Kansas City Zephyrs Assignment Essay

796 Words Sep 28th, 2011 4 Pages
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
…show more content…
Owners suggest that

signing bonuses should be expensed as incurred. But, on the other hand the players believe that

bonuses should be spread over the term of the player’s contract. To be economic wise and fair

the signing of bonuses needs to be capitalized and amortized over the lives of the contracts since

players are expected to provide benefits over the life of their contracts. In this case the player’s

are right and therefore the bonuses should be spread over the term of the player’s contract.

Secondly, the players argue that some significant part of players’ compensation is not paid immediately in cash. Some of the players receive only 80% of their salaries in any given year but yet the owners are reflecting that they are paying 100% in their statements. The players believe this is not only misleading but that the deferred compensation should be expensed only when the cash is spent. Based on these facts the players are correct and the deferred compensation should be expensed when actually earned. It is not fair and almost illegal to show and reflect fake numbers that in actuality are not being paid out. The third argument the players brought up was the fact the salaries that are being made to players whom are no longer part of the roster should be expensed and reflected in the statements when they are paid out and not when the players leave the roster. The players bring out a great point that it is possible that

Related Documents