What if Cuban becomes owner and

[Mark Priors Calves]

I've also heard Mike Murphy ( I know, I know) report that someone "in the know" has told him the Cubs have two sets of financial books, each with different figures.

I can't imagine a Fortune 500 company would keep 2 sets of books in them in this day and age. With the Enrons and World Coms getting busted, the risk is far to great to do this and expect to get away with it. And also, what would the motivation be for doing this? What could possible be worth destroying an enormous company?

[Geech]

I've also heard Mike Murphy ( I know, I know) report that someone "in the know" has told him the Cubs have two sets of financial books, each with different figures.

 

I don't believe that for a second. No reputable accountant would do that. Even a disreputable accountant would not do something so obviously fraudulent.

[nilodnayr]

The cubs make a lot more money than they report due to integration. For example, the cubs for accounting purposes for revenue sharing report that make less from the TV contract than the White Sox. How can they do this? Their parent company owns WGN. Its taking money out of one pocket and putting it in the other. The cubs with an independant owner would report much higher revenue, which would lead to giving up a greater portion for revenue sharing (one positive for the league approving the sale of the cubs). Also, for every home playoff game the cubs would get 1.2-1.3M in revenue in ticket sales alone.

[scs_paradise]

I've also heard Mike Murphy ( I know, I know) report that someone "in the know" has told him the Cubs have two sets of financial books, each with different figures.

 

I don't believe that for a second. No reputable accountant would do that. Even a disreputable accountant would not do something so obviously fraudulent.

 

You mean a reputable big five accounting firm like Andersen errrrrr um I mean Accenture now??? No wait, they DID do that and then they changed their name....

 

besides I'm not sure its illegal to misreport your earnings to MLB in the hopes of reducing your shared revenue burden. Its a matter of write offs you want to risk taking with the IRS vs. the write offs you will risk taking with MLB. MLB is privately held, as long as the Cubs report correctly to the IRS, the government couldn't care less what they report internally to MLB.

[Geech]

You mean a reputable big five accounting firm like Andersen errrrrr um I mean Accenture now??? No wait, they DID do that and then they changed their name....

 

Umm... No.

 

First of all, the charge against Arthur Andersen was Obstruction of Justice relating to shredded documents. And they were cleared of that charge by the US Supreme court, but not until a company of formerly 28,000 employees was reduced to 200 who focus on various lawsuits related to the government's unlawful destruction of their firm.

[wiumike]

Cuban may like to win, but the Chicago market cannot sustain a $130 million dollar team.

 

First and foremost Cuban is a business man. And from all reports a pretty smart business man. He'll want to win but not at the cost of losing millions of dollars. That is just foolish.

How would he lose money!!?? We've got so many revenue streams.

 

Last year the Cubs had @ $100 million dollar team and they made @ 10 million in profit.

 

You do the math.

The Cubs made a 7.9 million dollar operating profit in 2001. That same year, Forbes also said that the Cubs were worth 287 million dollars. If the recent reports of a worth between 500 and 600 million are correct, then I'd say that the Cubs had a profit of at least 20 million last year, at a minimum. That's just a guess though, obviously.

 

So last year the Cubs made 10 million in profit on a 100 million dollar payroll while finishing in 5 place in the NL central. That means there ratings were in the tank the last 2 or 3 months of the season.

 

What Cuban would do is do whatever is necessary to keep us contending as long as possible. That drives ratings and ticket sales until the last day of the year. That means making better signings or over paying for the right people to keep us in contention. Anyone have the number on the Cubs profit in ’03? I guarantee it was more than 10% return on investment compared to the payroll.

 

Just look at what Cuban has done in Dallas; before he took over they were a complete failure. I doubt they were drawing more the 7000 a night. At the same time they were still profitable since they were one of the cheapest teams in the league. He opened the wallet and the fans responded. As crazy as he is, the franchise value has doubled or tripled in value (tack on another 30 million in value after they win the championship) and they have a packed house every night.

