world com (a case of accounting fraud)
TRANSCRIPT
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