Tribunal Update

[RoyMac5]

8 minutes ago, RamNut said:

Which is within their remit. 
the outcome of the enquiry is a great result for us, but our legal challenges all failed, and our conduct contributed to the spiral of decline in deteriorating relationships. 

How so? From what I could see in the report the methods of calculating amortisation by some clubs (higher placed/richer ones I'd suspect) seems to be 'hidden' knowledge. Is it necessary in the PL to reveal how these values are achieved or do they just have to be consistent or 'logical in an accounting sense'?

[duncanjwitham]

2 minutes ago, RoyMac5 said:

That is somewhat of a self-fulfilling prophecy. You pay peanuts you get monkeys! I would suggest that under-estimated the expertise required to reach a similar level of qualified detail. Plus they aren't the brightest apples in the barrel - well that's how they come across.

That may well be true, but like I said, I don't think they thought they needed the detail.  I suspect they asked someone they knew to do a quick appraisal of Pride Park, and when he came back with a radically different value, they figured that was enough.  It didn't matter if the the 'correct' value was different, because they only needed a ballpark figure to prove we were massively inflating our value.  It just turned out their valuer really had no clue what he was doing, and did his appraisal using the (wrong!) worked examples from the RICS website and feeding in nonsense numbers.

[tinman]

1 hour ago, G STAR RAM said:

That's not how I read it.

The policy said the residual value was set to £0 as they entered the final year of their contract and then amortised on a straight line basis over the last year.

Did Butterfield and Johnson have their contracts extended before they entered the final year?

It would be interesting to know what ERV they used for either and surely by time the accounts were signed off it would actually be known what their pre-sale value (if any) was?

My understanding of the differences between the EFL methods and ours is that method gave more value to the player initall before dropping off at a faster rate. Using Anya as an example. THe blue line is EFL's method and ours is Orange

It's the reason why one year extensions were handed out to Butterfield etc as it reduces the losses in the final year as it kicks the can down the road a bit.

[RamNut]

10 minutes ago, RoyMac5 said:

How so? From what I could see in the report the methods of calculating amortisation by some clubs (higher placed/richer ones I'd suspect) seems to be 'hidden' knowledge. Is it necessary in the PL to reveal how these values are achieved or do they just have to be consistent or 'logical in an accounting sense'?

My comment was about the stadium valuation not amortisation.

[duncanjwitham]

1 minute ago, tinman said:

My understanding of the differences between the EFL methods and ours is that method gave more value to the player initall before dropping off at a faster rate. Using Anya as an example. THe blue line is EFL's method and ours is Orange

It's the reason why one year extensions were handed out to Butterfield etc as it reduces the losses in the final year as it kicks the can down the road a bit.

My understanding is, the players are given a 'value' that the club thinks they can sell them for, which must be less than it cost us to acquire them.  They get reviewed every 6 months, to account for age/form/injuries etc.  They amortise down to this up until the last year of their contract.  Over they last year, they straightline down to 0 and then leave for a free. 

The problem with handing out 1 month extensions to Butterfield etc is the timing of them.  If we did the extension with 1 month left of the final year, they'd have already amortised 11/12ths of their remaining value over that year.  So the extension does very little to spread the cost, it just moves half of the last month into the next year.  The only way it makes any kind of sense to me, is if we did the extension a year previously, and basically delayed the 'final year' of their contract by a year.  So we amortised the entire 'final year' over that little month extension the next year.  But I don't think that's what we did.

[G STAR RAM]

7 minutes ago, tinman said:

My understanding of the differences between the EFL methods and ours is that method gave more value to the player initall before dropping off at a faster rate. Using Anya as an example. THe blue line is EFL's method and ours is Orange

It's the reason why one year extensions were handed out to Butterfield etc as it reduces the losses in the final year as it kicks the can down the road a bit.

Fully understand the mechanism but think it smacks of a manipulation of figures.

If the players have left just a couple of months later the auditors have the evidence of their actual ERV and would therefore not be required to use DCFCs estimates.

[G STAR RAM]

2 minutes ago, duncanjwitham said:

My understanding is, the players are given a 'value' that the club thinks they can sell them for, which must be less than it cost us to acquire them.  They get reviewed every 6 months, to account for age/form/injuries etc.  They amortise down to this up until the last year of their contract.  Over they last year, they straightline down to 0 and then leave for a free. 

The problem with handing out 1 month extensions to Butterfield etc is the timing of them.  If we did the extension with 1 month left of the final year, they'd have already amortised 11/12ths of their remaining value over that year.  So the extension does very little to spread the cost, it just moves half of the last month into the next year.  The only way it makes any kind of sense to me, is if we did the extension a year previously, and basically delayed the 'final year' of their contract by a year.  So we amortised the entire 'final year' over that little month extension the next year.  But I don't think that's what we did.

THIS

[RoyMac5]

3 minutes ago, duncanjwitham said:

The only way it makes any kind of sense to me,

No disrespect, but it must have affected our P&S figures in a positive way for us else why do it? So it makes perfect sense.

[RoyMac5]

2 minutes ago, G STAR RAM said:

Fully understand the mechanism but think it smacks of a manipulation of figures.

Yes. That's what accounting is all about, do keep up. ?

[The Scarlet Pimpernel]

We basically have one smart cookie in Stephen Pearce.

