A Professional Sports Team and Related Items (Including a Stadium)were

question 64

Essay

A professional sports team and related items (including a stadium)were bought by an exceedingly wealthy investor and sports fan. The negotiated price was $225,000,000. Details of what was purchased and the agreed fair values are as follows:
$$\begin{array} { | l | r | } \hline \text { Stadium } & \begin{array} { r } \text { Fair value in } \\\$ \text { millions }\end{array} \\\hline \text { Land } & 70 \\\hline \text { Cable TV broadcasting contract } & 20 \\\hline \text { Player contracts } & 91 \\\hline \text { Spectator leases on luxury viewing boxes } & 9 \\\hline \text { Product licensing agreements } & 17 \\\hline \text { Season ticker subscriber list } & 18 \\\hline \text { Contacts and commitments for use of stadium } & 24 \\\hline \text { The "team" imputed or residual value } & 225 \\\hline \text { Total } & 34 \\\hline\end{array}$$ The team has been less than successful in its professional sports league and has been recording losses of $1,000,000 to $8,000,000 per year on its audited financial statements for the past five years. It was these losses that prompted the last owner to sell the team and related assets.
Required:
a. There are several identifiable intangible assets noted on the list. Group these assets into three classes, being those that are
(i)easily measurable and identifiable;
(ii)reasonably measurable and identifiable; and
(iii)very difficult to measure and identify.
For each group, what common quality or feature of these items distinguishes their classification?
b. While all the items can be assigned a value, would you capitalize all these amounts?
Explain your conclusion.

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Definitions:

Small Firms

Companies or businesses with a limited number of employees and a smaller footprint in their respective markets, often characterized by more flexible operations and less formal structures compared to larger corporations.

Informal Forecasting Techniques

These are non-structured, qualitative methods of predicting future events or outcomes based on intuition, experience, or informal analysis.

Sophisticated Forecasting Methods

Sophisticated forecasting methods involve advanced techniques to predict future events or trends based on historical data and statistical analysis, often utilizing complex algorithms and models.

Approximations

Estimates or close representations of a value or quantity when exact figures are unavailable or unknown.