Amortisation of transfer prices...

Discussion in 'General football forum' started by Damanino, 10 Aug 2017.

  1. Damanino

    Damanino

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    I know the basic that is calculated for the length of contract. Lets use Walker's transfer and lets use round numbers.

    So lets say he cost us 50m pounds, 5 year contract, wages 100k per week. (These probably are not accurate, doesnt matter now.)

    Every year in next 5 years he costs us 10m in amortization and 5m in wages. Thats clear. So 15m a year.

    Question 1:

    What happens if after 3 seasons he signs for extra 2 more years. After 3 seasons his "value" would be 20m pounds, as 10-10m cost for each of his last two years but he adds 2 more years to his contract. How is that calculated from that point?

    Question 2:

    What happens if after 3 seasons we sell Walker to China for 50m pounds?
    His value is again 20m pounds, we sell him for 50m. How is it accounted? Do we still have amortization cost 10-10m pounds in his 4th/5th year of contract on the books and a one lump sum transfer income of 50m after 3 seasons?

    Or we just deduct that actual value from the incoming fee so 50m-20m, and we have a transfer profit of 30m in that year's account for him?
     
  2. its grim up north

    its grim up north

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  3. dickie davies

    dickie davies

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    To Q1
    The remaining 2 years is discarded so his book value is amortised by the length of his new contract
    So in your scenario he's been with us three years, so his value for accounting purposes is now £20M
    That £20M would now be amortised over the new four year contract

    To Q2
    He goes into our accounts as an immediate £30m profit, even if the payments from the buying club are staged over a number of years
     
    Last edited: 10 Aug 2017
  4. 80s Shorts

    80s Shorts

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  5. quiet_riot

    quiet_riot

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  6. Damanino

    Damanino

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    cheers

    to Q2

    So in that case the player's amortisation cost is still in the books for two more years even two years after he left?

    Like Nolito signed for 4 years, left after first year now next 3 years we still have his cost on the books from 2016 summer transfer period?
    Isnt it easier to account like lets say 9m cost still left with 3 years to go (3m/year) but we got 9m from Sevilla so just write it down now as zero cost, zero profit, and its pulled from next years accounts?
     
  7. dickie davies

    dickie davies

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    No the player is no longer an asset so any profit or loss of the player is written into the year's accounts
    As your Nolito example has shown, it would go down as a zero
    If we'd bought him for 12m on a four year contract and after one year sold him for 8m it would be accounted as a 1m loss/deficit on player trading
     
  8. Wafty Cranker

    Wafty Cranker

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    Any idea how we account for academy players where no initial transfer fee is paid?

    I did have a look at the accounts once but I don't think I've ever seen a revaluation reserve on the balance sheet or anything. I even read IAS 38 to see if that would give me the answer!

    Any idea?
     
  9. Jalfraag

    Jalfraag

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    Valued at zero and wouldn't be able to value them any other way. That's how you get pure profit when you sell them.
     
  10. greasedupdeafguy

    greasedupdeafguy

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