Role Of Revenue Recognition In Assessment Answer

s an Act or Ordinance in favor of the same (Bagshaw, 2018).

Arguments in favor of providing the tax-free status for sporting clubs.

• The sporting clubs are engaged in the promotion of sports and in fostering the spirit among the players. The purpose can be held to be educational and charitable.
• The country wins a national and international reputation in sports competitions dependent upon the performance of the players.
• The incomes of these organizations are in the form of donations and contributions received from the state and private parties and the expenses are also reasonable in a way that no private shareholder or individual yields undue benefit from the same (Matthews, 2017).
• These organizations are also expected to provide facilities for better health care and training and practice sessions. The journey of an athlete from an amateur to a professional is carved in these sporting clubs (RSM, 2016).
• Financial gain is not the objective of sporting clubs and hence expecting them to pay tax thereby reducing the available surplus for the sports would not be justifiable.

For all the above reasons, the tax-free status of the sporting clubs should be retained.

Reasons why some clubs have attained large incomes since the tax-free status implemented

Over the recent years, might be a decade or so, the revenues of the sporting clubs have grown from a baby to a monster due to the heavy advertising and television rights. These deals run into millions and billions and have become more of a gamble (Bagshaw, 2018). It has become a lucrative business and advertising of all types particularly alcohol advertising has led to an astronomical increase in the revenues of the clubs (Philips, 2016). Thus the clubs are rolling in profits all the way and the surpluses generated through media rights, publicity and advertisements have raised the eyebrows of the public.

Initially, when the tax-free status was provided, televisions were not in existence and hence revenues might not have been sufficient to even run the clubs. But with the advancement in internet technology, times have changed drastically (Bagshaw, 2018).

Identification and discussion of the arguments against providing the tax-free status for sporting clubs.

• Sporting clubs have today become a fantasy and the spirit of sports is seen to take a backseat in most cases.
• With the increased revenues, the Executive pay has also increased by 40 percent and the employee salaries have also increased. There is no proper account of the utilization of the monies.
• The surpluses after meeting the operating expenses are supposed to be reinvested in the building of property and in the expansion of community infrastructure. But there is no oversight about the same (RSM, 2016).
• The accounts are not audited in the most appropriate way and these loose rules and regulations led to abuse of the facilities granted to the clubs (Accounting, 2017).
• The clubs also permit the recruitment of temporary members who attain the membership rights with the purview of tax evasion.
• The sporting clubs are also not having clear replies to the questions raised.

For all the above reasons, the tax-free status should be withdrawn for sporting clubs.

Public interest theory, Capture theory, and Economic Interest Theory

The public interest theory advocates that the markets and conditions are imperfect and the regulators are having full knowledge about the market due to which they can frame regulations in such a way that the scarce resources can be put to the most optimal use and public interest is promoted by the efficient allocation of goods, services, and opportunities (SMD, 2017). Capture theory advocates that the regulations are amended in a way so as to accommodate the requirements of those affected by the same. Based on the representations of those directly involved, the regulations are modified accordingly. The economic interest theory advocates that the policies and regulations are driven by the forces of demand and supply (Laux, 2014). The theories are developed within an industry and the objective is the creation of advantage for the industry.

Based on these theories, if the clubs retain their tax-free status, they can provide better and more advanced facilities for the sportsmen and this is ultimately in the public interest. It also creates an advantage for the specific country and fosters the same (Lapsley, 2012).

If the tax-free status is removed, the clubs are certain to face a crisis or slump in terms of available amounts. It might work against the interests of the public.

According to the public interest theory, the regulators, and the government, in this case, is responsible for intervention in the markets in order to improve the outcomes and results. Hence the government is responsible to build and upgrade the facilities provided in the stadiums as it ultimately serves the public interest and aims at providing equal opportunities for all (Merchant, 2012).

But rightfully, in this case, it would become a conflict between the clubs and the government as the theory is subject to limitations. Hence the practical application of the same is a question mark. The government behavior and motives might also not be appreciated by one and all as the government is only a neutral spectator.

Presence of other accounting theories

The classical theory and economic theories advocate the fact that the economy would behave in a way that provides the best solution for its people and hence theories, regulations and should be interpreted and designed to solve the problems.

