£10m FFP Bill

[ramblur]

The headline loss in 16/17 was just under £8m, after transfer profits of just over £16m. If you stripped these out of the result, you'd be left with a loss of c£24m based on 'normal' income and expenditure, or £2m/ month. It would be going some to add 50% to that this year, based on known transactions, so I think that aspect's drivel.

The only way I can see us falling foul of FFP is if the EFL objected to the 15/16 exceptional income - bit late in the day now, though, and it looked perfectly legal to me.

I see the topic of Butters, Bradders and Nick has cropped up. In 14/15 ( the last year before new arrangements came in) the yearly amortization was £3.320m , and the total net book value of players' regs was £7.39m - this implies that under the old method values wouldn't have been amortised down to zero for over 2 years.

The 15/16 figure was £3.370 m, a rise of £50k, but you can't fall into the trap of thinking that this just related to new 15/16 business, as some of the 14/15 stuff may have fallen out. Let's just say, looking at an extreme position, that total residual values of £7.39m were allocated to the 14/15 'members' b/fwd, thus meaning that the whole £3.32m falls out, and that the whole of the £3.37m relates to new 15/16 business. Shackell must account for over £1m of that (you have to add agents' costs. + League levy to fee), so you've only less than £2.37m left for the rest . If you wanted this to eventually bring the Butters/ Bradders residual values down to zero, this would imply all in fees for the pair of 4x £2.37m = £9.5m, which wasn't the case (even without agents' fees and levy). Don' t forget this scenario is an extreme situation ,which makes the assumption outlined earlier, and also implies no amortization for any regs other than Butters, Bradders and Shacks.

I maintain we have a potential problem over Nick, Bradders and Butters, and would agree with @Spanish .

[StaffsRam]

1 hour ago, Spanish said:

old rules now changed

As far as I can see, amortisation is still permissible under the profitability and sustainability rules.

This article from this year also says that it's still a used practice under FFP.

https://www.birminghammail.co.uk/sport/football/football-news/financial-fair-play-explained-matter-12408433

Edit: ^^ now I'm more confused. Think I'm going to choose to let you guys worry about this. I'm happier to live in blissful ignorance.... ;)

[PistoldPete2]

This story was in the daily fail. I dont believe much of it. The so called wage bill of £35 million even if true at one time has probably come down a lot... Certainly under clement we had a ridiculously large squad but albentosa, shotton , Camara , ince, hughes, Hendrick and co all gone since then and has been said bent shackell and Baird will knock a further huge chunk out of the wage bill. 

[Van der MoodHoover]

3 hours ago, Spanish said:

but i keep saying this if we sell an asset for less than its book valuation then it hits P&L and therefore FRR.  Letting Butters go for nothing may mean a £6m loss!  We've got to sell them this summer or extend

I do wish someone would either correct me on this rule or support my view, feels very lonely

That is correct I believe. And new accounting rules have meant that the club has discretion over what "residual value" (RV) to ascribe to players it buys.

So it play games to an extent.........if we're making big cash losses and are a little bit close to FFP limits then keep RVs high - maybe equal to purchase costs.

But when you sell, THEN you crystallise a profit or loss equal to the difference between the RV and the up front fee (can't include the add-ons as receipts I don't think if I was following Ramblur correctly).

Expiry of contract and hence release of player is same as selling them for 0, so we  may have a whole pile of "hits" to the accounting income waiting in the wings for 2019. Hence the need to navigate carefully between operating results and player write downs.

Ramblur was wondering what RVs might be being ascribed, but you only get a total figure so not easy to see how big the problem might be......

[ramblur]

27 minutes ago, StaffsRam said:

As far as I can see, amortisation is still permissible under the profitability and sustainability rules.

This article from this year also says that it's still a used practice under FFP.

https://www.birminghammail.co.uk/sport/football/football-news/financial-fair-play-explained-matter-12408433

Edit: ^^ now I'm more confused. Think I'm going to choose to let you guys worry about this. I'm happier to live in blissful ignorance.... ?

It's down to new financial regs that came into effect in 15/16, Staffie, and , believe me you wouldn't want to know ( I'm now blissfully unaware of the regulation number). @Carnero did post up a relevant extract from the reg a few weeks ago, but I can't remember the thread. Amortisation per se has always been a charge against FFP.

