EFL Verdict

[The Scarlet Pimpernel]

9 minutes ago, Van der MoodHoover said:

I've started so I'll finish... ?

The EFL probably (I say this with no evidence at all so it's just conjecture) wanted to avoid rule writing as far as possible, that's for sure. 

However, they appear to have done no real analysis to see whether a straight adoption of existing frameworks will give them what they now claim they want in terms of outcomes (everyone using the same approach to the detailed topic of amortising player contract values). 

Accounting standards by definition are really NOT industry specific. They are now based unequivocally on the principle of "economic substance over form" to reinforce this point. 

I think as far as "indicative market values" go then you would be looking for broadly comparable transactions. That's basically how property valuation is carried out. But it is a negotiable point and as it is indeed industry specific should be within the EFL purview. 

To be sure, if you held aggressive valuations in your accounts on the basis that you would be actively trading out these player assets, but you then didn't and they went for 0, then you would expect the following... 

- large final year write downs

- an increasing auditor challenge to the directors as to why they felt the approach met the overall principles of true and fair, plus the accounting concept of prudence. 

- ultimately an insistence on a revision to the approach in order for the auditors to continue to sign off. 

My overall issue with the EFL is that they appear to have "short circuited" these stages altogether and are now writing rules retrospectively at the same time as sanctioning a member for not complying with a non-existent rule. 

From a regulatory lens that is appalling behavior. 

 

This needs to be shouted from the roof tops but HOW????

[Spanish]

14 minutes ago, Van der MoodHoover said:

I've started so I'll finish... ?

The EFL probably (I say this with no evidence at all so it's just conjecture) wanted to avoid rule writing as far as possible, that's for sure. 

However, they appear to have done no real analysis to see whether a straight adoption of existing frameworks will give them what they now claim they want in terms of outcomes (everyone using the same approach to the detailed topic of amortising player contract values). 

Accounting standards by definition are really NOT industry specific. They are now based unequivocally on the principle of "economic substance over form" to reinforce this point. 

I think as far as "indicative market values" go then you would be looking for broadly comparable transactions. That's basically how property valuation is carried out. But it is a negotiable point and as it is indeed industry specific should be within the EFL purview. 

To be sure, if you held aggressive valuations in your accounts on the basis that you would be actively trading out these player assets, but you then didn't and they went for 0, then you would expect the following... 

- large final year write downs

- an increasing auditor challenge to the directors as to why they felt the approach met the overall principles of true and fair, plus the accounting concept of prudence. 

- ultimately an insistence on a revision to the approach in order for the auditors to continue to sign off. 

My overall issue with the EFL is that they appear to have "short circuited" these stages altogether and are now writing rules retrospectively at the same time as sanctioning a member for not complying with a non-existent rule. 

From a regulatory lens that is appalling behavior. 

 

Glad you finished the word wan, I was a bit worried there for a ? 

I misspoke when I said industry but I think you grasp the direction.  Apart from crypto I can't see a similar high value asset that has such a risk of ending up with no value and I think we all hope the country does not move to a view that all property ownership is theft.  So the reliability of an indicative market is different for footballers but you know this.  Sporting regulators, always felt they were not fit for purpose because of the nature of the appointees but that may be unfair.  In terms of the EFL at least they have established a framework with DC and LAP.  I don't know what more they could do to establish a decision body that is on the face of it, independent or at least balanced.  P&S has a unilateral limit on losses, a requirement that any injected funds by owners are capitalized rather than loans and a need to provide a summary before accounts are completed.  Outside of the that normal accountancy standards prevail.  Clearly, they are relying on the honesty of the clubs they regulate and in a multi million pound business perhaps that is naive. 

Perhaps the best course would be to request a specific P&S confirmation as part of the audit process.  Maybe the summary should be enhanced by a post audit version then any subsequent discoveries will be the fault of the auditor?  Nothing's perfect but lessons should be learnt as to the predicament DCFC and EFL now potential find themselves in.

Feel free to tear this to pieces

[Woodley Ram]

6 minutes ago, Spanish said:

Glad you finished the word wan, I was a bit worried there for a ? 

