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Long read but one thing I don't get. Take the Mudryk contract for example does that mean that his former club only get the full transfer money after the 8 years and recieve just 10 million a year? https://www.bbc.co.uk/sport/football/66507341
[Post edited 19 Aug 2023 8:10]
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Chelsea spending explained on 08:25 - Aug 19 with 2795 views
They get the full transfer fee on purchase, it is only on the club accounts that the fee gets amortised over several years. Its like depreciating an asset for any company.
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Chelsea spending explained on 08:25 - Aug 19 with 2798 views
Not necessarily, the accounting could be a bit iffy to me. They may have agreed a payment structure over 4 years but the cost is spread over 8 from an accounts POV to help with FFP or whatever its called now.
It could be that they have agreed a payment plan over 8 years but I can't imagine too many clubs going for that.
What I think has happened is the total cost of the contract (fee plus wages) gets spread over 8 years, to me this is finnancial jiggery pokery and a bit questionable but I may be doing them a diservice.
In the article it says "They have found this ingenious loophole by offering players long-term contracts. That's a brilliant accounting trick. But that is not how they pay the clubs" It suggests they are loaning the money which surely means these players are costing even more!
Some of their fees are suspiciously high even in the current spending environment.
How was Mudryk worth anywhere near £100m - a striker with a total career goal haul of 9? Likewise Fernandez who had a decent WC but only half a season in Europe. Deeply troubling.
Here’s hoping they have another awful season.
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Chelsea spending explained on 08:36 - Aug 19 with 2712 views
Chelsea spending explained on 08:30 - Aug 19 by Marshalls_Mullet
It's all just accounting technicalities.
If you disagree with City's spending, then you disagree with Chelseas spending.
And, indeed, most clubs do it, to a greter or lesser extent. I'm pretty sure that's how Mark Ashton got to his zero net spend for ITFC* in the transfer market, sending forward staged payments for players bought and balancing expenditure with those from ones previously sold.
* Over a three-year span, I think he actually said.
Chelsea spending explained on 08:51 - Aug 19 by Guthrum
And, indeed, most clubs do it, to a greter or lesser extent. I'm pretty sure that's how Mark Ashton got to his zero net spend for ITFC* in the transfer market, sending forward staged payments for players bought and balancing expenditure with those from ones previously sold.
* Over a three-year span, I think he actually said.
“I'm pretty sure that's how Mark Ashton got to his zero net spend for ITFC”
Await incoming Elephant Man with his feeble Victor Meldrew act; ‘franchise FC’, ‘doping’. *Yawn*
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Chelsea spending explained on 09:02 - Aug 19 with 2544 views
“I'm pretty sure that's how Mark Ashton got to his zero net spend for ITFC”
Await incoming Elephant Man with his feeble Victor Meldrew act; ‘franchise FC’, ‘doping’. *Yawn*
Heh. Unlike them, I'm merely suggesting that Ashton is using modern, high-level (and currently legitimate) methods of football accountancy.
To be fair, I agree with the Elephant that finances have done massive damage to football over the last three decades. I just don't think we can unilaterally revert to the 1970s (or pre-1936), not unless we want to be very non-League in the shortest possible time.
Chelsea spending explained on 08:30 - Aug 19 by Marshalls_Mullet
It's all just accounting technicalities.
If you disagree with City's spending, then you disagree with Chelseas spending.
The FFP rules are about accounting technicalities too. People seem to be conflating 2 separate things here. They can be compliant with FFP rules, but it can still be viewed as an obscene level of spending/profligacy.
I struggle to see why so many people are comfortable with the fees floating around at the moment, especially in the current economic climate for the rest of us. Fans seem to be able to divorce the spending in football from reality, but imagine how much good the near £1BN Chelsea have spent in 1 year would do for the more needy in society.
Chelsea spending explained on 08:25 - Aug 19 by philh
They get the full transfer fee on purchase, it is only on the club accounts that the fee gets amortised over several years. Its like depreciating an asset for any company.
I like to think of the players themselves amortising over 10 years.
In my mind, Caicedo will be 2 foot tall when his contract finishes.
SB
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Chelsea spending explained on 09:37 - Aug 19 with 2416 views
Chelsea spending explained on 09:30 - Aug 19 by Swansea_Blue
The FFP rules are about accounting technicalities too. People seem to be conflating 2 separate things here. They can be compliant with FFP rules, but it can still be viewed as an obscene level of spending/profligacy.
I struggle to see why so many people are comfortable with the fees floating around at the moment, especially in the current economic climate for the rest of us. Fans seem to be able to divorce the spending in football from reality, but imagine how much good the near £1BN Chelsea have spent in 1 year would do for the more needy in society.
Someone needs to look closely at the integrity of the accounting. If it is working as Jordan explains, then it is nonsensical. You can't/ shouldn't be acounting for players as depreciating assets (as you might machinery) over time, unless they are actually over 30 and losing value.
