NUFC finances

[AyeDubbleYoo]

Also quick question quayside, can we legitimately increase amortisation in an individual year if we have already defined the rate of depreciation over a player's contract in an earlier year? Seems a bit fishy but I guess it might be OK accounting-wise.

 

 

The accounting policy on amortisation in note 1(f)(1) gives some scope for impairment if "it is clear that a player is no longer expected to remain an active member of the playing squad". Any impairment must be based on "a measureable net realiseable value". 

 

Hope that helps!

 

 

Cheers (and leffe), seems to open up a whole world of random numbers in the accounts of football clubs.

[The College Dropout]

Any business tbh.

[AyeDubbleYoo]

Any business tbh.

 

Aye, I guess so.

[TaylorJ_01]

That's bullshit though. So we can say "Yanga-Mbiwa is no longer going to play so has depreciated £5m in value" or something like that?

[quayside]

Any business tbh.

 

Aye, I guess so.

 

There are reasons why things like amortisaion/depreciation are charged in accounts. Mostly it is to do with reflecting the fact that when you buy an asset (a player) it is intended that you get value for the player over the duration of a number of years. If you hit the accounting profit with the full value in one go then it is a distortion of the transaction that has taken place. I fully understand why people don't like it and it always gets a fair amount of air time on here. I suppose the key thing to look at is cash flow which has far less subjectivity, it shows we had £34 million in the bank as at 30th June 2014.

[Anderson]

If you put money in another account and say it's a payment for something then of course it comes off your profits because profits are what's left after all expenses have been paid for. Claiming a profit as an expense is rule 101 in avoiding tax. It's the same with high level of management in business, they are paid via their expenses and not an actual wage, this way they arn't tax on their income.

 

You make it up as you go along, don't you?

[Happy Face]

I'm with Ian here, I don't understand it.  I don't understand how we've accumulated £30m+ in a bank account, yet have reported a seemingly separate profit of £19m.

 

[Anderson]

That's bullshit though. So we can say "Yanga-Mbiwa is no longer going to play so has depreciated £5m in value" or something like that?

 

Not entirely sure how it works with footballers, but they can't just pluck random numbers out of the air. It'll be based on what was actually paid for him, instead of that figure being charged as an expense at the time we purchased him, his value will be depreciated over time. Because we got rid of him long before we originally intended to we can write down his value. It'll all add up in the end.

[AyeDubbleYoo]

Any business tbh.

 

Aye, I guess so.

 

There are reasons why things like amortisaion/depreciation are charged in accounts. Mostly it is to do with reflecting the fact that when you buy an asset (a player) it is intended that you get value for the player over the duration of a number of years. If you hit the accounting profit with the full value in one go then it is a distortion of the transaction that has taken place. I fully understand why people don't like it and it always gets a fair amount of air time on here. I suppose the key thing to look at is cash flow which has far less subjectivity, it shows we had £34 million in the bank as at 30th June 2014.

 

I get the need for it in principal, it just doesn't seem to apply very easily to such volatile assets. I mean Christiano Ronaldo could be worth nothing tomorrow if he breaks his leg and can never play again. Adjusting the value up and down based on such intangible things as player performance etc seems to open up far too much scope for fixing it.

[AyeDubbleYoo]

That's bullshit though. So we can say "Yanga-Mbiwa is no longer going to play so has depreciated £5m in value" or something like that?

 

Not entirely sure how it works with footballers, but they can't just pluck random numbers out of the air. It'll be based on what was actually paid for him, instead of that figure being charged as an expense at the time we purchased him, his value will be depreciated over time. Because we got rid of him long before we originally intended to we can write down his value. It'll all add up in the end.

 

But that's what I was asking, it's not straight-line depreciation like you would expect is it? For amortisation to suddenly go up it must mean we've suddenly devalued an asset during this specific year.

[Peppe]

Haven't read all the new posts, do we know where the £25M went?

[AyeDubbleYoo]

This is the gist:

 

In round numbers as far as I can see the 3 things that have reduced the profit from the expected levels are:

 

Increase in wages £16 million

Increase in amortisation £6 million

Increase in "other operating charges" £6 million

 

The wages increase is a surprise but without knowing who is earning what its hard to pinpoint, a bonus system is a possibility as someone earlier said. The amortisation is also a surprise as at first glance the gross cost of the squad of players has gone down from £88 million to £83 million from 2013 to 2014. Although that isn't a totally foolproof guide it does suggest there may have been some sort of impairment provision put through. No idea what "other operating charges" consists of.

 

 

[Anderson]

That's bullshit though. So we can say "Yanga-Mbiwa is no longer going to play so has depreciated £5m in value" or something like that?

 

Not entirely sure how it works with footballers, but they can't just pluck random numbers out of the air. It'll be based on what was actually paid for him, instead of that figure being charged as an expense at the time we purchased him, his value will be depreciated over time. Because we got rid of him long before we originally intended to we can write down his value. It'll all add up in the end.

