Morning all
So for background I work in finance and am a chartered accountant (yes it’s that exciting). I’d like to clear up what actually counts as a profit or loss on a player sale because I see a lot of misconceptions on here and on the internet.
A players transfer fee is amortised (depreciation of an intangible asset) over the life of their contract, so simply if you sign a player for £100m on a 5 year deal, the the profit and loss account will show amortisation of £20m a season.
Most people know this since Chelsea started offering out longer contracts so a smaller amount goes to the P&L, but a lot of people get the second part wrong.
Let’s take Harry Maguire. He signed for United for a reported £80m in the summer of 2019 on a 6 year contract (if I’m not mistaken). This means that £80m/6 (£13.33m) has been charged to the P&L each year totalling £53.3m.
Therefore, his current value on the United books is the difference between the transfer fee and this amount, so £26,7m.
This means that if we sold him for £30m, we haven’t made a £50m loss, we’ve made a £3.3m profit.
Obviously this is a rather simple explanation, but it’s important in thinking whether a transfer fee is reasonable or not. It’s also why Chelsea want to seek academy players as they cost nothing, and so can use the whole transfer fee as profit.
Hope I didn’t bore everyone too much
What an actual loss on a player is
posted on 14/6/23
You need to get on the spurs board and teach them about depreciation.
posted on 14/6/23
comment by it'sonlyagame (U6426)
posted 1 minute ago
comment by meltonblue (U10617)
posted 5 minutes ago
comment by it'sonlyagame (U6426)
posted 2 minutes ago
This means that if we sold him for £30m, we haven’t made a £50m loss, we’ve made a £3.3m profit
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Does that mean that you've made back all the money you spent on the transfer and made back a little bit on top, or does it just mean that if you sold him now it would register as a profit on this year's statement?
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The latter.
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Thought so. Not really a profit then, is it?
I mean, if I paid 20k for a car, paid it all off, then 15 years later sold it for 3k, it wouldn't mean I'd made 3k on the car overall, just for the year I sold it. Or am I being daft?
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It’s a profit compared to the assets worth at that particular time. With Maguire, and any footballer, their depreciation is the same over the lifecycle of the contract so you know at any particular point what the asset is valued at.
Whether you made a profit on the car or not in that context depends on what the actual value of it was at the time you sold it. All you’re doing is swapping one asset (the car) for another (money).
posted on 14/6/23
As Melton said, the timing of the payment (instalments or otherwise) has no bearing whatsoever on the P&L result; it’s a balance sheet movement only.
Agreed that there are a host of other variables & associated costs to consider when ascertaining a view of the holistic ‘value’ of a deal, such as acquisition costs both ways (when the club acquired the player; when the new club acquires him); wages; non-fiscal incentives like goodwill with the counter party & agent; etc.
The other thing is, in the OP, we’re solely considering an NBV approach, which doesn’t withstand in this context (and indeed would not withstand from a corporation tax perspective); I can’t think of a much more apt scenario in which revaluation to FMV is appropriate. The FMV, in footballing terms, is ultimately determined by whatever the top-bidding suitor are prepared to pay.
Whichever way you cut it, Harry Maguire has been an awful investment and huge waste of money; no amount of accounting manipulation will change that.
posted on 14/6/23
comment by Anfield RAP (U22951)
posted 1 hour, 36 minutes ago
comment by whodunnit (U22710)
posted 10 seconds ago
comment by KLS - Mick Lynch for prime minister (U1695)
posted 24 minutes ago
comment by Anfield RAP (U22951)
posted 10 minutes ago
comment by KLS - Mick Lynch for prime minister (U1695)
posted 12 minutes ago
So we made a profit on Andy Carrol?
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100% profit considering Chelsea paid for him.
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so does this mean when Liverpool signed him it was a 100% loss also?
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Nah. Carroll was a freebie - whatever Newcastle wanted for him was just added on to the Torres fee from Chelsea.
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that old chestnut.
posted on 14/6/23
This depreciation is also why clubs sometimes hang on to players because if they sell now they could make a loss but if they sell for the same or potentially less in a year it registers as profit. So if they divest themselves of his wages and get a loan fee in the intervening year its actually worth not selling them, for accounting and FFP reasons
posted on 14/6/23
This is a longwinded way of saying net spend waaankers, get in the bin.
posted on 14/6/23
comment by Kobbie The King Mainoo (U10026)
posted 4 minutes ago
This is a longwinded way of saying net spend waaankers, get in the bin.
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This
Utterboolasheet
In a few years the ‘sport’ will exist only as a Excel spreadsheet
posted on 14/6/23
Net spend is a valid stat tbf but just another stat in a sea of stats.
posted on 14/6/23
net spend waaankers, get in the bin.
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👆
posted on 14/6/23
All clear as mud.