world com (a case of accounting fraud)
TRANSCRIPT
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Case Study
Presented by: Kapish gaba
Nitin raghav
Pallavi srivastava
Parul verma
Prateek saini
Tushar singhal
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WORLD COM INC.
‘A CASE OF ACCOUNTING FRAUD’
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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.
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Company Profile
Name Year Head Office
Core Business
World Com 1983 Clinton, Mississippi
in the Georgia state of USA
providing long distance call services
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Promoters
Murray Waldrom And
William Rector Of USA
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Business Strategy
Mergers and Acquisitions
Joint Ventures
Partnership
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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
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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
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Reasons
Fall in earnings due to
Rise of mobile culture recession in American Economy Failure of M&A (due to non synergy)
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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
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Responsibility Zone
CEO, Bernard Ebber CFO, Mr. Scott Sullivan, Internal auditor, Cynthia Cooper, Auditor, Arthur Andersen.
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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.
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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
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Thank You