There are several accounting conflicts that are to be addressed between the owners and the players. These issues all have to do with the profitability of the Kansas City Zephyrs. It would seem, based on the evidence presented by both sides, that the owners of the Zephyrs hiding or reducing large portions of profit by implementing several accounting tricks and that the financial statements do not accurately reflect just how much revenue the baseball club is bringing in from year to year. It is important to identify the true profitability of the organization so that a fair, unbiased representation of the financial statements can be presented. These more accurate financial statements will be used to determine a more fair profit sharing plan between the owners and the players.
The accounting practices in question involve issues with players’ salaries expenses – more specifically regular player salaries, nonroster guaranteed player salaries, roster depreciation expense, overstated player salary expense – and related-party transactions.
Roster depreciation has to be backed out as a non-cash deduction which only truly has an effect when the team is sold. Even if the team is not sold, surely new players and other free agent acquisitions are constantly being made. Is player depreciation expense re-captured when there is a trade or a new, rising “star” player begins to emerge? Unless issued such as these can be clearly identified and fairly disclosed then the player depreciation should not have any effect on the bottom line when it comes to determining actual profits when determining contract negotiations for profit sharing plans between owners and players.
I agree with the players that the signing bonuses, though paid out up front, should be amortized over the life of the contract as the income is actually earned. This will create a more accurate depiction of the expenses that are incurred by the owners year by year....