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 over time. This fluctuation is due to trades, good scouting and good coaching which increases the value of the roster. On the other hand, player’s injuries and retirements will decrease the roster. Therefore, it is for these reasons that the players have won this argument and the roster should not be depreciated.
Overstated Player Salary Expense

The players argue that the owners