Premium Essay

Kansas City Zephyrs Baseball Club Inc.

In:

Submitted By rppater
Words 771
Pages 4
KANSAS CITY ZEPHYRS BASEBALL CLUB INC.
In this case we have a typical issue related with different accounting approaches analyzing expenses generated and paid in different periods. We have the position of the Owner-Player Committee (OPC) representing the owners who obviously want to present low profitability in their financial statements to get a better treatment for taxes and in the other side we have the position of the Professional Baseball Players Association (PBPA), the organization representing players, who argues that owners are not transparent with their financial statements showing low or in most cases negative profits, then players petition is that owners show real financial statements and that profit will be share with them.
To have a balanced judgment we should think about some accounting concepts as the Revenue and Expense Recognition Principle, where companies recognize revenues and expenses in the period of time when these are earned, which are the basis of Accrual Accounting. By the other hand we also have another approach, the Cash-basis Accounting where companies recognize revenue when cash is received and expense when cash is paid which is not generally accepted.
Analyzing the two versions of Income Statement we realized that they agree in several points but they differ basically in three aspects:
Roster depreciation:
As tax rules allow applying a maximum of 50% depreciation, owners proceeded that way (linearly for 6 years) probably with the intention of cover profits with expenses as depreciation. Players argue that no depreciation should have been considered because roster actually “appreciates”. In my opinion a team value changes through time, if they have a good performance during the season, they grow in experience and they improve skills the roster would appreciate, if team suffers in retirements and injuries and performance through the

Similar Documents

Premium Essay

Kansas City Zephyrs Baseball Club, Inc.

...Kansas City Zephyrs Baseball Club, Inc. This case helps demonstrate how different accounting techniques can come to different results. In this case I believe the owners of the team were not being completely honest in the way they were allocating expenses and therefore indicating losses instead of profits. There are three areas that the players association did not agree with the expenses allocated by the owners of the team. These areas are the Roster depreciation, the player’s compensation and related-party operations (specially the stadium costs). In the case of the Roaster depreciation, the owners consider a depreciation of the amount the roaster was worth at the time of purchase, they spread the depreciation linearly over six years with a value of two million per year. However, this value is not a fix value. The players feel that if anything the roster can appreciate with experience. This value should not be included because the roaster can appreciate or depreciate over time with continues trades and scouting, or injures and retirements; the value is shown in the yearly roaster value (salaries). In terms of the deferred compensation, this should not be included also. Since the players are not being paid during the year and it can be proved that the owners are not setting this money aside either. These payments should be expense at the moment of payment to the player. Also for the signing bonuses, the owners are registering the expense as incurred. However the...

Words: 395 - Pages: 2

Premium Essay

Kansas City Zephyrs Baseball Club, Inc. Case Study

...Kansas City Zephyrs Baseball Club, Inc. Case Study Antecedents: the Professional Baseball Players Association (PBPA) and the Owner-Player Committee (OPC) were engaged in a collective bargaining dispute where the PBPA believes they should share in the teams' profits. The OPC maintains, however, that the teams were losing money each year. Both sides had independent meetings with an arbitrator to evaluate and recommend a viable decision ”Who is right?” The case illustrate major areas in which both sides disputed the way the financial information is been presented, and the way key accounting concepts had been used taking in consideration the recognition of revenues and the matching concept: 1. - Players salary expenses, current roster salary, amortization of signing bonuses and non-roster guaranteed contract expenses 2. - Roster depreciation expense 3. - Related-party transactions (Stadium operations) 1. - Players salary expenses, current roster salary, amortization of signing bonuses and non-roster guaranteed contract expenses. A significant portion of players’ compensation packages is not paid in cash immediately. PBPA think the salaries due to players who are no longer on the roster should be recognized when the cash is paid out and not when the players leave the roster, GAAP however only allow the deferred compensation to be expensed when earned. Therefore, OPC is right. Some part of players’ signing bonuses as per the PBPA suggestion should be spread over...

Words: 549 - Pages: 3

Premium Essay

Case Analysis 10-3 Kansas City Zephyrs Baseball Club, Inc.

