Financial results out


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I mean the transfer fees will be put through the accounts over the length of the contract, if we spend £10m on transfers all on say players with 5 year deals, then the cost going through the accounts for transfer fees will be £2m per year.

I appreciate your point about the wages though.

No.

You're mixing cash and assets. Transfer fees will immediately hit the accounts in full, either in cash or creditors/debtors, depending on how the payments are structured.

Amortisation is just another name for depreciation of non-tangible asset.
 
Re: Financial results announced

As in the next sentance of my post, we are both putting the house in order after living beyond our means for years.

The loss of £30m includes amortisation of £29m which is just a balance sheet object and would onlu hurt the club if it was being valued for sale, or if it needed to raise finance, neither of which is true.

Nope, it's the writing off of players transfer fees and other "assets" over the length of their contracts / useful life. It's a real cost, which just isn't written off in full in the year it's incurred, it's spread over a number of years. It has nothing to do with selling the club or finance.

Looking at those our "house" appears to be far from "in order" and it is in fact propped up by the Henderson sale/profit.

No.

You're mixing cash and assets. Transfer fees will immediately hit the accounts in full, either in cash or creditors/debtors, depending on how the payments are structured.

Amortisation is just another name for depreciation of non-tangible asset.

Receivable yes, payable no.
 
Re: Financial results announced

How's that, on a basic level that seems accurate?

As above, any fees paid (or promised to be paid - depending on the structure of the deal) will immediately impact on the P/L.

How the assts are valued is an entirely different matter.

Nope, it's the writing off of players transfer fees and other "assets" over the length of their contracts / useful life. It's a real cost, which just isn't written off in full in the year it's incurred, it's spread over a number of years. It has nothing to do with selling the club or finance.

Looking at those our "house" appears to be far from "in order" and it is in fact propped up by the Henderson sale/profit.

Receivable yes, payable no.

Wrong.

If SAFC write a cheque for £5m, they can't just write it down over four years. That's clearly insane. The cash leaves the bank when the cheque clears.

You're mistaking cash flow and asset valuation.
 
Re: Financial results announced

As above, any fees paid (or promised to be paid - depending on the structure of the deal) will immediately impact on the P/L.

How the assts are valued is an entirely different matter.
Transfer fees paid (non performance related) are amortised over the length of the initial contract though rather than hit the P&L in full, which is what Ashely in (i think) is saying
 
Re: Financial results announced

Taken from the Arsenal accounts which are on their website

Player costs
The costs associated with acquiring players’ registrations or extending their contracts, including agents’ fees, are capitalised and amortised, in equal instalments, over the period of the respective players’ contracts. Where a contract life is renegotiated the unamortised costs, together with the new costs relating to the contract extension, are amortised over the term of the new contract. Where the acquisition of a player registration involves a non-cash consideration, such as an exchange for another player registration, the transaction is accounted for using an estimate of the market
value for the non-cash consideration. Provision is made for any impairment and player registrations are written down for impairment when the carrying amount exceeds the amount recoverable through use or sale.
Under the conditions of certain transfer agreements or contract renegotiations, further fees will be payable in the event of the players concerned making a certain number of First Team appearances or on the occurrence of certain other specified future events. Liabilities in respect of these additional fees are accounted for, as provisions, when it becomes probable that the number of appearances will be achieved or the specified future events will occur.
Profits or losses on the sale of players represent the transfer fee receivable, net of any transaction costs, less the unamortised cost of the player’s registration.
Remuneration of players is charged in accordance with the terms of the applicable contractual arrangements and any discretionary bonuses when there is a legal or constructive obligation.

Why would ours be any different?
 
Re: Financial results announced

Wrong.

If SAFC write a cheque for £5m, they can't just write it down over four years. That's clearly insane. The cash leaves the bank when the cheque clears.

You're mistaking cash flow and asset valuation.
that's exactly what happens though, similar to capitalising a purchase
 
Re: Financial results announced

As above, any fees paid (or promised to be paid - depending on the structure of the deal) will immediately impact on the P/L.

How the assts are valued is an entirely different matter.



Wrong.

If SAFC write a cheque for £5m, they can't just write it down over four years. That's clearly insane. The cash leaves the bank when the cheque clears.

You're mistaking cash flow and asset valuation.

I'm not. You're wrong. See my link from Arsenal. You're mistaking cash flow and accounting profit.
 
So to sum up; our results are poor but better then last years and with an increase to sponsorship, our results will get better next year?
 
Re: Financial results announced

As above, any fees paid (or promised to be paid - depending on the structure of the deal) will immediately impact on the P/L.

How the assts are valued is an entirely different matter.

If SAFC write a cheque for £5m, they can't just write it down over four years. That's clearly insane. The cash leaves the bank when the cheque clears.

You're mistaking cash flow and asset valuation.


I think you're getting a little mixed up too. The full transfer fee paid doesn't hit the P&L account immediately, although the cash (or related trade debtor if it's paid in instalments) will be recognised as soon as the transfer is made.

