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Kansas City Zephyrs Baseball Club Inc.

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KANSAS CITY ZEPHYRS BASEBALL CLUB INC.
In this case we have a typical issue related with different accounting approaches analyzing expenses generated and paid in different periods. We have the position of the Owner-Player Committee (OPC) representing the owners who obviously want to present low profitability in their financial statements to get a better treatment for taxes and in the other side we have the position of the Professional Baseball Players Association (PBPA), the organization representing players, who argues that owners are not transparent with their financial statements showing low or in most cases negative profits, then players petition is that owners show real financial statements and that profit will be share with them.
To have a balanced judgment we should think about some accounting concepts as the Revenue and Expense Recognition Principle, where companies recognize revenues and expenses in the period of time when these are earned, which are the basis of Accrual Accounting. By the other hand we also have another approach, the Cash-basis Accounting where companies recognize revenue when cash is received and expense when cash is paid which is not generally accepted.
Analyzing the two versions of Income Statement we realized that they agree in several points but they differ basically in three aspects:
Roster depreciation:
As tax rules allow applying a maximum of 50% depreciation, owners proceeded that way (linearly for 6 years) probably with the intention of cover profits with expenses as depreciation. Players argue that no depreciation should have been considered because roster actually “appreciates”. In my opinion a team value changes through time, if they have a good performance during the season, they grow in experience and they improve skills the roster would appreciate, if team suffers in retirements and injuries and performance through the…...

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