...to earn the same money promised him in his guaranteed contract? Of what importance are the periodic net income numbers if the clubs can always be sold for huge profits? How should Bill Ahern resolve the accounting conflict between the owners and players? How much did the Kansas City Zephyrs Baseball Club earn in 1983 and 1984? Facts This case shows that how different accounting methods can lead a company to different positions. That is what Bill Ahern was selected on April 9 to focus on reviewing the finances of the Kansas City Zephyrs Baseball Club, Inc., which was bought on November 1, 1982 by five shareholders for $24 million, because both the representatives of the owner of the 26 major league baseball teams and the professional players association agreed that Kansas City Zephyrs Baseball Club’s operations were representative, and the baseball club entity was not owned by another corporation, and it did not own the stadium where they play. So Bill Ahern was reviewing their finances on April 17, 1985. He had to make a difficult judgement in next two days. He spent Tuesday reviewing the history of major league baseball and the relationship between the various entities. On following day, Wednesday, he met with the twi Zephyrs owners’ representatives, and On the following Monday, Bill Ahern met with the representatives from Professional Baseball Players Association and their lawyer. The problem that was needed to be resolved was weather...

Words: 1721 - Pages: 7

Premium Essay

Harnischfeger Case

...Case Analysis 10-3 Kansas City Zephyrs Baseball Club, Inc. I.Issues Why does net income not equal cash flows? Why do we need accrual accounting? (Why do not we fire all accountants and just publish summary bank statements) Why do the differences between owners’, players’, GAAP and truth number exist?(Can accounting numbers be neutral representations of what happened? What happens if a retired non-roster player (e.g. Joe Portocararo) returns to the active roster while continuing to earn the same money promised him in his guaranteed contract? Of what importance are the periodic net income numbers if the clubs can always be sold for huge profits? How should Bill Ahern resolve the accounting conflict between the owners and players? How much did the Kansas City Zephyrs Baseball Club earn in 1983 and 1984? Facts This case shows that how different accounting methods can lead a company to different positions. That is what Bill Ahern was selected on April 9 to focus on reviewing the finances of the Kansas City Zephyrs Baseball Club, Inc., which was bought on November 1, 1982 by five shareholders for $24 million, because both the representatives of the owner of the 26 major league baseball teams and the professional players association agreed that Kansas City Zephyrs Baseball Club’s operations were representative, and the baseball club entity was not owned by another corporation, and it did not own the stadium where they play. So Bill Ahern was reviewing their finances on April...

Words: 1731 - Pages: 7

Premium Essay

Kansas City Case

...Kansas City Zephyrs Baseball Club, Inc.   Answer and submit these two questions for each item in dispute:  Who's correct and why?  for the Kansas City Zephyrs (6 points). ​ ​In this baseball accounting dispute case I would rule towards the side of the players.  First and foremost, their case on roster depreciation is a good point, because one, this is not done in any other industry when referring to staff or labor, and from a performance standpoint the way you may be able to determine if depreciation is present it could be determined by how much a player is playing in comparison to the previous year(s).  And in most cases if a player is actually “depreciating”, they will be put on waivers or released.  Next, deferred salaries should be accounted for in the fashion as pointed out by the PBPA, because if the owner’s actually do not pay this money in this fiscal year then that money would be assumed to be earning interest or invested.  The third point, referring to stadium operations would definitely need to be analyzed extremely close, because any situation where monies shifting from the right pocket to the left pocket, the rates can not vary from the going rate for these services or properties, because otherwise those transactions might as well be laundering.   Ultimately, the accounting policies and procedures practiced by the owners would lend one to question all of their financial reports because their acts up until this point would cause you to think antitrust issues could...

Words: 258 - Pages: 2

Premium Essay

Kansas City Zephyrs Assignment

...In the case study of the Kansas City Zephyrs Baseball Club, Inc. Bill Ahern the arbitrator was assigned to resolve the issue on the parties’ agreeing on the true profitability of the major league baseball teams. Both Zephyr’s owners and players disagree on three different areas: a) Roster depreciation, b) Overstated Player Salary Expense which entails current signing bonuses, roster salary, amortization of and non-roster guaranteed contract expense; and c) Related-Party Transactions (Stadium Operations). Roster Depreciation The owners recognize depreciation of a value placed on the player roster at the time the baseball club was purchased apparently because tax rules allowed them to do so. Tax rules allow this value to be set arbitrarily at a maximum of 50% of the purchase price. According to the owners the depreciation is capitalized and is being depreciated over six years. The players do not feel that any roster depreciation should be shown. They believe that the roster depreciation is providing numbers without any significance. The players further argue that depreciation expenses only arise when a team is sold therefore there can be two identical teams that reflect different results if one was sold and the other was not. Moreover, the players argue that rosters should appreciate not depreciate as players become more experienced with time. Economically speaking a baseball clubs’ most valuable asset is its player’s rosters and they obviously appreciate and depreciate...

