Amortization can be briefly defined as the allocation of the cost of the intangible assets. Lessing and residual value that has been projected to periods in which the asset is expected to contribute to the organization’s revenue generating activities estimated, capitalized cost is allocated less…
NBA franchise and other intangible assets have a value of $164,703 $164702 and $165 035 in years 1996, 1997, and 1998 respectively. This shows that the method of amortisation reflect the pattern of the usage of assets in generation of income. NBA intangible assets are defined in cost less amortisation that has accumulated. Straight line method spread over the useful estimated lives of the intangible assets which is generally 3-7 years provides the amortisation. b) Discontinued operations are referred to as parts of an entity that has been sold or has been put into held for sale grouping. While evaluating the future success prospects of an organization, an investor who has existed or a potential investor who will invest in future would remove the discontinued operations from consideration because these items have no bearing or effects on the future. The concern of the management is that some operations are discontinued to improve the results of the continuing operations. The operations and cash flows of the part has been removed from the ongoing operations and the entity will not have a significant involvement in the operations of the discontinued part after the transaction of disposal is made. c) Team costs and expenses increased between 1996 and 1997 from $27,891,264 to $40,941,156. This is because of after discontinuing some operations, it would require a major effort to re-establish the operation and requires significant effort and budget to continue the operations as before. This may need extra marketing, extra staffing. There can be a possibility of increase in the cost of living between the two years which would subsequently raise the amount of team costs and expenses. d) Net income was $420,306 and $12,267,317 in year 1997 and 1998 respectively. This was a hefty rise in the value of income. This is because of higher revenue that was gained. Higher revenue resulted from ticket sales and also from Television and radio broadcasting fees in 2008. By constant winning of games, heavy promotion and advertisement through the television and broadcast and also through reaching a wide fan base by selling many tickets resulted to the higher income. Through maintaining lower expenses such as team costs and expenses, selling and promotion, general and administrative in the year 1998 resulted to an increase in net income. e) Noting that net income was higher in 1996, distributions declared were higher in 1998 than in 1996, with $0.50 per unit. Distributions are that portion of corporate profits that is made by a corporation to its shareholders. Net income can either be re-invested in the business or distributed to stockholders. In 1996, the main source of the net income was from the discontinued operations income. This income was better invested back to the business instead of distributing it to the shareholders. This would help avoid double taxation and be realised as capital gains. Case 10-7 Cash movements and Periodic Income Determination a) Income determination is not an exact science. It is the best estimate of determination of what will be the base of individuals’ income on the evidence the individual presents. The base period can be the month for which revenue verification and identification of an individual is a requirement. Month’s income is used for the projection of income. Income averaged and a conversion factor can be used to reach at a quantifiable monthly income. b) Cash flow estimation is the prediction whose main purpose is the anticipation of the disbursements and receipts of cash. It is a fixed amount of time that it covers. Cash sensitivity and aggressiveness determines the penetration ...
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