RELATED PARTY TRANSACTION:

The disagreement regarding payment to stadium owner of the clubis that the company is paying rent more than other clubsi.e. the difference of $9.09 million to the stadium ownerswho are also the two shareholders out of five shareholders of the company, because of this reason company might be manipulating it’s earning and presenting conservative accounting method.

In light of my recommendation, the rent paid by the club owners is significantly higher than other clubs and it should be noted and negotiated between the players. According to the IAS 24, company should disclose all the necessary disclosure with the related parties so that the judgment can be concluded regarding those transactions.

Currently figures for stadium rent contradicts between the rents which all clubs paid and the rent paid by the Kansas City Zephyr Baseball Club i.e. the difference of $9.09 million. Audit should be done on these transactions and profit should be added back if manipulated.

 

3. SALE OF LUXURY BOXES:

 

The 25 luxury boxes will be sold for $250,000 upfront cash payment each and an annual fee which will be shared between the club and stadium owners. As $250,000 cash for each box will be paid upfront in cash, it should be accounted for the next year revenue as a whole because Kansas City Zephyr is already using conservative accounting approach and revealing net loss for the year. Kansas City Zephyr baseball will receive annual fees for five years according to the contract so allocating upfront fees for five years on straight line basis will be more conservative approach.

If the company recognize the upfront payment $250,000 per box for the luxury boxes in the year received, it could erode off its losses from its income statement. Decrease in losses by recognizing the luxury box payment could somewhat provide accurate figure for the financial performance of the year.

Thirdly, players who are no longer on roster and signed the contract to receive salary if they are injured, their salary should be set aside because it is an obligation by the company and currently this obligated salary by the company is $11.87 million. If the player who is not on roster, if bought by another club then company could reverse its liability to income by converting its obligation.

Players should understand that salaries are not overstated and it is the obligation which must be paid by the company and should be expensed when recognized.

. Such statement by players does not coincide with the accounting laws. Thirdly, players who are no longer on roster and signed the contract to receive salary if they are injured, their salary should be set aside because it is an obligation by the company and currently this obligated salary by the company is $11.87 million. If the player who is not on roster, if bought by another club then company could reverse its liability to income by converting its obligation.

Players should understand that salaries are not overstated and it is the obligation which must be paid by the company and should be expensed when recognized…………..

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