NBA Does Not Include Franchise Purchase Amortization In Claimed Losses

On Thursday, Deadspin and ESPN.com each reported that some NBA franchises include in their balance sheets two items that would certainly help make operating profits look like losses in some cases, but may represent actual, legitimate expenses: the amortization of franchise purchase prices and a “roster depreciation allowance.”

The purchase amortization effectively allows NBA team owners to claim a portion of the purchase price as a business expense over 15 years, reported Deadspin. But the NBA tells SBNation.com that amortization costs for franchise purchases are not included in the claimed $300 million in collective 2010-11 losses the owners have cited in labor negotiations.

The roster depreciation allowance, which effectively allows franchise owners to claim losses on player depreciation, works just like a parcel delivery service would claim depreciation on its delivery trucks. This effectively counts player payroll, a huge slice of NBA teams’ expenses, as a team expense twice. Depending on how legitimate you consider this allowance, which is written into federal code for tax purposes, team owners’ claimed losses could be considered exaggerated by no small amount.