The Rise and Fall of Enron
A Ken Lay, boss of Houston Natural Gas, was immediately appointed CEO of the newly-formed company.
В When it didn't receive answers, the regulator launched a formal investigation into Enron's investments. As a result, Enron's Chief Financial Officer resigned.
С During the 1990's Enron continued to expand and diversify at an incredible rate, it invested $2 billion in a power plant in India, bought a water company in the UK and acquired an electricity company in Portland, Oregon.
D Enron was founded in 1985 when two-gas companies, Houston Natural Gas and InterNorth, merged to create the first national natural gas pipe network.
E Finally, the company was declared bankrupt, but the directors had already sold their shares and walked away with the profits.
F Three years after its creation, Enron opened its first offices abroad as part of a strategy to take advantage of newly-privatized markets.
G By the end of 2000, annual revenues had readied $100 billion, making Enron the sixth-largest energy company in the world. Most of this was from trading activities.
H However, Enron was not satisfied with revenue just from gas trading, so it also moved into electricity trading, establishing a trading centre in London. This became the company's most profitable activity.
I The first evidence of false accounting came in the first few months of 2001 when Enron admitted it had lost $570 million. Its share price fell, causing a cash and credit crisis.
J In July, the regulator started asking Enron to give more details about its financial performance.
K At the same time as opening offices overseas, Enron began trading natural gas in North America.
L By the turn of the century, a highly competitive work culture had developed. Each year 15% of Enron's employees were sacked and replaced with younger, ambitious graduates.
M The investigation found that the company and its accountants had lied to its shareholders and employees about $2 billion of debt.
5. Give a brief account of the rise and fall of Enron: explain the reasons for its fall.
LANGUAGE
1. Practise reading the following international words, give their Russian equivalents.
standard, privatized, audit, auditor, scandal, ambitious, client, balance, total, transaction, certified, licensed, potential, execute, execution, control, controller, record v, keep records.
2. Practise saying the numbers from Figure 1 and 2 on p.
3. Read the following numbers and expressions in English.
0.4 2.5 3.6 0.5 4.867
7/8 2/5 ¼ 27/38 3/10
305 4,057 25,478 1,946 925,046,305
5 x 7 = 35 249 x 35 = 8,715
15 : 3 = 5 756 : 6 = 126
16 – 10 = 6 7056 – 250 = 6806
Assets = Liabilities + Owner’s Equity
4. Complete the sentences by forming adjectives from the verbs on the right according to the given pattern, work out the Russian equivalents of the derivatives obtained.
v + -able ® a 'that can be v-ed', e.g.
manage + -able ® manageable 'that can be managed' – 1) поддающийся управлению, легко управляемый; 2) выполнимый, осуществимый
market-able securities = 'that can be easily marketed (sold)' - рыночные (легкореализуемые) ценные бумаги,
| 1. The page had so many corrections and comments that the original text was virtually un……. . 2. The proposals must be …… to the shareholders. 3. The new bank building is the most …… structure in the city. 4. This section of law is only …… to businesses. 5. Her help made an …… difference. 6. A good manager must be able to adjust easily to …… environment. 7. A large international meeting was held with the aim of promoting ……development in all countries. 8. This is a highly …… product. 9. The recent tax reforms have made government more …… for its spending. 10. A cheque that is not …… cannot be exchanged for cash and must be paid into a bank account. 11. The price of the car is …… in 12 monthly installments. 12. Accounts …… are classed as current assets on a balance sheet. 13. Accounts …… are the amounts owed by a business to suppliers. 14. The two of them are in …… financial situation. | read accept recognize apply appreciate change sustain market account negotiate pay receive pay compare |
5. Add an appropriate negative prefix to italicized words, choose from the list given.
ir- un- in- dis- ab- under- mis- de-
1. Low demand for their products has made production very …profitable.
2. You must make everything clear now in order to avoid any …understandings later.
3. Four Season Ltd have been ... successful in marketing the new product.
4. The report showed that moving the production to a new site was …desirable.
5. We don't have a detailed cost analysis yet, so the management are …decided about future investment.
6. The management think that the policy of expanding sales is …correct.
7. Since …regulation, telephone companies have been able to set their own prices.
8. They …estimated the effect of the competitor's products on sale in this market sector.
9. Lots of the documentation which was lost in the fire is …replaceable.
10. Prices for raw material are …normally high at the moment.
11. They have decided to …continue the production of Product P because sales have fallen.
12. They were accused of …using their power to keep prices artificially high.
13. He was accused of …appropriating $30,000.
6. Make word partnerships and use them in the sentences of your own.
| 1. supply 2. keep 3. evaluate 4. overstate 5. prepare 6. adhere to 7. audit 8. make 9. cook | a. performance b. a balance sheet c. accounting reports d. books e. information f. standards g. records h. decisions i. revenues |
