Player transfer amortization cost - help

Damanino

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20 Mar 2011
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5,274
Guys, I cannot work out how this works.

Lets check Nathan Ake example, cost 40m pounds, signed a 5 year contract.
That is 8m cost each year until 2025. that is clear.

A) What happens if we decide to sell him for 20M in 2022 summer.
Would that mean he only cost us 2 x 8m of his cost for the two years, and we still have 24m.
But we receive 20m 2022 summer. Do we just cancel out 20m of the 24m and end with 4m loss?
Or would we still have his 8m yearly cost in the books in 2023, 2024, 2025 when he is not even here anymore.

B) What happens if Ake signs an extension in 2022 summer for another 3 year?
Would it be recalculated that the remaining 24m cost goes shared now for another 6 remaining years which is 4m per year not the 8m.

Basically how we account the changes like selling player or extending contract.
 

Marvin

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Joined
9 Jan 2006
Messages
42,497
Guys, I cannot work out how this works.

Lets check Nathan Ake example, cost 40m pounds, signed a 5 year contract.
That is 8m cost each year until 2025. that is clear.

A) What happens if we decide to sell him for 20M in 2022 summer.
Would that mean he only cost us 2 x 8m of his cost for the two years, and we still have 24m.
But we receive 20m 2022 summer. Do we just cancel out 20m of the 24m and end with 4m loss?
Or would we still have his 8m yearly cost in the books in 2023, 2024, 2025 when he is not even here anymore.

B) What happens if Ake signs an extension in 2022 summer for another 3 year?
Would it be recalculated that the remaining 24m cost goes shared now for another 6 remaining years which is 4m per year not the 8m.

Basically how we account the changes like selling player or extending contract.
I believe your first scenario is correct: i.e.The book cost at the time of sale would be: £40m minus £16m i.e. £24m as per your comment.

I am not sure what happens when a players contract is extended. I think they would take the remaining cost and then re-apportion it over the extended contract so that the book cost remains the same but it falls at a lower rate.

No doubt someone will correct us if we have it wrong
 

andy66

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10 Aug 2009
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133
Couple of videos on YouTube explain how it works and how clubs manipulate it by which year deals are reported.
 

Corky

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9 Dec 2005
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Look on page 28 and 29 of the financial statement, it explains what happens and it isn't as simple. E.g. even if a player has a contract extended there are costs which increase the value of the intangible asset, and player can be revalued due to impairments such as career threatening injuries for example.

 

Ribchester

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Look on page 28 and 29 of the financial statement, it explains what happens and it isn't as simple. E.g. even if a player has a contract extended there are costs which increase the value of the intangible asset, and player can be revalued due to impairments such as career threatening injuries for example.

Can a player be revalued as an increase in value if contract is extended due to development, performances being capped for country etc etc
 

Corky

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9 Dec 2005
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16,106
Can a player be revalued as an increase in value if contract is extended due to development, performances being capped for country etc etc


I doubt it -not an expert but if there are costs to resign the player, they are added, like maybe agents fees, legal fees etc.
 

Prestwich_Blue

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Joined
26 Jan 2006
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51,129
Location
Wherever I lay my hat that's my home
Guys, I cannot work out how this works.

Lets check Nathan Ake example, cost 40m pounds, signed a 5 year contract.
That is 8m cost each year until 2025. that is clear.

A) What happens if we decide to sell him for 20M in 2022 summer.
Would that mean he only cost us 2 x 8m of his cost for the two years, and we still have 24m.
But we receive 20m 2022 summer. Do we just cancel out 20m of the 24m and end with 4m loss?
Or would we still have his 8m yearly cost in the books in 2023, 2024, 2025 when he is not even here anymore.

B) What happens if Ake signs an extension in 2022 summer for another 3 year?
Would it be recalculated that the remaining 24m cost goes shared now for another 6 remaining years which is 4m per year not the 8m.

Basically how we account the changes like selling player or extending contract.
You're right on both points. So Sane cost us £50m and we sold him for £45m, let's say. People see that as a "loss" whereas it's actually a £35m profit in the P&L account. We had him for 4 years so his book value (original cost of £50m minus accumulated amortisation of 4x£10m) was £10m.

If he'd signed a new 4-year contract instead of leaving, the remaining £10m would have been reapportioned over those 4 years, so his amortisation would have been £2.5m a year. And Corky is right about adding any additional costs on that were incurred as a result of the contract extension.

Can a player be revalued as an increase in value if contract is extended due to development, performances being capped for country etc etc
No. The cost of players is always twhat we paid for them. You could however revalue players downwards, if serious injury is sonsidered to have impaired their value. It's like if you store goods in a warehouse that you paid £10m for. If the warehouse is flooded, those good might only be worth £1m afterwards, so you'd have to write off £9m as an expense.
 

creditunionhero

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Joined
7 Jul 2012
Messages
645
Location
Manchester
I am sure I have read somewhere recently that a club got round PL FFP by adding a balloon payment at the end of the contract equal to the value of the player at the end of his contract. This meant that the amortisation cost over his 5 year contract was much lower. ie buy a player for £10 mlilion say you get £5 million for him at the end of his contract, amortise £1million a year instead of £2million a year.
 

Del_Bosque

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27 Aug 2008
Messages
954
Sign a player for £50m on a 5 year deal it’s written down as £10m over each of the 5 years

If after 4 years you sell them for £30m it’s a £20m profit, as it’s the sale minus the remaining amount £10m to be written down

If the player signs a new 4 year contract after 4 years the remaining amount £10m is spread over the 4 years and becomes £2.5m a year
 

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