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Author Topic: Financial fair play  (Read 47150 times)

Online Drummond

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Re: Financial fair play
« Reply #660 on: October 19, 2018, 09:21:08 AM »
What's to stop the owners buying a club elsewhere and then loaning/selling those players to Villa on the cheap?

Offline SashasGrandad

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Re: Financial fair play
« Reply #661 on: October 19, 2018, 09:23:22 AM »
What's to stop the owners buying a club elsewhere and then loaning/selling those players to Villa on the cheap?

They could buy Small Heath - loan them Richards and insist he plays in every game.

Online paul_e

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Re: Financial fair play
« Reply #662 on: October 19, 2018, 10:21:29 AM »
Maybe Jacks new contract and sell on clause has helped.

How so?

Heíd presumably be on more money than on his previous contract and the sell on fee canít help until itís realised?
If an asset goes up in value you can take the excess value as a profit in that accounting period, so the justification is a new contract and sell on clause,I am not sure that it is valid under FFP.

OK, so firstly accounting standards make no attempt to "fair value" footballers - it's impossible to do so.  They're accounted for at amortised cost.

Secondly, the only time you take asset value appreciation in to the income statement is when it's an investment property or you're reversing a previous downward revaluation recognised through the income statement.

And thirdly, a sell on clause has no bearing on a players value in any case.  It's a term in a contract which is unlikely to ever get triggered.  If it did, would that mean players who didn't have a release clause would be worth nothing?!

I don't know anything about accounting but what I find interesting is that the confirmation statement in May listed our share value as £84m but last week there was a statement of capital which put us closer to £186m. What difference does that make and how is that additional value generated? I'd guess part of it is conversion of debt to equity but does anyone know what impact this would have on FFP?

Offline GarTomas

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Re: Financial fair play
« Reply #663 on: October 19, 2018, 12:35:50 PM »
Maybe Jacks new contract and sell on clause has helped.

How so?

Heíd presumably be on more money than on his previous contract and the sell on fee canít help until itís realised?
If an asset goes up in value you can take the excess value as a profit in that accounting period, so the justification is a new contract and sell on clause,I am not sure that it is valid under FFP.

OK, so firstly accounting standards make no attempt to "fair value" footballers - it's impossible to do so.  They're accounted for at amortised cost.

Secondly, the only time you take asset value appreciation in to the income statement is when it's an investment property or you're reversing a previous downward revaluation recognised through the income statement.

And thirdly, a sell on clause has no bearing on a players value in any case.  It's a term in a contract which is unlikely to ever get triggered.  If it did, would that mean players who didn't have a release clause would be worth nothing?!

I don't know anything about accounting but what I find interesting is that the confirmation statement in May listed our share value as £84m but last week there was a statement of capital which put us closer to £186m. What difference does that make and how is that additional value generated? I'd guess part of it is conversion of debt to equity but does anyone know what impact this would have on FFP?

Debt written off an converted to equity.

You can finance a company by putting your own money in and creating shares or equity or by borrowing someone elseís and putting that in as debt.

Lerner and Xia lent the money the club. So Xia paid Lerner around £84m which was the equity and then lent the club another £100m.

When the new owners came in they effectively cancelled or the debt for equity.

I think - an accountant may explain it better.

Online paul_e

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Re: Financial fair play
« Reply #664 on: October 19, 2018, 01:02:34 PM »
I don't know anything about accounting but what I find interesting is that the confirmation statement in May listed our share value as £84m but last week there was a statement of capital which put us closer to £186m. What difference does that make and how is that additional value generated? I'd guess part of it is conversion of debt to equity but does anyone know what impact this would have on FFP?

Debt written off an converted to equity.

You can finance a company by putting your own money in and creating shares or equity or by borrowing someone elseís and putting that in as debt.

Lerner and Xia lent the money the club. So Xia paid Lerner around £84m which was the equity and then lent the club another £100m.

When the new owners came in they effectively cancelled or the debt for equity.

I think - an accountant may explain it better.

Yeah, I get all of that but how much of the difference is a debt conversion and what other changes would cause this?  If, for example, we revalued BMH based on the valuation used in the HS2 buyout, would that justify an increase in share value and if so would that increase in asset value cancel out some the 'book debt' that is against us for FFP?

What I'm really getting at is what actions that lead to a share value increase would help with FFP and what actions wouldn't?  I'd assume that debt conversion makes no difference because the asset value of the club hasn't changed and we know that perceived value of players is irrelevant but fixed asset value surely helps.

Offline Ad@m

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Re: Financial fair play
« Reply #665 on: October 19, 2018, 01:23:04 PM »
FFP is a profit measure.  So anything balance sheet related (assets, liabilities and equity) are irrelevant unless they drive income or expenditure in the last 3 financial years.

It wouldn't work if it was a balance sheet measure as in that case, the richest bloke wins - nothing therefore stopping another Chelsea or Man City.  But by making it a profit measure and thereby linking it to revenue, the drawbridge is pulled up firmly to stop any of those pesky "small" clubs breaking the dominance of the (current) "big" clubs.

