Tribunal Update

[GB SPORTS]

6 minutes ago, rynny said:

At the same time we didn't have a witness and claimed that we didn't have enough time to prepare a defence against the amortisation claim, as the EFL had not previously mentioned it. I am sure now we will go full out and get an expert witness, and a better defence. 

i don't think we can have a new witness as that will mean new evidence presented, which isn't allowed.

[Kennington Ram]

Mel's team awaiting the second easiest fees they'll ever earn.

[Gritty]

8 hours ago, Malty said:

losed change in accounting policy. (Which perhaps the auditors should have flagged up in the financial statements?). So the E

 

8 hours ago, Malty said:

Ok, so at the end of the day the efl are  just trying to defend their own rules.

 

They failed on the first accusation. The stadium sale. I suspect on the basis of the communication between the two parties before the financial results were out and/or decisions were taken. I suspect a few pre-dated and signed documents were put together to help justify all this by the DCFC management, but Derby were cleared and the EFL have to accept it (and have, which is great news).
 

On the second accusation, which appeared to me out of the blue by the way, the EFL are questioning our amortisation policy. This accusation seems to be borne from a somewhat questionable spreadsheet (which had errors in it in prior years) married with an undisclosed change in accounting policy. (Which perhaps the auditors should have flagged up in the financial statements?). So the EFL probably do have grounds to appeal (sadly) and to defend their rules. They could win, but I’d imagine it would be tough for them as they are fighting registered auditors who will fight tooth and nail for their integrity.

So what of this new amortisation policy? Does a player have residual value after four years? 

Take a player like Lawrence? And for ease of maths he was bought for 4 million and has a four year contract. What is his value after 3 years?

Straight line, it’s £1 million. Right? But what does the club do after 3 years? Well if you’re in your right mind you sell, with any luck for more than 1 million and in reality you will probably get more than that considering inflation and the fact that Derby try and buy young. Alternatively you offer a new contract. So now the 1 million you have left is spread over a further, say two years. Meaning your fourth year “residual value” is £666k.

Worst case, you let the contract run.

To calculate the true “Residual value”, you’d have to work out the likelihood of each of the above happening and multiply it through.

so

1. sell for, say 2 mill. Residual value = £1 mill (remember You still have 1 mill to amortise)
2. Renegotiate giving residual Value 666k (above).
3. let the contract run it’s course. Residual value nil.

If the likelihood of each was equal then I’d argue the residual value of my theoretical Tom Lawrence was £555k.

This is all of course based on a whole load of assumptions that I’m sure you could drive a bus through, but it does demonstrate that there is some logic to residual values as it would absolutely stupid to assume that clubs don’t take action towards the end of a contract.

I recall we even extended Bradley Johnsons contract as an example last year.

In summary I think we can fight the case on residual values, albeit if we do it could set a dangerous precedent for other clubs and for the EFL.

I would also suggest that the EFL have  a real fight against a set of auditors on the accounting policy side of things.

I’d be very surprised and disappointed if Derby lost, but if I’m honest if I were the EFL I would want to have the fight.

Very sadly for all concerned this will be a costly and damaging set of proceedings.

The policy wasn't undisclosed.  There was a ton of discussion on this forum about it at the time it was first brought in (I had grave reservations as it happens precisely because of the hit on us if players left on a Bosman or we got our estimated values wrong).  Kieran Maguire even tweeted about it and he revealed recently he actually contacted the EFL to ask them questions about it for his blogs (but got no response). It was most certainly not undisclosed.  It was in the accounts. It may not have had CAPITAL LETTERS and been in red and flashing but it was there. And if a bunch of fans can find it, the EFL's accountants should have been able to.

As I've said before, I think what we did was against the spirit of the rules.  We did it to allow us to spend more early on and we hoped we'd be in the Prem by the time the contracts expired and it wouldn't be an issue. Also, giving players an extra month just so we take the hit in a different financial year is clearly gaming the system. The question is whether it is within letter of rules. Independent panel said it was. That's being appealed. We'll find out idc if it is definitely is within letter I guess

PS. Let's also be clear that this policy IS inferior in a real world sense.  Taking a massive hit of write-offs when players leave is evidence we ballsed up our estimated residual value including our judgment of their likelihood to leave on a free. If we had got the residual value estimate correct each year we would be amortising correctly in line with a players 'real' valuation and when they left their transfer fee would approximate their residual value and there would be no further amortisation to do). 

[RamNut]

The amortisation decision creates a precedent which presumably they don’t want.

secondly, I think the idc also made comment that we failed to make full disclosure, and we’re not able to provide much to evidence or corroborate our new ‘systematic’ process. If so, that is a weakness in our case.  

others with more interest in these things may argue otherwise, but it seems to me that our method of calculating the depreciation in the asset value of players, allows us to manipulate or manage the timing of the losses. We could in theory defer and group the losses into one year. That could allow us to manipulate the timings so that in one particular year the stadium sale wipes out all of the losses which would otherwise have occurred over several years. A very different timeline might have given a very different scenario of ffp compliance or non-compliance. 

personally I detest all this accountancy baalocks. As I have said before our crime was not excessive spending but poor recruitment. If we could have sold butterfield, Johnson, Blackman, huddlestone etc for reasonable fees then we wouldn’t be in this mess.  And the financial limits now effectively prohibit clubs from investing in players, when salaries and running costs already put the clubs on the brink of non-compliance. The accountancy rules have taken over. 

