Kansas City Zephyrs Baseball Club, Inc.
The five key areas in dispute related to the accounting techniques of the owners and the players are 1) roster depreciation, 2) current roster salary, 3) amortization of signing bonuses, 4) non-roster guaranteed contract expense, and 5) stadium operations.
Regarding roster depreciation, the owners take fifty percent of purchase price of $228 million and depreciate it for 6 years. The players believe that there should be no depreciation until the team is sold and that depreciation is not valid, as players tend to improve their skills through time. The players believe that this would increase roster value.
I have to agree with the owners as straight-line depreciation fairly common practice which many firms use today.
There might be a possibility that there could be no useful or salvage value if the owners decide not to purchase the team, therefore the depreciation costs have been calculated accordingly by the owners. Some players might get better with experience but age and injury also must be taken into consideration, therefore I believe that the team’s roster value does not increase.
Current Roster Salary:
Some the owners include deferred salary in the current roster salary expenses. Players believe that deferred roster salary should not be expensed right away since it is not paid in that given year rather 10 years later. In this scenario, I agree with the players. Zephyrs does not set the money aside now to pay for it in the future.
Amortization of Signing Bonuses:
Signing bonuses are another issue as the owners pay signing bonus in that given year and expense it that same year. Players believe that the signing bonuses should be amortized throughout the years of the contract because the signing bonuses are for the years of the contact. I agree with the owners as the signing bonus expense was incurred that given year.
Non-Roster Guaranteed Contract Expense:...