Board/Owners Related Stuff

[Makis]

Pete,  do you have some sources for that? I've read differently. For instance, home-grown players are worth nothing in the books as far as I know.

[Shukes]

7 hours ago, pete0 said:

The contract is the asset. I don't know enough about corporation tax or accounting but apparently this was in part the reason Rooney got the bumper contract whilst at United. By paying him the silly money it boosted their assets to help balance the books. 

I think I PeteO has got it as close to spot on there can be.

Now if only we could teach him something about players ability

[Shukes]

1 minute ago, Makis said:

Pete,  do you have some sources for that? I've read differently. For instance, home-grown players are worth nothing in the books as far as I know.

Never thought of that though.

[Palfy]

4 minutes ago, Shukes said:

Zero. His cost has already devalued on our books. He is paid for and only costs us a wage now.

But he still has to have a value and that value would be shown as part of the clubs assets, you seem to be confusing how his cost is removed from the accounts, and not how value is an asset. 
From what I’ve read if a player cost 25 million it will be entered in the business accounts as an asset, which would then form part of the businesses value, and that figure will remain the same until that asset is no longer with the club. 

[Palfy]

14 minutes ago, Makis said:

Pete,  do you have some sources for that? I've read differently. For instance, home-grown players are worth nothing in the books as far as I know.

Would that be because they weren’t purchased. 

[Matt]

8 hours ago, Makis said:

Player's value is very simply the price bought versus how long he has in his contract left. So for a 30 million pound player on a five year contract value drops by six million each year. And players who go beyond that original contract (sign a new one) are AFAIK considered to have no value. They don't really try to guess what players are worth in the accounts.

You’re missing the market factor and form. Eriksen is a prime example of how these 2 factors impact the rules. He is going to be sold for the same as they bought as him for, despite 6 months on his  contract - £2m in wages left. 

[Matt]

44 minutes ago, Shukes said:

Zero. His cost has already devalued on our books. He is paid for and only costs us a wage now.

Not quite. Payments are paid over several years, then there’s clauses etc. 

[Makis]

32 minutes ago, Palfy said:

Would that be because they weren’t purchased. 

That would be if it works as I have read but not if they work like Pete explained.

[Palfy]

1 hour ago, Matt said:

You’re missing the market factor and form. Eriksen is a prime example of how these 2 factors impact the rules. He is going to be sold for the same as they bought as him for, despite 6 months on his  contract - £2m in wages left. 

But that doesn’t affect his value, his wages are a separate entity to his value, his wages bare no resemblance to his value, his value forms part of the worth of the business and is part of the value of the business, his wages are entered into the accounts as an overhead to the business, Eriksen leaving early saves the business on going over heads for that player, but that wouldn’t make a difference to the value of the player. 
Well that’s how I understand it, when a player is bought for 25 million that is the value entered into the accounts that won’t change until the player leaves, is value doesn’t depreciate on a rolling scale, but the cost of his purchase price will go against the profit and loss of the business not the value of the assets which players form part of. 

[barryj]

This is probably the most intellectual conversation I’ve ever witnessed on here!

[Matt]

53 minutes ago, Palfy said:

But that doesn’t affect his value, his wages are a separate entity to his value, his wages bare no resemblance to his value, his value forms part of the worth of the business and is part of the value of the business, his wages are entered into the accounts as an overhead to the business, Eriksen leaving early saves the business on going over heads for that player, but that wouldn’t make a difference to the value of the player. 
Well that’s how I understand it, when a player is bought for 25 million that is the value entered into the accounts that won’t change until the player leaves, is value doesn’t depreciate on a rolling scale, but the cost of his purchase price will go against the profit and loss of the business not the value of the assets which players form part of. 

The point about wages is that the owning club has to take it into account when selling - you pay the end of the contract to the employee (I’m basing this on sacked managers being paid off, not fact)

[pete0]

4 hours ago, Makis said:

Pete,  do you have some sources for that? I've read differently. For instance, home-grown players are worth nothing in the books as far as I know.

I used to sit by corporation tax inspectors. (That said I can't remember for sure what happens with the transfer fees, sure they see them as one off costs but depends on the accountant as ultimately they could pick either way or both). 

Edit: thinking about the bookkeeping side if player costs were seen as an asset then we wouldn't see a loss in the accounts as there'd be an equal value asset to balance the cost of buying him. 

Edit 2: page 21 of Man U's most recent accounts advise they use the "fair value" of the player and contact costs initially, and then the contract costs on renewal. 

Note fair value is ambiguous, it's not necessarily what they paid. It can be quite complex and well beyond my very limited knowledge of accounting. 

https://beta.companieshouse.gov.uk/company/00095489/filing-history

[Shukes]

5 hours ago, Palfy said:

But he still has to have a value and that value would be shown as part of the clubs assets, you seem to be confusing how his cost is removed from the accounts, and not how value is an asset. 
From what I’ve read if a player cost 25 million it will be entered in the business accounts as an asset, which would then form part of the businesses value, and that figure will remain the same until that asset is no longer with the club. 

