You should be aware by now that because of the inappropriate actions of Enron Corporation in the late 1990s/early 2000s, Congress, the SEC and the accounting profession had to step in and make drastic changes. During the investigatory period, Enron actually moved from #5 on the S&P 500 to #3! But while Enrons stock traded at over $100 per share in January 2001, by years end, the stock traded at less than $1 per share. One of the largest bankruptcies in US history ensued, and along with the demise of Enron itself, its auditors Arthur Andersen also went out of business. Sarbanes-Oxley was passed and new regulations were put into place. During a post-mortem review of Enron, many problem areas were discovered. One was that transactions with related parties were not adequately disclosed in Enrons financial statements. The lack of information concerning these transactions made it difficult for experts analyzing Enron to identify problems the company was experiencing and hiding.

Task:

* Using the FASB Accounting Standards Codification at the FASB website, locate the relevant authoritative literature on related-party transactions. What is the specific citation that outlines the required information on related-party disclosures that must be included in the notes to financial statements?

* Describe the disclosures required for related-party transactions.

* Locate the Enron 12/31/2000 financial statements and search for the related party disclosure. Briefly describe the relationship central to the various transactions they describe.

* Why is it important for companies to disclose related party transactions? (Use the Enron disclosure of the sale of dark fiber inventory in your answer.)

* Write a professional-style MEMO outlining what you have learned thus far (in any course or elsewhere) regarding Enron in general.