as %ten +een &nt"i+#tin$ m"e t-an t-e
)e"atin$ in&me as is evi!ent %"m t-e ta+'e +e'9
As on 23st December
4555 3111 3116 3117 3118
O)e"atin$ In&me 2 2 5
Ot-e" In&me 3 1 3
G"ss In&me 2 5 5 3 ?
Net In&me 1 2 2
A &'se" eva'#atin % t-e &m)nents % "even#e an! &st ex)"esse! as a )e"&enta$e %
tta' "even#e "evea's t-at ea"nin$ %"m t-e main )e"atin$ se$ments 9e"e even ne$ative* T-is is
ex&'#!in$ t-e" )e"atin$ ex)enses an! !e)"e&iatin*
As on 23st December
4555 3111 3116 3117 3118
S-a"e % "even#e
Nat#"a' Gas an! Ot-e" )"!#&ts 5 ? 2 75
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
E'e&t"i&it0 3 3 5 25 6
Tta' S-a"e % Reven#e 6 6 ? ?1
(st % $as, e'e&t"i&it0, an! t-e" )"!#&ts ? 6 5 6?
It is t +e nte! t-at in t-e 0ea"s 1??? an! 2, En"n a&t#a''0 'st mne0 in t-e main
'ine % a&tivit0* It 9as ea"nin$ %"m meta's =1???: , 2: ?> an! t-e" s#"&es =1???: 13,
2: 6>, +t- in 1??? an! 2 as a )e"&enta$e t tta' "even#e t-at )"evente! En"n %"m
-avin$ an )e"atin$ 'ss*
Mark to market
A st#!0 % t-e a&&#ntin$ )'i&ies % En"n "evea's #se % ma" t ma"et a&&#ntin$ %"
t-e )"i&e "is mana$ement a&tivities 9-i&- in&'#!es ex)s#"e in %"9a"!s, s9a)s, )tins, an!
t-e" !e"ivatives* T-ese a"e "e%'e&te! in %ai" va'#e in t-e /a'an&e S-eet an! t-e im)a&t %
va'#atin !i%%e"en&e, #n"ea'ise! $ains, an! 'sses 9e"e "e&$nise! #n!e" t-e" "even#es* T-e
&as- %'9 im)a&t % t-e same 9as &nsi!e"e! as &as- %'9s %"m )e"atin$ a&tivities in t-e
&ns'i!ate! statement % &as- %'9*
T-e im)"tan&e % assets %"m )"i&e "is mana$ement a&tivities &an +e #n!e"st! %"m
t-e %''9in$ ta+'e ex)"essin$ t-is asset as a )e"&enta$e % tta' assets*
4555 3111 3116 3117
Assets %"m )"i&e "is mana$ement a&tivities
In&'#!e! in ""ent assets 1 6 7 7
In&'#!e! in Investments an! Ot-e" Assets 1 ? 6 5
Tta' S-a"e in Tta' Assets 32 17 13 11
ia+i'ities %"m )"i&e "is mana$ement a&tivities
In&'#!e! in ""ent 'ia+i'ities 17 7 ? 7In&'#!e! in De%e""e! &"e!its an! Ot-e" 'ia+i'ities 1 ? 5
Tta' s-a"e in Tta' ia+i'ities 3 15 1 1
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
It is nte9"t-0 t-at in&"easin$ )a"t % t-e tta' assets an! 'ia+i'ities % En"n &m)"ise!
