Scribd
Upload
196 views13 pages

Worldcom Case: Anisha .A Rohit.K Sravya.D Sravan.M Vineeth.S

Worldcom grew rapidly through acquisitions but struggled after a failed merger attempt with Sprint. To meet Wall Street expectations, top management engaged in fraudulent accounting activities such as improperly capitalizing line costs. This included reporting over $3.8 billion in regular operating expenses as capital expenditures to inflate profits. When the fraud was disclosed, Worldcom filed for bankruptcy in 2002 in what was then the largest such filing in U.S. history. The case highlighted the need for transparency, ethical leadership, and government oversight to prevent similar situations.

Uploaded by

Kiran Kumar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
196 views13 pages

Worldcom Case: Anisha .A Rohit.K Sravya.D Sravan.M Vineeth.S

Worldcom grew rapidly through acquisitions but struggled after a failed merger attempt with Sprint. To meet Wall Street expectations, top management engaged in fraudulent accounting activities such as improperly capitalizing line costs. This included reporting over $3.8 billion in regular operating expenses as capital expenditures to inflate profits. When the fraud was disclosed, Worldcom filed for bankruptcy in 2002 in what was then the largest such filing in U.S. history. The case highlighted the need for transparency, ethical leadership, and government oversight to prevent similar situations.

Uploaded by

Kiran Kumar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 13

WORLDCOM CASE

ANISHA .A
ROHIT.K
SRAVYA.D
SRAVAN.M
VINEETH.S
Case synopsis :

• Growth and decline of Worldcom

• Concern management of mergers and


acquisitions

• Accounting irregularities
Worldcom
• Dates back when Murray Waldron and William
Rector sketched out a plan to create long-distance
service provider in 1983
• Bernard Ebbers CEO of LDDS.
• LDDS and Advance Telecommunications merge and
form into Worldcom .
• Preminent Telecommunication company with 20
million customers , thousands of corporate clients
& 80,000 employees.
• MCI is the long distance unit of Worldcom which it
acquired in 1998.
Continued…
• Attempt to merge with Sprint was turned
down .
• This left Worldcom with strategic weaknesses,
Financial burdens.
• Disclosures of accounting frauds that involved
top management.
• Failure to make payments left Worldcom file
bankruptcy.
Situations that led to fraudulent activities

• Acquiring companies left right and center.


• Entering into the long term lease agreements.
• Meet the expectation of Wall Street analysts.
• Save themselves from the dot com tragedy.
• Owing to the CEO and the CFO’s grand plan.
How did it take place..
• Reporting operation through financial
statements.
• Expenditures made by companies are two types :
Operating expenditure (line costs) & Capital
expenditure.
• Accounting treatments for these expenses.
• Implications of the entries made
a) The transfer will reduce the company’s expenses
pre-tax net income will increase
Continued..
b) The value of the company’s capital assets and
total assets will increase by amount
transferred.
c) The value of the company’s net worth will
increase.
Role of top management
• CEO Bernard Ebbers

• CFO– Scott Sullivan

• Auditors
Failure of Ethics
• Overstating accounting irregularities.

• Pressure to deliver results

• Failure on the part of CEO.

• Turbulence in the Industry.


Challenges
• Company lost its trust by people

• Lck of ethical managers

• Need for company to be on track


Things to do
• Transparency

• Appointment of Council by Government

• Ownership of Government

• Appointment of New Ethical CFO

• Organisation Culture
Thankyou

You might also like