19 Aug 2016 15:10:33
Hello,

I've been reading this site for a long time and I really appreciate the amazing job that the eds are doing here.

Ed002 I just had a question about finances and transfer fees and I was wondering if you could shed some light on this. When clubs spend as high as 80 million pounds for a particular player as transfer fees (Temporarily setting aside all the other fees) apart from huge wages, how does a club calculate it's return on investment. I mean winning titles does get you money and maybe greater revenue through sponsors but will the club ever completely recoup such a massive investment? Moreover what is the criteria for measuring the ROI on a player?

I've written a lot and I don't completely understand football finances. It would also be extremely helpful if you could guide me to a few books.

{Ed002's Note - Clubs don't calculate a return on investment against individual players or transfer fees Monosaur.}

1.) 19 Aug 2016
19 Aug 2016 19:09:55
Simplistically, clubs account for players in the same way as an insurance company accounts for a chair. If he costs £80m and signs a 4 year contract then he'll be treated aa an asset with a 4 year life in the clubs books so will show as costing £20m in each of 4 years. Look up asset depreciation (or amortisation) . It's never quite that simple TBH but in one paragraph it tells the story.

2.) 19 Aug 2016
19 Aug 2016 19:17:44
As people have alludedicated to its beneficial for the parent club and the player but not for the club they're playing for as the manager wants to pick his best 11 for each game. Reminds me of Glen Johnson who at one time had it stipulated in his contract that he had to start at right back when fit. A situation which certainly didn't benefit the club. I think that a suitable loan needs to be found by the club where they feel that the player is good enough to get into the team when fit. It should then be up to the player to make himself first choice.

3.) 19 Aug 2016
19 Aug 2016 22:35:02
From what I can gather (never worked in football but am an accountant) - They don't treat players as investments as such, more as assets. The transfer fee paid (and possibly other associated costs) are added to the balance sheet and depreciated over the life of the contract.

This hits the p&l along with the players wages each year (plus any transfer costs that can not be capitalised in the first year) . If a player is sold they take the sale price less the net book value of the player (amount paid less amount depreciated to date) plus any associated costs (agents fee etc) and put that through the p&l as a profit / loss. I presume if a contract extension is agreed the useful life of the asset is extended.

4.) 20 Aug 2016
20 Aug 2016 02:52:15
Sounds like you've been watching money all too much monosaur.

5.) 20 Aug 2016
20 Aug 2016 09:21:18
My sincere apologies for muddling up names.

6.) 20 Aug 2016
20 Aug 2016 08:58:16
Hello

I'm an actuary myself, not much of an accountant, but employees of companies are generally not reported as assets on a company's balance sheet and their wages are treated as expenses on the income statement. When it comes to football would transfer fee treated as an expense or would the club treat that as an asset is my question.

The latter approach would be hard because market value in terms of such an asset would be very hard to determine and it could very easily be overstated or understated. @Tom36 amortizing that would be very difficult and moreover if they treat the transfer fee as an asset it would be hard be hard to present a true and fair view I think right, especially for listed clubs like united.

Ed002 so now am I correct in thinking that transfer fees are just and expense in the income statement and hence the club doesn't calculate a return on investment?

Thanks a lot Ed002 and fellow posters.

{Ed002's Note - (a) Clubs do not calculate a return on investment on the fees paid for players, nor their wages. (b) Clubs can choose to amatorize transfer fees should they wish - some do and some don't - but they must take one approach or the other and cannot mix them. (c) The cost of transfers are listed as capital expenditure on the accounts as the purchase (and disposal) of players' registrations. (d) Players are not tangible fixed assets of the club, they are simply intangible assets.

I hope this helps.}

7.) 20 Aug 2016
20 Aug 2016 12:08:17
Yes, that makes things clearer. Thanks a lot Ed002.

{Ed002's Note - You are welcome.}