Go to www.sec.gov and obtain WorldComs Form 10- K for year 2002. Using the restatement information presented

Question:

Go to www.sec.gov and obtain WorldCom’s Form 10- K for year 2002. Using the restatement information presented on pages 42– 48 of the form, identify any inappropriate adjusting entries (or failure to make appropriate adjusting entries) in the following areas:

a. Impairment

b. Inappropriate reduction of access costs

c. Purchase accounting

i. Goodwill and intangible assets

d. Long- lived assets

e. Revenue- related adjustments for:

i. Deferral of customer activation, installation, and provisioning revenue and cost

ii. Accounts receivable adjustments

iii. Revenue recognition adjustments

Example: Impairment on page 43. WorldCom overstated net income by failing to perform impairment tests on goodwill and other long- lived assets. This failure to write down assets resulted in a pre- tax understatement of expenses of $ 12,592 in 2001 and $ 47,180 in 2000, which overstated operating income by the same amounts.

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