The Regents - University of California | Office of The President

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WorldCom also announced it expects to record further
write-offs of assets previously reported, including the
likelihood that it may determine all existing goodwill
and other intangible assets, currently recorded as $50.6
billion, should be written off when restated 2000, 2001
and 2002 financials are released. The company will also
reevaluate the carrying value of existing property, plant
and equipment as to possible impairment of historic
values previously reported. However, until the
company’s audit of previously reported asset values is
complete it cannot determine with certainty the amount
of its ultimate write-offs.
141. The Press Release also included the following chart which
summarized the changes to the financial statements:
Reductions to WorldCom’s Pre-Tax Income
(in millions of dollars)
1999 2000 2001 1Q
2002
Total
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June 25, 2002
reported EBITDA
reductions
August 8, 2002
EBITDA
reductions
Total reduction in
EBITDA
August 8, 2002
non-EBITDA pre
tax adjustments
$ $ $3,055 $ 797 $3,852
$ 217 $2,864 $ 161 $ 88 $3,330
$ (8) $ 393 $ 166 $ (50) $ 501
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Total pre tax
income reductions
$ 209 $3,257 $3,382 $ 835 $7,683
142. These write-downs occurred because WorldCom made transfers from
the reserve accounts and used the money as if it were revenues from operations to
inflate profits at just the amount to meet Wall Street’s expectations.
143. The effect of the misstatements was to decrease the net revenues and
profits of WorldCom changing what had purportedly been successful years when
WorldCom was one of the most highly valued companies in the country and
considered a model for telecommunications companies into years of loss.
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COMPLAINT