INSIDE COMPLIANCE

Big Tech is bringing back the accounting technique that hid Enron’s debt, leading a growing number of critics to caution that Big Tech could experience a similar collapse. Big Tech companies, including Alphabet, Meta, and Microsoft, have been using off-balance-sheet accounting—the accounting strategy that allowed Enron to deceive its investors before it collapsed—to  structure and record their data center deals. This practice is taking place at a time when the SEC has slowed its enforcement actions and narrowed its enforcement priorities.  However, the SEC has also created a Financial Reporting and Accounting Unit intended to root out any potential accounting misconduct. So, while Big Tech’s concealed debt obligations create a significant risk to investors, the SEC’s new Financial Reporting and Accounting Unit is well-positioned to police any misconduct that may arise.