Sign In
Not register? Register Now!
Essay Available:
2 pages/≈550 words
Check Instructions
Accounting, Finance, SPSS
English (U.S.)
MS Word
Total cost:
$ 9.36

Understatement of Liability Case Accounting, Finance, SPSS Essay (Essay Sample)


Read three articles above and answer the following questions:
1. How did Lehman Brothers understate their liability?
2. Why do you think EY was not held liable for the incident as much as investors wished (You can discuss it in relation to what we talked about in Chapter 4)?
3. In the NYTimes article above, the judge said "the fact that Lehman’s accounting for the Repo 105 transactions technically complied with the rule does not mean that Lehman’s financial statements complied with GAAP.” What do you think the judge's statement means?


How Lehman Understated their Liabilities
Author Name(s), First M. Last, Omit Titles and Degrees
Institutional Affiliation(s)
How Lehman Understated their Liabilities
How did Lehman Brothers understate their liability?
Ernst & Young was responsible for handling Lehman's financial statements before the company sold investor's billions of monies in Lehman securities. In the audit, the firm failed to flag the "Repo 105" aspect of the financials. Repo 105 is a repurchase agreement that allowed Lehmann to temporarily lower its leverage and make it appear as though the firm was in a healthy state to reduce reliance on borrowed money. In essence, this accounting maneuver involves banks borrowing money from big companies by selling the company some assets. However, Lehman did this by taking less cash than the asset was worth (therefore, understating its liability) (Rapoport, 2013). In 2008, the company moved $50 billion off its balance sheet using this method. Expectations are that investors must be provided with all the necessary information before their monies are invested and that the use of Repo 105 should be disclosed both to investors and the government. In this case, therefore, Lehman misled investors about exposure to risky mortgage & real estate assets, risk management, financial health, and the bank's leverage. Thus, when the bank sold investor dollars in Lehman securities, the investors accumulated significant losses as Lehman went into bankruptcy in

Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:

Other Topics:

  • Review of Stockland property 2018/2019 report. Accounting, Finance
    Description: Iintegrated reporting is a journey towards more meaningful corporate reporting and continual improvement, which is beneficial to both the organization and its stakeholders. ...
    3 pages/≈825 words | APA | Accounting, Finance, SPSS | Essay |
  • Management Responsibility. Accounting, Finance, SPSS Essay
    Description: Financial statements reveal the precise picture of a company's financial health. These statements include the balance sheet, income, and cash flow statements....
    3 pages/≈825 words | APA | Accounting, Finance, SPSS | Essay |
  • Seminar Report-Dr. D H Fung.Reports Accounting, Finance, SPSS Essay
    Description: As such, the owners or members of management in these organizations usually have the responsibility of identifying various avenues and platforms to capitalize and make profits while meeting consumer needs, tastes and preferences. ...
    9 pages/≈2475 words | APA | Accounting, Finance, SPSS | Essay |
Need a Plagiarism Free Essay?
Submit your instructions!