Assurance and Forensic Accounting - Assignment Example

Assurance and Forensic Accounting Name Tutor ACCT 1111 Date Question 1 Corporate fraud occurs due to different motivations. The fraud triangle is commonly used to identify the causes of corporate fraud. The theory indicates that corporate fraud occurs as a factor of three key elements. These are (1) pressure, (2) opportunity to commit the fraud, and (3) attitude/rationalization of the person committing the fraud. Due to its effectiveness in outlining the reasons as to why people commit corporate fraud, the fraud triangle has come to be generally accepted in virtually every situation in which fraud is described or investigated. The fraud triangle and fraud scale are used below to analyse the collapse to Worldcom (Albrecht & Albrecht, 2004). In 2002 Worldcom collapsed. This was the biggest corporate collapse of an American company in history. By and large, fraudulent actions in the company were quite simple. Some debits were recorded instead of being recorded as expenses. This painted a picture of higher assets value, revenues, and net owners’ equity. The main determination was to “generate the numbers” anticipated by analysts after every quarter. The fraudulent actions at WorldCom’s were propagated by the CEO at the time (Bernie Ebbers), and CFO (Scott Sullivan) (Sidak, 2003). Pressure denotes the perceived need to commit fraud. Corporate fraud mainly arises from financial pressure. Other common types of fraud include emotional and lifestyle pressure (Romney & Steinbart, 2008). Ebbers and Sullivan found themselves under strong financial pressure to meet the expectations of the analysts at Wall Street. Ebbers was a very ambitious person and had set his eyes on driving Worldcom to the top of Wall Street. In fact Worldcom had come to be closely associated to the stock market. The pressure was so much considering that there was trouble in telecommunication industry that was facing a downturn. Most companies in the sector had gone under and the economic environment was not favourable. It was in the month of September 2000 that reality set in. Sullivan pointed out to the CEO clearly that the company’s financial and operating results were worse and the analysts quarterly expectations would not be met (Beresford, 2003). Ebbers refused to issue an earnings warning, as would be expected. The two executives then resolved to engage in fraudulent actions to conceal the troubling situation at Worldcom. Sullivan being loyal to Ebbers was under pressure to do what the CEO decided. Moreover, Ebbers and Sullivan were lavish spenders. At the time of this crisis Ebbers had acquired huge loans using Worldcom stock as collateral. Ebbers earned a cash-based salary of $935,000, but he had taken up a corporate loan of about $409 million he used for trading in stock options. Sullivan was constructing a mansion in Boca Raton, Florida. Therefore, the financial pressure was combined with some lifestyle and emotional pressure. Opportunity to commit fraud is associated with weak or lack of internal controls. Worldcom’s fraud was propagated by the control structure including the accounting systems, the control environment and the control procedures (Beresford et al., 2003). Worldcom was heavily involved in acquisitions. Under the leadership of Ebber, the company was engaged in over 75 acquisitions. The rate at which the acquisitions were made provided no room for the installation of proper accounting systems. In such a situation, manipulation of numbers would not be easy to detect. This provided Sullivan with the opportunity to manipulate the figures and conceal that for a longer period of time before it was noted by the auditors. Besides, the company did not have a proper work environment or company culture to guide the behaviour of employees. In fact Ebbers was reported having said that putting down an employee code of conduct would amount to time wastage. The control procedures lacked a system of authorisations at the headquarters. In such circumstances, Sullivan had the chance to instruct managers at the accounting department to make journal entries totalling to millions that were not supported by any documentation (Zekany, 2004). The final element of rationalization is associated with an individual’s ethical conduct. Romney and Steinbart (2008) indicate that rationalisation entails