Bob, although as I posted I thought ELN would go up for technical reasons, if you had read that WSJ article you would not be so comfortable about believing there wasn't massive fraud.
In my opinion, a key purpose of financial statements is to properly allocate financial performance by time period. From reading the WSJ article, I would conclude that ELN couldn't have been further from that view.
Over the years, we have seen examples of misallocation of immense magnitude, such as huge writeoffs by major corporations, which in effect meant that prior results were, in effect, misreported (too little depreciation, too small reserves for obsolete inventory or bad receivables, etc). In the insurance business you often see cases of large adjustments for incorrect prior estimates of reserves needed for unpaid claims - something which I personally know is tougher to determine than a layman would think. In my opinion, ELN and Enron have brought allocation of financial performance by time period to new lows. |
