WorldCom Takes Another $3.3 BILLION Write-Off !

FOX News Channel | August 8, 2002 | FOX News Channel Staff

[Mad_Tom_Rackham]

Bankrupt is bankrupt. I'm not sure they can get more bankrupt.

$2B less for the banks to recover. Sounds like a problem for somebody.

[F16Fighter]

Well there was the coroner's report, the autopsy, and now the accountant...

[Grampa Dave]

As we approach the day of truth in corporate balance sheets, I would like to make two predictions. I believe that day is 12 August when CEO's have to sign their companies balance sheets as being accurate. If they lie they get to clean Martha Stewarts cooking pots and pans in jail.

So there will be more of these "OOPS, here is another billion or two we lied about or misled our stock holders and creditors about. The new CEO's and some of the hanger ons are not going to place their elite necks into the SEC Nooses that are tied and being arranged on the big old CEO hanging tree being assembled on Wall Street.

Second prediction: Most of the Clintoonian corporations who appeared to be fantastic corporations were just like their role model Clintoon, big liars.

These corporations will have or had Rat CEO's and boards. They donated massive amounts of money to the Rats and the Clintoonians. They hired lawyers instead of scientists and good accountants. They never had good products or good people to make and sell the products. Last but not least, most of them used the Arthur Anderson, Clintoonian/Dood creative accounting to appear to magically beat their goals every day, week, month, quarter, and year. These Rat CEO's have the same problem defining a real profit as their buddy boy Clinton did in defining "Is and Sex".

[not-alone]

looks like the banks were involved, Citicorp and Merrill were ones that gave them loans , they showed as profit and banks sold off to public knowing it was bad

[Swanks]

May tank the telecom supplier stocks like Lucent and Nortel. Gee, Nortel might even go from $0.93 to $0.75!

That would be a stock price reduction from 99.2% to 99.7% ! BWAHAHAHA !

[Excuse_My_Bellicosity]

Here's a link from FoxNews.

[OldFriend]

The funny stuff began in 1999!!!!!!!!!!!!

[Wyatt's Torch]

As I said in another thread - here

If I'm reading this right and it was simple reversals of bad debt accruals then every company on the face of the planet is guilty.

This is an expense that was taken in a prior period and put into a reserve on the balance sheet. When bad debts (customers who fail to pay) occur, you write it off against the reserve. Periodically, these reserves are reviewed to see if they are too high or too low. If too high, you write down the reserve and take it into operating income. This has no impact on cash flow because the decrease in the liability offsets the increase in operating income.

This is one of the most common accounting practices and every company on earth does this. Unless there is more to the story, this is a non-event.

[OldFriend]

Don't forget Bush had a lot of help from the Mossad!

[alrea]

$2B less for the banks to recover. Sounds like a problem for somebody.

the banks played hardball and are getting hit in the teeth.

[TheCPA]

The term "reserve for bad debts" is actually an archaic term in financial accounting. More acceptable terms are "allowance for uncollectible accounts," "allowance for doubtful accounts," or "allowance for bad debts." This Allowance account is not a liability. It carries a credit balance like a liability, but it is a contra asset and not a liability. The term "reserve" often makes people think there is a reserve of money such as extra cash a company can draw on during bad times. Such a concept is false. These so called "reserves" are not assets at all, but are contra assets.

Under the matching principle of accrual accounting, a company must estimated its uncollectible accounts at the end of the accounting period. The company books an ESTIMATED expense for bad debts and increases the Allowance account by the same amount. When a particular account is later identified as uncollectible, it is written off against the Allowance account. Thus, the Allowance account is debited and Accounts Receivable is credited. It is not charged to expense because the expense was provided for in the esimated amount in the adjusting entry at the end of the year. If a company charged it to expense, it would be double counting.

For tax purposes, a company may not deduct a general estimate of bad debts. Rather, a company cannot take a tax deduction for bad debts until it identifies specific accounts that are uncollectible.

Because the bad debts expense entry is an estimate for financial accounting, a company should be able to reverse part of the entry later if the estimate in a prior period was too high. The effect of such a reversal is to increase income in the current period. Such an entry has no effect on cash flow.

Estimates are an inherent part of the financial accounting process. Companies should make the best estimates possible based on the information available. Changes in accounting estimates are not necessarily indicative of any fraud.

[marlin]

Let's not forget that Armstrong was instrumental in the Chinese getting missile guidance technology under clinton's watch - he's a rotten egg.

[Bubba_Leroy]

A few billion here, a few billion there, and this could start adding up to some real money.

[Southack]

So is Worldcom "finding" these instances of fraud in order to count them as expenses and get some big tax refund from Uncle Sam?

What's their angle/motivation to air these discrepancies AFTER they've gone into bankruptcy protection?

[FormerLurker]

With MCI's mindless customer service agents and fraudulent business practices, they deserve to go down...

[TheCPA]

The financial accounting and tax accounting treatment of bad debts is totally different. Thus, neither the booking of estimated bad debts expense or the reversing of it have any effect on the tax liability. However, if the company did not deduct expenses for line costs on the tax return that it apparently improperly capitalized for book purposes, the company might be entitled to a tax refund. My theory for the massive writeoff of goodwill etc is what is known as the "blood bath theory." It means that when things are bad, recognize all bad things at once so that once things turn around, the future will look better than it otherwise would.

[bonesmccoy]

From State of California database on Gray Davis contributions.... Search for MCI Worldcom. WILL THE GOVERNOR'S CAMPAIGN RETURN THESE FUNDS????? You'll find these entries:

NAME OF CONTRIBUTORX
PAYMENT TYPE
CITY
STATE
ZIP
ID NUMBER
EMPLOYER
OCCUPATION
AMOUNT
TRANSACTION DATE
FILED DATE
TRANSACTION NUMBER

MCI WORLDCOM
MONETARY
SACRAMENTO
CA
95833
773315
$3,000.00
3/23/2001
3/20/2002 773315-A42425

MCI WORLDCOM
MONETARY
SACRAMENTO
CA
95833
773315
$10,000.00
5/14/2001
3/20/2002
773315-A46523

WORLDCOM, INC.
MONETARY
ARLINGTON
VA
22202
810086
$5,000.00
1/7/2002
2/23/2002
810086-A59175

WORLDCOM, INC.
MONETARY
ARLINGTON
VA
22202
786160
$10,000.00
8/8/2001
3/20/2002
786160-A47571

[Southack]

"However, if the company did not deduct expenses for line costs on the tax return that it apparently improperly capitalized for book purposes, the company might be entitled to a tax refund."

Let's see. Worldcom is bankrupt and the stock is no longer publicly traded (i.e. worthless).

The bankruptcy protection shields Worldcom's assets from its creditors, or even gets entire loans wiped out.

And then up to three years after the fact, Worldcom can file for a massive tax refund, thus pumping volumes of money into an insolvent, worthless entity.

Heck of a scam.

[Grampa Dave]

Bones thanks for this:

Gentlemen, this needs to get to Simon's Campaign, and now we have another nick name for Enron Davis, he is also World Com Davis. After being Whoreacle Davis.