the perpetrator’s mind-set justifying the fraudulent actions. Ebbers and Sullivan were trusted individuals with no past criminal record. They used rationalisation to hide their fraudulent activities. The country was in a bad economic environment, the executives believed that their actions were one-time. There was a feeling that things would turn around. Besides, the nature of the crime was not violent so they Ebbers and Sullivan believed that they were not hurting any particular person. Therefore, the fraud triangle clearly reveals the causes of fraud at Worldcom. The financial pressures are clearly manifest due to the appetite to report high earnings and growing revenues. The fraud occurred in an environment that had weak internal controls. Ebbers and Sullivan had the opportunity to commit the fraud and conceal it. Rationalization was evident given that Ebbers and Sullivan believe that they were not injuring anyone. They believed that their wrongdoing was temporary. Besides, they were leading figures that would not be pointed fingers at easily due to their stature in society (Albrecht & Albrecht, 2004). Question 2 In Australia, false accounting is classified as a crime under section 58 of the Crimes Act (1958). It refers to a dishonest act of an individual aimed at gaining for himself or another or set to to cause loss to another. Acts of false accounting entail “destroying, defacing, concealing or falsifying any account/record/document made/required for any accounting purpose”. It also entails providing information for whichever intent to produce or make any account/record/document that a person knows is materially misleading, false or deceptive. Of the many wrongdoings that the Worldcom executives and employees were accused of is a journal entry made to recognize $35 million of revenue in 2001 from the Electronic Data Systems (EDS) contract. This entry was made based on performance forecasts. Worldcom entered into the EDS contract in 2001 involving considerable exchange-of-services. In this agreement EDS was to outsource its network and communication services to Worldcom for 11 years. The total value of the contract to Worldcom over the period was projected to be $6 billion. One of the terms to the contract were a minimum that would be met every year under what was referred to as a “Take or Pay” minimums. The alternative approach was the use of cumulative measures after every five years, eight years, and eleven years. A penalty was charged if the minimum was not met. In the same contract, it was agreed that an upfront payment would be made by Worldcom amounting to $100 million. The amount was to be repaid if the EDS would not meet its cumulative minimum usage after five years. The annual repayment would be $20 million over five years. This agreement was labelled the EDS ratable accrual (Albrecht & Albrecht, 2004). In the second quarter of 2001, given the pressure Worldcom excecutives were in, they decided to use the EDS ratable accrual to close the revenue gap. This arose from the projections showing that at around mid-June 2001 EDS was not likely to meet its yearly Take or Pay commitment. Furthermore, trend projections over the subsequent seven years showed that EDS would not fulfil the five-year minimum commitment. Therefore, the $100 repayment by Worldcom would start to be repaid as from 2005. Out of this an immediate “catch-up” entry that amounted to $35 million was made in the third quarter for September 2001 (Zekany et al,. 2004). This move was against the required accounting requirements. A general rule in accounting is to recognise revenues when they are earned. Besides, accounting standards do not allow for the recognition of revenue from uncertain events. This is to avoid integral speculation, a point noted by the Sullivan. Paragraph 18 of the Accounting Standards AASB 118 indicates that “revenue ought to be recognised at the time it is expected that the economic gain arising from the dealing will flow to the entity”. Further, there are situations where it “may not be conceivable up to when the consideration is received or the uncertainty is removed”. The entry pertaining to the EDS contract was uncertain because it was contingent on two factors: (1) EDS would actually not meet the minimum requirement over three years from when the accrual was proposed; and (2) EDS would pay the penalty should it fall