RESEARCH CASE 3: RECOGNITION CASES
PART ONE: Winston Diamond Jewelry purchased the naming rights for the baseball stadium where the Cranford Raptors play. The stadium is owned by the City of Cranford, which sold the 10-year rights for $2 million per year. The contract gives Winston the right to display its name and logo throughout the inside of the stadium, including above the scoreboard and along the wall of the main entrance to the stadium. The name Winston Arena will be mounted on the exterior of the stadium. Prepare a memo for the Mayor and City Council of Cranford documenting the accounting for the naming rights agreement. Cite authoritative guidance. Then, include your two naming rights deals (shown below) as examples in the memo. For each, identify the contract and any terms, identify the performance obligations, determine the transaction price, allocate the transaction price, and discuss the revenue recognition according to the terms. The naming rights organizations are public companies. Use disclosures included in 10-Ks and news stories in the business to find the information. Include links to the information in your memo.
Team 5: Wells Fargo Center and Lincoln Financial Field (Philadelphia)
one issue below to address.
GameDay.com, a website that offers sports betting, signs an agreement with Winston Stadium giving the company the right to run betting kiosks in the parking lots for 3 years. GameDay began constructing kiosks and an office hut for its own use in January of Year 1. During year 1, GameDay incurred interest of $500,000 on specific construction debt, and $200,000 on other borrowings. Interest computed on the weighted-average amount of accumulated expenditures for the building during year 1 was $400,000. Cole Hardy, the CFO of GameDay, wants to know whether the interest should be capitalized. Write a memo to Cole outlining accounting for capitalized interest. Explain how the accounting changes if all the interest is on specific construction debt or if all is on other borrowings. Cite authoritative guidance.