CREATIVE ACCOUNTING PARMALAT PDF

Parmalat, a food group famous all over the world for its long-lasting milk products, employs 35, people in 30 different countries. The news of cooked books or creative accounting has erupted into a full-fledge investigation into the company's practices - and will have long-lasting ramifications on Italian business and politics. The story began a little more than a week ago when Parmalat announced that Bank of America had declared false a document, which showed a deposit of nearly 4 billion euros in Parmalat's Bonlat Financing Corp. The disclosure sent shockwaves throughout Italy, worrying investors and knocking market confidence. Prosecutors began to investigate other questionable financial transactions, as the government rushed to develop a bankruptcy protection plan for the firm.

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Parmalat, a food group famous all over the world for its long-lasting milk products, employs 35, people in 30 different countries. The news of cooked books or creative accounting has erupted into a full-fledge investigation into the company's practices - and will have long-lasting ramifications on Italian business and politics.

The story began a little more than a week ago when Parmalat announced that Bank of America had declared false a document, which showed a deposit of nearly 4 billion euros in Parmalat's Bonlat Financing Corp. The disclosure sent shockwaves throughout Italy, worrying investors and knocking market confidence. Prosecutors began to investigate other questionable financial transactions, as the government rushed to develop a bankruptcy protection plan for the firm.

A scanning machine may even have been used to falsify Bank of America documents Calisto Tanzi, who had run the company since founding it in , is at the center of the probe into fraud. Although investigators have searched Tanzi's home, they were unable to take him in for questioning last week reportedly because he fled to another country.

Tanzi sent word that he had taken a holiday but would be available later, according to various media outlets. Among the other 20 or so people being investigated for fraud is Fausto Tonna, who was chief financial officer for 16 years before resigning in February. Investigators spent as many as nine hours questioning Tonna last week. According to The New York Times , the investigation has already revealed that Parmalat might have been hiding a "mass of liabilities" through public offering of shares from as far back as Now what?

In the meantime, the government put Enrico Bondi, who has a reputation for pulling companies out of trouble, in charge of restructuring Parmalat. By the end of last week, Parmalat was named insolvent and eligible for bankruptcy. This allows the company to continue operations while re-organizing its financial portfolio and paying off debts. Parmalat has six months to finalize its restructuring. There are two major factors that will keep Parmalat from suffering Enron's fate.

First, Italy has much laxer corporate ethics laws than the United States, especially since when business mogul Silvio Berlusconi took the office of prime minister, according to the BBC.

Second, Parmalat's bread and butter is its dairy, drinks and food business, which continues to function despite the financial irregularities. In other words, no one thinks the company is worthless, also according to the BBC.

Bondi and his crew do have one obstacle in their way: European Union laws that threaten to keep Berlusconi from letting the government actually prop up Parmalat in its time of need. Right now, the Italian government is trying to get the EU to declare Parmalat is in a state of "crisis," which will give Italy more flexibility in aiding the dairy giant.

Before the scandal broke, Parmalat had a stock market value of 1. It is the little guy who is suffering - from the farmers to the small-time investors. According to various reports, from 70, to 90, small investors own Parmalat stocks and bonds. Berlusconi's cabinet approved new rules for rescuing big firms that took effect almost immediately last week.

Italy's unemployment rate is already at about 9 percent and the government's plans for Parmalat are intended to keep employees from losing their jobs, which would undoubtedly raise the country's already inflated jobless rate. Just yesterday, Tanzi returned to Italy and was arrested in Milan on charges of fraud and misappropriating hundreds of thousands of euros.

His lawyers deny the charges. Amid the mess, there is a moral. The law always catches up with your lies - and you will eventually have to pay for your errors - in Italy and everywhere else. Tanzi certainly will discover that the truth is far more forgiving. Share Tweet. Travel Booking. Recipes Authentic Italian recipes for you to enjoy. Our Paesani Weekly column dedicated to today's Italy. Trivia Test your knowledge of Italy. Follow italiansrus.

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Creative accounting

Creative accounting is a euphemism referring to accounting practices that may follow the letter of the rules of standard accounting practices , but deviate from the spirit of those rules with questionable accounting ethics —specifically distorting results in favor of the "preparers", or the firm that hired the accountant. The terms "innovative" or "aggressive" are also sometimes used. Another common synonym is "cooking the books". Creative accounting is oftentimes used in tandem with outright financial fraud including securities fraud , and lines between the two are blurred. Creative accounting practices are known since ancient times and appear world-wide in various forms. Ian Griffiths in , describing creative accounting [2].

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