I misspoke when I said industry but I think you grasp the direction.  Apart from crypto I can't see a similar high value asset that has such a risk of ending up with no value and I think we all hope the country does not move to a view that all property ownership is theft.  So the reliability of an indicative market is different for footballers but you know this.  Sporting regulators, always felt they were not fit for purpose because of the nature of the appointees but that may be unfair.  In terms of the EFL at least they have established a framework with DC and LAP.  I don't know what more they could do to establish a decision body that is on the face of it, independent or at least balanced.  P&S has a unilateral limit on losses, a requirement that any injected funds by owners are capitalized rather than loans and a need to provide a summary before accounts are completed.  Outside of the that normal accountancy standards prevail.  Clearly, they are relying on the honesty of the clubs they regulate and in a multi million pound business perhaps that is naive. 

Perhaps the best course would be to request a specific P&S confirmation as part of the audit process.  Maybe the summary should be enhanced by a post audit version then any subsequent discoveries will be the fault of the auditor?  Nothing's perfect but lessons should be learnt as to the predicament DCFC and EFL now potential find themselves in.

Feel free to tear this to pieces

Sounds reasonable to me, 

Having read the relevant accounting rules I cannot understand how they come up with the opinion that we were in breach of them. I understand that it is not the done practice of a football club to immortalise that way but that's a different question.

We shot ourselves in the foot by not producing our own expert witness (was there a bit of Hubris there?)

The EFL are in a pickle but as you say they relied on honesty. If the EFL ask for accounts so that they can audit them, they should do so, in not finding this sooner they have not performed their duties properly, but we equally should have been more transparent about what we were doing.

I just want tis over and done with so we can move on, I also wish the other clubs supporters and indeed the clubs themselves would understand the facts and not jump to conclusions. 

[ilkleyram]

1 hour ago, Woodley Ram said:

Sounds reasonable to me, 

Having read the relevant accounting rules I cannot understand how they come up with the opinion that we were in breach of them. I understand that it is not the done practice of a football club to immortalise that way but that's a different question.

We shot ourselves in the foot by not producing our own expert witness (was there a bit of Hubris there?)

The EFL are in a pickle but as you say they relied on honesty. If the EFL ask for accounts so that they can audit them, they should do so, in not finding this sooner they have not performed their duties properly, but we equally should have been more transparent about what we were doing.

I just want tis over and done with so we can move on, I also wish the other clubs supporters and indeed the clubs themselves would understand the facts and not jump to conclusions. 

At least we'll be around forever.  It's more than some believe will happen

[Taribo]

2 hours ago, SamUltraRam said:

On the off chance that the EFL aren't going to appeal, unless they quickly state that, we still have to wait two weeks before we can start trading properly again waiting for the clock to tick down - more punishment for us

That's not an issue, we haven't got a pot to pee in so we won't be buying!

Any decent free/out of contract players will have already been snapped up or commanding a high fee contract - doubtful we can compete with many championship clubs.

 

[Spanish]

2 hours ago, SamUltraRam said:

On the off chance that the EFL aren't going to appeal, unless they quickly state that, we still have to wait two weeks before we can start trading properly again waiting for the clock to tick down - more punishment for us

 

5 minutes ago, Taribo said:

That's not an issue, we haven't got a pot to pee in so we won't be buying!

Any decent free/out of contract players will have already been snapped up or commanding a high fee contract - doubtful we can compete with many championship clubs.

 

and I guess we will still be in embargo until our restated accounts have been produced and checked

[DCFC1388]

11 minutes ago, Taribo said:

That's not an issue, we haven't got a pot to pee in so we won't be buying!

Any decent free/out of contract players will have already been snapped up or commanding a high fee contract - doubtful we can compete with many championship clubs.

 

Previous seasons I would agree with you but I do think this summer players will have to take lower wages to secure moves as pretty much all EFL clubs except the parachute funded ones will be cutting costs with no income from last season. 

So we may actually find ourselves in a position to compete with other Champ clubs even under and embargo if we can get the other off field uncertainty sorted. As a club we're still a big club to join at this level for many players.

