duncanjwitham

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.

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.

"He says €75m in his account is Spanish & it’s not blocked"
Is that like the "my girlfriend goes to another school, you wouldn't know her" of finance?

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

You can allocate a residual value to an intangible asset under FRS102, provided that:
- There is a commitment by a third party to buy it at the end of its useful life, OR
- There is an active market for the asset, and its residual value can be determined by reference to the market, and the market will exist at the end of the asset's useful life.
 
So it looks like Derby are saying - there's clearly an active market for players, and we buy players with the expectation of selling them at the end of their contracts, so it's not fair to allocate a RV of nil because that's ultimately not representative of the true situation. But the EFL says, well at the end of the contract, the player can leave on a free, so you need to amortise down to a RV of nil.
Without looking at the detail for each player it's tough, because some players (probably someone like Jozwiak), DCFC will expect to sell before his contract is up, and so will have some sort of RV; but some like CKR will probably not be sold and should be amortised down to nil value.
There's ultimately a lot of judgment around it because the RV should be set at the amount that Derby will eventually get for the player - who knows how much we'll sell Joz for in a few years, there are so many factors. But in terms of whether it's allowable under FRS102 to allocate a non-nil residual value to an intangible, yes it is.

"He says €75m in his account is Spanish & it’s not blocked"
Is that like the "my girlfriend goes to another school, you wouldn't know her" of finance?

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? 

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

"He says €75m in his account is Spanish & it’s not blocked"
Is that like the "my girlfriend goes to another school, you wouldn't know her" of finance?

"He says €75m in his account is Spanish & it’s not blocked"
Is that like the "my girlfriend goes to another school, you wouldn't know her" of finance?

"He says €75m in his account is Spanish & it’s not blocked"
Is that like the "my girlfriend goes to another school, you wouldn't know her" of finance?

There were the short extensions for Johnson, Blackman and Butterfield - that would spread ~£15m over 5 years instead of 4.  There were the automatic extensions to Huddlestone and Davies, that's £3m over another year.  Not massive amounts, but not nothing either.
The bigger issue will be with not knowing the exact individual fees for players, so you can't account for contract length or when they were sold.  The accounts will tell us we spent £50m in a given year, but we have no idea how much of that will be amortized over 2 years, 3 years, 4, years etc.  And when players are sold, we have no idea how much to knock off the amortization for subsequent years - both Vydra and Ince were sold (for profit) midway through their contracts.  Various other players have left for various reasons too - Raul Albentosa sold for profit after a season or so, Weimann sold after 3 years, Abdul Camara had his contract cancelled etc etc.  We can't always even be sure which financial year a player was sold in, if it's close to June 30th. There's going to be a massive amount of guesswork involved in doing it this way.

"He says €75m in his account is Spanish & it’s not blocked"
Is that like the "my girlfriend goes to another school, you wouldn't know her" of finance?

There were the short extensions for Johnson, Blackman and Butterfield - that would spread ~£15m over 5 years instead of 4.  There were the automatic extensions to Huddlestone and Davies, that's £3m over another year.  Not massive amounts, but not nothing either.
The bigger issue will be with not knowing the exact individual fees for players, so you can't account for contract length or when they were sold.  The accounts will tell us we spent £50m in a given year, but we have no idea how much of that will be amortized over 2 years, 3 years, 4, years etc.  And when players are sold, we have no idea how much to knock off the amortization for subsequent years - both Vydra and Ince were sold (for profit) midway through their contracts.  Various other players have left for various reasons too - Raul Albentosa sold for profit after a season or so, Weimann sold after 3 years, Abdul Camara had his contract cancelled etc etc.  We can't always even be sure which financial year a player was sold in, if it's close to June 30th. There's going to be a massive amount of guesswork involved in doing it this way.

There were the short extensions for Johnson, Blackman and Butterfield - that would spread ~£15m over 5 years instead of 4.  There were the automatic extensions to Huddlestone and Davies, that's £3m over another year.  Not massive amounts, but not nothing either.
The bigger issue will be with not knowing the exact individual fees for players, so you can't account for contract length or when they were sold.  The accounts will tell us we spent £50m in a given year, but we have no idea how much of that will be amortized over 2 years, 3 years, 4, years etc.  And when players are sold, we have no idea how much to knock off the amortization for subsequent years - both Vydra and Ince were sold (for profit) midway through their contracts.  Various other players have left for various reasons too - Raul Albentosa sold for profit after a season or so, Weimann sold after 3 years, Abdul Camara had his contract cancelled etc etc.  We can't always even be sure which financial year a player was sold in, if it's close to June 30th. There's going to be a massive amount of guesswork involved in doing it this way.

The problem is we don’t know exactly what the EFL appealed against, and what (if anything) we’ve been found guilty of. They could appeal the punishment we got, and we just get a bigger fine. They could appeal the use of ERVs and we have to recalculate or P&S submissions for the last 5 years and potentially fail any of those years, meaning points deductions etc.

Yeah, it's possible that a £30m loss that 'should' have occurred in a 3-year FFP window was moved outside of that window.  But that 'should' is doing a hell of a lot of work.  The tribunal report from the first hearing was crystal clear on the matter - the rules say absolutely nothing about how you amortize player values, only that it should be 'systematic'.  If it's true that we are using a system that's used by other prem clubs, and has been signed off by our accountants, HMRC etc, then I don't see they have a leg to stand on.

There’s no embargo relating to the EFL charge. As it stands we were cleared of basically everything, so that embargo was lifted.
Supposedly, we are still under a different one because of not filing our accounts. Which will presumably be sorted once the appeal is cleared and we know which amortisation method we can use to file those accounts.

My understanding was that they went down to zero over the duration of the final year, and didn’t hit zero until they actually left the club.  So as long as they signed a contract extension at some point in that year, some of the amortisation would be shunted over. We don’t know for sure at what point they actually signed those deals - they were announced at the end of the season, but it could have been at any time.

Yeah, it's possible that a £30m loss that 'should' have occurred in a 3-year FFP window was moved outside of that window.  But that 'should' is doing a hell of a lot of work.  The tribunal report from the first hearing was crystal clear on the matter - the rules say absolutely nothing about how you amortize player values, only that it should be 'systematic'.  If it's true that we are using a system that's used by other prem clubs, and has been signed off by our accountants, HMRC etc, then I don't see they have a leg to stand on.

Unless I'm completely mis-understanding something, it can't have "removed losses", all it can have done is shunt them into different financial years. We were still amortising players values, just not in a straight line.

Yeah, it's possible that a £30m loss that 'should' have occurred in a 3-year FFP window was moved outside of that window.  But that 'should' is doing a hell of a lot of work.  The tribunal report from the first hearing was crystal clear on the matter - the rules say absolutely nothing about how you amortize player values, only that it should be 'systematic'.  If it's true that we are using a system that's used by other prem clubs, and has been signed off by our accountants, HMRC etc, then I don't see they have a leg to stand on.

Unless I'm completely mis-understanding something, it can't have "removed losses", all it can have done is shunt them into different financial years. We were still amortising players values, just not in a straight line.

Unless I'm completely mis-understanding something, it can't have "removed losses", all it can have done is shunt them into different financial years. We were still amortising players values, just not in a straight line.

Unless I'm completely mis-understanding something, it can't have "removed losses", all it can have done is shunt them into different financial years. We were still amortising players values, just not in a straight line.