NEWSWIRE - February 13, 2001

Topic: Financial Statements, Cash Flow, and Taxes

Source: "SEC Probes Lucent Accounting Practices," by Dennis K. Berman, Michael Schroeder, and Shawn Young, Wall Street Journal, Friday, February 9, 2001, page A3.

Synopsis of Article: The article discusses the recent investigation by the SEC of Lucent Technologies, Inc. for possible fraudulent accounting practices. The investigation focuses on whether or not Lucent improperly booked $679 million in revenue during its 2000 fiscal year. It follows several restatements of financial results by Lucent, amid many management changes. The article provides an opportunity to discuss accounting practices, dissemination of financial information to the market, and credibility with investors.

Questions:

1. What is the nature of the accounting practices and changes followed by Lucent? How did they impact the financial statements?


2. Do you think Lucent broke the law?


3. How did the announcements by Lucent and the SEC over the past year impact the value of Lucent? Why did the value react the way it did?