The importance of knowing accounting...

One of the more interesting items that has come out of the Bernie Ebbers case is his claim that he does not understand accounting. In a description of his testimony Ebbers is reported to have:

"....admitted he was a demanding and sometimes temper-prone boss at WorldCom, but he repeatedly said he was unfamiliar with the details of finances and accounting, and left the numbers-crunching to Sullivan."

The accounting issue that has caused Worldcom so much trouble is simply the capitalization of maintenance and line costs. Students in intermediate financial accounting understand the basic issue of capitalization versus expensing, it is difficult to believe that Ebbers did not grasp this basic issue.