Salary cap accounting: The unique financial constraint for professional sports organizations

The objective of this thesis is to better understand how salary caps affect the financial management of organizations in professional sports leagues, with a primary focus on the National Basketball Association (NBA). There are certain rules related to the salary cap that are specified in the NBA's Collective Bargaining Agreement (CBA). The complex nature of these rules, including the calculation of team salary in regards to the salary cap, affects the ways that managers hire players. This research focuses on how managers of NBA organizations use these rules to the advantage of the organization. These advantages include increasing the financial capability of acquiring talent and improving he profitability of the organization while remaining within the rules of the salary cap. This research will also explore the contract structures of NBA players and how different contract structures may be more beneficial for the organization based on the organization's team salary in relation to the salary cap. The NBA will begin a new national television contract in 2016 which will lead to a large increase in league revenue. This paper will explore the potential effects of this increase in revenue on the management of NBA organizations. This research should be of interest to those who are interested in the financial aspects of sports. This thesis will explain how the salary cap functions in the NBA and the actions that it causes for managers of NBA organizations.