[wiumike]

I've also heard Mike Murphy ( I know, I know) report that someone "in the know" has told him the Cubs have two sets of financial books, each with different figures.

I can't imagine a Fortune 500 company would keep 2 sets of books in them in this day and age. With the Enrons and World Coms getting busted, the risk is far to great to do this and expect to get away with it. And also, what would the motivation be for doing this? What could possible be worth destroying an enormous company?

 

You are wrong about that, many companies keeps 2 sets of books for internal and external reporting. There are no laws that state companies can only have 1 set of records. The reason for this is for tax reasons and shareholder reporting. When the company is reporting there taxes they want to record things in a way to limit their net income to pay as little taxes as possible. This mainly deals with how a company defers income or depreciates assets to lower net income on a yearly bases. For obvious reason, the company would not want to report these same figures to its shareholders.

[CubinNY]

I've also heard Mike Murphy ( I know, I know) report that someone "in the know" has told him the Cubs have two sets of financial books, each with different figures.

I can't imagine a Fortune 500 company would keep 2 sets of books in them in this day and age. With the Enrons and World Coms getting busted, the risk is far to great to do this and expect to get away with it. And also, what would the motivation be for doing this? What could possible be worth destroying an enormous company?

 

You are wrong about that, many companies keeps 2 sets of books for internal and external reporting. There are no laws that state companies can only have 1 set of records. The reason for this is for tax reasons and shareholder reporting. When the company is reporting there taxes they want to record things in a way to limit their net income to pay as little taxes as possible. This mainly deals with how a company defers income or depreciates assets to lower net income on a yearly bases. For obvious reason, the company would not want to report these same figures to its shareholders.

 

I don't know if keeping two sets of accounting records is illegal or not, but your company should be reported to the IRS and the CFO should be brought up on charges. I'm sure the stockholders want to hear the most accurate information possible as does Uncle Sam.

[NCCubFan]

I don't know if keeping two sets of accounting records is illegal or not, but your company should be reported to the IRS and the CFO should be brought up on charges. I'm sure the stockholders want to hear the most accurate information possible as does Uncle Sam.

It's not only legal, but in some cases necessary to keep separate books for tax purposes vs. reporting to shareholders. For example, the method most companies use to depreciate assets for tax purposes (MACRS) is not acceptable for reporting to hhareholders because the write-off is too fast (an asset may really have a 10-year life, which would be the required write-off period for reporting to shareholders, but be depreciated over 7 years under the tax law). Requirements for reporting to shareholders are based on generally accepted accounting principles, which are developed mainly by the Financial Accounting Standards Board with input from the SEC, while reporting for tax purposes is governed by the tax code and IRS regulations. The two frequently contradict each other, requiring two sets of books.

 

Sorry for the accounting class, but I am a university accounting professor. Class dismissed. :D

[CubinNY]

I don't know if keeping two sets of accounting records is illegal or not, but your company should be reported to the IRS and the CFO should be brought up on charges. I'm sure the stockholders want to hear the most accurate information possible as does Uncle Sam.

It's not only legal, but in some cases necessary to keep separate books for tax purposes vs. reporting to shareholders. For example, the method most companies use to depreciate assets for tax purposes (MACRS) is not acceptable for reporting to hhareholders because the write-off is too fast (an asset may really have a 10-year life, which would be the required write-off period for reporting to shareholders, but be depreciated over 7 years under the tax law). Requirements for reporting to shareholders are based on generally accepted accounting principles, which are developed mainly by the Financial Accounting Standards Board with input from the SEC, while reporting for tax purposes is governed by the tax code and IRS regulations. The two frequently contradict each other, requiring two sets of books.

 

Sorry for the accounting class, but I am a university accounting professor. Class dismissed. :D

 

Thanks for information. Can companies intentionally mislead the public/IRS and have it be legal?

[wiumike]

I don't know if keeping two sets of accounting records is illegal or not, but your company should be reported to the IRS and the CFO should be brought up on charges. I'm sure the stockholders want to hear the most accurate information possible as does Uncle Sam.

