re: Miles unethical negotiation at LSU

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Deferred accounts can occur for a variety of reasons, deferred revenue is probably the most prominent kind that doesn't have anything to do with taxes, deffered assets relating to leases is about to over take it. LSU did not recognize a full loss when the signed the original agreement. They put it through the P&L as the costs were incurred. Original Entry: Debit Deferred asset $11m Credit ST/LT liab $11m Monthly Payments Made: Debit ST Liab $133K Credit Cash $133k Debit P&L $133K Credit Deferred Asset $133K Settlement: Debit ST/LT Liab $1.5M Credit Cash $1.5M Debit P&L $1.5M Credit Deferred Asset $1.5M Settlement Clearing Entry: Debit LT Liab $5M Credit Deffered Asset $5m SHOW ME THE GAIN!!!

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MissiePig:

I said typically, Deferred assets and Liabilities result from differences between book and tax accounting. All firms have book to tax differences so all of them will typically have deferred tax assets and liabilities. With respect to Deferred Revenue, that is a function of the business model of the firm and industry. For example, Magazine Companies who sell Mags on a prepaid subscription basis or Smart Phone companies that sell service on a prepaid basis. Those companies would debit cash and credit deferred revenue. In this context, deferred revenue is in fact a liability. That is the company has a contractual obligation to provide product (magazines) or service (wireless phone service) for some contractual period. Over the time period in the contract, the company will credit Revenue-Earned and debit the Deferred revenue account.

As for Les's contract, when he was employed, each month LSU recorded a debit to Compensation/Salary expense and credited cash. Contracts with employees are not assets. Employees and cash compensation paid to them represents an expense. We do not record the value of contracts for Human persons as assets as nobody today (thank God) is owned or controlled by another party.

For something to be an Asset on the balance sheet, I must provide future economic benefits (e.g., generate future earnings and cash flows), result from a past transaction or event (e.g., bought a piece of equipment) and is under the control of the entity.

So when Les was fired, debiting deferred asset does not make sense since it that does not meet the definition of an asset that I noted above. The only 2 things that could be debited or either Deferrred Compensation or some type of Loss on contract. A Contingent Loss is possible since the amount of LSU's loss was at the time they fired him, contingent on Les finding another job and LSU getting off the hook for the contract.

So if a Loss was debited in the year he was fired, that lowered the Net Income of LSU that year and the credit was for the full amount of the contract.

So as of this month, the Liability was $6.5. Million. LSU paid $1.5 Million (Credit to cash), the liability was written off (Debit for $6.5 million. To balance the entry, a credit for $5 million would be recorded.

Now the above accounting is how I think it would have been handled. If at the time LSU fired Less LSU debited Deferred Compensation for the full amount of his contract owed (that would be a contra-equity account) and credit the liability for the full amount (similar to above). Over time as LSU paid its annual payment (I think it was monthly), LSU would credit Deferred Compensation and Debit Compensation expense and also debit the liability for the amount paid and credit cash.

Not sure where leases come into play, in some instances Leases are recorded as an Asset along with the corresponding Liability. The SEC starting next year is going to require a lot more leases be recorded on balance sheet. Lease Assets recorded on balance sheet would not be Deferred assets, they would be part of Property, Plant and Equipment (PPE)

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What he did to LSU in his negotiations is highly unethical. If he knew he had the Kansas job locked, he just knowingly screwed LSU out of another $1.5 Mil.

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Moron. Everyone at the table knew exactly what was going on. LSU either could have forked over the money or continued to pay him $1.5M a year until 2023 while he watched other teams play instead.

Downvote #467.

Wow. This is really lopsided downvote. Some of those upvotes are probably fatfingered as well. Lol

Shhhhhhhhh

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kew48

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I’ve never seen so many downvotes and I spend a lot of time on the Poli board.

Wow! On 2 consecutive days we have seen the dumbest post ever awarded!

Never change Rantards..

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They did. They also spent $1.5MM more than they needed to. Congrats Les!!!

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Either you don't understand what happened or you're pretending not to understand.

What’s sad is your inability to use the quote function.

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this liability has limits

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You are correct, this liability has limits. They are 6.5 million.