duncanjwitham

2 minutes ago, RoyMac5 said:

Perhaps we couldn’t find an expert witness who agreed with our ‘point of view’? 

Our accountant as happy with the policy, the auditors signed off on it. There's even an external auditor posting on here who agrees with the fundamentals of what were doing.  Even a surface reading of FRS102 seems to indicate what we were doing was fine.  I'd be amazed if we couldn't find anyone. 

2 minutes ago, rynny said:

We didn't know they were going to add the amortisation policy on the charge until they revealed to the world. We tried to argue at the original hearing that we didn't have time to get an expert as we didn't have sufficient time to bring one in and get them up to date with what we do. 

Yet the EFL managed to find one and get him up to speed.  It didn't even need to be someone who knew what we were doing in-depth, seemingly they just needed to understand the basics of accounting.  And if anything, any delays in that charge are down to us being vague and misleading in describing what we're doing in the accounts. 

Just now, RandomAccessMemory said:

Or as there was an accountant on the IDC and we knew that he would actually understand accounting and we felt as it was completely in line with the rules we didn’t need to have someone there just to labour that point to someone who would already be aware of it?

That may have been the case, but that comes back to not knowing the rules of the game. The report from the appeal makes it clear - our accountant was there as a factual witness, not an expert one (i.e. there to speak on what we did, not what the law/accounting rules are, so his evidence on accounting regs was worthless), and presumably the same applies to the accountant on the panel.

8 minutes ago, richinspain said:

To be fair to the club, why would we think that we would need an expert witness to say eactly what the expert witness plus the expert "judge" on the previous panel had said?

Oh, wait. It's the EFL we're dealing with!

This was the previous panel.  The EFL put up Professor Pope who apparently knows nothing about day-to-day accounting. We put up nobody.  The only thing the appeals panel could do was basically say if the previous panel had made a technical mistake (i.e. got the law  or procedure wrong).  They decided that the previous panel hade made a mistake in ignoring Professor Pope because he was the only expert in the room and so accepted his word as gospel.  It basically came down to a matter of accounting expertise and we had no experts to argue our corner at all.  The only explanations I can think of are we either didn't understand the rules of the game we were playing, we couldn't be bothered to do it properly, or we tried to cheap out and get by without an expert. And I don't know which of those is worst.

10 minutes ago, Albert said:

For all the many things that Mel's regime have made a mess of, ironically, the one which will have the most direct consequences, actually seems to be the one where their ducks were in order. 

But ultimately, the fact we didn't use our own expert witness is what has cost us.  Which is our screwup.  If we'd found literally anyone with accounting experience to stand up and say what we did was was fine under the regs, we'd probably have been okay. The appeals panel would have seen 2 experts with differing opinions, and probably had to go with the original panel decision.  But because we didn't have our own expert, they had to go with the only expert in the room.  

4 minutes ago, BramcoteRam84 said:

Through potentially over inflating values of some players through our method for calculating ERV (which seems to be the main issue)  and not using a straight line method, we’ve limited/deferred losses out of the three year period being analysed giving us much more headroom to spend, none of the other clubs have done this and it goes against the spirit of the rules. Is this the case because if so this Is very different to our accounting being deemed acceptable but we should have just made it clearer?

It's kind of both. From a purely accounting point of view, our ERV method probably does better reflect the way we intend on using players (buying them, developing them, selling them on for profit).  But it does have the effect - particularly for players on long (4+ year) contracts - of deferring the amortisation of players beyond a 3-year FFP window.  It was up to the tribunal to decide if we were genuine in our reasons or were deliberately trying to evade the rules, and they seemed to settle more on the first.

8 minutes ago, Animal is a Ram said:

The LAP seems to think not:
"No other club has ever adopted the treatment utilised by the Club for amortisation or anything similar."

(p46, 82d)

I think that's still just referring to players though. No other club has used this method of valuing players for amortisation or anything similar.

That said, I'm not sure what intangible assets a football club would have that had resale value - their club branding etc probably won't, for example.

I'd love to know if any other clubs are using future economic benefits from disposal for anything at all (I mean literally anything, not just players), because if they're expressly banned by the EFL's head-canon version of FRS102, then they're all due a big punishment too.

1 minute ago, RandomAccessMemory said:

It is referenced all the way through FRS 102 that disposal of an asset is consuming a future economic benefit, so how has he come to the conclusion above and how have they completely ignored what FRS 102 says to come to the conclusion that Pope is right because he’s the ‘expert’?

