Kansas City Zephyrs Case Study

Name:Saloni Daga
Class: Financial Accounting

KANSAS CITY ZEPHYRS CASE STUDY

What I learned from others:

1. Sowinta pointed out that the deferred compensation of 15 million could be spread out over 3 years in an increasing rate( for example, 2m, 5m and 8m over 3 years). Her observation that it is a reasonable assumption that with training the players will get better with training.

2. Matt brought up the concept of the Matching Principle and how to could be used to explain various accounting issues we discussed.

3. Albert’s statement about the what we took away from the case study that accounts should be consistent(the management was not consistent in how it treated the bonus and the luxury box issue)


What I contributed:

1. The signing bonuses should be capitalized and treated as an asset instead of being expensed. It can be thought of as preliminary expenses/ incorporation costs when we first start a business. The players are the biggest asset of a baseball club as they help to generate revenue in the future through their performance. Hence, the signing bonus should be amortized over the life of the contract of the player.

What I wanted to contribute but couldn’t:

1. While I was doing some supplementary reading about such accounting issues while examining the case, I learnt that companies keep reserves and provisions. Thus, the Company could keep some kind of contingency reserve, which could be a percentage of net profits, every year. In the event of an injury of a player being released, the loses could be debited from this reserve which could not overstate loses in a particular year.
2. I also wanted to point out that the accrual concept of accounting could explain why the deferred compensation could be equally spread out after the player retires as they would still bring in revenue through commercials/ bobble heads etc.