world com (a case of accounting fraud)

Case Study

Presented by: Kapish gaba

Nitin raghav

Pallavi srivastava

Parul verma

Prateek saini

Tushar singhal

WORLD COM INC.

‘A CASE OF ACCOUNTING FRAUD’

Case Profile

Company capitalized some revenue expenditure and showed it as capital assets in the Balance Sheet. Violating the principles of GAAP (Generally Accepted Accounting Principles) company created worthless assets.

Company Profile

Name Year Head Office

Core Business

World Com 1983 Clinton, Mississippi

in the Georgia state of USA

providing long distance call services

Promoters

Murray Waldrom And

William Rector Of USA

Business Strategy

Mergers and Acquisitions

Joint Ventures

Partnership

Important Mergers & acquisition

In 1994 international communication network IDB

1995 William Telecommunications Group (Will Tel)

1996 MFS communication 1996 UU Net Technologies 1998 MCI communication for $ 40 billion, largest

take over in the history at that point of time 1998 Borooks Fiber Properties for $ 1.2 billion. 2001 Intermedia Communications

Accounting Scam

frauds by manipulations in the financial statement by capitalizing some revenue expenditure about $ 7683 million within 3 years and showed it as capital assets in the Balance Sheet By violating the principles of GAAP

Reasons

Fall in earnings due to

Rise of mobile culture recession in American Economy Failure of M&A (due to non synergy)

Profitability after Scam

Particulars Particulars 20012001$ in $ in MillioMillio

nsns

20002000$ in $ in MillionsMillions

19991999$ in $ in MillionsMillions

19981998$ in $ in MillionsMillions

19971997$ in $ in MillionsMillions

Revenue Revenue Op Op

income income

351793517935143514

390903909081538153

359083590878887888

1768717687--975975

7384738410181018

Responsibility Zone

CEO, Bernard Ebber CFO, Mr. Scott Sullivan, Internal auditor, Cynthia Cooper, Auditor, Arthur Andersen.

World Com and India:

Impact on VSNL World Com has to pay VSNL a

handsome amount of Rs 150 crore every month. Due to World Com bank ruptcy VSNL was not in a position to recover its outstanding line revenues from World Com which affect VSNL profitability up to an extent.

The Results

CFO Scott Sullivan and Financial Controller David Myers were arrested

NASDAQ Delist all securities of World Com wef 30 July 2002.

‘paradise lost’ for investors

Thank You