KANSAS CITY ZEPHYRS BASEBALL CLUB: AN ACCOUNTING DISPUTE
This case is about some accounting issues because of the differences between accounting approaches to analyze expenses generated and paid in different periods. The controversy arose between the baseball team owners and the players associations that were engaged in collective bargaining about the real profitability of the baseball business.
The owners obviously want to demonstrate low profitability in their financial statements so that they could get a better deal for taxes. Besides, they affirm that the teams are not getting profits, so as they are losing money the players will not have a strong complaint for a better payment. The owners are represented by the Owner-Player Committee
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For example, the Revenue and Expense Recognition Principle, in which companies recognize revenues and expenses in the period of time when these are earned, these are the basis of Accrual Accounting. Another important concept considered is the Cash-Basis in Accounting, in which companies should recognize revenue once cash is taken and expense when cash is paid, but this is not always accepted. After analyzing both sides (the owners and the players), and considering the two versions of Income Statement we can realize that they agree in many points but the dispute is fundamentally in the following …show more content…
They feel that this expense should be recognized when the team was sold. The value of player rosters appreciates and depreciates over time depending on the season because revenues are influenced by the performance of players, if the performance is great, more fans come, and new recruits can be gotten, and better statistics for the season. Even though, I think that the OPC is right because over time the players become more susceptible to get unfit and their performance could decrease depreciating the value of the entire team. Even when excellent trades and coaching increase the roster value, injuries and retirements will decrease it. Hence, the OPC should continue depreciating the roster as they are doing at the present, even though the depreciation shouldn’t be consistent simply because the IRS allows it, and should reflect the situation in any given
For the last 30 years, the New York Yankees have been a dominant force in Major League Baseball. Other teams do not make as much money as the New York Yankees therefore they have less capital to spend on big name players. In 1994, the Major Leagues put the luxury tax into place. The idea was to tax a club’s payroll if the total payroll exceeded a certain limit. However, the Yankees seem to exceed this limit every year. The Yankees are a notable team not only for their impressive history on the field, but also for their financial situation. The Yankees owner spends more on player salaries than any other franchise in baseball. “As of 2004, the team payroll is more than $182 million, which is $51 million more than the second-highest team, the Boston Red Sox, and more than the six lowest-payroll teams combined” (Wikipedia Encyclopedia”). The millions of people who are associated with baseball in this country, many of whom had only a vague idea of what was happening, are now asking themselves whether or not the game is being played fairly. Even though teams like the New York Yankees are able to assemble top-notch teams by ignoring the spending limit, a salary cap is necessary to maintain the equal competitive nature of major leag...
However, if the current rules remain in place and baseball continues without a salary cap, the only hope a small market team may have is to fend for themselves on the big market with financially superior teams. This becomes an exceedingly harder task when one team can afford the salary of two top players while those contracts are equal to the entire payroll of another team’s entire roster. Therefore, the question remains should baseball implement a salary cap, and if they do, how would it come into play. When asking the question regarding the salary cap, four supporting ideas arise for either the implementation of a salary cap or keeping it nonexistent.
Economic Theory Labor market theory is one of the most integral economic theories needed to dissect the inefficiencies in professional sports. Looking first at the type of market these leagues function in, one can see that they do not necessarily meet all the criteria that a competitive market requires. The big four sports leagues in the US have a set number of teams, which creates barriers to entry. Only when an expansion is agreed upon by the league, such as NHL has done for the upcoming season, are teams allowed to enter, and even then, it is limited to a maximum of a few teams in recent history. Additionally, the league makes it virtually impossible to exit, as selling a team is the closest they come to exiting the market.
As long has there has been business, Management and Labor have warred against each other for a bigger piece of the pie. Major League Baseball is no different. In the early years of professional baseball the owners controlled the salaries of the players and decided where they could play and what they would be paid. The players were bound to their team by the Reserve Clause that stated, the services of a player will be reserved exclusively for that team for the next season. This resulted in keeping the player’s salaries artificially low because the players were not allowed to offer their services to any other team. The Reserve Clause was in effect for more than One Hundred years of baseball history. It was challenged several times but the owners had won every time, until in 1970 when the St. Louis Cardinals traded outfielder Curt Flood to the Philadelphia Phillies. Flood refused to play for the Phillies and sued to become a free-agent. Flood’s case was in court for several years going all the way to the Supreme Court. He was never able to play in the Major League again. While he did not win his case, he laid the groundwork for a later case that involved two pitchers, Andy Messersmith and Dave McNally who filed a grievance against the league contending that, because they didn't sign contracts with their previous teams they were free agents. The owners and the Players Association agreed to submit to binding, impartial, arbitration in order to settle this case. On December 23, 1975 the arbitrator Peter Seitz ruled in favor of the players and the Reserve Clause was broken, and the era of free agency began in the Major Leagues. In 1976 when free agency began the average player salary was only $52 thousand dollars, but it has increased steadily ever since. By 1990 the average salary for a Major League Baseball player had risen to $589 thousand dollars. This Year baseball will start the 2001 season with an average player salary of more than $2 million, about 40 times higher than the typical wage in 1976 when free agency began.