Words: 812 - Pages: 4

Premium Essay

Kansas City Zephyrs Baseball Club

...Kansas City Zephyrs Baseball Club, Inc. 2006 Evaluation of the five (5) items of dispute between Professional Baseball Players Association (PBPA) and the Owner-Player Committee (OPC) 1- Roster Depreciation – The OPC is currently depreciating 50% of the purchase price over the period of six years, where the PBPA feels that the depreciation expense should be recognized at the time of the team being sold. So who’s right? I feel that the OPC is right not because they are following industry standard but because over time the player’s performance will decrease and they become more prone to getting injured depreciating the overall team value. Therefore, the PBPA should continue to depreciate the roster as they currently are. 2- Current Roster Salary - The OPC is currently expensing 100% of the players yearly salary including the portion of their salary of which is being spread out over the following 10 years, where the OPC feels that they should only expense the yearly amount of which is being paid out excluding the one that’s being spread out over the next ten years. So who’s right? I feel that the OPC is right since the salary portion that is being spread out in ten years it has actually being earned now and not in the next ten years. It has been deferred for ten years in order to aid in taxes purposes and to secure income in the following years but it has already been earned. 3- Amortization of Signing bonuses – The OPC is currently expensing the player’s...

Words: 536 - Pages: 3

Premium Essay

Kansas City Zephyrs

...Katelynn Tax 1/18/16 Kansas City Zephyrs Baseball Club, Inc. 2006 There are five main points of difference between the accounting methods of players and owners. The five main differences appear in roster depreciation, current roster salary, amortization of signing bonuses, non-roster guaranteed contract expense, and stadium operations. The following paragraphs analysis the main points above. Owners take 50% of purchase price of $228 million and depreciate it for 6 years this amounts to $19,000 a year in depreciation. While players on the other hand believe there should be no depreciation until the team is sold. They also believe that depreciation isn’t valid because players tend to improve their skills through time and therefore would increase roster value not decrease it. In my opinion I would have to side with the owners on this because generally many firms use straight line depreciation and its fairly common for depreciation to be done that way. Depreciation expenses are typically calculated at (total acquisition cost – salvage value)/useful life. It is possible that there could be no useful life or salvage value if other owners do not buy it and therefore depreciation should still remain as the owners have calculated. I also would like to note that not all players get better over time because of age, or recurring injuries so I believe that the teams do not increase roster value. In fact, I believe in the long run teams stay fairly the same with regards to performance...

Words: 786 - Pages: 4

Premium Essay

Finance

...Applying Accounting Principal to the Kansas City Zephrys Baseball Club Case Measurement Positions Roaster Depreciation Measurement Issues Player Compensation Stadium Expense 1. Owners’ Accounting The accounting follows the industry standard of accounting principles within the baseball field in essence the owners get to write off the declining market value of the player contracts as a loss while also counting the annual salaries paid the players as an expense. The financial statement account for bonuses, deferred compensation, and non-roster guaranteed contract expenses even though some of the expenses are not paid immediately .Money is being listed when it is actually not paid out. Two of the shareholders are the owners that own the corporation that is used for the games. It is not stated whether the amount paid is fair market value or not. 2. Players’ Accounting This was deleted from the proposed player’s income statements. Per the players this only occurs when a team has been sold and in this case team was bought in 2003 and this should not continue to be factored in since the team is already 3years old. Also the players have highlighted that the skill of a player actually increases the in roaster value with gained experience Players added amortization bonus to reflect varied contract because there is no guarantee that the players will indeed complete their contract. Further players only receive 80% of their salaries so this was adjusted to accurately reflect what was...