It's not only legal, but in some cases necessary to keep separate books for tax purposes vs. reporting to shareholders. For example, the method most companies use to depreciate assets for tax purposes (MACRS) is not acceptable for reporting to hhareholders because the write-off is too fast (an asset may really have a 10-year life, which would be the required write-off period for reporting to shareholders, but be depreciated over 7 years under the tax law). Requirements for reporting to shareholders are based on generally accepted accounting principles, which are developed mainly by the Financial Accounting Standards Board with input from the SEC, while reporting for tax purposes is governed by the tax code and IRS regulations. The two frequently contradict each other, requiring two sets of books.

 

Sorry for the accounting class, but I am a university accounting professor. Class dismissed. :D

 

Thanks for information. Can companies intentionally mislead the public/IRS and have it be legal?

 

Well I work for GE so I am pretty sure they are under quite a bit of scritiny over such things.

 

As for the question of misleading shareholders that is what lands people in jail. The numbers that are reported for tax purposes are not open to the public, so there wouldn't be confusion on the two sets that are being reported.

 

Thanks for the refresher NCCubbie, I have took my MBA accounting class 2 yrs ago and its good to hear that I rememered something from it :)

[UBlink]

I don't know if keeping two sets of accounting records is illegal or not, but your company should be reported to the IRS and the CFO should be brought up on charges. I'm sure the stockholders want to hear the most accurate information possible as does Uncle Sam.

It's not only legal, but in some cases necessary to keep separate books for tax purposes vs. reporting to shareholders. For example, the method most companies use to depreciate assets for tax purposes (MACRS) is not acceptable for reporting to hhareholders because the write-off is too fast (an asset may really have a 10-year life, which would be the required write-off period for reporting to shareholders, but be depreciated over 7 years under the tax law). Requirements for reporting to shareholders are based on generally accepted accounting principles, which are developed mainly by the Financial Accounting Standards Board with input from the SEC, while reporting for tax purposes is governed by the tax code and IRS regulations. The two frequently contradict each other, requiring two sets of books.

 

Sorry for the accounting class, but I am a university accounting professor. Class dismissed. :D

 

Thanks for information. Can companies intentionally mislead the public/IRS and have it be legal?

 

Well I work for GE so I am pretty sure they are under quite a bit of scritiny over such things.

 

As for the question of misleading shareholders that is what lands people in jail. The numbers that are reported for tax purposes are not open to the public, so there wouldn't be confusion on the two sets that are being reported.

 

Thanks for the refresher NCCubbie, I have took my MBA accounting class 2 yrs ago and its good to hear that I rememered something from it :)

 

Additionally, many companies keep additional "sets of books" for performance measurement distinct from financial reporting. Financial reporting is covered by GAAP, but if you want to use different methods internally for determining bonuses, capital spending, etc., that's not only legal but can make good sense. Many of the rules in GAAP are arbitrary (to eliminate or reduce judgement calls, etc.).

 

Just looked at their 10-K, and they only report on 2 segments - publishing and broadcasting/entertainment. That means they don't have to break out the Cubs separately from broadcasting in terms of public reporting, so the pricing of internal transactions between the Cubs and the broadcasting unit would not impact their public disclosure.

[NCCubFan]

Additionally, many companies keep additional "sets of books" for performance measurement distinct from financial reporting. Financial reporting is covered by GAAP, but if you want to use different methods internally for determining bonuses, capital spending, etc., that's not only legal but can make good sense. Many of the rules in GAAP are arbitrary (to eliminate or reduce judgement calls, etc.).

That's right. Companies can prepare the books however they want for managing the business internally; GAAP applies only to reporting to outsiders. So a business could really have three sets of books; one for reporting to shareholders, one for tax reporting, and one for managing the business internally.

Thanks for information. Can companies intentionally mislead the public/IRS and have it be legal?

