man that is different, but in part right...
The Rators of which Enron had many tied the common stock of Enron to loans in the SPE's. In other words the Enron stock was used as collateral to fund all of the Raptors. a link to explain what these companies were
This idea was repeated in other off balance sheet companies like Chewco and LJM. The problem for Enron was that they had to consolidate some of the SPE's as it became clear they were not true off balance sheet companies.
This lead to a loss of share holder value, which in turn caused the stock to sink and changed the ratios raters like the S&P use to rate the companies debt. The final consolidation in the 3rd QTR of 2001 put Enron below the level the raters viewed as investment grade.
Dynegy another energy company tried to buy Enron out. But because Enron could not tell Dynegy where all the cash was going a merger would have sunk Dynegy also and they pulled out. The raters then downgraded Enron triggering the debt owed at the SPE's as due and current by Enron. Enron of course did not have an extra $4 bin to pay these off and BK was the only choice.
>>It wasn't accounting that caused Enron<<
Read the book Enron: The Smartest Guys in the Room.
It was the accounting first and foremost! Sure they got some help from their investment bankers and auditors, but deregulation was just a side show that ultimately forced a few memos out that helped expose the accoounting.
The movie is out too! It's supposed to be a hoot. I saw a clip on CNBC of Kenneth Lay (the actual guy) expaining their accounting in a training video what a laugh.
KEY ACCOUNTING CONCEPT: They called it mark to market. When they signed a deal for building a plant, like the one GE just bought to bring out of mothballs (it had never been openned) and selling 25 years worth of electricity they booked all the profits from building the plant AND the 25 years. They could fiddle with the numbers and even if the profits were low now they could PROJECT the last 10 years at what ever they wanted. Then Fastow came up with the off balance sheet entities that would buy the stuff that was going bad and actually make the earnings look better! What a hoot.
Of course the bankers knew what was going on but with 100 of millions in fees a year who is going to tell them their full of
Chapter on California would have been a real laugh if I didn't live here.
>> Me too, but the alternative is Enron and WCOM <<
Sure. We're also talking about Stan and Iris Ovshinsky and Bob Stemple.
They hate accounting too.
With ECD you don't worry about fraud but have to learn to go with the flow.
Bad mistake, but not sa reflecti0on of any real dishonesty.
I blame myself for being stupid, not the people who revealed that stupidity to me and in the meantime made a lot of money along the way.
Can we deny that they took some big risks too, along the bumpy way ?
BNob Stemple gave up a million dollar salary for a hundred thousand or so and some options in a Micro-Cap.
Forget all that crap about a loser settling for minimum wage.
We all know what the Name Alone is still worth on the Open Employment Market.
How about this: "Bob Stemple Joins Toyota Hybrid Division as Chief Assistant Marketing Manager"
What does that pay in Yen ??
>>That is why it is backed out of expenses in the Cash Flow Statement (not the Income Statement where depreciation expense is recognized as a method for amortizing those machine costs over the useful life of the machinery and is part of Cost of Sales)so that only net cash expenses from the P&L are reflected in computing Cash Flow from Operations. <<
Don't mean to be obtuse here, but isn't that what I said? It is backed out of the cash flow analysis after being recognized on the income statement.
>> >>No. They are part of cost of good sold and need to be eliminated from the operating losses of $1,052,000 and $3,590,000 for the 3 month and 9 month period respectively<< <<
I think we all should know that a part of the "cost of goods sold" for the past 6 months or so has been the expense of EDCD figuring out why the machine was underperforming and then building a fix.
I think we also know that at least one strategic supplier owes ECd some compensation.
That said, we also know that these machines, like a good wine, increase in value with age as they get improved technology added and higher efficiency coatings for the paint pots.
We are talking about a printing press with magnetic bearings with a roller that never touches the paper. The kind of Plate that Never wears out. Infinite Impressions of the same changing news.
The 5 MW is worth triple what it cost and Canon got a REAL bargain on the 10MW with a whole country thrown in.
You may have been stunned by Forbes, but have you heard any real complaints from ANY of the companies that Stan bent over over the years, Except Manning, who screwed himself ?
It cost some of those companies more to change their names in ads and on stationary than they lost by investing with ECD in the future of energy and information.
<<Yes I understand they are not part of earnings, but the 'noncash' write off results in the cash still being there. It just doesn't count as earnings>>(ecd anonymous)
Not quite. Depreciation expense is part of the cost of sales expenses for Unisolar. The depreciation pertains perdominantly to the expensing of both the 5MW and 25-30MW machines, the cash for which was spent to build the machines and put them into service in prior years. That is why it is backed out of expenses in the Cash Flow Statement (not the Income Statement where depreciation expense is recognized as a method for amortizing those machine costs over the useful life of the machinery and is part of Cost of Sales)so that only net cash expenses from the P&L are reflected in computing Cash Flow from Operations.
>>No. They are part of cost of good sold and need to be eliminated from the operating losses of $1,052,000 and $3,590,000 for the 3 month and 9 month period respectively<<
Yes I understand they are not part of earnings, but the 'noncash' write off results in the cash still being there. It just doesn't count as earnings. Not that we'd have to pay any taxes on it for a while. That's why i used the words 'cash flow'.