[i-Ram]

2 hours ago, Van der MoodHoover said:

From a regulatory lens that is appalling behavior. 

 

[Van der MoodHoover]

2 hours ago, Spanish said:

Glad you finished the word wan, I was a bit worried there for a ? 

I misspoke when I said industry but I think you grasp the direction.  Apart from crypto I can't see a similar high value asset that has such a risk of ending up with no value and I think we all hope the country does not move to a view that all property ownership is theft.  So the reliability of an indicative market is different for footballers but you know this.  Sporting regulators, always felt they were not fit for purpose because of the nature of the appointees but that may be unfair.  In terms of the EFL at least they have established a framework with DC and LAP.  I don't know what more they could do to establish a decision body that is on the face of it, independent or at least balanced.  P&S has a unilateral limit on losses, a requirement that any injected funds by owners are capitalized rather than loans and a need to provide a summary before accounts are completed.  Outside of the that normal accountancy standards prevail.  Clearly, they are relying on the honesty of the clubs they regulate and in a multi million pound business perhaps that is naive. 

Perhaps the best course would be to request a specific P&S confirmation as part of the audit process.  Maybe the summary should be enhanced by a post audit version then any subsequent discoveries will be the fault of the auditor?  Nothing's perfect but lessons should be learnt as to the predicament DCFC and EFL now potential find themselves in.

Feel free to tear this to pieces

For me, I would draw the parallel with insurance regulation. 

With that, you start from the companies act accounts, but then the Prudential Regulation Authority adds on rules which effectively "adjusts" these accounts to meet their own criteria. 

The EFL are effectively doing the same thing already in the P&S rules (as some items are allowed and some are not) so it should be be easy peasy for them to insist that for p&l calculation purposes, the companies act balance sheet should be adjusted (restated) to show what it's like assuming straight line cost based amortisation. 

Takes all the ambiguity out and should add very little work. 

 

[Van der MoodHoover]

2 hours ago, Spanish said:

Glad you finished the word wan, I was a bit worried there for a ? 

I misspoke when I said industry but I think you grasp the direction.  Apart from crypto I can't see a similar high value asset that has such a risk of ending up with no value and I think we all hope the country does not move to a view that all property ownership is theft.  So the reliability of an indicative market is different for footballers but you know this.  Sporting regulators, always felt they were not fit for purpose because of the nature of the appointees but that may be unfair.  In terms of the EFL at least they have established a framework with DC and LAP.  I don't know what more they could do to establish a decision body that is on the face of it, independent or at least balanced.  P&S has a unilateral limit on losses, a requirement that any injected funds by owners are capitalized rather than loans and a need to provide a summary before accounts are completed.  Outside of the that normal accountancy standards prevail.  Clearly, they are relying on the honesty of the clubs they regulate and in a multi million pound business perhaps that is naive. 

Perhaps the best course would be to request a specific P&S confirmation as part of the audit process.  Maybe the summary should be enhanced by a post audit version then any subsequent discoveries will be the fault of the auditor?  Nothing's perfect but lessons should be learnt as to the predicament DCFC and EFL now potential find themselves in.

Feel free to tear this to pieces

Big pharma patents are another example. Fintech firms value the ip in their software. 

Intangible Assets take many forms. 

[The Scarlet Pimpernel]

So, here we are. Thanks to some very knowledgeable posters, we have, I think, unwrapped the lash-up the EFL have caused us, themselves an Wycombe.  It would be laughable it it wasn't so tragic but I just have a sneaking feeling DCFC Fans are more advanced than the EFL and the LAP on the matter. How did it come to this?

Edited June 30, 2021 by The Scarlet Pimpernel

[Eatonram]

I think it is clear from the sanction that the DC have some sympathy towards our case. I have some hope that they will prepare a carefully worded report that makes the point that their sanction should be seen as in addition to the protracted embargo that has already been very punitive towards the club and that it is their view that both parties accept their independent and neutral findings to allow the championship to move on. 