[S8TY]

3 minutes ago, Gritty said:

 

The policy wasn't undisclosed.  There was a ton of discussion on this forum about it at the time it was first brought in (I had grave reservations as it happens precisely because of the hit on us if players left on a Bosman or we got our estimated values wrong).  Kieran Maguire even tweeted about it and he revealed recently he actually contacted the EFL to ask them questions about it for his blogs (but got no response). It was most certainly not undisclosed.  It was in the accounts. It may not have had CAPITAL LETTERS and been in red and flashing but it was there. And if a bunch of fans can find it, the EFL's accountants should have been able to.

As I've said before, I think what we did was against the spirit of the rules.  We did it to allow us to spend more early on and we hoped we'd be in the Prem by the time the contracts expired and it wouldn't be an issue. Also, giving players an extra month just so we take the hit in a different financial year is clearly gaming the system. The question is whether it is within letter of rules. Independent panel said it was. That's being appealed. We'll find out idc if it is definitely is within letter I guess

PS. Let's also be clear that this policy IS inferior in a real world sense.  Taking a massive hit of write-offs when players leave is evidence we ballsed up our estimated residual value including our judgment of their likelihood to leave on a free. If we had got the residual value estimate correct each year we would be amortising correctly in line with a players 'real' valuation and when they left their transfer fee would approximate their residual value and there would be no further amortisation to do). 

I don't know as much about this as you seem to...but am i right in saying that the EFL's rules are in place to try and stop clubs going into financial meltdown?

It just seems like its all about punishing teams and fans rather than helping them, especially through difficult times like now for instance, so basically if a rich oil baron wanted to put money into a club, (therefore putting money into the game) it would not be able to be used because of FFP ?? thereby hampering clubs and meaning clubs could fold ?

Is this correct or am a off track here ?

[Kennington Ram]

4 minutes ago, RamNut said:

 

personally I detest all this accountancy baalocks. As I have said before our crime was not excessive spending but poor recruitment. If we could have sold butterfield, Johnson, Blackman, huddlestone etc for reasonable fees then we wouldn’t be in this mess.  And the financial limits now effectively prohibit clubs from investing in players, when salaries and running costs already put the clubs on the brink of non-compliance. The accountancy rules have taken over. 

Yep, although a world in which those players held their value (particularly Blackman, Johnson and Butterfield) is one in which we would have been promoted!

[R@M]

3 minutes ago, Gritty said:

 

The policy wasn't undisclosed.  There was a ton of discussion on this forum about it at the time it was first brought in (I had grave reservations as it happens precisely because of the hit on us if players left on a Bosman or we got our estimated values wrong).  Kieran Maguire even tweeted about it and he revealed recently he actually contacted the EFL to ask them questions about it for his blogs (but got no response). It was most certainly not undisclosed.  It was in the accounts. It may not have had CAPITAL LETTERS and been in red and flashing but it was there. And if a bunch of fans can find it, the EFL's accountants should have been able to.

As I've said before, I think what we did was against the spirit of the rules.  We did it to allow us to spend more early on and we hoped we'd be in the Prem by the time the contracts expired and it wouldn't be an issue. Also, giving players an extra month just so we take the hit in a different financial year is clearly gaming the system. The question is whether it is within letter of rules. Independent panel said it was. That's being appealed. We'll find out idc if it is definitely is within letter I guess

PS. Let's also be clear that this policy IS inferior in a real world sense.  Taking a massive hit of write-offs when players leave is evidence we ballsed up our estimated residual value including our judgment of their likelihood to leave on a free. If we had got the residual value estimate correct each year we would be amortising correctly in line with a players 'real' valuation and when they left their transfer fee would approximate their residual value and there would be no further amortisation to do).

I disagree that the amortisation method was not ‘within the spirit of the rules’. The panel specifically stated the EFL had not set out guidelines as to how player values should be calculated and DCFC used a standard accounting model....it is just different to how others implemented the same rules. Personally, I think it actually provides a more accurate value of players. 

Think of 2 similar leasehold properties, one with half the lease left of the other, the value Variation is never half.

[angieram]

Having slept (badly) on this news I  am still feeling devastated, to be honest.

It seems to me to be a further huge drain of resources - money, time and focus - that will occur before it is settled. What a waste of all three that should be being spent to help all EFL clubs to better navigate the perilous tides of post pandemic football.

While this is happening, where is the guidance and steer from the EFL to help clubs through to calmer waters? Sadly not in evidence, four days before the start of the season. 

The previous independent commission found that the EFL weren't acting maliciously in bringing these charges. I wonder what they are thinking now?

[RamNut]

5 minutes ago, Kennington Ram said:

Yep, although a world in which those players held their value (particularly Blackman, Johnson and Butterfield) is one in which we would have been promoted!

The age profile of some signings was also relevant. 