due. The uncertainty around this issues had not been removed. Therefore, this would amount to false accounting in Australia. Besides, the entry would amount to false accounting in Australia if weighed up against the five key elements of false accounting. The elements are: (1) a false statement of a material fact, (2) perpetrator’s knowledge that the statement is not true, (3) perpetrator’s intention to mislead the supposed victim, (4) supposed victim’s reasonable reliance on the statement, and (5) final harm to the supposed victim (Romney & Steinbart, 2008). The $35 million entry represents a false statement of a material fact. The entry was intended to boost revenues so as to meet Ebbers’ aggressive revenue growth targets. The reported figures would hoodwink the analysts at Wall Street regarding the performance of Worldcom and would therefore lead them to making wrong investment decisions. Indeed employees at Worldcom knew that this statement was not true, including the CEO, Mr Ebbers and the CFO, Mr Sullivan. They intended to deceive the analysts at the stock market. Analysts at Wall Street looked upon Mr Ebbers as a leader in the stock market. They believed in his actions. Therefore, they would reasonably rely on the reported figures. Finally, the investors suffered because after the fraudulent actions at Worldcom were revealed, the company’s share price failed significantly. Therefore, the investors lost their money under very painful circumstances. Question 3 Part A Horizontal and Vertical Analysis Horizontal Analysis a) Consolidated Balance Sheets The horizontal analysis indicates the changes in accounting figures from one accounting period to another. The analysis of Worldcom’s consolidated balance sheets indicates that the company was quite cautious. There was a slight increase in total assets and total liabilities and shareholder’s investment from $98.9 billion in 2000 to $103.9 billion in 2001. This represents a 5 per cent increase. The notable increases were in goodwill and other intangible assets ($3.943 billion), transmission equipment ($3.526 billion), long-term debt ($12.342 billion). Major reduction were in short-term debt ($7 billion) and minority interests ($2.491 billion) (Appendix 1a). b) Consolidated Statement of Operations The horizontal analysis of Worldcom’s consolidated statement of operations shows notable decline in revenues and incomes. Total revenue fell by $3.9 billion, operating income fell by $4.639 billion and net income fell by $2.652 billion from $4.153 billion in 2000 to $1.501 billion in 2001 (Appendix 1b). Vertical Analysis a) Consolidated Balance Sheets The vertical analysis indicates the largest portion of a company’s assets, liability or revenue in a particular accounting year. The analysis of Worldcom’s consolidated balance sheets indicates that the transmission equipment is the largest constituent of the total assets at 21 per cent in 2000 and 23 per cent in 2001. In total plant, property and equipment accounts for 45 per cent and 47 per cent of the total assets in 2000 and 2001 respectively. Goodwill and intangible assets constitutes a massive 47 per cent and 49 per cent of the total assets in 2000 and 2001 respectively. On the other hand, long-term debt constitutes a colossal sum of the total liabilities at 41 per cent in 2000 and 65 per cent in 2001. This shows that the company relied so much on debt to finance its operations. Additional paid-up capital constituted almost all shareholder’s investments at 95 per cent in 2000 and 94 per cent in 2001 (Appendix 1c). b) Consolidated Statement of Operations The analysis of Worldcom’s consolidated statement of operations shows that line costs constituted a large portion of the total revenues at 40 per cent in 2000 and 42 per cent in 2001. The selling, general and administrative expenses constituted 27 per cent in 2000 and 31 per cent in 2001 of the total revenue. In total expenses constituted 79 per cent of the total revenue in 2000 and 90 per cent in 2001 (Appendix 1d). Beneish Ratios The beneish ratios are used to calculate the M-Scores that help to detect earnings manipulation in companies, particularly in the services and manufacturing sectors. Table 1 below indicated the beneish ratios for Worldcom in 2000/01; Table 1: Beneish Ratios for Worldcom in 2000/01 Ratio Formula Calculation Result Day’s Sales in Receivables