If after 7 years Stansfield signs a new contract is he effectively paid off and has zero value on the books, meaning whatever we sold him for would be pure profit?
I'm dubious about 7 year contracts.
An awful lot can change over 7 years or even a shorter time.
[www.bbc.co.uk] just ask Bristol City
Chelsea's 9 year contracts with players seem crazy to me. My guess is most of the players they probably won't want in 3 years.
Some of them may have done well enough not to be sold at a loss, but most players are sold at a loss.
They'll have something like £85m+ each still due in wages in 3 years.
I presume they have inflation proof contracts as well, so that if you add a zero to footballers' wages over the next few years they won't miss out.
Otherwise I can't see why a player would sign for that long. 5 years, yes.
IanTI'd be very dubious about amortising a player's contract for longer than 5 years though.
It's a sensible (non) limit.
It's not really possible though accounting wise.
The only way to restrict the length is to bring in a rule that clubs can not have contracts in excess of 60 months at any point but then thats venturing in to employment law probably and restriction of earnings.
I see no issue with the rules as they are. If somebody wants to pay £500m for a 17 year old on a 15 year contract, then they should be able to under the proviso that the cash flow is there.
Long-term transfers carry their own risk and there's only a small age range of players that would be applicable for anyway.
Nikola Zigic- FEAIf after 7 years Stansfield signs a new contract is he effectively paid off and has zero value on the books, meaning whatever we sold him for would be pure profit?
It depends when he signed.
If he signed a 2 year extension when he had a year left, the balance would then be reduced over three years.
If he completely ran his 7 contract down and then signed the next day as a free agent then I think yes he would have a 0 book value (exc agent fees, signing on bonus etc)
Nikola Zigic- FEAIf after 7 years Stansfield signs a new contract is he effectively paid off and has zero value on the books, meaning whatever we sold him for would be pure profit?
So, normally a player would sign a new deal before their current one elapses. In that instance their remaining amortisation value is split across the length of the new deal.
If it fully runs out and is renewed it’s zero.
The point stands though I think that without a contract renewal, if a player is sold after the five years of amortisation is up, then the fee is booked entirely as profit?
Edit - just realised the 5 year cap was debunked in EFL, sorry
If the basic fee is about £12m, it works out at £1.7m a year. Hogan and Roberts annual wages probably covered that amortisated fee alone, not counting Stansfields wages.
Everbluesince92IanTI'd be very dubious about amortising a player's contract for longer than 5 years though.
It's a sensible (non) limit.
It's not really possible though accounting wise.
The only way to restrict the length is to bring in a rule that clubs can not have contracts in excess of 60 months at any point but then that's venturing in to employment law probably and restriction of earnings.
I see no issue with the rules as they are. If somebody wants to pay £500m for a 17 year old on a 15 year contract, then they should be able to under the proviso that the cash flow is there.
Long-term transfers carry their own risk and there's only a small age range of players that would be applicable for anyway.
IFRS exists for a reason - i'm not sure why football should sit outside these rules and be different.
I think what else has been forgotten is the amortisation ending from last season, Sunjic alone for example was over £1m amortisation per season.
Excellent piece Dan
OldhamIFRS exists for a reason - i'm not sure why football should sit outside these rules and be different.
Which particular IFRS number or do you just mean generally?
There are industries that have their own standards such as farming with live stock but AFAIK football/sports has no such IFRS/IAS unique to it.
El MayorNikola Zigic- FEAIf after 7 years Stansfield signs a new contract is he effectively paid off and has zero value on the books, meaning whatever we sold him for would be pure profit?
So, normally a player would sign a new deal before their current one elapses. In that instance their remaining amortisation value is split across the length of the new deal.
If it fully runs out and is renewed it’s zero.
Just with the caveat that no transfer is free as other costs other than purchase price get added to the total cost.
Signing on a free transfer will mean that those extra fees are increased because the agent will know that no transfer fee exists and get a larger bonus for both themselves and their client.
That includes players the club have brought through academies.
Everbluesince92El MayorNikola Zigic- FEAIf after 7 years Stansfield signs a new contract is he effectively paid off and has zero value on the books, meaning whatever we sold him for would be pure profit?
So, normally a player would sign a new deal before their current one elapses. In that instance their remaining amortisation value is split across the length of the new deal.
If it fully runs out and is renewed it’s zero.
Just with the caveat that no transfer is free as other costs other than purchase price get added to the total cost.
Signing on a free transfer will mean that those extra fees are increased because the agent will know that no transfer fee exists and get a larger bonus for both themselves and their client.
That includes players the club have brought through academies.
Yeah, but that has nothing to do with amortisation. If a player is signed on a free then their book value is zero.
El MayorEverbluesince92El MayorNikola Zigic- FEAIf after 7 years Stansfield signs a new contract is he effectively paid off and has zero value on the books, meaning whatever we sold him for would be pure profit?
So, normally a player would sign a new deal before their current one elapses. In that instance their remaining amortisation value is split across the length of the new deal.
If it fully runs out and is renewed it’s zero.
Just with the caveat that no transfer is free as other costs other than purchase price get added to the total cost.
Signing on a free transfer will mean that those extra fees are increased because the agent will know that no transfer fee exists and get a larger bonus for both themselves and their client.
That includes players the club have brought through academies.
Yeah, but that has nothing to do with amortisation. If a player is signed on a free then their book value is zero.
I think that's wrong. All costs associated with brining an asset to location for its intended use are capitalised.
[viewpoint.pwc.com]
El MayorEverbluesince92El MayorNikola Zigic- FEAIf after 7 years Stansfield signs a new contract is he effectively paid off and has zero value on the books, meaning whatever we sold him for would be pure profit?
So, normally a player would sign a new deal before their current one elapses. In that instance their remaining amortisation value is split across the length of the new deal.
If it fully runs out and is renewed it’s zero.
Just with the caveat that no transfer is free as other costs other than purchase price get added to the total cost.
Signing on a free transfer will mean that those extra fees are increased because the agent will know that no transfer fee exists and get a larger bonus for both themselves and their client.
That includes players the club have brought through academies.
Yeah, but that has nothing to do with amortisation. If a player is signed on a free then their book value is zero.
Nope, all acquisition costs (eg agents' fees) are capitalised and amortised. The book value of free transfers would be a lot lower than for those acquired for a hefty transfer fee, but they are unlikely to be zero