 

But that's what I was asking, it's not straight-line depreciation like you would expect is it? For amortisation to suddenly go up it must mean we've suddenly devalued an asset during this specific year.

 

In Mbiwa's case it'll be because the life of the 'asset' ended up being shorter than originally accounted for.

 

Edit: Although I've just realised Mbiwa's sale will have nothing to do with these accounts, so just ignore me.

[Guest Roger Kint]

Haven't read all the new posts, do we know where the £25M went?

 

Its in stiflers bank account, dont worry though its all above board

[Peppe]

Haven't read all the new posts, do we know where the £25M went?

 

Its in stiflers bank account, dont worry though its all above board

 

Rather have it in Stiflers bank account than Asshleys

[Interpolic]

Cookers aren't cheap these days.

[Guest reefatoon]

It will be safe in Stifler's bank account, his mam doesn't let him use that either.

[Deuce]

It will be safe in Stifler's bank account, his mam doesn't let him use that either.

 

[Anderson]

Any business tbh.

 

Aye, I guess so.

 

There are reasons why things like amortisaion/depreciation are charged in accounts. Mostly it is to do with reflecting the fact that when you buy an asset (a player) it is intended that you get value for the player over the duration of a number of years. If you hit the accounting profit with the full value in one go then it is a distortion of the transaction that has taken place. I fully understand why people don't like it and it always gets a fair amount of air time on here. I suppose the key thing to look at is cash flow which has far less subjectivity, it shows we had £34 million in the bank as at 30th June 2014.

 

I get the need for it in principal, it just doesn't seem to apply very easily to such volatile assets. I mean Christiano Ronaldo could be worth nothing tomorrow if he breaks his leg and can never play again. Adjusting the value up and down based on such intangible things as player performance etc seems to open up far too much scope for fixing it.

 

I don't really know how it works, but I'd guess they don't have that much scope to fiddle with player values. The way I assume it works is player x is bought for £5m on a five year deal. He's therefore valued as a £5m asset which is depreciated at £1m per year until the end of his contract. If he's injured after 2 years the club can write off the remaining £3m at that point. I don't think they'd have the freedom to increase/decrease player's values as they see fit. I could be completely wrong though.

 

Obviously makes a lot more sense when you're not dealing with people as assets, I guess they just try to make it work as best they can. Too many variables for it to be 100% watertight. No idea what happens when a player signs a new contract for example.

[AyeDubbleYoo]

Aye I hope that is the case, it's just confusing that amortisation can shoot up for one individual year.

[Anderson]

Obviously the rules are set-up to deal with more conventional assets, it's the treating people as assets that causes the confusion. I'd imagine because of that they have a bit more freedom than most businesses to mess around with figures, but they still can't just start plucking random numbers out of the air.

[quayside]

Obviously the rules are set-up to deal with more conventional assets, it's the treating people as assets that causes the confusion. I'd imagine because of that they have a bit more freedom than most businesses to mess around with figures, but they still can't just start plucking random numbers out of the air.

 

I think that's absolutely correct. Also the accounting policy does say that any impairment must be based on a "measureable net realiseable value" which basically means they have to come up up with some sort of logical method of valuation to satisfy the auditors! Obviously a sale/disposal of a player after the balance sheet date (these accounts do relate to a period of time that finished more than 9 months ago) would provide concrete evidence. I'd be interested to know if there were any players values written down for other reasons and how it was calculated though. 

[Zero]

My guess would be like this: take Mbiwa for example, we bought him for 10m, amortized over 5 years, so approx 2m per year amortization cost.  However after 1 year he's loan and sold to Roma for 5m.  So his net value after amortization (10 - 2) = 8m would take a hit of 3m immediately to "mark to market" (i.e. 8m - 5m).  i.e. it's like loss of value in inventory.

 

This is reasonable for Mbiwa's case as we obviously sold for less than his net value at that moment.  However I can't think of another player that has similar issues.  Santon is not the case as he is near the end of his contract and his net value is close to 0.

 

For the wages, pretty sure there is bonus elements, either to the players or to the manager (i.e. Pardew) if golfmag's info re profit sharing is correct.  I am not surprised for the wages to shoot up though, Remy is costly and those french winter injections would take a full year hit to the account.  That's reasonable.

 

However for the remaining 6m other operating cost, fucking hell, I simply can't think of any reason here. 

[AyeDubbleYoo]

Fuck it TBH, it's not like Mike Ashley is going to spend the money if we work out where it went.

 

[Zero]

Not really.  I think it actually indicates the reason why Santon's sold: to cut down the wage bill because Euro qualification is already gone at that point.  Pretty sure Sissoko and Gouffran are on high earners in the club and you can see the impact now. 

 

Seriously we have several deadwoods in the club that are highly paid and non-productive, e.g. Anita and Riviere.  Jonas (sorry) and Colo are close to that category as well.