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Chelsea spending explained on 09:45 - Aug 19 with 2379 views
Chelsea spending explained on 09:37 - Aug 19 by redrickstuhaart
Someone needs to look closely at the integrity of the accounting. If it is working as Jordan explains, then it is nonsensical. You can't/ shouldn't be acounting for players as depreciating assets (as you might machinery) over time, unless they are actually over 30 and losing value.
I wonder if the argument is that they are losing value over time, as players are cheaper to sign towards the end of their contracts?
Chelsea spending explained on 09:45 - Aug 19 by Swansea_Blue
I wonder if the argument is that they are losing value over time, as players are cheaper to sign towards the end of their contracts?
Possibly. Not sure Jordan can be right anyway because having a depreciating asset does not reduce your spending figures. It just gives you a notional loss to set against profits for tax purposes.
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Chelsea spending explained on 10:01 - Aug 19 with 2332 views
Some of their fees are suspiciously high even in the current spending environment.
How was Mudryk worth anywhere near £100m - a striker with a total career goal haul of 9? Likewise Fernandez who had a decent WC but only half a season in Europe. Deeply troubling.
Here’s hoping they have another awful season.
If you've had a dire season, people (fans and investors) want something to be done. If you can't spend well, spend big and hope nobody notices they aren't the same thing.
After all, if you splash the cash and fail, you're no worse off than you would have been, but save on months of grief while you sack managers and hide behind the "gelling" excuse. "We did our bit" ...
Chelsea spending explained on 09:30 - Aug 19 by Swansea_Blue
The FFP rules are about accounting technicalities too. People seem to be conflating 2 separate things here. They can be compliant with FFP rules, but it can still be viewed as an obscene level of spending/profligacy.
I struggle to see why so many people are comfortable with the fees floating around at the moment, especially in the current economic climate for the rest of us. Fans seem to be able to divorce the spending in football from reality, but imagine how much good the near £1BN Chelsea have spent in 1 year would do for the more needy in society.
I think most people agree it’s obscene but as with everything else it’s the joys of globalisation. The PL is a global commodity now and the TV rights and merchandise are sold worldwide. Even if fans in England turned off it wouldn’t make any difference. Gate receipts are fairly irrelevant now.
On the plus side, I wonder much domestic transfers generate in VAT?!
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Chelsea spending explained on 10:18 - Aug 19 with 2289 views
Chelsea spending explained on 09:45 - Aug 19 by Swansea_Blue
I wonder if the argument is that they are losing value over time, as players are cheaper to sign towards the end of their contracts?
Yes that is presumably the idea, the asset being the contract with the player, in theory worth zero come the end of the term. To get a bit technical, whether the club writes this down on a straight line or reducing balance is presumably up to them, but that could be where they can 'fiddle' things a little for FFP (just guessing).
Someone else mentioned tax, as an accounting nerd myself it did make me wonder what capital allowances are available to football clubs for player contract amortisation.
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Chelsea spending explained on 11:59 - Aug 19 with 2112 views
It’s presumably what all football clubs do, or should do, since ‘Bosman’. A player who runs down his contract is worth nothing - so you apportion his costs across the length of his contract. The fee is irrelevant.
The fly in the Chelsea ointment is who actually owns Chelsea. And whilst it’s clearly not Putin this time, the true owners of the hedge fund might be the Saudi Arabians who are busy buying surplus Chelsea players.
It’s presumably what all football clubs do, or should do, since ‘Bosman’. A player who runs down his contract is worth nothing - so you apportion his costs across the length of his contract. The fee is irrelevant.
The fly in the Chelsea ointment is who actually owns Chelsea. And whilst it’s clearly not Putin this time, the true owners of the hedge fund might be the Saudi Arabians who are busy buying surplus Chelsea players.
On the cash side of this Chelsea owners must have various investors with loans legally agreed. If they dont succeed on the pitch then they are in big trouble. There needs to be more financial restrictions on cash spending as well as FFP current rules.
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Chelsea spending explained on 12:21 - Aug 20 with 1783 views
For the OP. Imagine you have a balance sheet showing £80m in cash, but £0 in assets. You agree to buy this player for £80m cash (assume all paid at once for simplicity). Your balance sheet now shows £0 in cash and £80m in assets. So you've got the exact same balance you started with and no loses.
Now your player is on an 8 year contract, so standard practice would be to reduce his value evenly across his contract. So every year he reduces in value by £10m, hence a £10m loss each year.
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Chelsea spending explained on 12:23 - Aug 20 with 1776 views
Chelsea spending explained on 12:21 - Aug 20 by Kievthegreat
For the OP. Imagine you have a balance sheet showing £80m in cash, but £0 in assets. You agree to buy this player for £80m cash (assume all paid at once for simplicity). Your balance sheet now shows £0 in cash and £80m in assets. So you've got the exact same balance you started with and no loses.
Now your player is on an 8 year contract, so standard practice would be to reduce his value evenly across his contract. So every year he reduces in value by £10m, hence a £10m loss each year.
But making a loss helps with tax, not with ffp
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Chelsea spending explained on 13:41 - Aug 20 with 1715 views
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