✓ Economic Reality =US GAAP
I agree that most of the players actually improved their skill with experience, so if anything, there should be an increase in roster values over time. So from the perspective of economic reality, this is valuable asset like intangible assets. This asset is similar to the good will. Under previous US GAAP, the goodwill should be depreciated but in new US GAAP, it has been changed not to be depreciated. So it should be evaluated at every end of year without depreciation. This change is a trial to conform Economic reality to US GAAP.
Salary related cost
a. Current roster salary
(Economic Reality =US GAAP) 100% of each salary should be expensed each year according to the matching concept. The claim that only the 80% portion of the salary should be expensed in that accounting year is wrong because that is supported by cash basis.
b. Amortization of signing bonuses
(Economic Reality =US GAAP) Bonuses are a part of a compensation package and should be spread over the term of the player’s contract according to the matching concept. The claim that the cash outflow for bonuses should be expensed in one year is wrong because that is supported by cash basis.
c. Non roster guaranteed contract
(Economic Reality =US GAAP) The total amount of salary owed to all nonroster players should not be expensed but each salary on an annual basis should be recognized according to the matching concept. Also, a player’s contract may be picked up by another team.
✓ Economic Reality ≠ US-GAAP
The cost could be recognized at a market price if there is no related party relationship. That is because the benefit from using Stadium can be measured by the market price. So this transaction should be adjusted to the same amount as market price in the point of economic reality. But under US GAAP, The whole cost incurred as it is should be recognized...