Worldcom notes essay

Part of a current expenses was transferred to a capital account. In such a way, WorldCom boosted its net income (as expenses were understated) and its assets (as capitalized costs are treated as investment) from 1999 to 2001.

During 1983, Murray Waldron and William Rector drafted a business plan offering long distance telephone service. WorldCom was established in Hattiesburg, Mississippi by Bill Fields in 1984 under the name of Long Distance Discount Services (LDDS).

According to the investigation, the accounting maneuver was discovered by the internal auditor, Cynthia Cooper in WorldCom. The company’s revenue expenditure had been treated as capital expenditure, causing overstatement of profits by $3.8 billion in the financial results.

Table 2 summarized the WorldCom’s consolidated financial statement for three years period. In order to increase the stock price, the accounting department of WorldCom underreported ‘line cost’ which is the interconnection expenses with other telecommunication companies.