Accounting Scandals

Identify how balance sheet quality and earnings quality were impaired in each of the following accounting scandals:

· Waste Management 1988 - Falsely increased the useful lives of long-lived tangible assets

· Enron 2001 - Underreported balance sheet long-term debt

· WorldCom 2002 - Capitalized rather than expensed expenditures to maintain transmission lines

· AIG 2003 - Booked debt as revenue

· Lehman Brothers 2008 - Sold toxic assets (i.e., financial investments) to other banks with a buyback agreement, removing the toxic assets from its books