Why did companies such as Enron find the use of special-purpose entities to be advantageous?
Special purpose entity : An SPE is a general financing vehicle this is usually created for a single specific purpose. The special purpose entity (SPE) may be in the form of partnership firm, trust, or corporation.
Special purpose entity: -
E & Co established many special-purpose entities (SPEs) at least some of which were intended to manipulate the FR (financial reporting). E & Co had to use the special purpose entity (SPE) to avoid the balance sheet reporting debts, and in the reported income, the SPEs create fictional transactions. They also recognize losses in their income statements will avoid by the, transferred a bad investments and loans to the Special Purpose Entity (SPE’s).