The Boston Celtics are the most successful team in professional basketball history. Teams led by Bill Russell, Larry Bird, and Kevin Garnett have won a total of 17 NBA championships. The Celtics are also an unusual professional sports team because ownership shares in the Celtics were at one time publicly traded (on the New York Stock Exchange as "Boston Celtics Limited Partnership"). As such, the Celtics were required to file financial statements with the SEC each quarter. The June 30, 2001, balance sheet of "Celtics Basketball Holdings" follows.

1. From June 2000 to June 2001, the Celtics' total assets decreased by approximately $5 million. What assets accounted for most of the decrease? Of course, total liabilities and equity also decreased by $5 million; what liability or equity items accounted for most of the decrease?
2. As of June 30, 2001, the Celtics have their NBA franchise recorded, net of amortization, at approximately $3.393 million. What original value was recorded for the NBA franchise? Over how many years is the NBA franchise being amortized? In what year was the NBA franchise originally recorded?
3. Partners' capital as of June 30, 2001, is about negative $60.3 million. How can partners' capital become negative?
4. The Celtics reported a liability for deferred compensation totaling $6,409,137 ($1,226,316 + $5,182,821). However, the notes to the financial statements revealed the following: "Celtics Basketball has employment agreements with officers, coaches, and players of the Boston Celtics basketball team. Certain of the contracts provide for guaranteed payments which must be paid even if the employee is injured or terminated." The Celtics then disclose that the total amount of these guaranteed payments is $254.585 million.
Explain the vast difference between the $6.4 million deferred compensation liability reported in the balance sheet and the $254.585 million compensation obligation disclosed in the notes.

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Boston Celtics Limited Partnership and Subsidiaries Consolidated Balance Sheets June 30, 2001 June 30 2000 ASSETS CURRENT ASSETS Cash and cash equivalents. 12,572,324 $14,941,632 3,250,2125,799,898 636551 16,423,720 21,378,081 1,200,556 1,144,785 Accounts receivable Prepaid expenses and TOTAL CURRENT ASSETS PROPERTY AND EQUIPMENT, net NATIONAL BASKETBALL ASSOCIATION FRANCHISE, net of other current assets 601,184 amortization of $2,776,318 in 2001 and $2,622,078 in 2000 INVESTMENT IN NBA MEDIA VENTURES, LLC OTHER ASSETS 3,393,2633,547,503 5,018,420 4,263,420 776,815 $26,161.019 $31,110,604 125,060 LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) CURRENT LIABILITIES Accounts payable and accrued expenses $23,506,664 $24,478,303 6,498,726 9,204,607 1,226 316 1278410 31,231,706 34,961,320 50,000,000 50,000,000 5,182,821 6,369,646 708,000 erred game revenues Deferred TOTAL CURRENT LIABILITIES NOTES PAYABLE TO BANK. DEFERRED COMPENSATION-noncurrent portion OTHER NONCURRENT LIABILITIES PARTNERS' CAPITAL (DEFICIT) compensation current portion Celtics Basketball Holdings, LP-General Partner Celtics Pride GP-Limited Partner Castle Creek Partners, LP-Limited Partner 1,008 (29,111,174) (29,437,209) (31,144430) (31,493,235) (60,254,589) (60,929,436) 1,074 (60,253,508) (60,928,362) $26,161,019 $31,110,604 1,015 Celtics Basketball, LP General Partner 1,081 TOTAL PARTNERS' CAPITAL (DEFICIT)