How the NBA is "losing" money

[dlpin]

This is a pretty good piece, and shows why owners are afraid to open the books and show how they are "losing money."

http://deadspin.com/5816870/exclusive-how-and-why-an-nba-team-makes-a-7-million-profit-look-like-a-28-million-loss

[Guest]

That is a nice overview of the accounting tricks, yet it fails to mention that the franchise is most likely gaining value outside of looking at its annual operations. These boys are making a lot of money and one would be foolish to look at some shoddy forbes numbers are drawn conclusions without understanding the inner workings of their numbers.

[AHF]

This is a pretty good piece, and shows why owners are afraid to open the books and show how they are "losing money."

http://deadspin.com/5816870/exclusive-how-and-why-an-nba-team-makes-a-7-million-profit-look-like-a-28-million-loss

Looks like the author of that article confirmed that the Nets in fact lost money in both 2005 and 2006 before the economy went to hell over the next few years when the numbers were presumably even worse.

[Guest]

Looks like the author of that article confirmed that the Nets in fact lost money in both 2005 and 2006 before the economy went to hell over the next few years when the numbers were presumably even worse.

No, the author confirmed that under general accounting principles you can show that you have lost money. Rodney Fort's quotes are showing that the accountants are not accounting for all the value of the Nets. I will take Fort's word over just about anyone dealing with sports, he knows his stuff.

[Watchman]

No, the author confirmed that under general accounting principles you can show that you have lost money. Rodney Fort's quotes are showing that the accountants are not accounting for all the value of the Nets. I will take Fort's word over just about anyone dealing with sports, he knows his stuff.

He just presented it in a vague manner, and did not cite the extent of the so-called duplicated expenses. If the financial statements are indeed presented under general accounting principles, then a good example would be the original contract of Joe Johnson. Joe's contract called for a big up front payment. Therefore the cash outlay would exceed the expense for that year, as the contract would be amortized over the length of the contract. However, the expense, if determined using the cash basis of accounting, would have exceeded the general accepted accounting principles expense. The bottom line is, you cannot determine the financial condition of the team without having the balance sheet, statement of income and statement of cash flows along with the financial statement disclosures. All of these elements are needed to see what a team's financial position and results of operations in meaningful way.

[dlpin]

Another good read on the "losses" and showing how, to the extent that they exist, they are created by increasing operational expenses, not player salaries:

http://dberri.wordpress.com/2011/06/30/taking-a-look-at-the-numbers-behind-the-nba-labor-dispute/

[Guest]

Another good read on the "losses" and showing how, to the extent that they exist, they are created by increasing operational expenses, not player salaries:

http://dberri.wordpress.com/2011/06/30/taking-a-look-at-the-numbers-behind-the-nba-labor-dispute/

Thanks for posting that, I haven't read Dave Berri's blog in a while but I will certainly pick it up again as it is moving towards more interesting issues now. There was a time where all he did was spit out regressions and their "cool" results.

[AHF]

No, the author confirmed that under general accounting principles you can show that you have lost money. Rodney Fort's quotes are showing that the accountants are not accounting for all the value of the Nets. I will take Fort's word over just about anyone dealing with sports, he knows his stuff.

Didn't Fort issue this quote:

In other words, $41.5 million of the Nets' $49 million operating loss in 2005, and $40.2 million of its $57.4 million in 2006, is there simply to make the books balance. It is part of the purchase price of the team, being expensed each year. This doesn't mean they cooked their books, or that they tried to pull a fast one on the players. It is part of the generally accepted accounting practice to transfer expenses from the acquisition to the profit and loss over a certain time period. However, it's an argument that doesn't hold water in a discussion with Hunter and the players association, who would claim that the Nets didn't really "lose" a combined $106.4 million in those two years, but rather that they lost $7.5 million and $17.2 million, respectively.