Isn’t it better to conclude that Pope’s ‘expert’ evidence doesn’t reflect how FRS 102 is supposed to work and is therefore inadmissible, which appears to be what the IDC are being told they did wrong?

Their argument is that you can't guarantee that you can sell a player, because another club might not want to buy, or the player might not want to leave, so you can't assume he has any value at all.  But that literally rules out future economic benefits from disposal for anything at all ever, so I don't understand how it makes any sense.

1 minute ago, RandomAccessMemory said:

Could that be the reason why the IDC, which did contain an accountant, dismissed his evidence as they realised, due to that containing of an accountant that it was utterly irrelevant to the issue at hand?

That's something that struck me as odd.  The rules are very clear that the original tribunal had to contain an accountant for matters like this.  But the appeals panel have basically ignored that expertise and decided the only expert present was the EFL's witness so they have to take his opinion as fact.  So why even have an accountant on the panel in the first place?

16 minutes ago, angieram said:

Yes, I have seen articles that say that and also articles that say both sides can. Not sure which is true? 

The document basically says if the appeals panel determined a sanction it would be final, no appeals either way, but if they passed it back to the original tribunal it could be appealed.  Passing it back to the tribunal would require consent of both parties.  The document then progresses as through they will be making the sanction themselves (hence no appeals), but the statements yesterday mentioned referring back. I'd assume that both parties have agreed to go back to the original tribunal (hence we can appeal), but it's not totally clear.

11 minutes ago, Ghost of Clough said:

Don't  forget, the lateness of being notified of the 2nd charge resulted in inadequate time to prepare an expert witness

4 minutes ago, LE_Ram said:

You've got two different sets of people, both reading the same standards, and coming to different conclusions.

So it's back to what I said before. It's a matter of interpreting standards, and the EFL provided an expert to interpret them for the panel, and we didn't.  The lateness of the charge shouldn't have mattered, if it's that obvious we should have been able to find an accountant somewhere who understood it.

8 minutes ago, Ghost of Clough said:

They're trying to compare standard depreciation policies with amortisation. All they're saying is "this is the standard way of doing things". What they have failed to prove is our policy is not an acceptable alternative, as far as I can tell (they're looking at the problem backwards)

I just find it bizarre that they've picked as their an example something that clearly does have an expectation of being able to gain economic value by selling after you've finished using it.  And especially something that has a pretty well established process for determining it's value. 

I'm about 2/3rds of the way through, but the root of it seems to be the club screwed up buy not bringing in their own expert witness.  The expertise of our accountant didn't count (he was a factual witness, not an expert one), neither did that of the accountant on the panel (again not an expert witness).  So the EFL put up their guy that just read the dictionary to the tribunal, and the tribunal are basically required to accept it as fact.  If we'd put up our own expert, we'd probably have been fine.

From page 42 of the document. I could be misunderstanding, but are they really saying that if you buy a house you have no expectation of being able to sell it at all?  And after 40 years a house is effectively worthless? And then saying players are basically the same? Because that's an insane position to take.

2 minutes ago, LE_Ram said:

It’ll be interesting to read why the EFL have won this appeal, because as far as I’m aware, both are compliant with the accounting standard.

This is where you’ve gone wrong. You’ve bought accounting standards to a mudslinging contest.

3 minutes ago, Ken Tram said:

But the two examples that I found on YouTube last night ... so it just be wrong ... said that transfer fee is divided by the length of contract ... giving an equal fall in value each year.

Then, when a player is sold, the actual transfer value is compared to this amortisation figure.

I didn't understand how that translated to the accounts, but the amortisation was a simple linear decrease.

And, as it was shown, if a contract is extended, the amortisation Baku at that point, is divided by the new length of the contract.

All players in these examples went down to nil at the end of their contract.

So ... now people now how little I know (maybe they can explain to me what, if anything, Derby did differently)! It is probably linked to ERV, which hasn't been explained in the past 15 pages).

Basically, all we did is instead of doing an equal share each year (e.g. 25% per year on a 4 year contract), we split it differently depending on how likely we were to be able to sell the player. So someone like Vydra, we might have done something like 5%, 5%, 5%, 85%.  On the grounds that a player doesn’t plummet in value like that in real terms. Which was backed up when we sold him for a profit 2 years into that contract.  Other players we would have split differently - Huddlestone was probably done in equal shares per year since we had no chance of getting money for him.  Obviously some didn’t work as planned, and we would have taken a big hit in the final year when we let them leave on a free instead of selling them.