To get things into perspective, as at 30/6/17 the net book value of players' regs ( + agents' fees/ levy) was a whopping £42.565m. Since that point in time, Russell and Christie have gone (I'd guess combined net book value less than £1m), but fees have been paid for Curtis, 2 Toms, AW and CJ. At some point in time that £42.5m + 17/18 net additions, less anything we get in proceeds ( starting with c£3m for Christie/Russell) will have to be charged against profits ( and hence FFP) via amortization/impairments/both.

I see this as the biggest challenge, as I could easily see us getting below £13m FFP in 18/19 on normal income and expenditure, only for the bogeyman of transfer losses to undo all the work. Even if a player goes out of contract, it's still effectively treated as a sale with zero proceeds, so any remaining book value becomes a loss

[ramblur]

28 minutes ago, HantsRam said:

Ramblur was wondering what RVs might be being ascribed, but you only get a total figure so not easy to see how big the problem might be......

A residual value doesn't form part of the accounts. It's only a 'note' that tells you what value you've decided to amortise down to. If you subsequently revise the figure downwards, then a charge against profits is inevitable. 

No impairments were recorded in 16/17, and I obviously can't know about the current year.

[Van der MoodHoover]

6 minutes ago, ramblur said:

A residual value doesn't form part of the accounts. It's only a 'note' that tells you what value you've decided to amortise down to. If you subsequently revise the figure downwards, then a charge against profits is inevitable. 

Indeed. I see it as a risk measure. If the players aren't sellable for whatever reason then you're going to be writing that number down to 0 at some point - maybe in instalments. 

[ramblur]

3 minutes ago, HantsRam said:

Indeed. I see it as a risk measure. If the players aren't sellable for whatever reason then you're going to be writing that number down to 0 at some point - maybe in instalments. 

Trouble is, by the time you realise the value may be badly wrong, you're not left with much time to put things right. Assuming we could turn a reasonable profit, I could still see Vydra being sold before June 30, possibly allowing impairments against Butters/ Brads/Nick.

Believe me, I hate talking about any players as though they were cattle being sent to market, but I can't find any other way of outlining potential problems without naming certain players.

[Curtains]

12 minutes ago, ramblur said:

Trouble is, by the time you realise the value may be badly wrong, you're not left with much time to put things right. Assuming we could turn a reasonable profit, I could still see Vydra being sold before June 30, possibly allowing impairments against Butters/ Brads/Nick.

Believe me, I hate talking about any players as though they were cattle being sent to market, but I can't find any other way of outlining potential problems without naming certain players.

Ramblur  to sum up is there any truth in the 10 Million FFP claim and the 3 Million losses per month in the article the OP quoted 

 

[ramblur]

Just now, curtains said:

Ramblur  to sum up is there any truth in the 10 Million FFP claim and the 3 Million losses per month in the article the OP quoted 

 

Absolutely none whatsoever, as far as I can see. I think £2m/month (roughly) still applies on normal income, and I still think we need to cut at least £5m off net expenditure next year, but I don't see that as a particular problem. I think the £3m is absolutely ridiculous, but I struggle to see which of the 2 claims is more absurd.

[europia]

12 hours ago, HantsRam said:

 

 it is the mail after all! 

In which case we are probably rolling in cash

[RoyMac5]

1 minute ago, europia said:

In which case we are probably rolling in cash

So what if we are. Its about assembling a squad that plays well together, not about money.

[StaffsRam]

Just now, RoyMac5 said:

So what if we are. Its about assembling a squad that plays well together, not about money.

Very true, but sometimes b makes a easier.

.......Real Madrid......

[bigbadbob]

2 hours ago, ramblur said:

Absolutely none whatsoever, as far as I can see. I think £2m/month (roughly) still applies on normal income, and I still think we need to cut at least £5m off net expenditure next year, but I don't see that as a particular problem. I think the £3m is absolutely ridiculous, but I struggle to see which of the 2 claims is more absurd.

 Close thread

[plymouthram]

12 hours ago, Ghost of Clough said:

The academy is producing, but the players have limited exposure to first team football when the need it. Either in the first team or out on loan.

