The Problem With The NHL is…

…accounting? That is the NHL Players Association's response for why owners are losing money.

It's common for labor and management to hold differing views of a company's financial health during contract negotiations. General Motors Corp. and the United Auto Workers, for example, constantly bicker over how profitable the automaker really is. Labor disputes can even lead companies to profess extreme pessimism as they try to win concessions from unions. US Airways Group Inc., which recently reported a profit for the second quarter of 2004, was quick to point out that the airline expects future losses, and that another bankruptcy is a distinct possibility.

But large, publicly held airlines and auto companies release audited financial statements that are difficult to dispute. Most hockey teams — and most sports franchises, for that matter — are privately owned and are not compelled to release such documents. Teams that are owned by publicly held entities, such as The Walt Disney Co.'s Anaheim Mighty Ducks, are too small a part of their company's overall operations to show up in segmented reporting. In other words, when teams say they are doing poorly, players are asked to take management's word for it.

Each year, the NHL issues a Unified Report of Operations (URO) that includes aggregated revenues, costs, and — for the past few years — losses. But the players' union dismisses those numbers as inaccurate and too derivative to verify independently. The players claim that teams manage sales figures down and don't use uniform methods to account for varying types of revenue. "They offer selective disclosure," says Saskin. "If they want to claim poverty, they should open up the books and give full disclosure."

Arthur Levitt was hired to investigate the books, but the owners gave him the information so nothing has been settled. Accounting is one of those things that seems so straightforward but often times isn't. I think the parties involved should move away from profitability issues and find other bargaining points.

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