ENE... LOL about the interesting article in Business week. Nice synopsis of the article. I may post the BW
piece here.
As You've pointed out, Enron's Broadband ventures probably the biggest train wreck leading to ENE's downfall.
So it makes a certain Ironic sense that Ken Rice who was running the broadband division, was the second highest
paid exec in Houston in 2000.
Four of the six highest-paid executives in Houston are from Enron. But the highest-paid Enron executive is not Chairman Ken Lay. In fact, Lay made less money than three of his lieutenants because he received far fewer
stock options.
For example, Kenneth Rice, chairman and chief executive officer of Enron Broadband Services, one of Enron's business units, received more than twice as many options as Lay and Jeff Skilling, Enron's chief executive officer and president.
Consequently, Rice was the second-highest-paid executive in Houston, taking home $47,375,588 in 2000. Lay, who was the sixth-highest-paid executive, earned $35,665,037.
-------------------------------
it was always my understanding that a hedge had to be specifically designated as a hedge at the time it is entered into..
Henry, that's exactly what Timothy Lucas, who's FASB's technical director and also headed a FASB group that
reviewed this for FASB. He says you cannot first shoot the arrow and then paint the target around it. Nice
Analogy.
The temptation, of course, would be for a company to put on a hedge and wait to see if it rose or fell in value before deciding how to account for it. Under such a ploy, if a hedge rose in price, it would become a fair value hedge and add to profits. If it fell, it would go to the balance sheet and not hurt earnings at all.
To prevent this win-win situation from occurring, said Timothy S. Lucas, technical director at the Financial Accounting Standards Board, accounting rules require trading companies to designate in advance what type of hedge each trade represents. "The rules say you can't shoot the arrow first and then paint the target where it fell," Mr. Lucas said. "And the auditors are presumably looking at that."
John |