% v'ati'e assets an! 'ia+i'ities* T-is a's s-9s t-at En"n -as +een in&"easin$'0 mvin$ a9a0
%"m a t"a!itina' ene"$0 &m)an0 t an ene"$0 t"a!in$ &m)an0*
Reporting agency earnings at contract value
En"n -as in&"easin$'0 %se! n t-e 9-'esa'e ene"$0 se"vi&es 9-e"e t-e0 ente"e!
ma"et ea"'0 an! a&te! as a ma"et mae"* T-is 9as s#))"te! a$$"essive'0 +0 En"n On'ine
9-i&- 9as 'a#n&-e! in 1??? an! -an!'e! 5 t"ansa&tins 9it- a $"ss ntina' va'#e % USD
337 +i''in in t-e 0ea" 2 =En"n, 2>*
T-e t"a!in$ a&tivit0 % En"n 9as "e)"te! in t-e ntina' va'#e* Usin$ me"&-ant m!e'
% a&&#ntin$ En"n "e)"te! a'' t-e t"ansa&tins at t-e va'#e % t-e t"a!e instea! % at t-e am#nt
ea"ne! as +"e"a$e an! t"a!in$ %ees* Un!e" t-e me"&-ant m!e', t-e +;e&t % t-e t"a!e 9as
taen ve" +0 En"n, in&'#!in$ t-e "is % se''in$ an! &''e&tin$ t-e a&&#nts "e&eiva+'es* T-#$-
nt i''e$a' t a!)t, #sa$e % t-is met-! a''9e! En"n t "e)"t t-ei" "even#es an! &st %
$!s s'! at 'east %i%t0 times ve" 9-at 9#'! -ave +een "e)"te! #n!e" t"a!itina' a&&#ntin$
9-e"e n'0 t-e "even#e ea"ne! 9#'! -ave +een "e&$nise! as is evi!ent %"m t-e %''9in$ ta+'e
=Ra))"t B D-a"an, 2>*
.articulars 4555 3111 3116
Re)"te! )e"atin$ "even#es =Mi''in USD> 1,6? ,112 31,27
ess: Re)"te! &st % $!s s'! =Mi''in USD> ?,516 3,671 27,31
G"ss "%it =Mi''in USD> 7,262 5,351 ,6?
e" &ent "even#e $"9t- "e)"te! +0 En"n 151*3 2*3 <
e" &ent "ea' "even#e $"9t- 16*2 ?*6
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
T-is is ne "easn 9-0 En"n -a! s#&- )" )"%it "atis, a 9eaness 9-i&- 9as
s#&&ess%#''0 +s"e! +0 a $"eat $"9t- st"0* Re)"tin$ #n!e" a'te"native met-! % a&&#ntin$
9#'! -ave "e'e$ate! "an % En"n %"m n#m+e" 6 t n#m+e" 26 in t-e F"t#ne 5 'ist*
Special purpose entity
T-e in&"ease! im)a&t % ene"$0 t"a!in$ an! its )tentia' t a!ve"se'0 a%%e&t En"n, )"m)te!
En"n t #se %%
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
T-e in&me statement % En"n ve" %ive 0ea"s =1??7 9as st#!ie! t a""ive at t-e
ave"a$e st"#&t#"e % t-e in&me statement as )e"&enta$e % tta' "even#e* T-e &e%%i&ient %
va"iatin as &m)#te! t %in! #t -9 sta+'e 9as t-e st"#&t#"e a"#n! t-e ave"a$e a&"ss t-ese
%ive 0ea"s* T-e "es#'ts % t-e st#!0 a"e )"vi!e! in t-e %''9in$ ta+'e*
Average
!oefficient
of variationIncome %tatement
Revenues
Nat#"a' Gas an! t-e" )"!#&ts 5 2?
E'e&t"i&it0 3
T"ans)"tatin 2 16
Meta's 2 22
Ot-e" 6
0otal Revenue 3559 59
!ost and E&penses
(st % $as, e'e&t"i&it0 an! t-e" )"!#&ts 7 7
O)e"atin$ ex)enses 6 36
Oi' an! $as ex)'"atin ex)enses ?6
De)"e&iatin, !e)'etin an! am"ti8atin 2 2
Taxes, t-e" t-an in&me taxes 1 5
(nt"a&t "est"#&t#"in$ &-a"$e 1 22
Im)ai"ment % 'n$
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
"e%e""e! st& !ivi!en!s 2
Earnings on common stock 49 789
It ma0 +e +se"ve! t-at t-#$- t-e tta' &sts an! ex)enses "emaine! %ai"'0 sta+'e a"#n!