How could baseball team owners lose $580 million in revenue and baseball players lose $230 million in salary pay in one year? The 1994-95 Major Baseball League 232 day strike lead to millions of dollars lost and millions of fans frustrated by what they say was an act of war. The mediation between Major League Baseball team owners and baseball players was ineffective in delivering a bargaining agreement that would protect the players from being used by the owners for the benefit of their businesses. First, I will provide some background information about the baseball strike followed by cross cultural competence factors and how they affected the event. Next, we will look at the negotiation factors that will include the TIPO model and negotiation strategies. Finally, I will give some highlights and effects of the mediation process. Now, let's look at one of the most famous baseball strikes of all times.
Imagine a business that brings in $60 million each year ,and the people fueling that industry receive none of the revenue(Wieberg). These same people work 40 hours in their sport every week, these “people” are college athletes. The NCAA, the governing body for major college sports, is the industry doing this to college athletes(Edelman). This is an issue of exploitation and control by large institutions over primarily poor people, the NCAA is guiding them in directions to make money for everybody while doing everything possible to keep the players out of the money. College Athletes deserve profit because they bring in large revenue into their program, the NCAA, and they invest tons of time into their sport.
While the coaches of these sports teams are benefitting greatly the players still receive nothing. The coaches are receiving way too much. One of the main points about the unfairness of coaches compared to players is that the coaches are allowed to advertise while players are not. The coaches receive very generous compensation for advertising, so why is it a big deal if a college athlete is being paid for being in an advertisement? Coaches are able receive huge deals from companies, and can make way over one million dollars a year. The only way college coaches are able to receive all these deals from shoe companies and others are by how the players perform. When the coaches have players that per...
The two revenue sports in college athletics are men's basketball, and football. These teams make millions of dollars, while the individual athlete receives no compensation for their efforts. They are controlled by a governing body (NCAA), which tells them when they work, and when they can't work (Barra). The teams are lead into battle by their coaches, their leaders. These coaches, leaders, partake in an annual payout in upwards of two million dollars, plus endorsement deals. Why then, in a country that...
The players need to make a contract work by agreeing to some form of salary cap, allowing owners to control costs. Players and owners will win, revenues will improve for businesses dependent on games for income, and the fans will win!
The economics of baseball has grown since the beginning and has become more complicated every year. Baseball players are now making millions of dollars to do something that they love and enjoy. It's not their fault the money they can receive has reached the million mark, even for some of the less talent of ball players. This has happened to all sports, but especially to the American pastime. Baseball is more of a business than just a game and many things have made it this way. A lot of reasons have contributed to the rising salaries there is today and it will not stop there. The amount of baseball contracts will keep rising each year.
As we all know, business is always followed by the money behind it. The owners of these major league teams know that good business makes them the most money. For an owner, being the best or “richest” is one of their top priorities. Owners know that it takes a lot of money to earn more money. Every business deal or transaction that a team owner makes is based on how much money or revenue that particular deal is going to make for their franchise. Some of these business deals include: trading players, buying players, recruiting/signing players, firing coaches, television deals, and contracts ...
Where does all of this money come from to pay these superstar athletes? It comes from the fans. The same fans that cry when their team loses, celebrates when they win and pay six dollars for a beer and seven dollars for a deluxe hot dog at their team’s game. Ticket prices continue to go up every year. How fair is it for the fans to pay at least $100 to go see a game and watch their favorite player jog out a ground ball or not play their hardest, or a player misses a game because they are “sick or injured.” If a hard working person missed a couple days a month because they were sick or hurt, they would be fired without a doubt. In the case of athletes, they go on a two week paid vacation, otherwise known as the 15-day disabled list.
The sport of baseball became a business, causing the sport to evolve into modern baseball. A.G. Spalding, president of the White Stockings “insisted the players be paid like entertainers; he created Spalding Sporting Goods, manufacturing balls, caps, uniforms, and gloves” (Smith, n.d., Baseball as a Business section). Spalding’s creation, gave each team a greater sense of unity; matching uniforms made the players a unit. A person enjoys being identified as part of a team, especially if the team happens to be successful. Unfortunately, the team owners did not pay for the player’s uniforms; the players were responsible for their own uniforms and their salaries were not adjusted for the additional
Sports are one of the most profitable industries in the world. Everyone wants to get their hands on a piece of the action. Those individuals and industries that spend hundreds of millions of dollars on these sports teams are hoping to make a profit, but it may be an indirect profit. It could be a profit for the sports club, or it could be a promotion for another organization (i.e. Rupert Murdoch, FOX). The economics involved with sports have drastically changed over the last ten years.
Accounting principles are main consideration , certain standards like rules of operations are pillar characteristicis to built accounting statements. Accounting principles can be presented in many ways, sometimes its create confusion for readers mainly for beginners, but still acoounting principles are main tool to obtained financial statements. Its hold the whole acoounting process together.