Offline GarTomas

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Re: Financial fair play
« Reply #666 on: October 19, 2018, 02:31:10 PM »
I don't know anything about accounting but what I find interesting is that the confirmation statement in May listed our share value as £84m but last week there was a statement of capital which put us closer to £186m. What difference does that make and how is that additional value generated? I'd guess part of it is conversion of debt to equity but does anyone know what impact this would have on FFP?

Debt written off an converted to equity.

You can finance a company by putting your own money in and creating shares or equity or by borrowing someone elseís and putting that in as debt.

Lerner and Xia lent the money the club. So Xia paid Lerner around £84m which was the equity and then lent the club another £100m.

When the new owners came in they effectively cancelled or the debt for equity.

I think - an accountant may explain it better.

Yeah, I get all of that but how much of the difference is a debt conversion and what other changes would cause this?  If, for example, we revalued BMH based on the valuation used in the HS2 buyout, would that justify an increase in share value and if so would that increase in asset value cancel out some the 'book debt' that is against us for FFP?

What I'm really getting at is what actions that lead to a share value increase would help with FFP and what actions wouldn't?  I'd assume that debt conversion makes no difference because the asset value of the club hasn't changed and we know that perceived value of players is irrelevant but fixed asset value surely helps.

The shares only have a nominal value of say £1 each usually linked to when the company was started.
So if someone starts a company with £1m they can have 1m shares of nominal value of £1

If the company is very successful the actual value of the shares can increase without the nominal value changing.

A really simple (and unrealistic!) example is to start a football club with £1m and then buy one player for 500k and agree to pay him 500k for a year.

At the end of the year sell the same player (because heís donít really well in this fictional one man team) fo £2m

Your now left with £2m in cash (as the original £1m was spent buying the player and paying his wages) but now have £2m from the buying club.

The nominal value of the shares is still £1 but the actual value is £2

I donít know the ins and outs of FFP but Iím certain there is a lot in there to stop this.

All assets on a balance sheet depreciate or amortise over time.

Offline Ad@m

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Re: Financial fair play
« Reply #667 on: October 19, 2018, 04:34:23 PM »
All assets on a balance sheet depreciate or amortise over time.

At the risk of taking this off topic, no they don't.

The only assets that depreciate are Property, Plant & Equipment (Tangible Fixed Assets in the good ol' days) and the only assets that amortise are (some) Intangibles. 

All other assets (investment properties, inventory/stock, trade debtors/receivables, cash, prepayments, accrued revenue/income, etc) don't.

Offline Risso

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Re: Financial fair play
« Reply #668 on: October 19, 2018, 04:42:42 PM »
Land isnít depreciated either.

Offline cheltenhamlion

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Re: Financial fair play
« Reply #669 on: October 19, 2018, 05:49:46 PM »
No I agree, but I don't think we have. Snoddy and Terry were £110k a week in wages. I would imagine that the signings we've made are covered by that. I highly doubt we've made Bolasie our hughest paid player ever, especially when Boro agreed the same package with Everton.

We are on for the full whack on Bolasie.

Offline GarTomas

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Re: Financial fair play
« Reply #670 on: October 19, 2018, 06:27:33 PM »
All assets on a balance sheet depreciate or amortise over time.

At the risk of taking this off topic, no they don't.

The only assets that depreciate are Property, Plant & Equipment (Tangible Fixed Assets in the good ol' days) and the only assets that amortise are (some) Intangibles. 

All other assets (investment properties, inventory/stock, trade debtors/receivables, cash, prepayments, accrued revenue/income, etc) don't.

Iím no accountant!!

Offline Mister E

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Re: Financial fair play
« Reply #671 on: October 19, 2018, 06:36:51 PM »
We are on for the full whack on Bolasie.
Ö which begs the question: why??

Offline Ad@m

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Re: Financial fair play
« Reply #672 on: October 19, 2018, 06:43:20 PM »
All assets on a balance sheet depreciate or amortise over time.

At the risk of taking this off topic, no they don't.

The only assets that depreciate are Property, Plant & Equipment (Tangible Fixed Assets in the good ol' days) and the only assets that amortise are (some) Intangibles. 

All other assets (investment properties, inventory/stock, trade debtors/receivables, cash, prepayments, accrued revenue/income, etc) don't.

Iím no accountant!!

Evidently! ;)

Offline cheltenhamlion

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Re: Financial fair play
« Reply #673 on: October 19, 2018, 06:44:10 PM »
We are on for the full whack on Bolasie.
Ö which begs the question: why??

One imagines Bruce.

Online cdbullyweefan

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Re: Financial fair play
« Reply #674 on: October 19, 2018, 07:07:56 PM »
It doesn't seem that unreasonable to me. He cost twenty odd million last season. You wouldn't expect to get him on the cheap.