Back in ControlBy Baselinemag | Posted 2004-05-28 Email Print
MCI rolled out new cost-analysis software as part of its recovery from massive accounting fraud and the biggest bankruptcy in U.S. history.Obscured by the attention paid to the $11 billion worth of outright accounting fraud at telecommunications giant WorldCom was this normally staggering detail: The company, now known as MCI, didn't really know what its costs were for each line of business when it filed for bankruptcy in July 2002.
The idea that the $20 billion a year communications company couldn't tell what its costs were by business surfaced last month when Michael Capellas, the ex-CEO of Compaq Computer hired as WorldCom's chief executive in November 2002, told Wall Street analysts that the company had established internal processes for determining profit and loss by business unit.
Given that this was an earnings call, the message was clear: Evaluating the performance of business segments wasn't a routine part of how the company had been run. "You may say, 'Well, that shouldn't be particularly new,'" Capellas said, "but that's obviously something we've had to put in place over the last year."
Because federal accounting rules require public companies to disclose financials by segment if they manage their business that way internally, MCI plans to begin reporting profit-and-loss figures starting with the second quarter of 2004 for its three newly reorganized business units: Enterprise Markets, U.S. Sales and Service, and International and Wholesale Markets.
How MCI implements new financial controls and reporting systems will be key to its chances for recovery. If it fails to adhere to either general accounting standards or the tight strictures on the process of gathering and signing off on financial data that are now law as a result of the Sarbanes-Oxley Act of 2002, MCI's access to capital to operate or grow its business is likely to wither.
IT Solutions Builder TOP IT RESOURCES TO MOVE YOUR BUSINESS FORWARD
Which topic are you interested in?
What is your company size?
What is your job title?
What is your job function?
Searching our resource database to find your matches...