Agree with this, we have produced, but not promoted to the 1st team. previous managers have not given the academy players a chance. The last manager to give players a first team chance was Nigel Clough. With the likes of Hendrick, Hughes etc. The U23s won promotion recently, so there is progress being made. I just feel our last 4 managers were too concerned in trying to get promotion and not willing to gamble with the youth we have within the club.

[EssendonRam]

18 hours ago, therealhantsram said:

No, but my point is, there are no fines UNLESS you are promoted. We haven't been promoted, so If we break FFP, we get a transfer embargo instead. That's why I can't make any sense of this "£10m FFP bill" claim.

Isn’t it the other way?

Fines and/or embargoes apply - full stop - but the FL can’t enforce them if you are promoted to the Premiership.

Both QPR and Forest precedents say this is the case.

[Ghost of Clough]

2 hours ago, EssendonRam said:

Isn’t it the other way?

Fines and/or embargoes apply - full stop - but the FL can’t enforce them if you are promoted to the Premiership.

Both QPR and Forest precedents say this is the case.

FL and PL rules are now ‘aligned’ so you’ll get fined when promoted. Changed in the last year or so

[PistoldPete2]

15 hours ago, ramblur said:

The headline loss in 16/17 was just under £8m, after transfer profits of just over £16m. If you stripped these out of the result, you'd be left with a loss of c£24m based on 'normal' income and expenditure, or £2m/ month. It would be going some to add 50% to that this year, based on known transactions, so I think that aspect's drivel.

The only way I can see us falling foul of FFP is if the EFL objected to the 15/16 exceptional income - bit late in the day now, though, and it looked perfectly legal to me.

I see the topic of Butters, Bradders and Nick has cropped up. In 14/15 ( the last year before new arrangements came in) the yearly amortization was £3.320m , and the total net book value of players' regs was £7.39m - this implies that under the old method values wouldn't have been amortised down to zero for over 2 years.

The 15/16 figure was £3.370 m, a rise of £50k, but you can't fall into the trap of thinking that this just related to new 15/16 business, as some of the 14/15 stuff may have fallen out. Let's just say, looking at an extreme position, that total residual values of £7.39m were allocated to the 14/15 'members' b/fwd, thus meaning that the whole £3.32m falls out, and that the whole of the £3.37m relates to new 15/16 business. Shackell must account for over £1m of that (you have to add agents' costs. + League levy to fee), so you've only less than £2.37m left for the rest . If you wanted this to eventually bring the Butters/ Bradders residual values down to zero, this would imply all in fees for the pair of 4x £2.37m = £9.5m, which wasn't the case (even without agents' fees and levy). Don' t forget this scenario is an extreme situation ,which makes the assumption outlined earlier, and also implies no amortization for any regs other than Butters, Bradders and Shacks.

I maintain we have a potential problem over Nick, Bradders and Butters, and would agree with @Spanish .

A loss of £24 million for 2016/17 ignoring transfer business is pretty dire tho. It does suggest the wage bill was just ridiculous. A large squad with overinflated wages, and apart from the recent departures that won't have changed that much altho we did trim a bit during 2016/17 so the end figure will be lower than at the start. Income will be lower too due to falling a attendances after 14 months of Rowett hoofball. 

[RadioactiveWaste]

So, the article in the mail was pretty much BS, however, it won't be completely untrue because Mel would presumably sue them.

You might reasonably conclude that we do have some issues over the coming year or two after a lot of "kick the problem down the road" accounting in previous years.

 I'd further  speculate  the club's ability to meet them depends on selling players to "fix" values ascribed in the FFP accounts. Perhaps we'll start doing double deals "Vydra for £7m but you have to buy Anya for £5m or Butterfield for £5m" instead of selling Vydra for £13m

 

 

[ramblur]

2 hours ago, PistoldPete2 said:

A loss of £24 million for 2016/17 ignoring transfer business is pretty dire tho. It does suggest the wage bill was just ridiculous. A large squad with overinflated wages, and apart from the recent departures that won't have changed that much altho we did trim a bit during 2016/17 so the end figure will be lower than at the start. Income will be lower too due to falling a attendances after 14 months of Rowett hoofball. 

Match income is only part of total revenues and if that fell it could be more than made up for in other areas. It's quite likely that amortization may have risen by £1m+ (charge against FFP) in 17/18, due to our having signed 3 older players this year.

I'd agree that a loss of £24m on normal trading is far too high, and I'm sure Mel agrees.