Abstract
The spectacular rise and fall of Enron Corp. offers a vivid illustration of how companies can use the legal form of transactions to obscure the economic substance underlying those transactions. The purpose of this paper is to examine Enron’s use of misleading accounting practices in relation to: (1) off-balance-sheet financing; (2) revenue recognition; and (3) financial statement disclosures. In these three areas of accounting concern, the paper examines the relevant US GAAP requirements and the ways that Enron used US GAAP to conceal the economic substance underlying those transactions. It is the argument of this paper that had the concept of substance over form been applied at Enron, investors and creditors would have been provided with a more realistic view of the company’s financial position and its results of operations, potentially avoiding what became the one of the largest corporate bankruptcies in US history.