Index (DSRI) 0.87 Gross Margin Index (GMI) 1.04 Asset Quality Index (AQI) 0.97 Sales Growth Index (SGI) 0.90 Depreciation Index (DEPI) 0.85 Sales, General and Administrative Expenses Index (SGAI) 0.86 Leverage Index (LVGI) 1.06 Total Accruals to Total Assets (TATA) -0.04 M-Scores Five-variable model M = -6.065 + 0.823DSRI + 0.906GMI + 0.593AQI + 0.717SGI + 0.107DEPI M = -6.065 + 0.716 + 0.942 + 0.575 + 0.645 + 0.901 = -3.096 Eight-variable model M = -4.84 + 0.92DSRI + 0.528GMI +0.404AQI + 0.892SGI + 0.115DEPI – 0.172SGAI + 4.679TATA – 0.327LVGI M = -4.84 + 0.8 + 0.549 + 0.392 + 0.803 + 0.098 – 0.148 – 0.187 – 0.347 = -2.88 The m-score for Worldcom was greater than -1.78 and was, therefore, a manipulator. Part B Horizontal and Vertical Analysis Horizontal Analysis c) Consolidated Balance Sheets The horizontal analysis indicates the changes in accounting figures from one accounting period to another. The analysis of Worldcom’s consolidated balance sheets indicates that the company was quite cautious. There was a slight increase in total assets and total liabilities and shareholder’s investment from $98.9 billion in 2000 to $103.9 billion in 2001. This represents a 5 per cent increase. The notable increases were in goodwill and other intangible assets ($3.943 billion), transmission equipment ($3.526 billion), long-term debt ($12.342 billion). Major reduction were in short-term debt ($7 billion) and minority interests ($2.491 billion) (Appendix 1a). d) Consolidated Statement of Operations The horizontal analysis of Worldcom’s consolidated statement of operations shows notable decline in revenues and incomes. Total revenue fell by $3.9 billion, operating income fell by $6.419 billion and net income fell by $4.432 billion (Appendix 1e). Vertical Analysis c) Consolidated Balance Sheets The vertical analysis indicates the largest portion of a company’s assets, liability or revenue in a particular accounting year. The analysis of Worldcom’s consolidated balance sheets indicates that the transmission equipment is the largest constituent of the total assets at 21 per cent in 2000 and 23 per cent in 2001. In total plant, property and equipment accounts for 45 per cent and 47 per cent of the total assets in 2000 and 2001 respectively. Goodwill and intangible assets constitutes a massive 47 per cent and 49 per cent of the total assets in 2000 and 2001 respectively. On the other hand, long-term debt constitutes a colossal sum of the total liabilities at 41 per cent in 2000 and 65 per cent in 2001. This shows that the company relied so much on debt to finance its operations. Additional paid-up capital constituted almost all shareholder’s investments at 95 per cent in 2000 and 94 per cent in 2001 (Appendix 1c). d) Consolidated Statement of Operations The analysis of Worldcom’s consolidated statement of operations shows that line costs constituted a large portion of the total revenues at 43 per cent in 2000 and 50 per cent in 2001. The selling, general and administrative expenses constituted 27 per cent in 2000 and 31 per cent in 2001 of the total revenue. In total expenses constituted 79 per cent of the total revenue in 2000 and 90 per cent in 2001 (Appendix 1f). Beneish Ratios Table 2: Beneish Ratios for Worldcom in 2000/01 (Adjusted Figures) Ratio Formula Calculation Result Day’s Sales in Receivables Index (DSRI) 0.87 Gross Margin Index (GMI) 1.12 Asset Quality Index (AQI) 0.97 Sales Growth Index (SGI) 0.90 Depreciation Index (DEPI) 0.85 Sales, General and Administrative Expenses Index (SGAI) 0.86 Leverage Index (LVGI) 1.06 Total Accruals to Total Assets (TATA) -0.04 M-Scores Five-variable model M = -6.065 + 0.823DSRI + 0.906GMI + 0.593AQI + 0.717SGI + 0.107DEPI M = -6.065 + 0.716 + 1.015 + 0.575 + 0.645 + 0.901 = -2.213 Eight-variable model M = -4.84 + 0.92DSRI + 0.528GMI +0.404AQI + 0.892SGI + 0.115DEPI – 0.172SGAI + 4.679TATA – 0.327LVGI M = -4.84 + 0.8 + 0.549 + 0.591 + 0.803 + 0.098 – 0.148 – 0.187 – 0.347 = -2.68 The m-score for Worldcom was greater than -1.78. This points to a manipulation of figures as well. References Albrecht, S., & Albrecht, C. (2004). Fraud examination & prevention. Australian Accounting Standards Board (AASB). Accounting Standard AASB 118; Revenue. Beresford, D. R. Katzenbach, N. d. and Rogers, C. B. (2003). Report of investigation by the special investigative committee of the board of directors