The Case of the Vanishing Debt.

The Case of the Vanishing Debt
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The Case of the Vanishing Debt
As an independent auditor of the authority, I refute the authority’s decision to no longer report the liability to the county’s debt services advances. Legally, it is impossible to remove the liability from the authority’s books without a legal release of the debt liability by the creditor of the same debt. The accounting standards 140 on the disposition of a liability, an entity is required to derecognize a debt when such debt is extinguished either through judicial means or when the creditor acknowledges the termination of the debt obligation CITATION Ras10 l 1033 (Rashty & John O’Shaughnessy, 2010). In this case, the creditor, who is the county, has not released the authority of the debt obligation.
The accounting standard 405.20 allows businesses to release a debt from its financial statements if the debtor is able to offer cash or other materials that will offset the debt CITATION Rec16 l 1033 (Reck, Lowensohn, & Wilson, 2016). The sports authority managing the stadium can be able to release the debt from its balance sheet conceptually if the target of reaching the agreed 3,000, 000 annual stadium attendance mark. However, there is a high possibility of reaching the 3 million annual attendances for the stadium given that the stadium has the potential to host several sports and entertainment activities within a year.
Given the above prevailing conditions and possibilities of reaching the triggering mark, the authority should continue to recognize the county’s liability in its accounting books.

Such recognition is in accordance with the accounting Government accounting standards, the FASB accounting standard 405 and conforms to the legal recognition of the debt (Wilson & Kattellus, 2007). Once the triggering attendance mark is reached, the authority, in agreement with the county, can derecognize the debt from its books.
References
BIBLIOGRAPHY l 1033 Rashty, J., & John O’Shaughnessy. (2010). Revenue Recognition for Cloud-Based Computing Arrangements. The CPA Journal, 80(11), 32.
Reck, J., Lowensohn, S., & Wilson, E. (2016). Accounting for Governmental and Nonprofit Entities (17 ed.). New York, NY: McGraw-Hill Higher Education.
Wilson, E. R., & Kattellus, S. C. (2007). Accounting for governmental and nonprofit entities. Irwin Professional Publishing.