Round-tripping, also known as round-trip transactions or "Lazy Susans", is defined by The Wall Street Journal

The Wall Street Journal

The Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....

, as a form of barter

Barter

Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a...

 that involves a company selling "an unused asset

Asset

In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...

 to another company while at the same time agreeing to buy back the same or similar assets at about the same price." Round trips are characteristic of the New Economy

New Economy

The New Economy is a term to describe the result of the transition from a manufacturing-based economy to a service-based economy. This particular use of the term was popular during the Dot-com bubble of the late 1990s...

 companies. They played a crucial part in temporarily inflating the market capitalization

Market capitalization

Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...

 of energy traders such as Enron

Enron

Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...

, CMS Energy

CMS Energy

CMS Energy is a public utility supplying electric power and natural gas to Metro Detroit and most of Michigan. Its headquarters are located in Jackson, Michigan. The company has operated since 1890....

, Reliant Energy

Reliant Energy

RRI Energy, Inc. , based in Houston, Texas, United States, was an energy company that provided electricity to wholesale customers in the United States. The company was one of the largest independent power producers in the nation with more than 14,000 megawatts of power generation capacity across...

, and Dynegy

Dynegy

Dynegy Inc. , based in Houston, Texas, United States, is a large owner and operator of power plants and a player in the natural gas liquids and coal business...

.

In international scenarios, round tripping is used for tax evasion and money laundering as well.

Other companies making unconventional round-tripping deals include AOL

AOL

AOL Inc. is an American global Internet services and media company. AOL is headquartered at 770 Broadway in New York. Founded in 1983 as Control Video Corporation, it has franchised its services to companies in several nations around the world or set up international versions of its services...

 with Sun Microsystems

Sun Microsystems

Sun Microsystems, Inc. was a company that sold :computers, computer components, :computer software, and :information technology services. Sun was founded on February 24, 1982...

 and Global Crossing

Global Crossing

Global Crossing Limited was a telecommunications company that provides computer networking services worldwide. It maintained a large backbone and offered transit and peering links, VPN, leased lines, audio and video conferencing, long distance telephone, managed services, dialup, colocation and...

 with Qwest Communications. It is alleged that when some telecommunications companies swapped capacity, they booked the value of the incoming capacity as revenue and the value of the outgoing capacity as an investment

Investment

Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

. These transactions had the effect of inflating profits. The SEC

United States Securities and Exchange Commission

The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...

 ruled that booking revenues from swaps in telecommunications capacity was improper.

Many such companies have used round-tripping to distort the market by establishing false revenue benchmarks

Revenue recognition

The revenue recognition principle is a cornerstone of accrual accounting together with matching principle. They both determine the accounting period, in which revenues and expenses are recognized...

, aiming to meet or beat the numbers put out by Wall Street

Wall Street

Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...

stock analysts. As a result of abusive round trips, barter between publicly held companies has become discredited among professional investors.

External links

• Forbes.com Round Tripping On Energy By Dan Ackman, May 16, 2002.
• Slate How Enron and Qwest ruined a smart New Economy business practice. By Daniel Gross Aug. 21, 2002.

http://blogs.barrons.com/techtraderdaily/2010/10/04/satyam-faces-sec-fraud-charges/