No I think your misreading me mate, or I’m just not explaining it properly.

Im talking from an asset management perspective. An asset can be valued at zero, but still add value to the company. Imagine buying a van through a business. Once it has reached zero... it holds value to your company, but is pure profit. After a players contract has ran down, his initial company value has changed from an asset value to a pure profit value, with overheads.

His value is now not counted as an asset on the accounts, but is still a value to the club.

 

Edit: Palfy I think we’re both saying the same thing.

[Shukes]

5 hours ago, Matt said:

Not quite. Payments are paid over several years, then there’s clauses etc. 

Your right. To be fair I don’t know the details and length of the contract.

[StevO]

On 15/01/2020 at 09:23, Palfy said:

I’ve read the accounts that were published and they make scary reading, to think we are owned by an accountant is not far short of an April’s fool joke, we owe as a club to Moshiri to date £350 million in personal loans, we are being kept a float by two men in Moshiri and Usmanov, what concerns me is if they throw another few hundred million more at Ancelotti and the team and that fails, is one or both going to throw the towel in and with draw there money, and look to their next project. 
Let’s not forget these are business men not born and bred Evertonian’s, the amount of debt they have got the club into is now that great that the club wouldn’t be able to survive if they called the loans in, it’s peanuts to them and their wealth, but they could walk if they constantly keep failing to buy success. 
I am for one very concerned at how we have become so financially miss managed and what the future holds, I know people will say there billionaires don’t worry but that could turn out to be fool’s gold, if they can’t create the success there money and the new stadium requires, I don’t trust them to stay around if Brands and Ancelotti don’t work out, because why do they need to. 

They couldn’t just withdraw £350m, as there isn’t £350m in the bank. They wouldn’t be able to get £350m from the bank to withdraw it, as they would need to guarantee the money.
The risk is theirs, nothing to worry about. 
If they pulled out, they lose that money as they would have no chance of getting it back. 
They didn’t buy the club to make a profit, it’s a very expensive toy. Got to have a mansion, a yacht and a football club nowadays. 

[Makis]

3 hours ago, Matt said:

The point about wages is that the owning club has to take it into account when selling - you pay the end of the contract to the employee (I’m basing this on sacked managers being paid off, not fact)

I don't think it works like that. If that was the case the club should have already kicked out some of the wasters.

[StevO]

19 hours ago, Palfy said:

They don’t depreciate players values like the do vehicles by a percentage every year over a three or four year deal, the adjustment is made to the business when a player leaves not whilst they are still here. 

When you sign a player his value/cost is spread over the term of his first contract. 
 

You buy a £10m player with a five year contract he goes on the accounts at £2m per year for five years. 
If after three years, when you have paid off £6m of his value, you sell him for £5m you have made a £1m profit. 
If you sell him after five years the whole transfer fee is a profit. 
 

There would only ever be a loss if you sell them in the time of the first contract, and for less than what is outstanding. 
 

If you sell a player who was never paid for (academy or free transfer) it’s all profit if you sell them for a fee.

[StevO]

16 hours ago, Makis said:

Player's value is very simply the price bought versus how long he has in his contract left. So for a 30 million pound player on a five year contract value drops by six million each year. And players who go beyond that original contract (sign a new one) are AFAIK considered to have no value. They don't really try to guess what players are worth in the accounts.

yep, this. 

[StevO]

15 hours ago, pete0 said:

Close, most use the wages. £100k a week player on 5 year contract is worth £25m in the books and depreciates as each year lapses. New longer contract or higher wages then increases the assets worth. 

Nope. Nothing to do with wages. Wages are an expense, players are depreciating assets spread over the life of the first contract at the price paid. 
Free transfers and academy graduates financially have no value in the accounts. 

[Makis]

3 hours ago, pete0 said:

I used to sit by corporation tax inspectors. (That said I can't remember for sure what happens with the transfer fees, sure they see them as one off costs but depends on the accountant as ultimately they could pick either way or both). 

Edit: thinking about the bookkeeping side if player costs were seen as an asset then we wouldn't see a loss in the accounts as there'd be an equal value asset to balance the cost of buying him. 

Edit 2: page 21 of Man U's most recent accounts advise they use the "fair value" of the player and contact costs initially, and then the contract costs on renewal. 

Note fair value is ambiguous, it's not necessarily what they paid. It can be quite complex and well beyond my very limited knowledge of accounting. 

https://beta.companieshouse.gov.uk/company/00095489/filing-history

Well, you have to take deprecation into account in any business. If you as a business owner buy a machine you might consider it takes 5 years before you have to replace it. So 20% if its value is deprecated every year.

This is also what it says in Everton's financial statement:

Under FRS 102, the Club is required to
capitalise the cost of acquiring a player’s
registration (transfer fee) and then
amortise it over the length of the player’s
contract, effectively reducing the balance
sheet value of a player over that time.
No increase in the valuation of a player is
permitted until that player is sold and a
revised value is crystallised in the profit
and loss account through a one-off profit
or loss on disposal.