The taxation status is encouraged in a view that the larger sporting clubs are minting huge sums of money. On the contrary, the tax-free status is encouraged for the smaller clubs as there is not much inflow of money. Hence depending on the situations, the regulations are to be designed (Accounting, 2017).

Possible impacts if the tax-free status was withdrawn from small local sporting clubs and children’s sporting clubs

If the tax-free status of small local sporting clubs and children’s sporting clubs is withdrawn it might lead to the closure or shut down of a few small clubs that might find it difficult to meet the operational expenses (Potter, 2014). The promotion of sports as a whole might also be impacted as no player reaches the AFL and NRL directly. Every payer has a humble beginning and from a grassroots level.  Hence, the need of the hour is that a separate legislation exists for the division of tax rules between small clubs versus large clubs as the small clubs are constantly in the requirement of funds but the same goes unheard (Philips, 2016). Also, the pumping of funds by AFL into Greater Western Sydney Giants FC and the Gold Coast Suns FC is being viewed as a misappropriation of funds. AFL and NRL are undoubtedly booming whereas the grass root organizations are perishing (Bagshaw, 2018).

Conclusion

The accounting theory in support for this would be the public interest theory and also the Capture theory as the welfare of the public is considered to be a priority and the regulations are to be amended or modified to suit the same. Hence, from the above discussion, it is clear that when the club is exempt from the tax it has an access to various concessions. It is imperative that the clubs should have proper knowledge so that the tax affairs can be managed in a prudent manner.

References

Accounting.  (2017) Economic interest theory and regulation [online]. Available from: https://greg-accounting.blogspot.in/2013/01/economic-interest-theory-and-regulation.html https://greg-accounting.blogspot.in/2013/01/economic-interest-theory-and-regulation.html [Accessed 12 May 2018]

Bagshaw, E. (2018) 'Open to abuse': Experts slam AFL's tax-free 'rort' [online]. Available from: https://www.smh.com.au/politics/federal/open-to-abuse-experts-slam-afl-s-tax-free-rort-20180304-p4z2rx.html [Accessed 12 May 2018]

Lapsley, I. (2012). Commentary: Financial Accountability & Management. Qualitative Research in Accounting & Management [online].  9(3), pp. 291-292. https://doi.org/10.1111/1468-0408.00081 DOI:  https://doi.org/10.1108/qram.2012.31409caa.008 [Accessed 11 May 2018]

Laux, B. (2014) Discussion of The role of revenue recognition in performance reporting.  Accounting and Business Research. [online]. 44(4),  380-382. DOI: https://doi.org/10.1080/00014788.2014.897867 [Accessed 11 May 2018]

Matthews, T. (2017) Fairer funding model for grassroots Australian Football [online]. Available from: https://www.change.org/p/federal-minister-for-sport-fairer-funding-model-for-grassroots-australian-football https://www.change.org/p/federal-minister-for-sport-fairer-funding-model-for-grassroots-australian-football [Accessed 12 May 2018]

Merchant, K. A. (2012). Making Management Accounting Research More Useful. Pacific Accounting  Review [online]. 24(3), p. 1-34. DOI: https://dx.doi.org/10.1108/01140581211283904 https://doi.org/10.1108/01140581211283904 [Accessed 2 May 2018]

Philips, K. (2016) 50 Perfectly Legal Ways To Get Money & Benefits Without Paying Taxes [online]. Available from:  https://www.forbes.com/sites/kellyphillipserb/2016/12/24/50-perfectly-legal-ways-to-get-money-benefits-without-paying-taxes/#44d1bd9c6044  [Accessed 12 May 2018]

Potter, M.R. (2014) Capture Theory and the Public Interest: Balancing Competing Values to Ensure Regulatory Effectiveness. International Journal of Public Administration. [online]. 37, p. 638-645. Available from: https://doi.org/10.1080/01900692.2014.903266 [Accessed 12 May 2018]

RSM. (2016) Taxation of Clubs and Associations – don’t be “teed” off at tax time [online]. Available from: https://www.rsm.global/newzealand/insights/tax-insights https://www.rsm.global/newzealand/news/taxation-clubs-and-associations-charity [Accessed 12 May 2018]

SMD. (2017) Inside the NFL’s Tax-Exempt Status [online]. Available from: https://time.com/3839164/nfl-tax-exempt-status/ https://www.sportsmanagementdegreehub.com/nfl-tax-exempt/ [Accessed 12 May 2018]