Are NBA players depreciable assets?

Mike submits the following:

This past Monday, NBA Commisoner David Stern announced the cancellation of the first two weeks of the 2011 NBA regular season. This move comes as negotiations between NBA team owners and players have failed to make positive ground on signing a new Collective Bargaining Agreement (CBA). The CBA is used to define the characteristics of the relationship between players and owners such as salary restrictions and how NBA income is split up. At the heart of the disagreement is the claim by owners that 20 of 30 NBA teams fail to turn a profit in our current economy  and the owners demand to make the new CBA more favorable for them. Players have come out and disputed the claims of economic hardship and pointed to certain accounting “tricks” that NBA owners use to help make their teams seem less profitable than they truly are. This article, released a few months ago when the lockout first began, shows how accounting is playing a huge role in these labor negotiations.
Do you think that owners are being dishonest about how profitable their teams are?
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About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

2 comments

  1. I cannot say I know much about the lockout; however, it does seem that owners are being dishonest about the income that the teams are really making. These teams should not be able to claim players salaries as expense twice on their taxes as the article said. This policy is allowing the teams to claim a loss when in reality they are making a profit. It seems like a big mess. The tax provision should really be looked at again.

  2. I found this article very interesting because I had no idea that this practice of claiming NBA players as depreciable assets was even happening. Why this tax loophole is even legal is beyond me because it allows teams such as the Nets to manipulate their financial statements to make players and others believe that they are incurring a loss. It seems that the owners of these teams are being greedy and do not want to distribute the team’s wealth to the players (not that a NBA player averaging $5 million a year should really be complaining).

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