Aston Villa banter 16969

 

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08 Aug 2023 17:27:58
Now I'm a reasonably intelligent guy but can someone please explain to me how some clubs seem to be spending tens of millions of pounds on players (and did the same in January and last summer) yet don't have European football to potentially swell the finance coffers this season, let alone lure players to the club in the first place?
Where does FFP come into play?
There are clubs who it appears are biding by the rules (Newcastle, Liverpool ) and they have European football this season.

Agree0 Disagree0

08 Aug 2023 17:56:42
Now isn’t that a coincidence, within minutes of posting my comment above : the EPL are investigating Chelsea for potential financial rule breaches under previous owner.
SHOCK!

09 Aug 2023 22:51:52
It comes down to two things. Payment structure and length of deal.
If you agree say a £40m deal but pay £20m up front and then £10m for the next two then only £20m comes from this years accounts.
Now let's say you sign the player on a 5 year deal. You depreciate the value over that 5 year period and so they lose £8m per season.
So, at the end of year 1. For your £40m player, you have paid out £20m in cash and have a remaining liablity of £20m but still hold a £32m asset.
So… in accounting terms, on the balance sheets you’re actually £12m in profit (although your cash position is reduced) . This ultimately means that with reduced cash you’re less financially flexible but in profitability terms you’re strong
It gets more complex when you factor wages etc but in broad principle…

10 Aug 2023 02:07:39
Good explanation PV.

10 Aug 2023 08:02:09
Of course, at the end of year two, you’ve now paid out £30m and have an asset valued at £24m so now you’re showing a £6m loss.
Critically though, £30m paid out but only £6m loss and by now you’ve done other deals, had next years TV money etc.
Its not just about the size of the fee, it is everything in a balance.

10 Aug 2023 08:36:49
My last post in this as although I find this interesting, I do appreciate its a bit of a dry subject.
The example I’ve used above is massively simplified but does give the general idea.
The important thing is that FFP looks at losses in terms of company accounts. £40m spend on a transfer does not equal an immediate £40m loss. That loss is only fully realised across the full contract length and can be further affected by extending contracts etc…
Thats it. I’ll stop now!





 

 

 
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