Coppello

I'm not 100% clear on the EFL rules for this but it would be allowed in the Premier League. I've also been a bit nervous about Villa forecasting this as it will allow them to write off a substantial amount of any loss.

Applying accounting rules, profit on transactions with related parties should be at an arms length. Given that they’ve had an independent valuation, who have determined that the fair value of Pride Park is £80m (which is farcical), they’ve technically worked within the rules. The problem is that transactions with related parties can be genuine and it can’t always be genuine. For example, we can the rugby club rent for the use of Ashton Gate in the accounts of the stadium. We’ve actually charged rent at an arms length and it’s fair for them to pay for the use of the stadium. What they’ve done is the financial equivalent of scoring a goal when a player is down injured; there’s no rules against it but it’s unethical. Unless the EFL enforce a change in rules, the same thing will continue to happen. Legally, I don’t think the EFL can ask them to strike it off this years accounts. What I think they can do is scrutinise the accounts and appoint a surveyor to conduct another valuation. I have absolutely no idea how they can reach £80m for a 20 year old stadium built on a converted rubbish tip in Derbyshire.

@Downend City The EFL have their own accountants which monitor and scrutinise the FFP submissions of clubs. Part of it is based on the financial statements which are audited by an external accounting firm and should provide assurance that they meet the relevant accounting standards. However, there are several deductions made to the accounts to make them more in line with the FFP requirements and the auditors will not look at this as they’re looking at them from a completely legal view. The figures reported in the accounts, less the deductions, will then be scrutinised by the EFL’s accountants. They will have limited information on how the deducted items have been made up, for example they have limited oversight over the total academy spend, the deductions for women’s football, community spend etc. which makes their job a little harder. However, the most contentious piece of the reporting is the forecasts submitted for the upcoming year(s). The auditors will not review these and therefore the whole review is performed by the EFL and this is where the scope for creative accounting increases significantly. In the Premier League, the forecasts are heavily scrutinised and if you report significant profits from player trading, they threaten to hold your hand through the transfer window.

Yeah, it wasn't exactly groundbreaking stuff but he did say quite a few things which did make me think. I agree with your point in terms of failing the PL FFP requirements, it is bloody hard to do. At the same time, they're marking you pretty tightly and query many of the numbers that go into your forecast. At the club I work at, the PL contact us with queries each week despite there being significant headroom. With a culture as poor as it seems with the EFL, I can't imagine that they can oversee the activities of 72 clubs that closely.

I had an interesting conversation with a former Finance Director of a Championship club last regarding the state of the EFL at the moment. He described the FFP reporting as farcical and indicated that the finance department of the EFL were pretty incompetent. Often he would phone the EFL's office, who are based in Preston, and ask Tad Detko (FD of EFL) queries regarding the reporting requirements. In a thick Lancashire accent, Tad would often respond with, "If it doesn't take the piss, I'm happy". It sums up the league's culture towards financial fair play and clubs have pushed their luck more and more. It is quite a contrast to the Premier League who are in constant communication with clubs and drive the reporting requirements. It sounds like those in charge of FFP at the EFL are simply not competent and perhaps do not have the capacity to monitor all 72 clubs.

Dean Elgar always seems to get runs against us. Such a dangerous player and how I wish he was back.

128-5. I'm glad Ben Cox has gone, he can be a dangerous player on his day.

Another one from the King's College Taunton cricket factory. They've developed a fantastic cricket Centre of Excellence in the past few years and its output has done a lot for Somerset CCC.

You've asked a short but bloody difficult question @Grey Fox. The answer is most probably but there's a difference between taxable profit and accounting profit. The taxable profit doesn't get published and is hard to work out. But it is very likely they'd pay quite a lot of tax on the sale of the stadium.

I think we're agreeing with the same point haha. I understand Derby (or more likely the owner) used a surveyor to value the stadium and obtain a report. This would prove to the auditors that the transaction was conducted at the market price. However, the value of the stadium on the accounts would've been kept at the historical cost i.e. the cost of construction (and capital expenditure since then) less depreciation charged over the last twenty years or so. In their defence, using an historical cost to calculate the profit is not something that I have a problem with as it's completely legitimate from an accounting perspective. The issue I have is that the surveyors valuation of £81.1m and the consideration that this what the stadium is valued at. As others have discussed on here previously, this should be adjusted to a market value or an arms-length transaction. I'd be surprised if another surveyor valued the stadium at 50% of the £81.1m used as the sales price.

This morning I had a meeting with an independent surveyor who were conducting a stadium valuation. The consultants who I spoke to had worked on the valuations of a number of Premier League and Championship grounds, none of which were Pride Park. I discussed the valuation of £80m with them and they could not fathom how they reached that figure. The ground valuations are commonly made through the depreciated replacement cost method i.e. what would it cost to build a replica stadium and then depreciate over the number of years the stadium has been in existence to account for wear and tear. The stadium is built on an industrial estate away from the City centre and therefore the land value is pretty low. A stadium such as Craven Cottage would have a decent valuation given the location and property prices in the area. They estimated that the valuation should be lower than this and I believe that the independent valuers report should be scrutinised. The Football League should engaged their own surveyors to conduct a valuation. This would then help to determine whether the transaction occurred at an 'arm's length'.

I'm certain we report under Bristol City Holdings Ltd in order to capture every element of the football club. We are allowed to report the non-match day income as part of our FFP as it shows that a club can generate income without relying on handouts from the EFL. I don't doubt for a second that we are reporting things honestly and being transparent. That what makes the Derby debacle so infuriating.