?6 % t-e tta' "even#e, s-a"e % ea&- in!ivi!#a' &nstit#ent va"ie! "a!i&a''0 9it- ex&e)tin %
&st % $as, e'e&t"i&it0, an! t-e" )"!#&ts* It is inte"estin$ t +se"ve t-at En"n !i! nt "e)"t
an0 ex)enses n Oi' an! Gas Ex)'"atin in 1??? an! 2, a testimn0 t t-e %a&t t-at t-e
&m)an0 9as mvin$ a9a0 %"m a man#%a&t#"e" t a t"a!e"*
Balance Sheet Analysis
T-e %a&t % s-i%t % em)-asis is a's evi!ent %"m t-e st"#&t#"e % t-e +a'an&e s-eet* Un!e"
t-e -ea! % "e)"t % ")e"t0, )'ant, an! e#i)ment, ma;" &m)nents 9e"e tta''0 "e)'a&e!
an! "estate! +et9een 1??6 < 1?? an! 1??? 4 2 as is s-9n in t-e ta+'e +e'9:
.roperty: .lant: and E*uipment: at cost '=%D Million( 4555 3111 3116 3117Ex)'"atin an! )"!#&tin, s#&&ess%#' e%%"ts met-! 1 2?1
T"ans)"tatin an! !ist"i+#tin 51 526?
-'esa'e ene"$0 )e"atins an! se"vi&es 5 36?
Retai' ene"$0 se"vi&es 11
(")"ate an! t-e" ? 2?
Nat#"a' $as t"ansmissin 7?17 7?
E'e&t"i& $ene"atin an! !ist"i+#tin 677 3552
Fi+"e )ti& net9" an! e#i)ment 3? 36?
(nst"#&tin in )"$"ess 72 112
Ot-e" 2257 1?13155? 13?12 156?2 1362
ess: A&m#'ate! !e)"e&iatin, !e)'etin, an! am"ti8atin 3617 3231 5135 562
.roperty: and E*uipment: 2 35863 358;7 1375
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
An ana'0sis % &mmn si8e statement % /a'an&e S-eet % En"n %"m 1??6 t 2 +"in$s #t
inte"estin$ +se"vatins* T-e &m)'ete &mmn si8e statement is )"!#&e! in Ta+'e I in t-e
annex#"e*
Balance %-eet 4555 3111 3116 3117
A%%E0%
Tta' ""ent assets 7 22 2 1
Tta' investment an! t-e" assets 37 7 3 1
")e"t0, an! E#i)ment, Net 1 32 37 1
0otal Assets 1 1 1 1
/IABI/I0IE% A
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
+e&ame )#+'i& n9'e!$e t-at t-e !ivestments 9e"e mst'0 t ass&iate &m)anies an! 9e"e
m"e % + ent"ies t-an +ein$ a&t#a''0 "ea'ise! "even#e* T-is in%'9 9as +ein$ #se! in
investin$ a&tivities in&'#!in$ "e)a0ment % 'n$ an! s-"t te"m !e+ts* At t-e same time En"n
9as in!#&tin$ ne9 'n$ te"m !e+ts 9-i&- 9as me"e'0 &-an$in$ t-e !e+t &m)sitin "at-e" t-at
!e+t e#it0 "ati* T-#s e%%e&tive'0 )"&ee!s %"m "e'ease % 9"in$ &a)ita' an! sa'e % me"&-ant
assets 9e"e +ein$ #se! t "e)a0ment % !e+ts* T-e &as-%'9 statement % En"n is )"vi!e! in
Ta+'e II % t-e annex#"e*
Pustylnick Modified Altman
T-e %''9in$ ta+'e s-9s &m)#tatin % t-e #st0'ni& m!i%ie! A'tman s&"e % En"n
%" %ive 0ea"s*
!omputation Factors eig-t 4555 3111 3116 3117 3118
S-a"e-'!e"s E#it0 HTta' Asset 1*2 *21 *3 *2 *2 *266
Retaine! ea"nin$s H Tta' assets 1* *1 *1 *1 *3 *2
E/IT H Tta' Assets 3*3 *1 *2 *2 *1 *3
Ma"et va'#e % e#it0 H Tta' !e+t *7 * *26 *17 *13 *22
Reven#e H Tta' assets *??? 1*536 1*2 1*7 *75 *23
$ %core 3C717 3C;7> 3C273 3C375 3C347
T-e &m)#te!
