TLDR: Basically we always make it back in shirt sales
Ah this brings back memories!
Well summarised op
EBITDA
Had to learn about this stuff when I became an asset owner.
You should add that clubs are required to assess their assets (players) for any impairment and if they believe the value of the asset has decreased then they are required to take an impairment charge (write off a portion of the book value of the player) in the period the assessment takes place.
Hypothetical situation. Player signs for £50m on 5 year contract which would be amortized at £10m p/a. After 1 year his book value is £40m. If it turns out that this player was actually Ali Dia reincarnated then the club would be obliged to assess the net realizable value of the player and write down the value of the asset to £0 at the end of year 1, taking a £40m hit to profit in that year.
If the club then sells the player in year 2 for £5m then that's £5m profit in year 2. But it still doesn't erase the £50m charged to the P&L in year 1 (£10m amortization, £40m impairment).
I think it's rare to see impairment charges but it surely must happen when players get convicted of serious offences/drug cheating or turn out to be have been purchased at vastly inflated fees (Lukaku to Chelsea springs to mind).
Oh, whodunnit isn't going to be able to resist this one!!
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
Ali Dia reincarnated
----
He died?
In booking keeping terms but not in real terms.
Thanks vidicthelegend.
Would it be fair to say that your explanation applies to the formal definition in of profit from a legal and accountancy point of view, but the common usage of "sell player at a higher fee than we bought him = made a profit"? Is there an accountancy-specific term that would be used to describe this scenario?
That's profit and loss in accounting terms but not real life terms. If accounting made actual sense and wasn't just a huge dodgy fudge then accountants wouldn't exist
comment by Anfield RAP (U22951)
posted 18 minutes ago
Ali Dia reincarnated
----
He died?
----------------------------------------------------------------------
Would've died again after reading that!
So we made a profit on Andy Carrol?
comment by KLS - Mick Lynch for prime minister (U1695)
posted 12 minutes ago
So we made a profit on Andy Carrol?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
comment by KLS - Mick Lynch for prime minister (U1695)
posted 15 minutes ago
So we made a profit on Andy Carrol?
----------------------------------------------------------------------
In the year we sold him, yes. But not overall due to the accumulated depreciation across prior seasons.
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?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
----------------------------------------------------------------------
comment by Alisson Wonderland (Formerly LGT) (U13718)
posted 6 minutes ago
comment by KLS - Mick Lynch for prime minister (U1695)
posted 15 minutes ago
So we made a profit on Andy Carrol?
----------------------------------------------------------------------
In the year we sold him, yes. But not overall due to the accumulated depreciation across prior seasons.
----------------------------------------------------------------------
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?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
----------------------------------------------------------------------
----------------------------------------------------------------------
so does this mean when Liverpool signed him it was a 100% loss also?
comment by Anfield RAP (U22951)
posted 1 hour, 17 minutes ago
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
----------------------------------------------------------------------
Income tax, other tax, finders fee....
I think as Rap said - it ultimately depends on what the payment structure of the fee was from the outset. Sometimes it’s in instalments, sometimes a large chunk then instalments and sometimes paid up front.
This means that if we sold him for £30m, we haven’t made a £50m loss, we’ve made a £3.3m profit
--------
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?
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?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
----------------------------------------------------------------------
----------------------------------------------------------------------
so does this mean when Liverpool signed him it was a 100% loss also?
----------------------------------------------------------------------
Nah. Carroll was a freebie - whatever Newcastle wanted for him was just added on to the Torres fee from Chelsea.
comment by newWAYNEorder (U23010)
posted 20 minutes ago
comment by Anfield RAP (U22951)
posted 1 hour, 17 minutes ago
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
----------------------------------------------------------------------
Income tax, other tax, finders fee....
----------------------------------------------------------------------
No money back, no guarantee
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
--------
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?
----------------------------------------------------------------------
The latter.
comment by Anfield RAP (U22951)
posted 1 hour, 42 minutes ago
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
----------------------------------------------------------------------
On the first point, when the transfer fee is paid has no bearing on the amortisation on the p&l.
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
--------
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?
----------------------------------------------------------------------
The latter.
----------------------------------------------------------------------
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?
Sign in if you want to comment
What an actual loss on a player is
Page 1 of 2
posted on 14/6/23
TLDR: Basically we always make it back in shirt sales
posted on 14/6/23
Ah this brings back memories!
Well summarised op
posted on 14/6/23
EBITDA
Had to learn about this stuff when I became an asset owner.
posted on 14/6/23
You should add that clubs are required to assess their assets (players) for any impairment and if they believe the value of the asset has decreased then they are required to take an impairment charge (write off a portion of the book value of the player) in the period the assessment takes place.