7. Identify which term of those on the right describes each mathematical expression.
1 75% 2 E = mc2
4 1,623 + 3,004 =4,627 5 9,260 – 1,111 = 8,149 6. 87 x 25 = 2175 7. 1,505 = 301 8. Direct costs 724 Indirect costs 200 Costs Direct : Indirect = 3.62 9. $12,24/hour | a. formula b. multiplication c. division d. average e. addition f. ratio g. rate h. subtraction i. percentage |
8. Match the words on the left to the right definitions, then use them to complete the sentences that follow.
| 1. Accountancy | a. record of money received and spent |
| 2. Accounting | b. theory of keeping financial records |
| 3. Account | c. a person who keeps and works with financial records. |
| 4. Accountant | d. activity of keeping financial records |
1. He's at university studying _________ .
2. A bookkeeper writes details of financial transaction in the _________ .
3. A business manager needs some __________ knowledge in order to understand what he reads in the company's ___________.
4. Most people in the profession read __________ magazines and journals to stay informed.
5. The chief __________ has completed the draft ___________ for the year.
6. Can you check that the figures have been entered correctly in the bank _________?
7. The directors of the company approve the ___________ at the end of the __________ year.
8. Each branch maintains its own full ____________ system.
9. The management of the company have not yet decided on their ___________
policies.
10. He's been working as an _____________ with this firm for several years now.
9. Identify the meanings of the 'account' phrases in bold in the sentences below and give their Russian equivalents. Choose the correct definition from the list on the right.
| 1. How do you account for the sudden fall in the stock value? 2. Agents buy and sell goods on their own account. 3. They gave the solicitor a detailed account of the customer's business deals in the last year. 4. The draft accounts had to be adjusted on account ofthe discovery that a major debtor had gone bankrupt. 5. Raw materials account for 30% of the manufacturing cost. 6. They are regular customers in this shop and are now able to buy on account. 7. On no account should these figures be released before the board meeting. 8. When making decision for the future the managers have to take this year's poor performance into account. 9. By all accounts, they will benefit greatly if the deal goes through. 10. The advertising company has won two new accounts in South Africa | a. people say b. report c. under no circumstances d. consider e. explain f. big customers g. for themselves h. because of i. on credit j. represent |
10. Translate the following sentences into English using 'account' phrases from Activity 9.
1. Эти товары были приобретены в кредит.
2. Вы должны представить нам детальный отчет о Ваших расходах за данный период.
3. По общему мнению, к концу года произойдет слияние этих двух компаний.
4. Ни в коем случае нельзя прекращать работу предприятия.
5. При принятии решений менеджеры должны учитывать информацию, предоставляемую бухгалтерами.
6. Оплата за отопление составила 30% накладных расходов.
7. Мы должны скорректировать бюджет из-за происшедших изменений на рынке.
8. Моя функция – искать новых заказчиков.
9. Ему приходится покупать канцелярские принадлежности за свой счет.
10. Как можно объяснить рост дефицита федерального бюджета в США в начале 90-х годов?
11. Identify accounting terms defined on the left, some prompts are given.
| 1. all objects, tangible or intangible, that are of value to its possessor, such as buildings, machinery, money in the bank, money owed by customers, etc. | a_ _ _ _ s |
| 2. a financial plan for the future | b_ _ _ _ t |
| 3. the loss of value of the things that have been consumed | d_ _ _ _ _ _ _ _ _ _n |
| 4. a statement of the financial position of the company | b_ _ _ _ _ e s_ _ _ t |
| 5. official books for keeping accounts | l_ _ _ _ _ s |
| 6. goods which are bought by the company | p_ _ _ _ _ _ _ s |
| 7. goods which the company has available to sell | s_ _ _ k |
| 8. customers who have received goods but not paid for them yet | d_ _ _ _ _ s |
| 9. the company that has supplied goods but has not received any money for them yet | c _ _ _ _ _ _ r |
| 10. companies make this when they sell their goods for more than it costs them to make them | p_ _ _ _ t |
| 11. money which is borrowed | l _ _ n |
| 12. an official examination of accounts | a_ _ _ t |
12. Match the English accounting terms to their Russian equivalents.
| a. accounts receivable (US), or debtors (GB) b. liabilities c. profit and loss account d. stock taking e. income statement f. double entry bookkeeping g. ledger h. inventory i. balance sheet j. accounts payable (US) or creditors (GB) k. intangible assets l. cash flow m. accounting transaction | 1. инвентаризация, переучет 2. дебиторская задолженность, счета дебиторов 3. отчет о доходах и расходах 4. баланс, балансовый отчет 5. материально-производственные запасы, наличные товары 6. кредиторская задолженность, счета к оплате, счета кредиторов 7. задолженность, обязательства, пассивы 8. нематериальные активы 9. движение денежной наличности 10. проводка 11. система двойной записи 12. главная книга, гроссбух 13. счет прибылей и убытков |
13. Render the following Russian text into English, use some of the active vocabulary from activity 12:
Согласно международным бухгалтерским стандартам (МБС), финансовая отчетность охватывает балансы, отчеты о доходах (счета прибылей и убытков), отчет о движении денежных средств и другие материалы. Обычно финансовые отчеты готовятся или публикуются один раз в год и являются объектом аудиторского заключения.
