Can someone help me with a accounting fraud question i have to do for school?

I need to answer whether or not this would be considered legal or illegal:

Scenario #A: A large parent company creates numerous special purpose entities (SPEs), or subsidiaries in foreign countries, allowing these SPEs to create sub-subsidiaries of themselves, funding the whole enterprise with notes receivable to the parent company, which are recorded as income in the financial statements of the parent company.

Simply creating the companies has not generated any income for the parent company in your scenario (except for a small amount of interest income on the notes). The notes should be recorded as assets, not income.

Legal

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　　Investment Account 　　Invest Money 　　Invest in Gold 　　Invest Fund 　　Income Fund 　　HYIP 　　High Yield 　　Hedge Fund

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