EFL appeal

[Reggie Greenwood]

19 minutes ago, Pearl Ram said:

Well we are not a special case. 19 other clubs have to contend with those newly relegated teams as well and if they didn’t have to “get creative” then really, neither should we. 

I’m beginning to wonder why Roy Mac shook that Steven Pearce’s hand after the Wednesday game in a congratulatory manner when it looks to me like he ain’t as clever as he likes to think he is and is complicit in all this baalocks.

Plenty of other clubs have been more than creative in recent years Boro , Leicester , QPR ( which affected us directly) , Wolves , Reading , Sheff Wed , Leeds , Wolves , Forest , Watford , Villa , Bournemouth come to mind without even thinking hard about it. 

Edited May 11, 2021 by Reggie Greenwood
Added Villa

[Ramtastic ones]

6 minutes ago, Ken Tram said:

Could any sanction be appealed?

Are there different types of appeal?

Appealing matters of "law" and appealing sanctions?

Maybe, both sides gets one chance to identify a significant misinterpretation of the rules - and then get a last chance to argue their position.

And then, guilt or otherwise, has been determined.

But, then there is the sanction - and perhaps that can be challenged too if there are grounds that the reasoning for determining a sanction were flawed.

To take a crass example, if the panel said, "We are imposing the maximum sanction, because Derby have broken the rules three times in a row," we could challenge it because the breach was wrongly being seen to cover as the separate breeches. 

Presumably, because errors in sentencing can occur, the process would include the ability to correct errors.

Or maybe not!

Various posts refer to" the vindictive nature of the efl's actions". I would say it is worse than vindictive in that they failed to act upon information submitted to them and only raised issue when wonky 'boro started crying. Lacking any real fortitude, instead of telling said parties to go fourth, they acted. Were they (the efl) a compitent organisation, they would have and should have, challenged Derby when the first set of accounts showing this practice were submitted and nipped it in the bud. 

[dcfcollie]

Might be a really stupid question but.. if they are supposedly finding us guilty of not filing our accounts properly according to accounting practices. Then why aren't the HMRC after us as well?

[MrPlinkett]

5 minutes ago, Reggie Greenwood said:

Plenty of other clubs have been more than creative in recent years Boro , Leicester , QPR ( which affected us directly) , Wolves , Reading , Sheff Wed , Leeds , Wolves , Forest , Watford , Villa , Bournemouth come to mind without even thinking hard about it. 

Poses the question,  if so many clubs are having to be creative,  does it mean the rules aren't fit for purpose 

[Ken Tram]

3 hours ago, LE_Ram said:

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.

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).

[Half Fan Half Biscuit]

4 minutes ago, dcfcollie said:

Might be a really stupid question but.. if they are supposedly finding us guilty of not filing our accounts properly according to accounting practices. Then why aren't the HMRC after us as well?

Depreciation and amortisation aren’t relevant when it comes to determining taxable profits or losses. 

[RadioactiveWaste]

4 minutes ago, dcfcollie said:

Might be a really stupid question but.. if they are supposedly finding us guilty of not filing our accounts properly according to accounting practices. Then why aren't the HMRC after us as well?

And presumably the account's auditors would have a thing or two to say...

[Van der MoodHoover]

48 minutes ago, RadioactiveWaste said:

One thing to bare in mind, the stadium sale charge was in our favor and not appealed - so we can count that and that does significantly reduce the maximum of potential poo we might be in.

I think imm going to downgrade my patent poo alert status from

Level 4 - full painful

To

Level 3 - mild collywobbles 

 

I'm optimistic we'll be down in "single formed stool" territory within a week or so. 

?

[angieram]

10 minutes ago, dcfcollie said:

Might be a really stupid question but.. if they are supposedly finding us guilty of not filing our accounts properly according to accounting practices. Then why aren't the HMRC after us as well?

Because Keiran Maguire hasn't written to them yet.

[duncanjwitham]

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.

[Ken Tram]

4 hours ago, RadioactiveWaste said:

I thought we wrote the value down to 0 at the end of the contract the same as the straight line method because at the end of the contract they do not have a value to club, the issue was how much we said their contract was worth in between the start and end points?

Effectivly, the EFL argument is that this cannot be know, so the only viable option is to writ it down evenly over the course of the contract (it is impossible to justify anything else), DCFC's argument is, yes, you can based on how good they are and what other similar players transfer for. It's harder to justify from the DCFC side, but the orginal hearing dtermined that we did that.

Thanks! 

It does make us sound dodgy from the perspective of Financial Fair Play - if every other club do it linearly.

On the other hand, it makes us sound prudent and responsible, if our accounting methods were providing us with the clearest possible picture of our actual financial position.

Maybe some clubs do both - creating separate reports following the expected processes from the perspective of FFP?

Maybe syne clubs do it only the standard FFP way because that provides the information that the club has to work to.

And maybe ... I have finally understood reheat this is all about, and explains why people say that Mel annoyed the EFL.

Maybe, Mel wanted accounts in the most accurate way. Maybe the EFL wanted it to be done in a crude way. Maybe the independent panel decided that clubs should not be prevented from doing their accounts in the most accurate way. Maybe the EFL argued that clubs must do it in a crude way.

So, maybe this is a case of a couple of stags rutting, arguing about how much control the EFL has over football clubs?

Maybe we didn't do anything wrong at all (from the perspective of spending too much money), but we didn't comply with red tape.

Obviously, it is harder for the EFL to police FFP, if clubs do things differently. But if the EFL if imposing crude accountancy practices, that makes it harder for clubs to run as effectively as they can.

