Auditing A Publicly Traded Company

TO: Management, Company B FROM: Team B DATE: October 26, 2009 humble: Share-Based Payment embraceage and Special Purpose Entities In the past, accounting for share-based payments and specific inform entities (SPEs) has been complicated. The downfall of companies such as Enron and Worldcom has made it unavoidable for the fiscal Accounting Standards Board and the Securities and Exchange Commission to rewrite the charge these types of payments are traceed. In addition, the changes in the economic purlieu waste also created a accept for standards to be clearer and mitigate detailed. These changes acquit made it easier for investors and other users of this information to better conceive non only how these items are reported but also to afford a better overall view of corporate bell in relation to SPEs and stock options. A SPE is a gunman judice entity that has a specific purpose and activity with a extraordinary life. When a troupe sets up a SP E, the objective is to overthrow large financial risk from an investment that could potentially torture the firm. GAAP does not require firms to report SPEs with both conditions: they do not have major voting power, and a trey party owns ten percent of the SPE. Based on these cardinal conditions, a lodge will not have to report the SPE on their financial statements or bear the risk of the investment. imputable to these reasons, companies have been setting up SPEs to cherish their business and to stoop out on larger risks. The way an SPE operates is that a troupe essentially sells the asset to the SPE and has a capital lease from the SPE. This traffic gives the company the advantage of the SPE because the SPE recognizes the asset and the liabilities connected to the asset, rather than the company that creates the SPE. Overall, SPEs protect companies from risk of loss on their investment and the might to narrow on larger investments. As it concerns SPE several fi nancial facts need to be explored to ensure ! consistency with GAAP. For...If you want to lay down a full essay, order it on our website: OrderEssay.net

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