[RadioactiveWaste]

You know, in the bigger picture, perhaps the EFL need to produce an Approved Code of Practice document for P&S compliance, covering all acceptable accounting methods - it'd be more worthwhile than the guidance they currently issue.

It's obviously have to be comprehensive and even then wouldn't be able to cover every eventuality, but an ACOP is not the same thing as the rules, and it's rules you have to comply with, not an ACOP.

Just think it'd be helpful as a way forward.

[duncanjwitham]

5 minutes ago, RoyMac5 said:

No disrespect, but it must have affected our P&S figures in a positive way for us else why do it? So it makes perfect sense.

Yeah, obviously it did something or we wouldn't have done it.  I just can't see how what we seemed to do fits with what we know about how the amortisation policy works.  There's obviously some nuance we are unaware of - the timing of the extensions being one possibility IMO.  But I'd be very surprised if we did what I said (and amortised the entire 'final year' in a few weeks), because that straight-up seems like fiddling the figures, and I can't imagine we'd have got that past the tribunal etc.

[Ghost of Clough]

2 hours ago, G STAR RAM said:

That's not how I read it.

The policy said the residual value was set to £0 as they entered the final year of their contract and then amortised on a straight line basis over the last year.

Did Butterfield and Johnson have their contracts extended before they entered the final year?

It would be interesting to know what ERV they used for either and surely by time the accounts were signed off it would actually be known what their pre-sale value (if any) was?

The residual value is set to £0 at the end of a player's contract. An ERV is set either at the start of the final year, or when the club expects to sell the player. With Johnson and Butterfield, it's likely we expected promotion within 2 seasons therefore expecting to sell the pair at the end of season 2. So an ERV close to the original fee would have been set. This ERV would have been adjusted every 6 months so towards the end of 16/17, with little chance of promotion, the ERV moved to the start of their final years. The contract extension in the final year resulted in the amortisation being evenly split between the final 2 years.

This graph may help show what I'm trying to say:

[Ghost of Clough]

Reviewing the P&S losses and it's concerning how close to the limit we will be for 2020 and 2021.

Confirmed P&S profit/losses are:

• 2018 = £7.207m
• 2019 = -£31.517m

This means our maximum allowable loss for 2020 is £14.69m.

The worrying part is the amortisation. When I saw the 2019 losses, I assumed this was a result of considerable amortisation charges. This was not the case. Confirmed amortisation in 2018 was £6.5m, 2019 was £4.6m and (unless it was a typo) 2020 was £25.1m as of April 2019.

Using the known 2018 and 2019 figures, I'm struggling to see how we've met 2020 limits. An increase in the amortisation charge of over £20m will only be partially offset by a reduction in wages (a rough stab in the dark of £13m from 17/18). Profit on disposal isn't going to be much - Thomas, Delap and Lampard may fall inside 19/20 - possibly about £7.5m combined. These estimates result in a P&S loss of about £36.6m in 19/20, resulting in a 3 year loss of over £60m. I must be missing something!

[RoyMac5]

3 minutes ago, Ghost of Clough said:

This means our maximum allowable loss for 2020 is £14.69m.

I guess we either need to sell or get promoted?

[Duracell]

3 minutes ago, RoyMac5 said:

I guess we either need to sell or get promoted?

I too am starting to warm to the idea of getting promoted. 

[RoyMac5]

3 minutes ago, Duracell said:

I too am starting to warm to the idea of getting promoted. 

I'd prefer to sell our players from the standpoint of being a Prem club and charging Prem values too! But I think, realistically someone (Bogle seems a good bet), will probably have to be sold this season to fund our promotion attempt. We're still in need of incoming, with experience for my preference.

[Duracell]

Just now, RoyMac5 said:

I prefer to sell our players from the stanpoint of being a Prem club and charging Prem values too! But I think, realistically someone (Bogle seems a good bet), will probably have to be sold this season to fund our promotion attempt. We're still in need of incoming, with experience for my preference.

I agree, looks more likely we will have to sell to buy. Isn't there something gloriously Derby County that even when we have a wealthy fan owner, we still have to sell the family silver below the market rate?

[Ghost of Clough]

12 minutes ago, RoyMac5 said:

I guess we either need to sell or get promoted?

There seems to be no urgency to sell. We're surely outside of the 2020 reporting period now, so can't see what we can do to impact it. I must be missing something

[MikeS]

2 hours ago, duncanjwitham said:

That may well be true, but like I said, I don't think they thought they needed the detail.  I suspect they asked someone they knew to do a quick appraisal of Pride Park, and when he came back with a radically different value, they figured that was enough.  It didn't matter if the the 'correct' value was different, because they only needed a ballpark figure to prove we were massively inflating our value.  It just turned out their valuer really had no clue what he was doing, and did his appraisal using the (wrong!) worked examples from the RICS website and feeding in nonsense numbers.

As the commission said, the EFL had a duty to represent all of its clubs and to investigate a complaint made by another team. In the end, the complaint was not proven and, judging from remarks by the panel about the EFL's valuation, frivolous.

The League's valuer, who came up with the lower figure, used comparisons with other stadia which were not fit for purpose after not even visiting the stadium. Instead, a colleague was sent to look over the ground and he came up with the notion that PP was just "bog standard"!

Even more laughable was Boro's ludicruous claim that the stadium was worth around £22 million. Both the EFL and especially Boro should pay the cost of the whole wasted exercise.