[DCFC1388]

3 minutes ago, Eatonram said:

I think it is clear from the sanction that the DC have some sympathy towards our case. I have some hope that they will prepare a carefully worded report that makes the point that their sanction should be seen as in addition to the protracted embargo that has already been very punitive towards the club and that it is their view that both parties accept their independent and neutral findings to allow the championship to move on. 

They need to get this report issued asap though so things can start to move on

[Eatonram]

Meanwhile Manchester United pay £73m for a single player and the football authorities cannot see what the problem is. 

[Eddie]

7 hours ago, Spanish said:

 

and I guess we will still be in embargo until our restated accounts have been produced and checked

Even if they are all above board and all boxes are ticked, the EFL will throw them out and penalise Derby heavily, probably because the font used for the accounts wasn't Comic Sans.

[rammieib]

So Derby are in embargo until the accounts are submitted.... so submit the accounts Derby. 

They will have done all this work a long time ago so actually, what is stopping us from submitting the accounts and removing the transfer embargo???

So I have a sneaky suspicion that we will actually fail P&S and they will wait as long as possible. If they release the updated accounts now, we fail P&S, its going to create a real poo show with regards to the amortisation and potential EFL appeal. The two should be separate, but the pressure will build and one could indirectly affect the other.

I think financially, we're in a worse position than many suspect. I hope I am wrong.

 

[Reggie Greenwood]

15 minutes ago, rammieib said:

So Derby are in embargo until the accounts are submitted.... so submit the accounts Derby. 

They will have done all this work a long time ago so actually, what is stopping us from submitting the accounts and removing the transfer embargo???

So I have a sneaky suspicion that we will actually fail P&S and they will wait as long as possible. If they release the updated accounts now, we fail P&S, its going to create a real poo show with regards to the amortisation and potential EFL appeal. The two should be separate, but the pressure will build and one could indirectly affect the other.

I think financially, we're in a worse position than many suspect. I hope I am wrong.

 

All the accounts guys on here plus Swiss Ramble and even Maguire seem to suggest you are wrong and DCFC are within the P&S parameters 

[Taribo]

13 minutes ago, rammieib said:

So I have a sneaky suspicion that we will actually fail P&S and they will wait as long as possible. If they release the updated accounts now, we fail P&S, its going to create a real poo show with regards to the amortisation and potential EFL appeal. The two should be separate, but the pressure will build and one could indirectly affect the other.

I think financially, we're in a worse position than many suspect. I hope I am wrong.

I have the same feeling, despite reassurances from people more accountancy-qualified than I am, and even self-appointment 'expert' Kieran Maguire.

In my mind we used the amortisation as a way to spend more, so obviously we will fail 'standard' P&S accounting as we weren't comparing our figures in this way. I'm probably (and hopefully) wrong!  

[Ghost of Clough]

28 minutes ago, rammieib said:

So Derby are in embargo until the accounts are submitted.... so submit the accounts Derby. 

They will have done all this work a long time ago so actually, what is stopping us from submitting the accounts and removing the transfer embargo???

So I have a sneaky suspicion that we will actually fail P&S and they will wait as long as possible. If they release the updated accounts now, we fail P&S, its going to create a real poo show with regards to the amortisation and potential EFL appeal. The two should be separate, but the pressure will build and one could indirectly affect the other.

I think financially, we're in a worse position than many suspect. I hope I am wrong.

 

Do you know that we are, as a fact, in an embargo? Or are you basing it on usual circumstances of late accounts = embargo.

And what impact would a soft embargo have anyway? Signings can still be made if certain requirements are met. As you seem so sure we are over the limit, then it would be better to submit as late as possible. If we were under an embargo at the moment, it would be a soft one. If we submitted the accounts which showed we were over the limit, then we would most certainly be under a 'hard' embargo instead.

[Ghost of Clough]

8 minutes ago, Taribo said:

I have the same feeling, despite reassurances from people more accountancy-qualified than I am, and even self-appointment 'expert' Kieran Maguire.

In my mind we used the amortisation as a way to spend more, so obviously we will fail 'standard' P&S accounting as we weren't comparing our figures in this way. I'm probably (and hopefully) wrong!  

It allowed us to spend more, but didn't originally factor in a stadium sale. The profit from that should mean we sneak inside the limits