Hypothetical situation. Player signs for £50m on 5 year contract which would be amortized at £10m p/a. After 1 year his book value is £40m. If it turns out that this player was actually Ali Dia reincarnated then the club would be obliged to assess the net realizable value of the player and write down the value of the asset to £0 at the end of year 1, taking a £40m hit to profit in that year.
If the club then sells the player in year 2 for £5m then that's £5m profit in year 2. But it still doesn't erase the £50m charged to the P&L in year 1 (£10m amortization, £40m impairment).
I think it's rare to see impairment charges but it surely must happen when players get convicted of serious offences/drug cheating or turn out to be have been purchased at vastly inflated fees (Lukaku to Chelsea springs to mind).
posted on 14/6/23
Oh, whodunnit isn't going to be able to resist this one!!
posted on 14/6/23
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
posted on 14/6/23
Ali Dia reincarnated
----
He died?
posted on 14/6/23
In booking keeping terms but not in real terms.
posted on 14/6/23
Thanks vidicthelegend.
Would it be fair to say that your explanation applies to the formal definition in of profit from a legal and accountancy point of view, but the common usage of "sell player at a higher fee than we bought him = made a profit"? Is there an accountancy-specific term that would be used to describe this scenario?
posted on 14/6/23
That's profit and loss in accounting terms but not real life terms. If accounting made actual sense and wasn't just a huge dodgy fudge then accountants wouldn't exist
posted on 14/6/23
comment by Anfield RAP (U22951)
posted 18 minutes ago
Ali Dia reincarnated
----
He died?
----------------------------------------------------------------------
Would've died again after reading that!
posted on 14/6/23
So we made a profit on Andy Carrol?
posted on 14/6/23
comment by KLS - Mick Lynch for prime minister (U1695)
posted 12 minutes ago
So we made a profit on Andy Carrol?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
posted on 14/6/23
comment by KLS - Mick Lynch for prime minister (U1695)
posted 15 minutes ago
So we made a profit on Andy Carrol?
----------------------------------------------------------------------
In the year we sold him, yes. But not overall due to the accumulated depreciation across prior seasons.
posted on 14/6/23
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?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
----------------------------------------------------------------------
posted on 14/6/23
comment by Alisson Wonderland (Formerly LGT) (U13718)
posted 6 minutes ago
comment by KLS - Mick Lynch for prime minister (U1695)
posted 15 minutes ago
So we made a profit on Andy Carrol?
----------------------------------------------------------------------
In the year we sold him, yes. But not overall due to the accumulated depreciation across prior seasons.
----------------------------------------------------------------------
posted on 14/6/23
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?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
----------------------------------------------------------------------
----------------------------------------------------------------------
so does this mean when Liverpool signed him it was a 100% loss also?
posted on 14/6/23
comment by Anfield RAP (U22951)
posted 1 hour, 17 minutes ago
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
----------------------------------------------------------------------
Income tax, other tax, finders fee....
posted on 14/6/23
I think as Rap said - it ultimately depends on what the payment structure of the fee was from the outset. Sometimes it’s in instalments, sometimes a large chunk then instalments and sometimes paid up front.
posted on 14/6/23
This means that if we sold him for £30m, we haven’t made a £50m loss, we’ve made a £3.3m profit
--------
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?
posted on 14/6/23
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?
----------------------------------------------------------------------
100% profit considering Chelsea paid for him.
----------------------------------------------------------------------
----------------------------------------------------------------------
so does this mean when Liverpool signed him it was a 100% loss also?
----------------------------------------------------------------------
Nah. Carroll was a freebie - whatever Newcastle wanted for him was just added on to the Torres fee from Chelsea.
posted on 14/6/23
comment by newWAYNEorder (U23010)
posted 20 minutes ago
comment by Anfield RAP (U22951)
posted 1 hour, 17 minutes ago
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
----------------------------------------------------------------------
Income tax, other tax, finders fee....
----------------------------------------------------------------------
No money back, no guarantee
posted on 14/6/23
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
--------
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?
----------------------------------------------------------------------
The latter.
posted on 14/6/23
comment by Anfield RAP (U22951)
posted 1 hour, 42 minutes ago
This is incredibly simplistic as it doesn't take into account the fact that most transfer fees are both performance related and paid in instalments.
It also doesn't factor in wages, agent fees, bonuses, admin fees etc, albeit it they will show on separate P&L's.
----------------------------------------------------------------------
On the first point, when the transfer fee is paid has no bearing on the amortisation on the p&l.
posted on 14/6/23
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
--------
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?
----------------------------------------------------------------------
The latter.
----------------------------------------------------------------------
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?
Page 1 of 2