32 minutes ago, Ghost of Clough said:

A value (ERV) is assigned to a player for the start of the final season. It is then a straight line from when they sign to that ERV. the remaining amount is amortised in the final season. Contract extensions mean setting a new ERV and adjust the straight line to suit (current period in time to ERV)

I understood it to be the opposite.  We assess the ERV of every player every 6 months, up until the point we decide they have no resale value, they then amortize down to zero in a straight-line over the rest of their contract.  So for some players, that would be from day 1 because we never intend selling them (Curtis Davies and Huddlestone, for example), others it would be when they hit a certain age (Waghorn maybe) or when they got injured (George Thorne's second injury maybe).  When a player hits the final year of their contract, they will be added to the no-resale-value list if they aren't on it already, because they can leave on a free.

31 minutes ago, Spanish said:

More specifically, the panel determined that the Club’s policy was not in accordance with accounting standard FRS102 because it failed to accurately reflect the manner in which the Club takes the benefit of player registrations over the lifetime of a player’s contract.

If one was being facetious, you could easily read that as the EFL saying "you keep saying you intend on selling players, but then sign a bunch of 30 year olds, play them out of position, sack the manager that signed them and then pay them to go away"...

5 minutes ago, LE_Ram said:

As an external auditor myself

No idea if this is your area of expertise but worth asking...

If I understand it, the club is saying we can give players residual values to intangible assets (i.e. players in this case) because we have an expectation (not a guarantee though) of selling them.  The EFL is saying no, you can't *guarantee* you can sell them, so you have to assume they have no residual value at all.

So surely this argument holds for any asset a company might have - you can't (outside of a pre-agreed sale or something) have any guarantee that there's someone on the other end to buy it from you.  So is it normal for companies to be able to give residual values to intangible assets they have an expectation of selling?  Are the EFL trampling over standard accounting practice or are we bending the rules?

It isn't transfers that put clubs into admin, it's the wages paid to them.  League one and two have got it right with a limit on wages/turnover ratio IMO.

So as far as I can tell, it seems to be related to this:

Pope basically argued that since we couldn't *guarantee* we could sell a player, we had to assume (for accounting purposes) that the player would potentially never be sold.  The question then is, does that completely undermine our ERV model (since if there's no guarantee of a sale at some point, you have to do a straight-line amortization)?  And if it does, are they going to force us to recalculate (and potentially fail) P&S for the years in question? 

Just now, Ghost of Clough said:

So the "EFL win" is simply that the Disciplinary Commission need to reconsider Professor Pope's evidence?

Have I understood that correctly?

That's the way it reads to me. The panel could easily accept his evidence and still rule in our favour.

A year ago, Jordan thought the EFL appealing was crazy:

https://www.facebook.com/talkSPORT/videos/vb.127256559100/596563687700328/?type=2&theater

Now, he thinks we'll definitely get a sanction?

12 minutes ago, G STAR RAM said:

But he had £80m (from the sale of the ground) to play with before putting any debt on the club.

Im really struggling to see how in 3 years we have burned through that £80m and loaded lots of debt on thr company too?

I don't really understand it either.  From what I do understand, the stadium sale basically resulted in this (approx figures):

Derby sold a £40m asset for £80m.  Mel's other company is paying for this in instalments, so they owe DCFC a debt, not the other way around.  That generated £40m paper profits which covered FFP, but didn't really affect cash flow (because of the instalments).

Mel has been putting money in to cover running costs, and may have taken a loan out during the COVID closures. But I don't see where massive debts have come from.  Signings have been covered by other player sales.  And Mel has covered overspend in wages. So what else is there?

Do we actually know for sure that that's his twitter account? It's not some Forest WUM or something?

7 minutes ago, Carnero said:

Yes, but the amortisation is cancelled in part by the "pure profit" sale of an academy player, so it's swings and roundabouts.

Yeah, it just gets spread weirdly over the years.  We might be net neutral over the 5 years, but have highs and lows in individual years.  The three-year-rolling FFP window is supposed to allow you to cover that to some degree, but our valuation model is punishing us for it.