Mr. Doublecount

Dear Mr. Doublecount,

I am writing this letter in regards to your questions concerning Screagle players’ salary negotiations.

After looking at the Screagles Baseball Company and Screagles Stadium Inc. income statements, in

comparison to the relationship between the two companies, you may want to consider consolidating

both income statements by using the control equity method.

The Screagles Stadium was built for the Screagles baseball team. The revenue and expense of the

stadium is generated through the baseball team. Due to this affiliation between the parent and

subsidiary company, I would recommend consolidating the income statements. U.S. GAAP (Generally

Accepted Accounting Principles) states that when there is a controlling financial interest between two

parties, they have to consolidate. There are two ways to determine if control exists: quantitative (voting

majority) and qualitative (economic risk and reward). The relationship between Screagles Baseball

Company and Screagles Stadium Inc. displays both.

General partnerships are outlined in the FASB ASC 970-810-25-1, with special regards to consolidation in

FASB ASC 810-10-15-8, which explains “that the usual condition for a controlling financial interest is

ownership of a majority voting interest, and, therefore, as a general rule ownership by one entity,

directly or indirectly, of over 50 percent of the outstanding voting shares of another entity is a condition

pointing toward consolidation.” From the inquiry, I see that Screagles Baseball Company owns 91% of

the voting rights regarding Screagles Stadium Inc. This fulfills the quantitative requirement for control.

Screagles Stadium Inc. was built specifically for baseball. All of the Screagles’ home games are played

there. The stadium makes its revenue from the games played by the team, including ticket sales,

concessions, and parking. This demonstrates the economic risk and reward, meeting the...