The club buys a player for £5M cash on a 5 year contract, the journal entries are:
Dr Intangible Fixed Assets (Balance Sheet item) £5M
Cr Bank (Balance Sheet item) £5M
Therefore this won't impact on the P&L immediately.

As the contract winds down, the asset will be amortised over the term of the contract(or the useful "life" of the player - which the club may not deem to be the full term of the contract, perhaps due to the player's age, or likelihood of signing a pre-contract agreement), and the entries in the accounts will be:
Dr Amortisation charge (P&L) £1M
Cr Intangible Fixed Assets (Balance Sheet) £1M

Therefore, provided the club has a standard policy of a full year's amortisation in the year of purchase, then only £1M of the transfer fee paid will be recognised in the accounts in the year the player is purchased.
 
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Re: Financial results announced

I think you're getting a little mixed up too. The full transfer fee paid doesn't hit the P&L account immediately, although the cash (or related trade debtor if it's paid in instalments) will be recognised as soon as the transfer is made.

The club buys a player for £5M cash on a 5 year contract, the journal entries are:
Dr Intangible Fixed Assets (Balance Sheet item) £5M
Cr Bank (Balance Sheet item) £5M
Therefore this won't impact on the P&L immediately.

As the contract winds down, the asset will be amortised over the term of the contract(or the useful "life" of the player - which the club may not deem to be the full term of the contract, perhaps due to the player's age, or likelihood of signing a pre-contract agreement), and the entries in the accounts will be:
Dr Amortisation charge (P&L) £1M
Cr Intangible Fixed Assets (Balance Sheet) £1M

Therefore, provided the club has a standard policy of a full year's amortisation in the year of purchase, then only £1M of the transfer fee paid will be recognised in the accounts in the year the player is purchased.

Cheers. That's pretty much as I thought.

Assuming that you seem to know what you're talking about, am I right in thinking that the claim the players are formally "valued" in the accounts is nonsense as well. Surely the "value" of the players as shown in the accounts is just whats left that hasn't had amortisation on their contracts?
 
Re: Financial results announced

As above, any fees paid (or promised to be paid - depending on the structure of the deal) will immediately impact on the P/L.

How the assts are valued is an entirely different matter.



Wrong.

If SAFC write a cheque for £5m, they can't just write it down over four years. That's clearly insane. The cash leaves the bank when the cheque clears.

You're mistaking cash flow and asset valuation.

what an odd remark.... I think you're doing exactly what you claim others are!

Perhaps you're confusing Balance sheets and P&L's, the cashed cheque will be fully recognised in the balance sheet as a purchased Intangible asset then written down over useful life (length of contract) as with any asset. The only part recognised in the P&L is the amortisation.

Your description does tally with dealing with disposal of an asset (player) though.
 
Wow, accountants really are as dull as fook!
To be honest, it feels like I am doing work skiving on here today.

edit: Although I never did think I would see double entry accounting on here.

Cheers. That's pretty much as I thought.

Assuming that you seem to know what you're talking about, am I right in thinking that the claim the players are formally "valued" in the accounts is nonsense as well. Surely the "value" of the players as shown in the accounts is just whats left that hasn't had amortisation on their contracts?
I would say that is formally valued, but just my opinion.
 
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To be honest, it feels like I am doing work skiving on here today.

edit: Although I never did think I would see double entry accounting on here.


I would say that is formally valued, but just my opinion.

What I mean is, I assume they can't say "Sessegnon is worth far more than we paid for him, let's increase £4m we have left as a value for him to £24m" in the same way that Henderson will have been "worth" nothing until they sold him.
 
Re: Financial results announced

I think you're getting a little mixed up too. The full transfer fee paid doesn't hit the P&L account immediately, although the cash (or related trade debtor if it's paid in instalments) will be recognised as soon as the transfer is made.

The club buys a player for £5M cash on a 5 year contract, the journal entries are:
Dr Intangible Fixed Assets (Balance Sheet item) £5M
Cr Bank (Balance Sheet item) £5M
Therefore this won't impact on the P&L immediately.

As the contract winds down, the asset will be amortised over the term of the contract(or the useful "life" of the player - which the club may not deem to be the full term of the contract, perhaps due to the player's age, or likelihood of signing a pre-contract agreement), and the entries in the accounts will be:
Dr Amortisation charge (P&L) £1M
Cr Intangible Fixed Assets (Balance Sheet) £1M

Therefore, provided the club has a standard policy of a full year's amortisation in the year of purchase, then only £1M of the transfer fee paid will be recognised in the accounts in the year the player is purchased.

Thanks for that explanation.

Am I correct in saying that a true picture of the club's finances will only appear with a view of the balance sheet and the correct interpretation thereof?

What I mean is, I assume they can't say "Sessegnon is worth far more than we paid for him, let's increase £4m we have left as a value for him to £24m" in the same way that Henderson will have been "worth" nothing until they sold him.

