Telecommunications company, WorldCom, has written off $US79.8 billion in goodwill and other assets as it struggles to recover from the largest bankruptcy in US history.
The previous $US45 billion value related to WorldCom's goodwill had been completely written off the company's balance sheet and the value of its equipment and other intangible assets reduced from $US44.8 billion to $US10 billion, WorldCom said.
Goodwill is a dollar amount placed on intangible factors such as the value of a company's reputation and anticipated future earnings, in excess of asset value. Generally accepted accounting principles call for goodwill to be written off over time, but usually on a more gradual schedule.
The $US34.8 billion decline in the value of WorldCom's plant, property and equipment assets reflects the overcapacity that has stifled the telecommunications industry over the last two years. WorldCom pursued an acquisition strategy to become a leading carrier of IP (Internet Protocol) traffic around the world, but those acquisitions are no longer worth what the company paid for them.
The writedowns reduce WorldCom's depreciation and amortisation expenses to $US143 million, down from $US480 million. Despite the expense reduction, the company posted a net loss from continuing operations before reorganisation items of $US47 million on revenue of $US2.2 billion for the month of December.
WorldCom's huge write-downs come close to AOL Time Warner's (AOLTW's) record-setting 2002 writedowns of nearly $US100 billion.
WorldCom filed for Chapter 11 bankruptcy protection in July of 2002 after it admitted it had overstated its earnings over the last three years by about $US7 billion.