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Forensic Accounting, Forensic Techniques, and Fraud Detection Copyrighted 2001 D. Larry Crumbley, ... - page 189 / 352

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© D.L. Crumbley

A Parmalat subsidiary issues a security of 500 million euros, and buyer makes an irrevocable commitment to convert debt into equity in 2008.

Balance sheet treats 500 million euros transaction as $523.8 million in funds for capital increase.

Amount rolled into a single entry of $764 million which encompasses minority interest funds for capital increase and shareholder equity.

On consolidation under equity method shown as $523.8 million equity.

Therefore, debt into equity.

Of Parmalat $18 billion debt, nearly $16 billion was not disclosed. Until mid-2003, Parmalat received a clean bill of health from auditors.

Source: Henry Sender, “Parmalat Unit May Offer Accounting Clues,” Wall Street Journal, January 29, 2004, p. C-5

Water Into Wine

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