Enron - Natural Gas Industry Message Board

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Gold/Mining/Energy : Enron - Natural Gas Industry

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To: Smart_Money who wrote (1050)	12/3/2001 5:09:59 PM
From: geoffrey Wren	Read Replies (1) of 1433

I don't understand the partnership accounting situation. I recall with Rite-Aid, they had long term leases on their stores that did not show up on the balance sheet, and it was a material factor in their fall from grace. Accountants say they should be on the balance sheet, because, after all, if Rite-Aid cuts back its stores it is looking at having to pay the remainder of 10 year or 20 year leases. Fair enough. But if you show the liability, then you should show the asset too: the leasehold interest. In reality, they should roughly balance out. If the leases were made in good times the leasehold interest would be worth more than the liability (you could sub-lease at a profit); if made in bad times, the reverse (you could sub-lease, but at a loss). Any way, assuming that ENE has to report its exposure on all these partnership debts, what is the counter-balancing asset to report, assuming there is one? Future energy delivery? I suppose that the partnerships might have locked into future deliveries of oil or gas at a higher price than present market. What is the story? Who knows?

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