of WorldCom, inc. Romney, M. B. and Steinbart, P. J. (2008). Accounting information systems (7 / Marshall B Romney, Paul John Steinbart, Barry E Cushing ed.). Reading, Mass.: Addison-Wesley. Sidak, G. (2003). The failure of good intentions: The WorldCom fraud and the collapse of american telecommunications after deregulation. Yale Journal on Regulation. Zekany, K. Braun, L. and Warder, Z. (2004). Behind closed doors at WorldCom: 2001. Issues in Accounting Education, vol. 19, no.1, pp. 101-117. Appendices 1. a) Consolidated Balance Sheets Horizontal Analysis 2000 2001 Absolute Change % Change Assets Current assets Cash and Cash Equivalents 761 1416 655 86.07 Accounts receivable 6815 5308 -1507 -22.11 Deferred tax assets 172 251 79 45.93 Other current assets 2007 2230 223 11.11 Total current assets 9755 9205 -550 -5.64 Property and equipment Transmission equipment 20288 23814 3526 17.38 Communications equipment 8100 7878 -222 -2.74 Furniture, fixtures and other 9342 11263 1921 20.56 Construction in progress 6897 5706 -1191 -17.27 Total assets 44627 48661 4034 9.04 Accumulated depreciation -7204 -9852 -2648 36.76 Net assets 37423 38809 1386 3.70 Goodwill and other intangible assets 46594 50537 3943 8.46 Other assets 5131 5363 232 4.52 98903 103914 5011 5.07 Liabilities and Shareholder’s Investment Current liabilities Debt 7200 172 -7028 -97.61 Accrued interest 446 618 172 38.57 Accounts payable and accrued line costs 6022 4844 -1178 -19.56 Other current liabilities 4005 3576 -429 -10.71 Total current liabilities 17673 9210 -8463 -47.89 Long-term liabilities less current portion Long-term debt 17696 30038 12342 69.74 Deferred tax liability 3611 4066 455 12.60 Other liabilities 1124 576 -548 -48.75 Total long-term liabilities 22431 34680 12249 54.61 Commitments and contingencies Minority interests 2592 101 -2491 -96.10 Company securities 798 1993 1195 149.75 Shareholder’s investment Series B deferred stock Preferred stock Common stock 29 -29 -100.00 Worldcom group common stock 30 30 MCI group common stock 1 1 Additional paid-up capital 52877 54297 1420 2.69 Retained earnings 3160 4400 1240 39.24 Unrealized gain/loss on securities 345 -51 -396 -114.78 Cumulative foreign currency translation -817 -562 255 -31.21 Treasury stock -185 -185 0 0.00 Total shareholder's investment 55409 57930 2521 4.55 Total liabilities and shareholder's investment 98903 103914 5011 5.07 b) Consolidated Statement of Operations Horizontal Analysis 2000 2001 Absolute Change % Change Revenues 39090 35179 -3911 -10.01 Operating expenses Line costs 15462 14739 -723 -4.68 Selling, general and administrative 10597 11046 449 4.24 Depreciation and amortisation 4878 5880 1002 20.54 Other charges Total 30937 31665 728 2.35 Operating income 8153 3514 -4639 -56.90 Other income/expense Interest expense -970 -1533 -563 58.04 Miscellaneous 385 412 27 7.01 Income before taxes 7568 2393 -5175 -68.38 Provision for income taxes 3025 927 -2098 -69.36 Income before minority interests 4543 1466 -3077 -67.73 Minority interests -305 35 340 -111.48 Income before cumulative effect 4238 1501 -2737 -64.58 Cumulative effect -85 85 -100.00 Net income 4153 1501 -2652 -63.86 Distributions 65 117 52 80.00 Net income to common shareholders 4088 1384 -2704 -66.14 Net income to Worldcom 2608 1407 -1201 -46.05 Cumulative effect -75 75 -100.00 Net income to Worldcom 2533 1407 -1126 -44.45 Net income/loss to MCI 1565 -23 -1588 -101.47 Cumulative effect -10 10 -100.00 Net income/loss to MCI 1555 -23 -1578 -101.48 c) Consolidated Balance Sheets Vertical Analysis 2000 2001 Assets Current assets Cash and Cash Equivalents 761 1416 Percent 1% 1% Accounts receivable 6815 5308 Percent 7% 5% Deferred tax assets 172 251 Percent 0% 0% Other current assets 2007 2230 Percent 2% 2% Total current assets 9755 9205 Percent 10% 9% Property and equipment Transmission equipment 20288 23814 Percent 21% 23% Communications equipment 8100 7878 Percent 8% 8% Furniture, fixtures and other 9342 11263 Percent 9% 11% Construction in progress 6897 5706 Percent 7% 5% Total PPE 44627 48661 Percent 45% 47% Accumulated depreciation -7204 -9852 Percent -7% -9% Net PPE 37423 38809 Percent 38% 37% Goodwill and other intangible assets 46594 50537 Percent 47% 49% Other assets 5131 5363 Percent 5% 5% Total assets 98903 103914 Percent 100% 100% Liabilities and Shareholders’ Investment Current liabilities Debt 7200 172 Percent 