It's not legal to intentionally mislead the public. An outside auditor (if doing their job properly) would not sign off misleading financial statements; an auditor has to express an opinion on whether the financial statements fairly reflect the business's operating results and financial position. Plus, under Sarbanes-Oxley the company's CEO and CFO must certify, under penalty of law, that the financial statements are not knowingly misleading. As far as the IRS is concerned, the issue is simply whether the company has fully reported its revenue and is legitimately entitled to deduct the expenses they have. As long as the revenue and expenses have been reported in compliance with the tax code, the company's obligation is merely to pay the lowest amount of taxes they are required to pay by law. Deducting expenses in order to reduce the tax liability is perfectly acceptable as long as the tax code (or related IRS guidelines or court rulings) permit the deduction. If not, then it's tax evasion, which can result in fines and/or jail time.. In fact, tax evasion is how Al Capone and other gangsters of that time were caught. It could never be proven that they engaged in illegal activities (even though everybody knew they were), but it could be proven that they received income that they didn't report on their tax returns. By using tax evasion to get them, it only had to be proven that they had income that wasn't reported; it wasn't necessary to prove how they got the income.

 

Test tomorrow. :D

[CubinNY]

Additionally, many companies keep additional "sets of books" for performance measurement distinct from financial reporting. Financial reporting is covered by GAAP, but if you want to use different methods internally for determining bonuses, capital spending, etc., that's not only legal but can make good sense. Many of the rules in GAAP are arbitrary (to eliminate or reduce judgement calls, etc.).

That's right. Companies can prepare the books however they want for managing the business internally; GAAP applies only to reporting to outsiders. So a business could really have three sets of books; one for reporting to shareholders, one for tax reporting, and one for managing the business internally.

Thanks for information. Can companies intentionally mislead the public/IRS and have it be legal?

It's not legal to intentionally mislead the public. An outside auditor (if doing their job properly) would not sign off misleading financial statements; an auditor has to express an opinion on whether the financial statements fairly reflect the business's operating results and financial position. Plus' date=' under Sarbanes-Oxley the company's CEO and CFO must certify, under penalty of law, that the financial statements are not knowingly misleading. As far as the IRS is concerned, the issue is simply whether the company has fully reported its revenue and is legitimately entitled to deduct the expenses they have. As long as the revenue and expenses have been reported in compliance with the tax code, the company's obligation is merely to pay the lowest amount of taxes they are required to pay by law. Deducting expenses in order to reduce the tax liability is perfectly acceptable as long as the tax code (or related IRS guidelines or court rulings) permit the deduction. If not, then it's tax evasion, which can result in fines and/or jail time.. In fact, tax evasion is how Al Capone and other gangsters of that time were caught. It could never be proven that they engaged in illegal activities (even though everybody knew they were), but it could be proven that they received income that they didn't report on their tax returns. By using tax evasion to get them, it only had to be proven that they had income that wasn't reported; it wasn't necessary to prove how they got the income.

 

Test tomorrow. :D[/quote']

 

Thanks professor. Next question. Do you think MLB teams (or any professional team) intentionally mislead the public when they report earnings. If so, how much do you think the Trib makes on the Cubs? Do you think they can sustain $130 million 25 man roster?

 

I know a lot about behavior but next to nothing about the world of high finance.

[Derwood]

My new fear would be that if Cuban bought the Cubs but TribCo. kept WGN TV that that would be the end of nationwide Cubs broadcasts. Unless the sale had games on WGN as a contingency, I would think it more likely that Cuban would try to make his own TV network or sell all the rights to CSN.

[anemic offense]

wants to push the budget to $130 million next year? Looks like the Cubs could be sold, so this is more plausible now. Basically, he'd take the same approach as the Yankees & the Red Sox by buying his way to a title via getting the best free agents.

With Maddux, Wood & Pierre coming off the books, the Cubs would have lots of money to play with.

 

Who would you want him to sign??