This is a complete guess! In this scenario, we have been annoying, but maybe we needed to, to force the issue, and it will be hard to justify a significant sanction for that, because there is an onus on the EFL to adapt. In this scenario, in quite proud of Mel. Very British behaviour!

(I know that this is a wild guess - but it has certainly left me wondering if this is more to do with postering and control, then FFP.)

[Pearl Ram]

24 minutes ago, Reggie Greenwood said:

Plenty of other clubs have been more than creative in recent years Boro , Leicester , QPR ( which affected us directly) , Wolves , Reading , Sheff Wed , Leeds , Wolves , Forest , Watford , Villa , Bournemouth come to mind without even thinking hard about it. 

So why are the EFL seemingly hell bent on “ getting” us ? This is what I’m trying to understand. Out of all the teams you mentioned, only Wednesday then Birmingham and Wigan who you didn’t mention have been punished. Unless I’ve missed the points deductions the ones that never got promotion thus escaping the EFL’s jurisdiction.

[Pearl Ram]

45 minutes ago, The Scarlet Pimpernel said:

We did it to try and compete at the top where Derby County fans in the main expect us to be. The thought of midtable mediocrity doesn't excite me much. As such I'm not criticising Mel Morris with hindsight. 

If that’s a dig you’re way off beam me Old China.

[Ghost of Clough]

2 minutes ago, Pearl Ram said:

So why are the EFL seemingly hell bent on “ getting” us ? This is what I’m trying to understand. Out of all the teams you mentioned, only Wednesday then Birmingham and Wigan who you didn’t mention have been punished. Unless I’ve missed the points deductions the ones that never got promotion thus escaping the EFL’s jurisdiction.

Leeds, Forest, Reading, QPR and a number of others have all been under at least one embargo in the past

[LE_Ram]

11 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).

Yep so assuming Derby chose to amortise the players contract over the length of their contract, they would have nil residual value at the end of their contract.

For example, take a scenario where Derby sign a player for £4m on a 4 year contract.

The EFL argue that the only economic benefit a club gets from the player is them playing matches, and at the end of their contract they can leave for £nil - so you would amortise in line with that economic benefit - the player is expected to play over their contract so you would amortise their registration fee over the 4 years on a straight line - £1m per year gets expensed and increases your loss/decreases the profit. If they leave on a free at the end of their contract, you’ve already amortised down to £nil so there’s no impact to your profit - the carrying amount is £nil and your proceeds on the sale are £nil so there’s no profit or loss.

In that situation, if a player leaves at the end of year 3 for £3m, they’d have had 3 years of amortisation so be carried in the accounts at £1m, and you’d recognise a profit on the sale of the player of £2m.

Derby however say that they get more than just the benefit of the player playing matches, in that they also expect them to be sold before contract expiry. So your economic benefits are the player playing matches and the cash you get in from selling them. This is where ERV comes in - expected recoverable value - this is the amount Derby expects to be able to sell a given player for. Some players won’t be given an ERV if Derby don’t expect to sell them - for example, if our player above was 34 and expected to retire after playing at Derby, the treatment would be the same - £1m charged every year and no value at the end.

However, if it was someone like, say Joz, well DCFC would argue that if he plays well they’ll sell him on - so they decide when and for how much do we think we’ll sell. For example, if they think they’ll sell the player for £3m in three years, they will only charge £333k per year amortisation because you’d expect that by the time they’re sold for £3m, they’re carried in your accounts for £3m.

In both situations, the net P&L impact is the same over the whole contract - it’s just using Derby’s method the profits you make on a transfer are smaller, because your player is valued higher in your accounts, because you’ve charged less total amortisation.

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.

[Pearl Ram]

Just now, Ghost of Clough said:

Leeds, Forest, Reading, QPR and a number of others have all been under at least one embargo in the past

Embargo schmembargo, if we come out of this with “just” an embargo I’ll take that as a right result.

[Ghost of Clough]

2 minutes ago, Pearl Ram said:

Embargo schmembargo, if we come out of this with “just” an embargo I’ll take that as a right result.

It won't even be an embargo ?

[duncanjwitham]

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.

[Philmycock]

EFL leaking the result to the media before an official statement, what a bunch of Gibson's these incompetent self-serving slags that run our league.

EFL, an organisation that allowed Bury FC to die.

Premier League please come and save us with a division 2 so we can leave these amateurs.

[Ken Tram]

4 hours 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)

Thank you, thank you, thank you for explaining ERV!

Are you saying that the normal approach is to have a single constant rate of amortisation*, from the initial transfer value, down to zero at the end if the contract.

*What some might think of as depreciation, I suppose.

And that ERV (whatever ERV stands for), means that two constant rates of amortisation are used. One amortisation rate, from the transfer value, down to the ERV (is it .... estimated residual value??????), with the ERV being set for the beginning of the final year of the contract; and a second amortisation rate going from the ERV down to zero during the final year?

But, do clubs using the ERV method, vary the ERV over time? Or is it set at the beginning of the contract?

And you may have to hold my hand now!

I presume that the annual amortisation rate is much "lower", meaning that the accounted value of players is higher, even though it ends up at zero? Or is the amortisation (depreciation) greater, on the basis that player values are even lower in the final year of a contract?

And either way, does this genuinely give a more accurate picture of player value?

Does it tend to imply lower annual expenditure than the crude amortisation method?

In the crude method, the difference between value and amortised value only seems to come to light when a player is sold. Is this the case with the ERV method?