The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
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<strong>of</strong> operations. Under GAAP, the restatement <strong>of</strong> previously issued financial<br />
statements is reserved for circumstances where no lesser remedy is available.<br />
Under Accounting Principles Board Opinion No. 20, Accounting Changes,<br />
restatements are only permitted, and are required only to correct material<br />
accounting error or irregularities that existed at the time the financial statements<br />
were originally prepared and issued.<br />
134. WorldCom concluded that the amount <strong>of</strong> improper transfers were:<br />
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First Quarter 2001<br />
Second Quarter 2001<br />
Third Quarter 2001<br />
Fourth Quarter 2001<br />
First Quarter 2002<br />
Total<br />
$771 million<br />
$610 million<br />
$743 million<br />
$931 million<br />
$797 million<br />
$3.852 billion<br />
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Ibid. As a result <strong>of</strong> the restatement, WorldCom’s reported earnings would be<br />
reduced to $6.339 billion for 2001 and $1.368 billion for first quarter 2002, and<br />
the company, rather than having a pr<strong>of</strong>it, would have a net loss for 2001 and the<br />
first quarter <strong>of</strong> 2002.<br />
D. June 25, 2002 Announcement <strong>of</strong> Restatement<br />
135. In a June 25, 2002 Press Release, WorldCom announced it would be<br />
restating its financial statements for 2001 and the first quarter <strong>of</strong> 2002 because <strong>of</strong><br />
improper recognition <strong>of</strong> Line Costs which improperly inflated revenues:<br />
[I]t [WorldCom] intends to restate its financial<br />
statements for 2001 and the first quarter <strong>of</strong> 2002. As a<br />
result <strong>of</strong> an internal audit <strong>of</strong> the company's capital<br />
expenditure accounting, it was determined that certain<br />
transfers from line cost expenses to capital accounts<br />
during this period were not made in accordance with<br />
generally accepted accounting principles (GAAP). <strong>The</strong><br />
amount <strong>of</strong> these transfers was $3.055 billion for 2001<br />
and $797 million for first quarter 2002. Without these<br />
transfers, the company's reported EBITDA would be<br />
reduced to $6.339 billion for 2001 and $1.368 billion for<br />
first quarter 2002, and the company would have reported<br />
a net loss for 2001 and for the first quarter <strong>of</strong> 2002.<br />
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COMPLAINT
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