 

Schmidt & Soriano would be at the top of my list. Cubs would probably have enough for Mulder too. That depends on how Prior, Guzman and Marmol perform. It would be nice to get another left-handed bat, but there aren't many available...

 

I'd want Zito first and foremost, then if you could get Soriano and either Schmidt or Mulder without compromising a long term deal for Z, I think even if the Cubs did nothing else, they'd be a contender next year.

 

I'm afraid Zito will be nothing more than an overpaid BP pitcher in this division. With Wrigley, the new Busch, the Juicebox, and GAB, you have 4 homer friendly parks to left field. Instead of his slow-big benders dying on the track in places like Oakland and Safeco, they'll be several rows deep in these parks. Getting Zito would be a HUGE mistake IMO.

[UBlink]

Thanks professor. Next question. Do you think MLB teams (or any professional team) intentionally mislead the public when they report earnings. If so, how much do you think the Trib makes on the Cubs? Do you think they can sustain $130 million 25 man roster?

 

I know a lot about behavior but next to nothing about the world of high finance.

 

As noted earlier, the Cubs, for example, only publicly report the earnings of the Cubs in combination with their broacasting segment. The earnings numbers you hear for just the Cubs are estimates from outsiders. I believe one person mentioned that Forbes provided one estimate. I wonder if any MLB team's earings are reported publicly as a unique segment.

 

Any attempt to break out the earnings of the Cubs as an entity distinct from the broadcasting group is going to be highly subjective because the amount paid to the Cubs for broadcasting rights is not an arm's length transaction. Also what the Cubs pay the broadcasting group for advertising, etc. I'm certain that this is a continuing source of contention in establishing the revenue levels for revenue sharing.

[srbin84]

wants to push the budget to $130 million next year? Looks like the Cubs could be sold, so this is more plausible now. Basically, he'd take the same approach as the Yankees & the Red Sox by buying his way to a title via getting the best free agents.

With Maddux, Wood & Pierre coming off the books, the Cubs would have lots of money to play with.

 

Who would you want him to sign??

 

Schmidt & Soriano would be at the top of my list. Cubs would probably have enough for Mulder too. That depends on how Prior, Guzman and Marmol perform. It would be nice to get another left-handed bat, but there aren't many available...

 

I'd want Zito first and foremost, then if you could get Soriano and either Schmidt or Mulder without compromising a long term deal for Z, I think even if the Cubs did nothing else, they'd be a contender next year.

 

I'm afraid Zito will be nothing more than an overpaid BP pitcher in this division. With Wrigley, the new Busch, the Juicebox, and GAB, you have 4 homer friendly parks to left field. Instead of his slow-big benders dying on the track in places like Oakland and Safeco, they'll be several rows deep in these parks. Getting Zito would be a HUGE mistake IMO.

 

I agree that he might give up some extra homers on the road, but I think he would be a pretty good pitching at Wrigley. Capuano is doing alright. We also have a lot of good lefty hitters in our division too, so that would help neutralize the park factor. I look back to what Rusch did in 2004 and 2005 and think Zito would do a little better than that, probably an ERA in the mid to high 3's.

[NCCubFan]

Thanks professor. Next question. Do you think MLB teams (or any professional team) intentionally mislead the public when they report earnings. If so, how much do you think the Trib makes on the Cubs? Do you think they can sustain $130 million 25 man roster?

That's beyond my knowledge (I don't have any background in professional sports), but UBlink gave a good response about the Cubs specifically. They're part of the Trib, not a stand-alone company, so it's hard to measure their profitability directly. I don't know if teams try to mislead the public, but there have been times in the past when they've been accused of trying to mislead their players unions in an attempt to make it look like they're not able to pay what the unions are asking for. This issue has been raised in the past during strikes/lockouts.

[Old Style]

This topic was brought up a few months ago, and I ripped Cuban as nothing more than a hype man (a la Flava Flav) with no results to show. I guess now I am eating my words, with the Mavs 2 games away from the title. :(