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kpmg. ENRON: WHAT HAPPENED & THE IMPLICATIONS The Accounting Issues. Live Webcast January 25, 2002. Terry Iannaconi, KPMG. Issues Identified in the November 8, 2001 Form 8-K Disclosing the Restatement. Non-Consolidated Special Purpose Entities (SPE’s)

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  1. kpmg

  2. ENRON: WHAT HAPPENED & THE IMPLICATIONSThe Accounting Issues Live Webcast January 25, 2002 Terry Iannaconi, KPMG

  3. Issues Identified in the November 8, 2001 Form 8-K Disclosing the Restatement • Non-Consolidated Special Purpose Entities (SPE’s) • Sale of Company Stock for Notes Receivable • Use of “Intercompany” Derivative Instruments • Related Party Transactions Disclosures • Other Items: Prior Year Proposed Audit Adjustments and Reclassifications

  4. Other Possible Issues • Fair Value Considerations for Certain Transactions

  5. Non-Consolidated SPE’s • EITF Topic No. D-14 Transactions Involving Special-Purpose Entities • EITF Issue No. 90-15 Impact of Nonsubstantive Lessors, Residual Value Guarantees, and Other Provisions in Leasing Transactions • Concept of “Substantive Capital Investment”

  6. Sale of Stock for Notes Receivable • SEC Staff Accounting Bulletin No. 40, Topic 4E, Receivables from Sale of Stock • EITF Issue No. 85-1, Classifying Notes Receivable for Capital Stock

  7. Effect of “Unwinding” Intercompany Derivative Instruments as a Result of Consolidation Restatement • Statement of Financial Accounting Standard No. 80 Accounting for Futures Contracts • Statement of Financial Accounting Standard No. 133 Accounting for Derivative Instruments and Hedging Activities

  8. Disclosures of Related Party Transactions • Regulation S-X Rule 4-08(k) • Generally Accepted Accounting Principles • Statement of Financial Accounting Standards No. 57 Related Party Disclosures

  9. Prior Year Proposed Audit Adjustments and Reclassifications • No information available concerning nature of Passed Audit Adjustments • Passed adjustment for 1997 approximated 50% of reported net income for the year

  10. Other Possible Issues: Fair Value Considerations • Determination of Fair Value for Transactions Among Non-Consolidated Related Parties • Terms available to clearly independent third parties vs. transactions with persons or entities that are able to negotiate transactions on terms that would not be available from clearly independent third parties

  11. Q&A - Open Discussion

  12. kpmg

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