Attention Accountants: Hockey players’ salaries

[kobasew19]

I’m doing a case for class and just wanted the opinions of some accountants on this board. Here are the scenarios:

Player A has been traded to another team because the coach doesn’t like how passive his play has been. His one way contract stipulates that he couldn’t be released and he’d continue to receive his full salary if he was unable to play due to injury. The deal specified that Team A (the team that traded Player A) must continue to pay part of Player A’s salary of 125,000 in year one and 100,000 in year two. These payments are contingent on Player A on not retiring in the next two years. (This is unlikely as he is only 25, and he would still get paid out if he was injured) Also, 1.1 million of his original signing bonus was unamortized at the time of the trade.

Player B has been traded to another team for future considerations. Player B has had one injury after another throughout his career. Team A has agreed to pay part of Player B’s salary in each of the four years remaining on his contract. The amount of payment depends on the number of games that Frankie plays each season. If Player B plays less than 31 games, the team would have to pay 80,000 of his salary. If Player B plays 31-49 games, Team A must pay 55,000 and if he plays more than 49 games, then no payment is required. At the time of the trade, the unamortized value of Player B’s original signing bonus was 1,330,000.

Player C was a free agent signing by Team A. The five-year contract, reportedly worth as much as 25,000,000 included a 3,000,000 signing bonus. Player C’s contract is loaded with bonus clauses tied to his on-ice performance. If he appears in the annual all star game held in February, he will receive a 1,000,000 bonus. If by the all star game, he has scored at least 30 regular season goals, Player C would receive an additional 500,000. At the end of the regular season, another 500,000 bonus goes to Player C if he has a total of 60 goals. One the team reps have confirmed that Player C has been added to the all star roster and has 37 goals and 83 assists a month prior to the event.

So as Team A’s accountant, make the correct entries and remember to base everything in accordance with GAAP.

Thank you guys in advance for your help with this.

[Bobblehead]

So you want people on CP to do your homework for you?

[kobasew19]

Originally Posted by Bobblehead

So you want people on CP to do your homework for you?

Haha no, i have some insight on this but i would like to have it confirmed.
Here is what I got feel about the scenarios:

Player A’s salary is likely and measurable so set up a current liability for the 125k for year one and a long term liability for the 100k. I would write off the 1.1 M signing bonus as there is no more future benefit from it.

I would argue that since Player B is plagued by injuries that it is possible that he wouldn’t play more than 31 games in the season, therefore, I would set up a liability for 80k and make an adjusting entry at the end of the year for the difference. I would also write off the signing bonus.

I would capitalize the 25m and the 3 m signing bonus as Player C holds a future benefit for the team. I would also argue that the bonus may be capitalized as well (2M worth, because it would seem likely that Player C would hit the 60 goal plateau before the end of the season)


Thoughts?

[Bobblehead]

Well, I'm wondering what font you are going to use for your next response....

[kobasew19]

Originally Posted by Bobblehead

Well, I'm wondering what font you are going to use for your next response....

yeah it was messed up because i'm copying and pasting from word...anyways let's get back on topic shall we?

[bradster57]

As an accountant, I log onto CP to get away from doing accounting!

[Locke]

Originally Posted by bradster57

As an accountant, I log onto CP to get away from doing accounting!

Ditto. This looks way too much like work.

You are tainting hockey for me!

[Gozer]

I also wish to chime in with an "eff off".

[Phaneuf3]

$42?

$Threeve?

i dunno - i'm not actually an accountant.

[tvp2003]

Originally Posted by kobasew19

I’m doing a case for class and just wanted the opinions of some accountants on this board. Here are the scenarios:

David Moss has been traded to Minnesota because Coach Keenan doesn’t like how passive his play has been. His one way contract stipulates that he couldn’t be released and he’d continue to receive his full salary if he was unable to play due to injury. The deal specified that Calgary must continue to pay part of Moss' salary of 125,000 in year one and 100,000 in year two. These payments are contingent on Moss not retiring in the next two years. (This is unlikely as he is only 25, and he would still get paid out if he was injured) Also, 1.1 million of his original signing bonus was unamortized at the time of the trade.

Rhett Warrener has been traded to Buffalo for future considerations. Warrener has had one injury after another throughout his career. Calgary has agreed to pay part of Warrener's salary in each of the four years remaining on his contract. The amount of payment depends on the number of games that Warrener plays each season. If Player B plays less than 31 games, the team would have to pay 80,000 of his salary. If Player B plays 31-49 games, Team A must pay 55,000 and if he plays more than 49 games, then no payment is required. At the time of the trade, the unamortized value of Warrener's original signing bonus was 1,330,000.

Dion Phaneuf was a restricted free agent signing by Calgary. The five-year contract, reportedly worth as much as 25,000,000 included a 3,000,000 signing bonus. Phaneuf's contract is loaded with bonus clauses tied to his on-ice performance. If he appears in the annual all star game held in February, he will receive a 1,000,000 bonus. If by the all star game, he has scored at least 30 regular season goals, Phaneuf would receive an additional 500,000. At the end of the regular season, another 500,000 bonus goes to Phaneuf if he has a total of 60 goals. One the team reps have confirmed that Phaneuf has been added to the all star roster and has 37 goals and 83 assists a month prior to the event.

So as Calgary's accountant, make the correct entries and remember to base everything in accordance with GAAP.

Thank you guys in advance for your help with this.

Fixed (circa 2008/09)

[nickerjones]

its gonna be awesome if the the dion has 37 goals and 83 assists on the season prior to next years all star game

[Log]

Sounds like a Lynn Sugden question. He's a prof in Edmonton.

[fredr123]

Delete this thread before kobasew19 gets expelled!