Hoi, jimbo

**Mr JP Fugley** · 06-21-2007, 04:59 PM

Does amortisation just mean reducing the value of an asset to zero over a fixed period. Or is it more complicated than that. I'm discussing it on a football forum thing.

Cheers

**jimbo12345** · 06-21-2007, 05:05 PM

depends on the circumstances Mr Fudgley. It's generally a yearly charge made on a companies P&L sheet to make any vtangable/intangable liability or debt to the value of sweet FA over time.

In real terms, think mortgage. Pay it off bit by bit. Eventually house is yours, no debt.

If i was cynical, i'd say thats what Ken Bates did at Leeds United.

NB I am a business analyst/consultant, not a financial analyst/accountant.

**jimbo12345** · 06-21-2007, 05:08 PM

( i checked on google, i am sort of right)

**Mr JP Fugley** · 06-21-2007, 05:10 PM

Specifically footballers, Celtic have been doing it for a number of years and as I understand it we're done now. Part of the reason for the good profits last year if I understand correctly.

I was discussing it with a Villa supporter and it appears to me they have been doing the same thing.

I suppose the markets don't really like players being assets, too much risk of them becoming worth zilch with a bad injury.

**jimbo12345** · 06-21-2007, 05:36 PM

Ah yes, but clubs generally receive high payouts for quality injured players. Yes, the clubs pay a lot to insure the quality players, but imagine how difficult to value each individual player insurance rates, when performances, injuries, transfers etc change weekly/daily etc. They are generally overvalued in this case, mainly due to hype, publicity, a lucky couple of weeks.

I believe most lower divisions have a pretty set rate for insuring players, which would increase obviously if a player bagged 50 goals in a season, as for that club to loose such an asset, would be a bigger blow than to loose the 3rd choice keeper.

Don't see players like Beckham/Ronaldo/Andy Booth as players, more as brands with hard to define intangable assets (great skills leading to more public interest) which in turn leads to revenue generated through shirt sales, advertising for the player and club, sponsorships, which are both tangable and intangable.

Look what happened to Italian league, the bubble burst a while back. The cost to maintain the assets (players/stadiums etc) became too large for the revenues they were bringing in.

As for the long term payoff you mentioned, it has pros and cons i believe. Cons, yes, if said player doesnt perform as club expected, this has negative effect on results/shirt sales/advertising, which you could say is a loss to the clun. If he breaks his spine and never plays again, club is usally well covered.

Pros, say you buy a player for 10 million over 10 years, barring/dependant on interest clauses, is 1 million a year. To say you got a bargain for buying a player for 10 million right now is fair enough, as that one million in 10 years will PROBABLY be worth a lt less than it is now. Think inflation. If he doesn't perform, sell him and try to recoup money. A loss may be made here, but thats football. But think of the hard to value things like advertsing, media coverage that that player brought to the club. Add that to shirt sales, the gol he scored to win thw A cup.

Football, particularly transfers, is always a gamble. SOme might say luck, but look at who Man U have bought, huge young names, although seemingly pricey, SHOULD bring in a hell of a lot more revenue soley and by their team contribution over the period of their contract. If they are injured, go back to the insurance part.

It's 138am here, i'm a little drunk and ranting shite. Forgive me, i knw what i mean, and thats all that matters.

**Mr JP Fugley** · 06-21-2007, 05:40 PM

So why would a club like Celtic do it. There must be some business reason. Or have you already explained it and I'm too non-accountanty to understand.

Tell you what, I'll get pished and read it again. That sounds the wisest way.

**jimbo12345** · 06-21-2007, 05:53 PM

playing for a player over time? I'm no financial/accounting person. But, i'd say that the mathematics before such a player is bought to a club is prety intense. CLubs can no longer throw around figures willy nilly. They need to assure shareholders/board members that the player is a sound investment.

I'd say, for example Celtic, either have cash flow problems or, a very good long term plan and require revenue for other masterplans. Celtc is business 1st. I used leeds as an exact opposite example. They went silly, spent money they never had in a hope that they got lucky and won the major tournaments....they nearly did. Look where they are now.

Celtic has a decent setup, with good value in the team they have. They may splash the cash occasionally for a 50 goal a year striker, as that player SHOULD improve the teams performance/stadium attendances/shirt sales/cup and title chances. Not a dead-cert, but a better chance than me or u.

Look at Beckham, he played shite, Madrid didnt want him. LA buy him soley for media purposes. He played well again, Madrid dont want to let him go, as his value, not only as a player, but as a marketable asset to improve status amongst the media scrum etc.

It's all about the tangable and the intgable, and having a sound judgement on valuing it correctly. Martin O'Neill was a genius of that. Fergie is. Wenger not bad. Mourhinio, definitely not.

**Mr JP Fugley** · 06-21-2007, 07:23 PM

Not paying for a player over time, no. They had the players listed as assets of the business and over a number of years removed them by this process of amortisation. They no longer form part of the assets.

Celtic have a fantastic financial set-up now. I think bringing Peter Lawwell in was an excellent move.