Enron Corp. - University of California | Office of The President

Automated Quotations system or by the National Quotations Bureau. Restricted stock does not meet
this definition.
554. Enron falsely recorded its Merchant Assets as if they all had readily determinable
values. This was not the case. For example, an internal report called "Enron Net Works Investment
Table" lists, among other things, the following investments:
Name of Company Comments Stock Restrictions
Acta Technology, Inc Not publicly traded Restricted securities
Financial Settlement
Matrix.com
PentaSafe Security
Technologies, Inc.
Not publicly traded Restricted securities
Not publicly traded Restricted securities
Solo Energy Corporation Not publicly traded Restricted stock
555. Indeed, none of the above had readily determinable values as defined under SFAS No.
115. Therefore, Enron's investments with changes in fair value should have been recognized as
unrealized gains and losses and reported net of applicable income taxes in a separate component of
stockholders' equity and not current earnings.
556. Enron also improperly valued its Merchant Assets. In order to meet earnings
expectations Enron would: (1) manipulate the original assumptions; (2) utilize inconsistent
valuation approaches; or (3) establish arbitrary milestones. Indeed, CFOs from each of the Enron
cells, (Enron North America had approximately 100 cells), would receive a report indicating the
mark-to-market values of their respective Merchant Assets. Each cell was expected to contribute to
Enron's earnings. If there was an earnings shortfall, the team leader would have his or her team
reassess its mark-to-market valuations in order to meet its required earnings contribution.
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