Баланс предприятия отражает финансовое положение предприятия на определенную дату. В соответствии с МБС баланс раскрывает содержание трех важнейших категорий: актива, обязательств и капитала. Активы, характеризующие хозяйственные средства предприятия, представлены в активе баланса, а обязательства, а также собственный капитал фиксируется в пассиве баланса. Несмотря на то, что во всех странах баланс принципиально понимается одинаково, расположение его статей отличается многообразием.
Отчет о доходах, или отчет о прибыли, представляет собой описание отдельных обстоятельств, которые обусловили тот или иной результат деятельности предприятия за определенный период.
В некоторых странах, например, в США, придается большое значение отчету о движении денежных средств.
14. During a job interview Alan is talking about his previous jobs. Complete what he says with the best form of the verb in brackets. Choose between past simple, past continuous or past perfect, the first has been done for you.
INTERVIEWER: So, Alan, why did you quit your last job?
ALAN: Well at the time I (1) was working (work) as a financial officer for an International Accountancy firm in London. I (2) ………. (be) in the same company for three years.
INTERVIEWER: How (3) ……… (you/get) the job?
ALAN: Just after I (4) ……… (finish) university I (5) ………. (go) to a job fair. I still (6) ……… (decide) what I wanted to do and I was interested to see what kind if jobs there (7) ……… (be) at the fair. While I (8) ………. (look) at information on one of the stands for a large international accountancy firm, someone (9) ………. (give) me an application form to fill in. I thought this might be a good career opportunity for me as I (10) ………. (already/take) some accountancy exams for my degree. So I (11) ……… (complete) the form and (12) ………(send0 it off. They (13) ………. (interview) me the following week and got job. At first, I (14) ……… (feel) satisfied with the job, but as time went by, things (15) ………. (change) and I began to hate working there.
INTERVIEWER: So what (16) ……… (go) wrong?
ALAN: Well the situation was this: I (17) ……… (work) for a person who was very difficult, er …very demanding … never satisfied. What's more, my job (18) ………. (become) too repetitive and really wanted to do something more creative. So, that's why I resigned … I (19) ………. (not have) another job to go to, but I knew I (20) ………. (have) to make a change.
15. Study the figures in the table describing the changes in three oil companies' performance and then complete the presentation extract analyzing these changes with phrases of comparison given below; the first has been done for you.
in comparison with twice as much a lot a little different
similar by far considerably more roughly the same
| Sales $ mil. | % change | Profit $ mil. | % change | |
| Chevron | 50,000 | 5,000 | ||
| Texaco | 52,000 | 3,000 | ||
| Exxon Mobil | 210,000 | 16,000 |
"If we look at the figures for the oil sector last year, you can see that the three largest US companies all did very well (1) in comparison with the previous year.
Let's start by comparing Chevron and Texaco. Their sales were (2) ………., although Chevron made (3) ………. profit. Looking at the year-on-year trend you can see that the percentage change in sales was very (4) ………. between the two companies, whereas the change in profits was quite (5) ……… . In fact, Chevron's profits grew (6) ……… faster – 150% compared to 116%.
Now let's look at Exxon Mobil, the market leader. The table shows that Exxon is (7) ……… the largest company, with more than (8) ……… sales as Chevron and Texaco combined, and (9) .……… profit. In terms of percentage growth, Exxon's figures were (10) ……… .
16. Complete the sentences using the verb in brackets in the form of either Participle I or Participle II; translate the sentences into Russian with the focus on Participles.
