b. When companies spend money or incur costs, those expenditures can be accounted for in a number of ways. Some types of expenditures, most commonly those incurred by a company in its normal operations, are treated as current or operating expenses. Examples include recurring costs such as salaries and wages, insurance, equipment rental, electricity, and maintenance contracts. In brief, almost all routine expenditures that a company makes are operating expenses. Other types of expenditures, most commonly those which result in the acquisition of or improvement to the company?s assets, are treated as capital expenditures. Examples include purchases of real estate, manufacturing equipment, and computer equipment. Operating expenses and capital expenditures generally receive different accounting treatment. Operating expenses are generally reported on a company?s Income Statement and subtracted from revenues, in the period in which the expense is incurred or paid, to derive net income. Capital expenditures, by contrast, are not subtracted from revenues and are not generally reflected on the Income Statement. Instead, capital expenditures are reflected as assets on a company?s Balance Sheet and, depending on the nature of the asset and its expected useful life, are subject to depreciation.
c, If a company transfers or reclassifies a given expenditure from an operating expense to a capital expenditure, that transfer will have the following effects in the reporting space surfing iphone case period for which the transfer is made: (a) the company?s operating expenses will be reduced and the company's net income will be increased by the amount reclassified or transferred; and (b) the value of the company's capital assets will increase by the amount reclassified, WorldCom's Networks and Third-Party Access Fees, 13, Based on my review of the WorldCom public filings described above, I am aware of the following..
a. WorldCom provides a broad range of communications services to United States and foreign-based businesses and consumers. WorldCom provides, among other things, data transmission services, Internet-related services, commercial voice services, international communication services, long distance service, and other telecommunication services. b. WorldCom has generally employed what it refers to as an "on-net" business strategy, which is based on maintaining the ability to provide service through its own facilities. To carry out its "on-net" business strategy, WorldCom maintains extensive network facilities to connect metropolitan centers and various regions throughout the world. To serve customers that are not directly connected to its networks, WorldCom pays fees to use or lease so called "off-net" facilities and connections from other telecommunication companies.
c, The various fees that WorldCom must pay to use or lease facilities belonging to third-parties are generally referred to by WorldCom in its internal reports, publicly space surfing iphone case filed financial reports, and elsewhere as "line costs" or "telco" expenses, 14, Based upon my interview of WorldCom's Vice President for Internal Audit (the "VP-IA") and my interviews of members of the WorldCom engagement team from Arthur Andersen, I learned that, prior to the first quarter of 2001, WorldCom did not capitalize "line costs."..
WorldCom's Expanded Reliance on Third-Party Leases. 15. I have spoken with WorldCom's Vice President for Telco/Line Cost Accounting & Planning (the "VP-LCAP"), who informed me of the following, in substance and in part. a. In or about 1999, WorldCom entered into a large number of long-term lease agreements with various third-party carriers to gain access to out-of-network facilities. WorldCom secured these leases in anticipation that a proliferation of various Internet-related business ventures likely would increase the demand for WorldCom services in the near future, although such demand did not then exist.