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
Chanos Discriminant Function
T-e va'#e % (-ans !is&"iminant %#n&tin &an +e &m)#te! as +e'9:
!omputation Factors 4555 3111 3116 3117 3118
"in$ &a)ita' =(#""ent Assets> J Retaine!
ea"nin$s J T"ai'in$ E/IT % 12 mnt-s J T"ai'in$
"even#e % 12 mnt-s H Ave"a$e t tta' asset %
12 mnt-
2*? 1,57 1*3?6 1*17 1*261
T-e (-ans !is&"iminant s&"e maintains a &'se &""e'atin 9it- #st0'ni& :
Ratios
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
s
Da0s sa'e in "e&eiva+'es in!ex 1*31 1*75
G"ss ma"$in in!ex 1*1 1*1?3
Asset #a'it0 in!ex 1*3? 1*25
Sa'es $"9t- in!ex 1*13 1*76
Tta' a&&"#a's t tta' assets in!ex *1 *31
T-e "atis &m)#te! a+ve +"in$ %"t- t-e %''9in$ sa'ient "eve'atins:
1* Sin&e 1?? t-e !a0s sa'e in "e&eiva+'e in!ex s-9s an in&"easin$ t"en! 'minatin$ in a
va'#e ex&ee!in$ 1 in t-e 0ea" 2* T-is si$ni%ies t-at t-e &m)nent % a&&#nts
"e&eiva+'e in tta' sa'es 9as in&"easin$* T-ese a"e #s#a' 9-en eit-e" t-e entit0
a$$"essive'0 #ses &"e!it t +st sa'es " -ave nn
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27
INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
5* Simi'a" sit#atin is +se"ve! %"m t-e va'#es % a&&"#a's t asset +ase in!ex im)'0in$
a&&e'e"ate! a&&"#a's #sin$ t-e &"e!it )'i&0*
S#mma"i'0 t-e /eneis- "atis #ne#iv&a''0 )inte! #t t9a"!s t-e )ssi+'e mani)#'atin in
t-e %inan&ia' statements % En"n*
rove and Cook Ratios!
T-e G"ve an! ( "atis %" )e"%"man&e a))"aisa' a"e &m)#te! +e'9 =Te+$,
211>:
!ategory Ratio 4555 3111 3116 3117 3118
Va'#atin
"i&e t / Va'#e 1* *?6 *76 *5? *65
"i&e t Ea"nin$s 65 3 2 11 21
"i&e t Sa'es *7 * *72 *7 *?1
"i&e t (as- F'9 5 112 167 1 6
"%ita+i'it0
"%it ma"$in *?6 *? *6 *1 *5
T) 'ine $"9t- => 151 2 5 53 5
/ttm 'ine $"9t- => 1 26 56 2 13
Mana$ement
E%%e&tiveness
Ret#"n n Assets => 1*5 2*6 2* *
Ret#"n n E#it0 => ? ? 1 1*? 17
Finan&ia' St"en$t-(#""ent Rati 1*6 1*6 *?6 1*7 1*6
De+t e#it0 "ati *65 *65 1* 1*11 *?
