Question
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,
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.
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