17% 0% Accrued interest 446 618 Percent 1% 1% Accounts payable and accrued line costs 6022 4844 Percent 14% 11% Other current liabilities 4005 3576 Percent 9% 8% Total current liabilities 17673 9210 Percent 41% 20% Long-term liabilities less current portion Long-term debt 17696 30038 Percent 41% 65% Deferred tax liability 3611 4066 Percent 8% 9% Other liabilities 1124 576 Percent 3% 1% Total long-term liabilities 22431 34680 Percent 52% 75% Commitments and contingencies Minority interests 2592 101 Percent 6% 0% Company securities 798 1993 Percent 2% 4% Total liabilities 43494 45984 Percent 100% 100% Shareholders’ investment Series B deferred stock Preferred stock Common stock 29 Percent 0% Worldcom group common stock 30 Percent 0% MCI group common stock 1 Percent 0% Additional paid-up capital 52877 54297 Percent 95% 94% Retained earnings 3160 4400 Percent 6% 8% Unrealized gain/loss on securities 345 -51 Percent 1% 0% Cumulative foreign currency translation -817 -562 Percent -1% -1% Treasury stock -185 -185 Percent 0% 0% Total shareholder's investment 55409 57930 Percent 100% 100% Total liabilities and shareholder's investment 98903 103914 d) Consolidated Statement of Operations Vertical Analysis 2000 2001 Revenues 39090 35179 Percent 100% 100% Operating expenses Line costs 15462 14739 Percent 40% 42% Selling, general and administrative 10597 11046 Percent 27% 31% Depreciation and amortisation 4878 5880 Percent 12% 17% Other charges Total 30937 31655 Percent 79% 90% Operating income 8153 3524 Percent 21% 10% Other income/expense Interest expense -970 -1533 Percent -2% -4% Miscellaneous 385 412 Percent 1% 1% Income before taxes 7568 2403 Percent 19% 7% Provision for income taxes 3025 927 Percent 8% 3% Income before minority interests 4543 1476 Percent 12% 4% Minority interests -305 35 Percent -1% 0% Income before cumulative effect 4238 1511 Percent 11% 4% Cumulative effect -85 Percent 0% 0% Net income 4153 1511 Percent 11% 4% Distributions 65 117 Net income to common shareholders 4088 1394 Net income to Worldcom 2608 1407 Cumulative effect -75 Net income to Worldcom 2533 1407 Net income/loss to MCI 1565 -23 Cumulative effect -10 Net income/loss to MCI 1555 -23 Part B e) Adjusted Consolidated Statement of Operations Horizontal Analysis 2000 2001 Absolute Change % Change Revenues 39090 35179 -3911 -10.01 Operating expenses Line costs 16697 17754 1057 6.33 Selling, general and administrative 10597 11046 449 4.24 Depreciation and amortisation 4878 5880 1002 20.54 Other charges Total 32172 34680 2508 7.80 Operating income 6918 499 -6419 -92.79 Other income/expense Interest expense -970 -1533 -563 58.04 Miscellaneous 385 412 27 7.01 Income before taxes 6333 -622 -6955 -109.82 Provision for income taxes 3025 927 -2098 -69.36 Income before minority interests 3308 -1549 -4857 -146.83 Minority interests -305 35 340 -111.48 Income before cumulative effect 3003 -1514 -4517 -150.42 Cumulative effect -85 85 -100.00 Net income 2918 -1514 -4432 -151.88 Distributions 65 117 52 80.00 Net income to common shareholders 2853 -1631 -4484 -157.17 Net income to Worldcom 2608 1407 -1201 -46.05 Cumulative effect -75 75 -100.00 Net income to Worldcom 2533 1407 -1126 -44.45 Net income/loss to MCI 1565 -23 -1588 -101.47 Cumulative effect -10 10 -100.00 Net income/loss to MCI 1555 -23 -1578 -101.48 f) Adjusted Consolidated Statement of Operations Vertical Analysis 2000 2001 Revenues 39090 35179 Percent 100% 100% Operating expenses Line costs 16697 17754 Percent 43% 50% Selling, general and administrative 10597 11046 Percent 27% 31% Depreciation and amortisation 4878 5880 Percent 12% 17% Other charges Total 30937 31655 Percent 79% 90% Operating income 6918 499 Percent 18% 1% Other income/expense Interest expense -970 -1533 Percent -2% -4% Miscellaneous 385 412 Percent 1% 1% Income before taxes 2918 -1514 Percent 7% -4% Provision for income taxes 3025 927 Percent 8% 3% Income before minority interests 3308 -1549 Percent 8% -4% Minority interests -305 35 Percent -1% 0% Income before cumulative effect 3003 -1514 Percent 8% -4% Cumulative effect -85 Percent 0% 0% Net income 2918 -1514 Percent 7% -4% Distributions 65 117 Net income to common shareholders 2853 -1631 Net income to Worldcom 2608 1407 Cumulative effect -75 Net income to Worldcom 2533 1407 Net income/loss to MCI 1565 -23 Cumulative effect -10 Net income/loss to MCI 1555 -23 Read More