Bah Blah Case Summary
The object of the dispute is the profitability of Kansas baseball team Blah blah, purchased November 1, 2003, for 228 million dollars.
The players, in particular, believe that the owners hide part of the profits, through the use of non-transparent accounting techniques. The points on which the dispute is centered, are:
- The roster depreciation;
- Players salary expense;
- Related-party transactions-.
I) The roster depreciation:
The owners have allocated 50% of the purchase price to the value of the initial roster. capitalized and depreciated as a result of this value every 6 years. On the other hand, players, consider the depreciation is not admissible because most of them improve their skills through experience. Our decision…………………..(Feliciana)
II) Players salary expense:
The first disagreement regards the accounting of Players’ salaries. For highest paid roster Players company defers the 20% of the salary for 10 years. According to Players salaries should not be booked at the whole value but at 80%.
Salaries have to be accounted as expenses in the Income Statement at the 100% of their value.
The second disagreement is about bonuses, which are included in current roster salary expense, while should be spread over time as “amortization of bonuses”, as Players argue.
Bonuses have to be capitalized and ammortized over time.
Finally, referring to the non roster guarantee contract, Players underline it should be recognized when the cash is paid out and not when players actually leave the roster, as Owners do.
The solution should be the creation of a reserve whose amount would depends on the probability of the player to be released.
III) Related party transaction:
The related party transaction on which the dispute is based, concerns the rent of the stadium.
Players suggest that stadium operations have to be accounted at 80% of the value accounted by the Owners. According to Players, in fact, two of them are the sole owners of the stadium and, for this reason, they move some profits to the stadium corporation hiding team’s gains.
There must be a disclosure about the stadium rent so that it could be acceptable to account Stadium Operations at about 80% of what the owners charged.
The players, in particular, believe that the owners hide part of the profits, through the use of non-transparent accounting techniques. The points on which the dispute is centered, are:
- The roster depreciation;
- Players salary expense;
- Related-party transactions-.
I) The roster depreciation:
The owners have allocated 50% of the purchase price to the value of the initial roster. capitalized and depreciated as a result of this value every 6 years. On the other hand, players, consider the depreciation is not admissible because most of them improve their skills through experience. Our decision…………………..(Feliciana)
II) Players salary expense:
The first disagreement regards the accounting of Players’ salaries. For highest paid roster Players company defers the 20% of the salary for 10 years. According to Players salaries should not be booked at the whole value but at 80%.
Salaries have to be accounted as expenses in the Income Statement at the 100% of their value.
The second disagreement is about bonuses, which are included in current roster salary expense, while should be spread over time as “amortization of bonuses”, as Players argue.
Bonuses have to be capitalized and ammortized over time.
Finally, referring to the non roster guarantee contract, Players underline it should be recognized when the cash is paid out and not when players actually leave the roster, as Owners do.
The solution should be the creation of a reserve whose amount would depends on the probability of the player to be released.
III) Related party transaction:
The related party transaction on which the dispute is based, concerns the rent of the stadium.
Players suggest that stadium operations have to be accounted at 80% of the value accounted by the Owners. According to Players, in fact, two of them are the sole owners of the stadium and, for this reason, they move some profits to the stadium corporation hiding team’s gains.
There must be a disclosure about the stadium rent so that it could be acceptable to account Stadium Operations at about 80% of what the owners charged.