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  • August 2017 (Revised November 2017)
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Accounting for Political Risk at AES

By: Gerardo Pérez Cavazos and Suraj Srinivasan
  • Format:Print
  • | Language:English
  • | Pages:26
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Abstract

As a global energy generating company, AES frequently faces challenges from political changes and instability. This is exacerbated by the fact that in many instances AES' primary customer is the government, which is also in charge of law-making. For example, AES' management team has encountered expropriation risks in Venezuela, collection problems in the Dominican Republic, and regulatory changes in the United States that have led to asset impairments. More recently, the Bulgarian energy regulator announced its intentions to seek a 30% price reduction on a power purchase agreement signed over ten years ago with AES. Accordingly, AES' management is evaluating whether the renegotiation will lead to any asset impairments and the overall effects on its financial statements.

Keywords

Political Risk; Asset Impairment; Risk Factors; Fair Value; Fair Value Accounting; Financial Reporting; Financial Statements; Energy Industry; Bulgaria; Dominican Republic; United States; Venezuela

Citation

Pérez Cavazos, Gerardo, and Suraj Srinivasan. "Accounting for Political Risk at AES." Harvard Business School Case 118-023, August 2017. (Revised November 2017.)
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About The Author

Suraj Srinivasan

Accounting and Management
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Related Work

    • August 2017
    • Faculty Research

    Accounting for Political Risk at AES (B)

    By: Gerardo Pérez Cavazos and Suraj Srinivasan
    • November 2017 (Revised November 2017)
    • Faculty Research

    Accounting for Political Risk at AES

    By: Gerardo Pérez Cavazos and Suraj Srinivasan
    • August 2017 (Revised November 2017)
    • Faculty Research

    Accounting for Political Risk at AES

    By: Gerardo Pérez Cavazos and Suraj Srinivasan
Related Work
  • Accounting for Political Risk at AES (B) By: Gerardo Pérez Cavazos and Suraj Srinivasan
  • Accounting for Political Risk at AES By: Gerardo Pérez Cavazos and Suraj Srinivasan
  • Accounting for Political Risk at AES By: Gerardo Pérez Cavazos and Suraj Srinivasan
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