[Andicis]

Wigan gets an owner who wants to relegate them for financial gain, where is the EFL? Ah yes, that's right - punishing the club doing something different that is legal within the rules. Useless, pathetic, petty.

[TigerTedd]

I hope fans are allowed back in time for Derby vs Sheffield Wednesday. Imagine 90+ mins of ‘duck the EFL!’

but who stole the chant of whom?

[Gritty]

20 minutes ago, R@M said:

I disagree that the amortisation method was not ‘within the spirit of the rules’. The panel specifically stated the EFL had not set out guidelines as to how player values should be calculated and DCFC used a standard accounting model....it is just different to how others implemented the same rules. Personally, I think it actually provides a more accurate value of players. 

Think of 2 similar leasehold properties, one with half the lease left of the other, the value Variation is never half.

The purpose of 'fair value accounting' is to ensure the assets are 'fairly valued' each year in the accounts. The fact we had players valued at large values going into their final year of their contracts wasn't a fair value because we could never have realised that value. 

[RoyMac5]

30 minutes ago, angieram said:

The previous independent commission found that the EFL weren't acting maliciously in bringing these charges. I wonder what they are thinking now?

They also said they didn't see evidence of a vendetta against Mel (my phrasing). I wonder what they are thinking now too?

[R@M]

1 minute ago, Gritty said:

The purpose of 'fair value accounting' is to ensure the assets are 'fairly valued' each year in the accounts. The fact we had players valued at large values going into their final year of their contracts wasn't a fair value because we could never have realised that value. 

How it ended up after the fact with some players....and your point is valid up to ‘never’; we COULD have realised the values up to the point they were written off.  Who is to say what is a fair value if you include the replacement cost and value to us as opposed to other clubs as an investment? I am not sure if anything at all depreciates in an exact straight line, cars hold value then drop off sharply, leaseholds only drop in the last 25 years (usually last quarter of lease). 

[RamNut]

9 minutes ago, Gritty said:

The purpose of 'fair value accounting' is to ensure the assets are 'fairly valued' each year in the accounts. The fact we had players valued at large values going into their final year of their contracts wasn't a fair value because we could never have realised that value. 

Perhaps the EFL just noticed what we sold Hughes, bogle and Lowe for and concluded that we hadn’t got a clue when it came to player values. 

[Ghost of Clough]

11 minutes ago, Gritty said:

The purpose of 'fair value accounting' is to ensure the assets are 'fairly valued' each year in the accounts. The fact we had players valued at large values going into their final year of their contracts wasn't a fair value because we could never have realised that value. 

Do you think the straight-line method is ‘fair value accounting’?

[StarterForTen]

Surely this is just about mitigating legal costs isn't it? The EFL are staring down the gun barrel of a seven figure bill and I would assume they think leveraging point 5 of the second charge (which, on reading the findings, I think they are entitled to do) could help them swerve some of the costs.

I think the EFL will win this one because a breach (albeit a seemingly administrative one) was found and not punished. That said, I do not think the the punishment will be severe; more than likely a fine. However, such a 'victory' would give them grounds to defend the apportionment of costs.

That opportunity, along with any fine they might bring in, makes this a defendable decision. I appreciate it is unpalatable to us Derby people but this is just corporate manoeuvring. The EFL's lawyers will be telling them that by going down this path it may be that, at the end of it, they are exposed to a bill of £500k instead of £1m.

Easy as it is to think there is some form of agenda against the Club, sometimes it's just down to the pounds, shillings and pence.

[The Scarlet Pimpernel]

I think the report from the original hearing confirmed that we carry out a playing staff valuation every six months. Based upon the valuation at that time our calculations are made. This seems very sensible to me. I don't see the problem the EFL have? Anybody able to enlighten me?

[Gritty]

2 minutes ago, Ghost of Clough said:

Do you think the straight-line method is ‘fair value accounting’?

No. That's why the straight line method isn't called 'fair value accounting'.

Fair value accounting is usually used as an improvement on the straight line method for those areas where it is possible to estimate a fair value for the asset.  The fact we have made massive lumpy write-offs suggests to me we have failed to accurately estimate the fair value

[The Scarlet Pimpernel]

3 minutes ago, StarterForTen said:

Surely this is just about mitigating legal costs isn't it? The EFL are staring down the gun barrel of a seven figure bill and I would assume they think leveraging point 5 of the second charge (which, on reading the findings, I think they are entitled to do) could help them swerve some of the costs.

I think the EFL will win this one because a breach (albeit a seemingly administrative one) was found and not punished. That said, I do not think the the punishment will be severe; more than likely a fine. However, such a 'victory' would give them grounds to defend the apportionment of costs.

That opportunity, along with any fine they might bring in, makes this a defendable decision. I appreciate it is unpalatable to us Derby people but this is just corporate manoeuvring. The EFL's lawyers will be telling them that by going down this path it may be that, at the end of it, they are exposed to a bill of £500k instead of £1m.

Easy as it is to think there is some form of agenda against the Club, sometimes it's just down to the pounds, shillings and pence.

Is the soft embargo from January - August not a punishment?