Ana'0sis % t-ese "atis +"in$s #t t-e %''9in$ -i$-'i$-ts:
1* Des)ite t-e $"eat $"9t- "ate, t-e ma"et va'#atin % En"n -as +een ext"eme'0 )"* In
%a&t ex&e)t in 2, t-e ma"et !i! nt even "e&$nise t-e + va'#e % t-e &m)an0*
T-is ma0 a's in!i&ate t-at t-e ma"et 9as nt &nvin&e! n t-e %inan&ia' "e)"ts %
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26
INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
En"n* T-is is a's "e%'e&te! in t-e '9 )"i&e ea"nin$ an! )"i&e t sa'es "atis* T-e -i$-
)"i&e t &as- %'9 9as &nt"i+#te! $"eat'0 +0 a$$"essive "e&$nitin % "even#e +0 En"n
!es)ite '9 "ea'isatin*
2* T-e )"%ita+i'it0 "atis 9e"e ve"0 '9 t-#$- t-e $"9t- "ate 9as ext"eme'0 -i$-* In %a&t
t-e 0ea" n 0ea" $"9t- "ate % Net in&me 9as 56 in 1?? 9-e"eas t-e "even#e
$"9t- 9as 5* Simi'a"'0 in t-e 0ea" 2, "even#e $"9t- 9as 151 as a$ainst a net
in&me $"9t- % 1* T-ese nn:
1* De"ivatives: T-e ntes ! nt "evea' t-e t0)es % !e"ivatives it -a! 9it- t-e ass&iate
&m)an0 EDI an! ass&iate! +'i$atins % En"n*
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
2* T-e %ai" va'#e % )'an assets =USD 5 Mi''in> an! +ene%its +'i$atin =USD 65
Mi''in> #n!e" em)'0ee +ene%its )'an seeme! 9e'' mat&-e!* T-e !is&'s#"e !i! nt
"evea' t-at assets in&'#!e! ESO % En"n va'#e! at USD 177 mi''in 9-i&- a&t#a''0
+"in$s !9n t-e asset va'#e t USD 62 mi''in*
3* T-e extent % "e'ate! )a"t0 t"ansa&tin 9as nt !is&'se!*
T-e )"+'em in t-ese &ases 9as nt 'e$a'it0 +#t intent* Ana'0sts %se! mst'0 in 9-at 9as
!is&'se! an! nt n 9-at 9as nt* T-is is 9-e"e SAS ?? &mes in #se%#' +0 s#$$estin$
&nsi!e"atin % )ssi+'e %"a#! 9-i'e )"e)a"in$ t-e a#!it )'an*
!onclusions
It m#st +e nte! t-at +est #se % "ati ana'0sis "e#i"es #n!e"stan!in$ % t-e ass&iate!
'imitatins* Sme % t-e ma;" 'imitatins a"e !es&"i+e! +e'9 =G#e"a"!, G#e"a"!, B S&-9a"t8,
26>:
1* Ratis !i%%e" %"m an in!#st"0 t ant-e"
2* Mis'ea!in$ %inan&ia' !is&'s#"es 9i'' $ene"ate mis'ea!in$ "atis*
3* T-e im)a&t % seasna' %a&t"s s-#'! +e #n!e"st!
It m#st a's +e nte! t-at 9-eneve" 9e "e'ate an item in t-e +a'an&e s-eet 9it- ant-e" in t-e
in&me statement, 9e a"e &m)a"in$ a )e"i! !ata 9it- a time !ata* T-is #sa$e is )"ne t
mis'ea!in$ inte")"etatins* F" exam)'e i% t-e invent"0 'eve' $es #) in t-e 'ast !a0 % t-e
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2?
INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
a&&#ntin$ 0ea", a'' "atis inv'vin$ invent"0 9i'' &-an$e t-#$-, in "ea'it0, t-e im)a&t % t-e
-i$- va'#e 9as ve"0 'imite!*
T-e ana'0ti&a' %"ame9" %" assessin$ )tentia' %"a#! ma0 a's %s n a!e#a&0 % &a)ita'
in %a&e % va"i#s "iss %a&e! +0 t-e entit0* A &m)an0 9it- a!e#ate &a)ita' is 'ess 'ie'0 t +e
te"mina''0 a%%e&te! +0 a %"a#! " a!ve"se im)a&t %"m n"ma' +#siness "is ex)s#"e* Usa$e %
!#e !i'i$en&e )"&ess in&'#!in$ #antitative ana'0sis &an &nt"i+#te si$ni%i&ant'0 t assess
)e"%"man&e &"e!i+i'it0 =('a#ss, Rn&a''i, B eisan$, 2?>* M#&- as it is ne&essa"0 t )"event
%"a#!, it is e#a''0 im)"tant t s#"vive t-e im)a&t % %"a#!* "visin % a!e#ate am#nt %
&a)ita' is a st"n$ ste) in t-at !i"e&tin*
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3
INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
Reference
T-e Cin$stn (ttn Mi'' (m)an0 imite!, 2 =(A 1?7>*
AI(A* =212, Ma"&- 23>* SAS 99. Ret"ieve! %"m AI(A:
-tt):HH999*ai&)a*"$HResea"&-HStan!a"!sHA#!itAttestHD9n'a!a+'eDmentsHAU<
317*)!%
AI(A* =212, Ma"&- 23>* Summary of SAS 99* Ret"ieve! %"m AI(A < Ame"i&an Instit#te %
(As:
-tt):HH999*ai&)a*"$HInte"estA"easHF"ensi&An!Va'#atinHRes#"&esHF"a#!"eventinDet
e&tinRes)nseHa$esHS#mma"02%2SAS2N*as)x
A'tman, E* I* =1?7>* Finan&ia' Ratis: Dis&"iminant ana'0sis an! t-e )"e!i&tin % &")"ate
+an"#)t&0* Journal of Finance, 23=>, 5?* E%%e&ts % t-e ne9 /ase' (a)ita' A&&"! n /an &a)ita'
"e#i"ements %" SME* Journal of Financial Ser!ices "esearch, 2#, 15, 2
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
/ie"man, .* =2>* Accounting+finance lessons of %nron& a case study. Sin$a)"e: "'!
S&ienti%i&*
/"a8en, *, nes, C*, B im+e'man, M* F* =2?>* )sing nonfinancial measures to assess fraud
risk. Ret"ieve! %"m -tt):HHss"n*&mHa+st"a&t755
(aette, * /*, A'tman, E* I*, Na"a0anan, *, B Nimm, R* =2>* anaging -redit "isk& $he
reat -hallenge for loal Financial arkets. .+en: -n i'e0 B Sns*
(a")ente", T* =26>* A#!it Team /"ainst"min$, F"a#! Ris I!enti%i&atin, an! F"a#! Ris
Assessment: Im)'i&atins % SAS ??* Accounting "e!ie', 111?* 1uantitati!e -orporate Finance. S)"in$e": Ne9
P"*
ames, * M*, Sti&ne0, (* *, /"9n, *, /a$insi, S* *, B /"a!s-a9, M* =21>* Financial
reporting, financial statement analysis, and !aluation& a strategic perspecti!e. O-i:
(en$a$e ea"nin$*
C'+, R* *, B Ove"!a-', * A* =26>* Futures, options, and s'aps. Ox%"!: i'e0
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
#$-"am, T*, B M&Dna'!, /* =211>* -en is a ia+i'it0 nt a ia+i'it0 Text#a' Ana'0sis,
Di&tina"ies, an! 1, 35* Em)i"i&a' a'$"it-m % !ete&tin )% mani)#'atin 9it- %inan&ia' statements*
Journal of Accounting, Finance, and %conomics, :=2>, 5* %nron& corporate fiascos and their implications. Ne9
P": F#n!atin "ess*
Simn, (* A* =2>* $he effect of an 7ntentional Strategy on Auditors 7dentification of Fraud
"isks. as Ve$as: De)a"tment % A&&#ntin$, Unive"sit0 % Neva!a*
