Opinion ID: 2787659
Heading Depth: 4
Heading Rank: 2

Heading: Accounting Standards

Text: 10 ¶23. The Tann, Brown & Russ audit did not declare the specific accounting standards it used, stating only that it “conducted [the] audit of the schedule in accordance with auditing standards generally accepted in the United States of America.” Relevant to this case are two generally recognized accounting standards, either or both of which provide guidance as to what should and should not be classified as contractual obligations. ¶24. The Financial Accounting Standards provide guidance on analyzing and preparing financial statements for businesses and nonprofits. Under these generalized standards, liabilities are defined as “probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.” ¶25. By contrast, the Governmental Accounting Standards—the District’s CPA used these standards when it performed the District’s 2011 audit—provide guidance on analyzing and preparing the financial statements of state and local governments. These standards provide that,“[f]or an obligation to be a liability, it should be a present obligation,” meaning “[t]he event that created the liability has taken place.” This is distinguishable “from a commitment that may become a liability in the future when the event giving rise to the liability occurs. The government may be able to withdraw from or avoid the commitment until a future event giving rise to the liability occurs.”