American Accounting Scandals

CORPORATE GOVERNANCE ASSINGMENT The Problems and Issues • Inflating Capital Expenses o Companies Under Investigation: Adelphia Communications, WorldCom o Fact: Adlephia Communications caused losses of over 60 Billion to investors  A company books its everyday, ordinary, operating expenses under capital expenses  Problem is according to GAAP capital assets expenses can be spread out for the duration of use  Example: WorldCom transferred over $3.83 billion in operating expenses to property plant and equipment accounts in their ledger.  This it …

…assumptions; • Requiring the prompt disclosure of insider transactions.  CONSQUENCES  Is allowed by law when onIt makes sense in times where one company has increasing demand to improve efficiency but this was not the case, as the Washington post noted “Most such swapping transactions took place in 2000 and 2001 when prices dropped because there was more than enough fiber-optic capacity to go around and that glut led companies to find new revenue streams.” Ultimately, this misleads stakeholders.