1. A company’s managers, investors, and creditors use information … in its income statement and balance sheet to measure financial success. (represent)
2. The cash receipts and payments for operating activities, such as products … or services …, are summarized in the cash flows from operating activities section of the statement. (sell, perform)
3. Accounting is considered to be less … worldwide than in the United States. (standardize)
4. Individuals … and … a business by themselves do not have to worry about control, because the individual is both the owner and only employee. (own, operate)
5. This exhibit shows how to calculate a company’s cash … from customers. (collect)
6. Depreciation is the part of the cost of a physical asset … as an expense to each time period in which the asset is used. (allocate)
7. Multinational companies must comply with different sets of regulations … on where the factories and offices are located. (depend)
8. Today virtually all businesses have … accounting systems. (computerize)
9. The people … the real decisions are all at Head Office (make).
10. The stock market crash of 1929 … by the Depression of the 1930s, led to federal regulation of the securities market. (follow)
11. A code of professional conduct … by the members of AICPA guides them in their professional work. (adopt)
12. The abbreviation GAAP stands for ‘generally … accounting principles’ that all US accountants have to follow in measuring, recording, and reporting transactions. (accept)
17. Rewrite the sentences using appropriate participial clauses; the number of required transformations is given in brackets.
1. When you compare one company’s return on total assets with that of another company, you should consider the age of the assets of each company (1).
2. After the team coordinators determined the goals, they supplied the upper-level managers with the information about the resources that were required to meet these goals (2).
3. As he had a good working knowledge of accountancy, he could hope to pass his CPA exam in the nearest future (1).
4. I went over to him as I thought he was the manager, but he said he was a sales assistant.
5. The woman who is talking to Robert Wilkinson is the Chief Finance Officer at Accor (1).
6. We invested 5,000 in a China fund because we hoped that the market would go up (1).
7. I resigned the next week and didn’t regret my actions any moment (1).
8. When the management accountant is faced with an ethical dilemma, s/he should determine how stakeholders are affected (1).
9. As it was explained in Chapter 5, although a business makes no cash payment when it records depreciation, this expense still reduces taxable income (2).
10. When companies expand their operations they frequently become involved in transactions with customers and suppliers in other countries (1).
11. As he is a Chartered Accountant and has 5 years post qualification experience he obviously has a very good chance of obtaining this position (2).
12. If Mr. Brown is found guilty of accounting fraud and misleading the public, he will be barred from ever serving as chief accounting officer for a publicly held company (1).
SPEAKING
1. Communication Situation: Calling a Financial Consultancy
a. Read the followingtelephone conversation between a company’s managing director and a financial consultant. Find out the reason for the call.
| Brown: Berg: Brown: Berg: Brown: Berg: Brown: Berg: Brown: Berg: Brown: Berg: Brown: Berg: Berg: Brown: | John Brown. Hello. My name is Anders Berg. I'm Managing Director of Woodtech Ltd, a wood machinery manufacturer. Oh, yes. How can I help you? Well, an associate in the industry recommended you. You helped raise finance for Bill Wylde a few years ago. Yes. That's right. Well, Woodtech Ltd now wants to expand into new markets with a new product. Up till now we have served specialists in the wood industry but our new product is aimed at the small manufacturer. What we need is finance. Right! First of all, I'll need some background information. Can you let me have a copy of your balance sheet and profit and loss figures for the past three years? Of course. I'd also like a letter outlining your ideas and a cash flow forecast for the new product. Fine. If you let me have these by the beginning of next week, we can arrange a meeting for the week after. That will give me enough time to look through the figures. Good. Can I suggest a meeting on Monday 16th at 9 o'clock. That's fine. I look forward to receiving your letter and accounts in the next few days. I'll post them first thing tomorrow. I look forward to meeting you on Monday 16th. Goodbye. Goodbye. |
b. Act out a similar conversation of your own, modifying the names of people and companies; make sure you use financial and accounting terms appropriately and preserve the italicized functional phrases.
2. Explain the metaphor "Accounting is a language of business".
3. Describe the importance of accounting to managers, investors, creditors, and government.
4. Explain the difference in the subject matter of managerial and financial accounting.
5. Describe the difference in bookkeepers' and accountants' job functions.
6. Characterize major types of financial reports.
7. Suppose you are to participate in a university seminar on accounting professional ethics. Get ready to give a brief account of American corporate scandals involving accounting fraud.
WRITING
1. Imagine that you have just started your first job as an accountant in a medium-size company. Write an e-mail to your former schoolmate and share your impressions of the first month in the job.
2.You saw an advertisement about a vacancyfor an accountant in Minsk subsidiary of Delloite & Touch, prepare your CV and write a cover letter to apply for the position.
KEY VOCABULARY
| account n accounting n accountant n certified public accountant chartered accountant bookkeeping n bookkeeper n auditor n auditing n management accounting financial accounting cost accounting record v keep records transaction n | assets n (pl) liabilities n (pl) intangible assets profit and loss account balance sheet income statement accounts receivable accounts payable double entry system ratio n cash flow costs n debtor n creditor n bottom line | ledger n depreciation n goodwill n allocate costs creative accounting fraud n misappropriation n understate v overstate v generally accepted accounting principles (GAAP) integrity n evaluate v add v subtract v divide v multiply v |
SUPPLEMENTARY READING