WorldCom link in AOL accounts probe

Link: AOL admits accounting inacurracies

A report in today’s Washington Post claimed that one of the deals incorrectly booked as revenue involved a contract with WorldCom signed 12 months ago whereby AOL bought internet capacity from UUNet, a unit of WorldCom, to expand its online network.

In return WorldCom agreed to buy advertisements on AOL in a multi-year multimillion-dollar arrangement.

Such arrangements are considered ‘hollow’ because one set of goods or services are exchanged for another, and the only purpose is to book more revenue. The SEC is currently investigating whether such an accounting practice – called a round trip – violates government regulations.

Last week AOL, in its accounting oath made to the Securities and Exchange Commission, admitted that three deals worth $49m had been incorrectly booked as revenue.

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