S#sen, (* *, B "i$-t, (* * =27>* -ontemporaneous "isk Factors and the rediction of
Financia Statement Fraud. Ret"ieve! %"m -tt):HHss"n*&mHa+st"a&t?3637
Te+$, /* =211>* oes the %nron -ase Study ro!ide ;aluale /essons in the %arly etection
of -orporate Fraud < Failure( Instit#te % Deve')ment Mana$ement, /ts9ana*
Ret"ieve! %"m -tt):HHss"n*&mHa+st"a&t1?75
Te+$, /* =211>* oes the %nron -ase Study ro!ide ;aluale /essons in the %arly etection
of -orporate Fraud < Failure( Instit#te % Deve')ment Mana$ement, /ts9ana*
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
0able I) !ommon %ie %tatement – Balance %-eet
Balance %-eet 4555 3111 3116 3117
A%%E0%
!urrent Assets
(as- an! &as- e#iva'ents 2 1 1
T"a!e "e&eiva+'es =net % !#+t%#'> 17 ? 6 7
Ot-e" "e&eiva+'es 3 2 3 2
Assets %"m )"i&e "is mana$ement a&tivities 1 6 7 7
Invent"ies 1 2 2 1
De)sits
Ot-e" 2 2 2 3
0otal current assets >89 449 459 369Investments and Ot-er Assets
Investments in an! a!van&es t #n&ns'i!ate! a%%i'iates 15 15 12
Assets %"m )"i&e "is mana$ement a&tivities 1 ? 6 5
G!9i'' 7 6
Ot-e" 1 15 17
0otal investment and ot-er assets 289 >89 >29 >39
.roperty: .lant: and E*uipment: at cost
Ex)'"atin an! )"!#&tin, s#&&ess%#' e%%"ts met-! 17 1?
T"ans)"tatin an! !ist"i+#tin 1? 23
-'esa'e ene"$0 )e"atins an! se"vi&es 16 16
Retai' ene"$0 se"vi&es
(")"ate an! t-e" 2 1
Nat#"a' $as t"ansmissin 11 21
E'e&t"i& $ene"atin an! !ist"i+#tin 6 11
Fi+"e )ti& net9" an! e#i)ment 1 1
(nst"#&tin in )"$"ess 1 3
Ot-e" 3 7
2 2 5 71
ess: A&m#'ate! !e)"e&iatin, !e)'etin, an! am"ti8atin 7 1 16 2
.roperty: and E*uipment:
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3
INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
S-"t te"m !e+t 3 3
(#stme"Ws !e)sit 6
Ot-e" 3 5
0otal current liabilities 3 2 21 16
/ong term debt 13 21 25 2
Deferred credits and ot-er liabilities
De%e""e! in&me taxes 3 7 ?
ia+i'ities %"m )"i&e "is mana$ement a&tivities 1 ? 5
Ot-e" 5 6
0otal deferred credits and ot-er liabilities 21 1? 1? 21
!ommitments and contingencies 6
Minority Interests 1 3 6 5
!ompany obligated preferred securities of subsidiaries 3 %-are-olders E*uity
"e%e""e! st& 1
(nve"ti+'e ;#ni" )"e%e""e! iss#e 2 3
(mmn st& 13 2 16 1?
Retaine! ea"nin$s 5
A&m#'ate! t-e" &m)"e-ensive in&me
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
0able II) %tatement of !as- Flo,
%tatement of !as- Flo, 4555 3111 3116 311
!as- flo, from operating activities
Re&n&i'iatin % net in&me t net &as- )"vi!e! +0 )e"atin$ a&tivities
Net in&me ?6? ?3 63 1
(#m#'ative e%%e&t % a&&#ntin$ &-an$es 131
De)"e&iatin, !e)'etin an! am"tisatin 55 6 26 7
Oi' an! $as ex)'"atin ex)enses 121 12
Im)ai"ment % 'n$ 'ive! assets 327 1
De%e""e! in&me tax 26 21 6
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INVESTMENT, TAXATION AND FRAUD EXAMINATION: ASSIGNMENT 3
Net =a&#isitin> !e)sitin % t"eas#"0 st& 326 13? 13