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Detroit Bankruptcy - Essay Example
Author : bartonarchibald
Finance & Accounting
Pages 5 (1255 words)
Name Institution Course Instructor Date Accounting Issues that contributed to the Detroit Bankruptcy Introduction Detroit became the largest city in terms of size and population in the United States history to file for chapter 9 municipal bankruptcy in July, 18, 2013 with an estimated debt of $18-20 billion…
The announcement of bankruptcy by Detroit is a prophesied case. The liquidation of a municipal’s assets cannot happen as a result of the request of a creditor. A municipality is under the state’s jurisdiction as it is defined by the state. The 10th Amendment of the4 American constitution reserves any power not defined by the constitution for the state. Declaration of bankruptcy rulings ate made in U.S. Bankruptcy courts under federal jurisdiction Many factors have indicated reduced financial activity in the city. The population of the city dropped from a 1.5 million figure in the city’s peak in the fifties to a current size of around 700,000 leaving the city a shadow of itself with tens of thousands of abandoned buildings ("How Detroit went broke - Economics - AEI"). This coupled with the deindustrialization of the city have largely affected the collection of the revenues in the city. However, the major contributor of the state of the city is the accounting of the funds of the municipality. Legacy costs These are the bills of the municipality in the form of public employee pensions, healthcare, and other post employment benefits. The Government Accounting Standards Board (GASB) in 2006 required all local governments to report publicly OPEB liabilities but did not require the funding of the shortfalls of the OPEB liabilities (John Macomber). ...
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