Words: 1732 - Pages: 7

Premium Essay

Notes

...The University of Illinois Executive MBA July 13, 2004 Tentative Syllabus Managerial Perspective on Financial Accounting Accountancy 401X; Fall 2004 Michael J. Sandretto, 225C David Kinley Hall (217) 244-6410 (office); (217) 352-4832 (home, before 10:30 p.m.) sandrett@uiuc.edu or michaeljsandretto@earthlink.net Texts: Antle, Rick, and Stanley J. Garstak, Financial Accounting, Southwestern (United States), second edition, 2004 (Antle). Palepu, Krishna G., Paul M. Healy, and Victor L. Bernard, Business Analysis and Valuation: Using Financial Statements, Text Only, Southwestern (United States), fourth edition, 2004 (Palepu). Background: Accounting is called the language of business for at least two reasons. First, accounting terms such as sales, revenues, profit, net income, costs, gross margin, expense, and capitalize are widely used in business. Any businessperson is expected to understand those terms. Second, managers rely on accounting to understand an organization’s economic condition at a point in time and its economic performance over a period of time. As a result, they use accounting information to communicate with others. Managerial Perspective on Financial Accounting will help you understand publicly available financial statements for publicly traded companies and financial statements prepared for internal use. It is also an introduction to financial statement analysis and valuation methods. The basic financial accounting methodology...

Words: 2809 - Pages: 12

Premium Essay

Will Do Next Time

...Instructor’s Manual and Test Bank to accompany A First Look at Communication Theory Sixth Edition Em Griffin Wheaton College prepared by Glen McClish San Diego State University and Emily J. Langan Wheaton College Published by McGraw­Hill, an imprint of The McGraw­Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright Ó 2006,  2003, 2000, 1997, 1994, 1991 by The McGraw­Hill Companies, Inc. All rights reserved. The contents, or parts thereof, may be reproduced in print form  solely for classroom use with A First Look At Communication Theory provided such reproductions bear copyright notice, but may not be reproduced in  any other form or for any other purpose without the prior written consent of The McGraw­Hill Companies, Inc., including, but not limited to, in any  network or other electronic storage or transmission, or broadcast for distance learning. PREFACE Rationale We agreed to produce the instructor’s manual for the sixth edition of A First Look at Communication Theory because it’s a first-rate book and because we enjoy talking and writing about pedagogy. Yet when we recall the discussions we’ve had with colleagues about instructor’s manuals over the years, two unnerving comments stick with us: “I don’t find them much help”; and (even worse) “I never look at them.” And, if the truth be told, we were often the people making such points! With these statements in mind, we have done some serious soul-searching about the texts that so many teachers—ourselves...

Words: 159106 - Pages: 637

Free Essay

Test2

...62118 0/nm 1/n1 2/nm 3/nm 4/nm 5/nm 6/nm 7/nm 8/nm 9/nm 1990s 0th/pt 1st/p 1th/tc 2nd/p 2th/tc 3rd/p 3th/tc 4th/pt 5th/pt 6th/pt 7th/pt 8th/pt 9th/pt 0s/pt a A AA AAA Aachen/M aardvark/SM Aaren/M Aarhus/M Aarika/M Aaron/M AB aback abacus/SM abaft Abagael/M Abagail/M abalone/SM abandoner/M abandon/LGDRS abandonment/SM abase/LGDSR abasement/S abaser/M abashed/UY abashment/MS abash/SDLG abate/DSRLG abated/U abatement/MS abater/M abattoir/SM Abba/M Abbe/M abbé/S abbess/SM Abbey/M abbey/MS Abbie/M Abbi/M Abbot/M abbot/MS Abbott/M abbr abbrev abbreviated/UA abbreviates/A abbreviate/XDSNG abbreviating/A abbreviation/M Abbye/M Abby/M ABC/M Abdel/M abdicate/NGDSX abdication/M abdomen/SM abdominal/YS abduct/DGS abduction/SM abductor/SM Abdul/M ab/DY abeam Abelard/M Abel/M Abelson/M Abe/M Aberdeen/M Abernathy/M aberrant/YS aberrational aberration/SM abet/S abetted abetting abettor/SM Abeu/M abeyance/MS abeyant Abey/M abhorred abhorrence/MS abhorrent/Y abhorrer/M abhorring abhor/S abidance/MS abide/JGSR abider/M abiding/Y Abidjan/M Abie/M Abigael/M Abigail/M Abigale/M Abilene/M ability/IMES abjection/MS abjectness/SM abject/SGPDY abjuration/SM abjuratory abjurer/M abjure/ZGSRD ablate/VGNSDX ablation/M ablative/SY ablaze abler/E ables/E ablest able/U abloom ablution/MS Ab/M ABM/S abnegate/NGSDX abnegation/M Abner/M abnormality/SM abnormal/SY aboard ...

Words: 113589 - Pages: 455