CASE

Enron Corporation was a darling in the energy-provider arena, and in January 2001 its stock price rose above $100 per share. A collapse of investor confidence in 2001 and revelations of accounting fraud led to one of the largest bankruptcies in U.S. history. By the end of the year, Enrons stock price had plummeted to less than $1 per share. Investigations and lawsuits followed. One problem area concerned transactions with related parties that were not adequately disclosed in the companys financial statements. Critics stated that the lack of information about these transactions made it difficult for analysts following Enron to identify problems the company was experiencing.

Required

1. Consult IASB pronouncements at www.ifrs.org or access the pronouncement from some other source. What authoritative pronouncement requires the disclosure of related-party transactions? When did the requirement become effective? [5 Marks]

2. Describe the disclosures required for related-party transactions. [5 Marks]

3. Use EDGAR (www.sec.gov) or another method to locate the December 31, 2000, financial statements of Enron. Search for the related-party disclosure. Briefly describe the relationship central to the various transactions described [5 Marks]