Write a 150-word comment on the submission below. It is based on the documentaryThe Smartest Guys in the Room. (http://watchdocumentaries.com/enron-the-smartest-guys-in-the-room/). Shareholder's

When questioned by Congress, Jeffrey Skilling insisted he always acted in the best interest of shareholders. What price mentioned throughout the story do you think Skilling had in mind when he made that claim?	The price mentioned throughout the story that Skilling had in mind when saying that he acted in the best interest of shareholders was the stock price of Enron. The stock price of Enron was Skillings greatest motivator throughout the history of Enron, and because he was able to increase the price of Enron stock, Shareholders wealth grew for a period of time. He can point to the stock price and say that when he was an executive at Enron, the stock price was doing great, possibly in a last ditch effort to avoid taking blame for the failure of the company. Skilling was consistently able to increase the share price of Enron over the course of the Energy companys life, despite the fact that the company really wasnt doing that well. As the share price of Enron grew, the value of each shareholders equity grew, but since this growth was falsified, the true value of the equity was declining. Enron Shareholders are people who own individual stock in Enron, so as the price of Enron stock increased the shareholders benefited. From the morally corrupt view that Skilling had, his claim to congress was true that he was acting in the best interest of the stakeholders, because each stakeholders wealth grew with the rise in Enron stock. The problem with this point of view is that it doesnt consider the fact that Skilling had inside information, and he knew that the stock would eventually fail. Skilling himself and lots of other top executives at Enron had large ownership in Enron from their contracts, and the executives skimmed profits from deals that Ernon made with other companies. Its said a group of 29 Enron executives sold 17.3 million shares for a profit of 1.1 billion dollars. This was done just before the transfer of ownership of Enron and the eventual bankruptcy of the company. By selling all of their Enron stock before the collapse of the company through the use of insider information, Jeff Skilling and the other executives that played a part in inflating Enron stock cheated other Enron shareholders out of billions of dollars. Skilling may believe that he was acting in the interest of shareholders because Enron stock seemed to consistently increase, but he might as well have been printing fake money and giving it to the shareholders. By using Mark to Market accounting, Enron presented itself as a great potential investment, as they could report the future profits based on contracts, instead of the actual profits, which turned out to be losses. Enron encouraged media promotion of itself, and by citing the growth in the company, Enron was able to get a total of 96 million shares which was valued around $80 per share on December 31st 2000. 11 months later, the company filed for bankruptcy and the stock was valued at less than a dollar. Among all of the other malpractices of Enron, the false inflation of Enron stock was the worst procedure that Skilling and other executives at Enron followed. Regardless of whether or not Skilling believes he acted in the best interest of stakeholders, the stock price of Enron was dishonestly over-inflated, which made a lot of money for Enron executives like Skilling at the expense of shareholders.
The arrangement between Enron and Merrill Lynch for the Nigerian Energy Barge was claimed to be a sale by some people and a loan by other people. Which do you think it was? Describe the differing effects on Enrons balance sheet of the two ways of viewing the handling of the Barge.	The arrangement between Enron and Merrill Lynch for the Nigerian Energy Barge was actually a fraudulent loan disguised as a sale. It was debated whether the transaction should be looked at as a sale or a loan. This arrangement made it appear that Enron made a 12 million pretax profit on a sale of Nigerian Energy Barges while no real profits were gained, and the sale didnt really take place. The unlawful transaction involved Enron executives and Merrill Lynch bankers who made it seem like Enron was booking profits in order to fool shareholders of Enron stock. They also recieved bonuses from the transaction, and due to the transaction involving physical assets instead of cash, there was no risk. Many experts believe it was made to look like a sale because Enron needed to report a profit for a specific period, and by selling the Barges to Merrill Lynch instead of loaning them, Enron could report an increase profits overall. Many look at the transaction as a sale because thats how it was originally reported by Enron. We believe that it is a loan because if it were a sale then Enron wouldnt have bought the barges back, and Enron has a history of falsely reporting profits. This unethical transaction resulted in multiple executives from both companies being charged with multiple fraud and bribery charges. If Enron had reported the transaction as a loan, their balance sheet would not be affected and no additional profit would have been added to the balance sheet. Since the transaction was reported as a sale though, Enrons profits during the period were increased by 12 million, which was a favorable result for the company. This scenario ended up being one of many times that Enron came up with different ways to falsely report profits.
Discuss Mark to Market Accounting. Do you think it will always accurately reflect the income of a business? Why? Or why not?	Over the course of the film, we started to understand how Mark to Market Accounting may not always be a clear reflection of the income of a business. The film showed us how Mark to market accounting allowed Enron to include future unknown income when recording profits for book purposes. This became an unethical business practice as Enron was essentially fabricating income and making it seem like their profits were constantly rising, despite the fact that they were pouring money into different projects and werent breaking even. The Executives at Enron used Mark to Market Accounting to report profits from an idea without the profit ever actually becoming part of income. Employees at Enron constantly came up with innovating projects that they could report great profits from to be able to inflate the value of the company. Because the accounting methods at Enron were highly inaccurate, the company would eventually get to a point where they cant come up with any more profits, and Enron would collapse. Mark to Market accounting uses market value of assets as the current value of assets for accounting purposes, which can accurately reflect the assets of a company if used properly and when the economy is stable. In the case of Enron, Mark to Market accounting does not accurately represent income, as the company was fraudulent when reporting their income. In other cases, using the market value of current assets when reporting income is still not accurate, because markets are subject to a lot of volatility. When properly used, Mark to Market accounting can accurately reflect the current value of an asset if the market value of that asset is stable and legitimate. Despite this, we believe that most companies should only use Mark to Market accounting as possible estimation of the value of assets, and not a method of measuring income because the market can be manipulated and isnt always accurate.