In all honesty, I've not actually read into the accounts as much as I should have but this is my interpretation of the group which I am pretty confident about. From a football club, I imagine we report at a consolidated level to the Football League. I've knocked together what I perceive the football section of the group looks like (although I am aware of there being other companies sitting above BCHL): As you can see the stadium sits below the holding company which is common practice for many football clubs. Regarding the rental income, as the Bristol City Holdings Ltd report as a consolidated set of accounts, ie the results of Ashton Gate Stadium Ltd and Bristol City Football Club Ltd. When preparing consolidated accounts, intra-group transactions are eliminated and therefore any rental transactions between Ashton Gate Stadium Ltd and Bristol City Football Club Ltd will net off. The group accounts are, in its simplest form, the results of the companies added together. If my quick scan of the accounts is correct, we will actually benefit from the rental income from the rugby club.

No, the stadium is owned by Bristol City Holdings Ltd which is the football club.

They say that they have had the stadium independently valued by experts which is interesting. I'd struggle to see how the stadium valuation of £80m has been ascertained using the depreciated replacement cost method given that it's not brand new and it's in Derby, not the most expensive area of the country. I'm currently working on a stadium valuation at the moment in a more affluent area of the country and I'd be amazed if it comes out at 75% of the fee. I do wonder if we will see a wave of Championship and Premier League clubs following this method which would be absolutely ridiculous. It throws FFP rules into complete disrepute. The fact that it has been audited is a bit of an embarrassment to Smith Cooper (their audit firm) who has signed this off. As a side note, it is commonly stated that the football club do not own the stadium which is a little misleading. Yes, it's not held in the same legal entity as the footballing activity but it is held in a company that Bristol City Holdings Ltd own 100% of. It doesn't really change things in the grand scheme of things because if it was held in Bristol City Football Club Ltd, Lansdown could still asset strip the football club and sell off Ashton Gate. It's just slightly easier now it's in a separate entity as he could effectively sell shares in it but the Bristol City group still 100% own the stadium.

When the most recent TV deal was announced, the Premier League introduced a short-term cost control element to the FFP reporting. This basically meant that, if a club had wage costs of over £67m, these costs could only be increased by £7m year-on-year. This doesn't sound a lot when you consider it works out as £135k per week but this threshold can be supplemented by the Company's Own Revenue Uplift (CORU). This can be calculated as the average player trading profit from the past three years OR uplift in commercial revenues. This was put in place to dissuade clubs from splashing all of the additional TV money on wages. In reality, the rules are very easy to get around and is one of the reasons why you're seeing clubs have an official tractor sponsor or the signing of other odd commercial deals. Since this was introduced, no Premier League club has failed this test and it is being removed next year. In addition, if a Premier League club wanted to obtain a UEFA license to enter a European competition, it can only make a loss of £105m over the past three seasons. Again, this is quite a difficult threshold to breach and does not necessarily put off many clubs. With Premier League TV revenues stalling, I think we've hit the ceiling and we will not continue to see wage and transfer records broken year after year. When the broadcasting rights are put up for auction in a few years, the market may be shook up again but I think international TV companies are becoming less interested.. Current FFP rules are very far from penalising a lot of clubs and therefore we will not see a huge change in the figures seen above over the next few years.

Where did you see this?

I don't know anything about aviation so this may be a stupid question - would a plane of this size have a black box?

You'd amortise it over 3 years initially as there's no obligation to extend the contract and therefore the initial life is just 3 years. I actually don't know the answer to the second question as I've never really thought about it. I thought it was simply different wording calling something a new deal - obviously exercising an option to extend what happened yesterday is a little different. Regarding the amortisation you'd rebase the remaining "cost" of the transfer fee over the new period. For example, let's just take the COD example, using £3m as a transfer price (as dividing £2m over 3 years is horrible!): - We purchased him in 16/17 for £3m on a 3 year deal. - We'd amortise that £3m over three years (£1m per year). However, let's say we exercised the option two years into the contract, you'd rebase the amortisation charge. So there's £1m left on the balance but now two years left of the contract. Therefore the charge would then change to £500k per year. That's a very high level summary and it obviously gets a little more complex than that. One of the good things about the sales of Bobby Reid and Joe Bryan in the summer is that they're academy graduates and would therefore not have any value on the balance sheet before their sale. Therefore, the transaction value will be pretty much pure profit which will help with things from an FFP perspective.

Exactly right - you'd do well to make a loss that large with the TV money floating around. Yeah, the STCC can cause a headache but it's a bit of a crap rule in all fairness as there's a few loopholes, particularly for the larger clubs. The purpose of it was to stop teams splashing all of the new tv money on the new players and therefore you can only increase your wages by £7m a year. However, if you can prove you're not solely reliant on the TV money and have large commercial revenues, you can get past that rule. So it doesn't really affect the big 6 clubs but puts a massive stranglehold on the middle tier of clubs such as Watford, Palace, Southampton etc. I can see this rule being amended in the near future to be honest.

Good thread by the way @Mr Popodopolous, I started developing a website analysing FFP but had to give it up due to work. The growing importance of it is quite interesting. I'm actually an accountant a football club and part of my role is analysing their FFP position. It's a Premier League club though so they're subject to slightly different rules. Yeah, I can't see a get out unless they get promoted this season. They really have gone gung-ho and show no signs in slowing down in terms of spending.

To follow on from this debate (albeit a week later!), you would have to recognise them in the period in which the window opens. If they sold Grealish, the transaction wouldn't be able to happen until next year's accounts, i.e. after the 1st June 2019. That is because the risk and rewards of owning the player wouldn't transfer until the window was open. Obviously this differs if he went to a country without the window restrictions. Never thought I'd be having an accounting debate on OTIB!

The Andi Weimann of the heavyweight division.

FFS ? I was looking on twitter for streams and typed in Haye v Chisora as well...

http://zoneland90.blogspot.com/p/r.html