[pete0]

40 minutes ago, StevO said:

Nope. Nothing to do with wages. Wages are an expense, players are depreciating assets spread over the life of the first contract at the price paid. 
Free transfers and academy graduates financially have no value in the accounts. 

"FRS 10" requires investments in player contracts by football companies to be capitalized and amortized. Given the high degree of uncertainty associated with such contracts, it is not clear that this treatment is consistent with asset capitalization criteria. The evidence provided in this paper does not support inconclusively this capitalization requirement in that it indicates weak association of investment in player contracts with three measures of future benefits. In particular, the duration of this association is at most two years, which is shorter than the duration implied by the amortization period reported by sample companies. Nonetheless, other findings suggest that market participants seem to agree with the treatment prescribed by "FRS 10". These results should be of interest to practitioner and standard setters who (axiomatically) regard intangibles acquired in an arm's length transaction as assets. Copyright Blackwell Publishers Ltd, 2005.

https://www.google.com/amp/s/www.researchgate.net/publication/4991521_Accounting_Valuation_and_Duration_of_Football_Player_Contracts/amp

I'm just going from what a colleague told me, I only know basic bookkeeping. Had a quick Google, does the above not mean the contracts are assets? 

[Matt]

45 minutes ago, Makis said:

Well, you have to take deprecation into account in any business. If you as a business owner buy a machine you might consider it takes 5 years before you have to replace it. So 20% if its value is deprecated every year.

Maybe I'm getting mixed up then... Are depreciation and value not very different things? By that I mean, the depreciation as you explain it is clear, but the value is determined by the return of investment. Or am I getting completely fucking confused?

[StevO]

19 minutes ago, pete0 said:

"FRS 10" requires investments in player contracts by football companies to be capitalized and amortized. Given the high degree of uncertainty associated with such contracts, it is not clear that this treatment is consistent with asset capitalization criteria. The evidence provided in this paper does not support inconclusively this capitalization requirement in that it indicates weak association of investment in player contracts with three measures of future benefits. In particular, the duration of this association is at most two years, which is shorter than the duration implied by the amortization period reported by sample companies. Nonetheless, other findings suggest that market participants seem to agree with the treatment prescribed by "FRS 10". These results should be of interest to practitioner and standard setters who (axiomatically) regard intangibles acquired in an arm's length transaction as assets. Copyright Blackwell Publishers Ltd, 2005.

https://www.google.com/amp/s/www.researchgate.net/publication/4991521_Accounting_Valuation_and_Duration_of_Football_Player_Contracts/amp

I'm just going from what a colleague told me, I only know basic bookkeeping. Had a quick Google, does the above not mean the contracts are assets? 

The players transfer fee is spread across the length of the first contract, but the players registration is the asset. So if a player signs a new contract for more money he doesn’t become a higher value asset in the accounts. But when the player is sold adjustments are made, if required, to the asset register and the profit or loss is in the accounts. 
That’s how it’s done at Everton anyway. 

[StevO]

19 minutes ago, Matt said:

Maybe I'm getting mixed up then... Are depreciation and value not very different things? By that I mean, the depreciation as you explain it is clear, but the value is determined by the return of investment. Or am I getting completely fucking confused?

As something depreciates it’s value lowers.

Example, Gylfi was about £50m and his contract was probably five years.
To the accounts, after year one he was valued at £40m, after year two he was valued at £30m, after year three £20m, year four £10m and after the fifth year his value is nil (in the accounts).  
 

Sell him in the sixth year for £10m and it’s all profit. 

[Matt]

9 minutes ago, StevO said:

As something depreciates it’s value lowers.

Example, Gylfi was about £50m and his contract was probably five years.
To the accounts, after year one he was valued at £40m, after year two he was valued at £30m, after year three £20m, year four £10m and after the fifth year his value is nil (in the accounts).  
 

Sell him in the sixth year for £10m and it’s all profit. 

It’s retail value drops, yes. It’s overall value can continue to grow. It’s the whole point of doing an ROI!

[Sibdane]

4 minutes ago, Matt said:

It’s retail value drops, yes. It’s overall value can continue to grow. It’s the whole point of doing an ROI!

ROI, NPV, IRR, Payback period, etc. I would love to see the financial model that the club uses to value an asset. 

[StevO]

22 minutes ago, Matt said:

It’s retail value drops, yes. It’s overall value can continue to grow. It’s the whole point of doing an ROI!

Well it’s accountable value drops, but it’s market value can grow (we are still talking players aren’t we?). 

[Romey 1878]

Fuck, I have a headache. 

[Matt]

32 minutes ago, StevO said:

Well it’s accountable value drops, but it’s market value can grow (we are still talking players aren’t we?). 

Players and some material things, yes. But that’s clear for me and is what I mentioned as one of the 4 factors - market value, not “market”

[Shukes]

47 minutes ago, StevO said:

Well it’s accountable value drops, but it’s market value can grow (we are still talking players aren’t we?). 

This is exactly what I have been trying to say. It just takes someone more intelligent than me to explain it haha.

Accounts wise a players value depreciates, but his value to the club remains as they still have an asset to sell.