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Kansas City Zephyrs Baseball Club, Inc.

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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 signing bonus should be amortized over the contract life of the player since they are providing benefits during their contracts. About the players that no longer on the current roster and are still being paid, the expense should be accounted for when it is paid, not a reserve since some players can be picked up by other teams that will cover their salaries.

And finally regarding the stadium...

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