5-106. Go to www.sec.gov and obtain WorldCom’s Form 10-K for year 2002. Using the restatement information presented on pages 56–62 of the form, identify any inappropriate adjusting entries (or failure to make appropriate adjusting entries) in the following areas:

a. Impairment

b. Inappropriate reduction of access costs

c. Purchase accounting i. Goodwill and intangible assets

d. Long-lived assets

e. Revenue-related adjustments for:

i. Deferral of customer activation, installation, and provisioning revenue and cost ii. Accounts receivable adjustments iii. Revenue recognition adjustments Example: Impairment on page 57. WorldCom overstated net income by failing to perform impairment tests on goodwill and other long-lived assets.

This failure to write down assets resulted in a pre-tax understatement of expenses of $12,592 in 2001 and

$47,180 in 2000, which overstated operating income by the same amounts.