Accounting practice in the post‐Enron era: the implications for financial statements in the property industry

Abstract

AbstractThe corporate failure of the Enron Corporation made world headlines for many reasons — greed, alleged malpractice and criminal behaviour, and the sheer size and speed of its collapse. A critical factor in Enron's demise was the use of creative and manipulative accounting practices to distort reported profitability and indebtedness. This paper uses the Enron case and similar financial events to highlight the accounting issues arising from recent corporate failures, and to examine the implications for the future. These include whether it could happen outside the USA, what lessons are being learned and the implications for those involved in real estate and property management. The case argued here is that all financial statements are simply artificially constructed realities attempting to describe the (financial) well being of a company within a framework of prescribed rules determined by socio‐economic debates. The perceived laxness of US accounting regulations compared with UK and International Accounting Standards (IAS) adds weight to the calls for adoption of universal standards within the USA, since Europe claims — with some qualification — that ‘it could not happen here’. Copyright © 2003 Henry Stewart Publications