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Kansas City Zephyrs Baseball Club, Inc. Case Study

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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 the term of the player’s contract. OPC think the signing bonuses should be expensed as incurred. GAAP only allow for signing bonuses to be capitalized and amortized over the life of the transaction. Therefore, PBPA is right.

PBA think the salaries due to players who are no longer on the roster should be recognized when the cash is paid out, not when the players leave the roster. The payments...

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