I think I can recall some revaluation of the club's real estate a few years ago, but in terms of player valuations I cannot see a rational reason why that would be done.

This is why, before speculating on the club's current financial health, we need to see and interpret the balance sheet.
 
Re: Financial results announced

Thanks for that explanation.

Am I correct in saying that a true picture of the club's finances will only appear with a view of the balance sheet and the correct interpretation thereof?



I think I can recall some revaluation of the club's real estate a few years ago, but in terms of player valuations I cannot see a rational reason why that would be done.

This is why, before speculating on the club's current financial health, we need to see and interpret the balance sheet.


Valuation = transfer fee minus x years amortisation. Valuations are too unreliable, Football is not a stable market. There could be arguements for revaluation of a player if a concrete bid is made and turned down, but it would be a massive can of worms for this to become the overriding principle. So many variables attached to valuing a player. Clubs would have massive revaluation reserves, or/and massive swings in profit year on year.
 
What I mean is, I assume they can't say "Sessegnon is worth far more than we paid for him, let's increase £4m we have left as a value for him to £24m" in the same way that Henderson will have been "worth" nothing until they sold him.
Yeah I thought that is what you meant, and no, wouldn't be worth it anyway.
But I would say the players have a value in the balance sheet, so would class that as formal
 
Re: Financial results announced

I think you're getting a little mixed up too. The full transfer fee paid doesn't hit the P&L account immediately, although the cash (or related trade debtor if it's paid in instalments) will be recognised as soon as the transfer is made.

The club buys a player for £5M cash on a 5 year contract, the journal entries are:
Dr Intangible Fixed Assets (Balance Sheet item) £5M
Cr Bank (Balance Sheet item) £5M
Therefore this won't impact on the P&L immediately.

As the contract winds down, the asset will be amortised over the term of the contract(or the useful "life" of the player - which the club may not deem to be the full term of the contract, perhaps due to the player's age, or likelihood of signing a pre-contract agreement), and the entries in the accounts will be:
Dr Amortisation charge (P&L) £1M
Cr Intangible Fixed Assets (Balance Sheet) £1M

Therefore, provided the club has a standard policy of a full year's amortisation in the year of purchase, then only £1M of the transfer fee paid will be recognised in the accounts in the year the player is purchased.

You're right of course, I got myself into a bit of mix trying to make a different point to Ashley. I'll try again.....

The operating loss includes circa £30m amortisation, and this is the reason the accounts aren't as bad as they seem. It's not a 'real' loss because the way the players are valued and would only be a problem if we were trying to raise finance or valuing the club. The value of the players on the balance sheet is purely subjective, for example Sess will be valued at around about £2.5m and McClean at £250k*, Larsson at £0 etc.

Apologies for that, I'll hand my CIMA certs in tomorrow. :-D


*Will have changed with his new contract this week.
 
Re: Financial results announced

You're right of course, I got myself into a bit of mix trying to make a different point to Ashley. I'll try again.....

The operating loss includes circa £30m amortisation, and this is the reason the accounts aren't as bad as they seem. It's not a 'real' loss because the way the players are valued and would only be a problem if we were trying to raise finance or valuing the club. The value of the players on the balance sheet is purely subjective, for example Sess will be valued at around about £2.5m and McClean at £250k*, Larsson at £0 etc.

Apologies for that, I'll hand my CIMA certs in tomorrow. :-D


*Will have changed with his new contract this week.


Not sure I agree on this one completely, if we didn't capitalise player registrations we would have had to write the value of the transfer off completely at the time of registration changing hands. Meaning all these figures would have already transcended our income statement and we'd have shown/carried larger losses each year on the P&L and within our reserves on our Balance Sheet. It is a very real cost. Although I do agree that it has zero impact on our working capital (cash flow), so will never (on it's own) threaten the company as a trading entity. FFP recognises amortisation as a genuine cost.

And the value of the players is not at all subjective, it's based on a recognised accounting treatment and completely objective, what is subjective is the fluctuating market values that you are comparing your balance sheet value to. Whether the balance sheet values are correct is another thing, but with no reliable market place to judge the value of the player it is seen as the best option.
 
Re: Financial results announced

Not sure I agree on this one completely, if we didn't capitalise player registrations we would have had to write the value of the transfer off completely at the time of registration changing hands. Meaning all these figures would have already transcended our income statement and we'd have shown/carried larger losses each year on the P&L and within our reserves on our Balance Sheet. It is a very real cost. Although I do agree that it has zero impact on our working capital (cash flow), so will never (on it's own) threaten the company as a trading entity. FFP recognises amortisation as a genuine cost.

And the value of the players is not at all subjective, it's based on a recognised accounting treatment and completely objective, what is subjective is the fluctuating market values that you are comparing your balance sheet value to. Whether the balance sheet values are correct is another thing, but with no reliable market place to judge the value of the player it is seen as the best option.

This is what I understood. I still can't see how Steak Pie can claim if we pay £5m for someone we write it off in full through the P & L account straight away. It's just not what happens.
 
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