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The Championship FFP Thread (Merged)


Mr Popodopolous

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7 minutes ago, downendcity said:

....but this is the core of the problem.

The whole ethos of ffp is that a club's day to day financial management enables it to stay within the financial parameters set down within the rules i.e. it lives within it's financial means and doesn't have to rely on metaphorically finding a few million down the back of the sofa at the 11th hour to bail itself out. We all know that it was the EFL's cock up when drafting the new rules that left the inadvertent loophole that enabled clubs to sell their stadia. You previously referred to the number of clubs that voted for the new rules, but I wonder whether the majority realised this loophole existed when voting, as sale of stadia to a related third party was not allowed under the previous rules?

It's a bit like a couple living a lifestyle beyond their incomes,  but being secure in the knowledge that at the end of 3 years of financial reckless living they can "balance the books " by selling their home to one of their children to raise the money to pay off loans and credit cards. The problem is that they don't own the home anymore, so won't be able to do the same thing when they next get into financial difficulty.

The other factor is your statement that " the sale figure was most likely determined by how much was needed to ensure the club was compliant". Fair value isn't determined by the amount the club needed to avoid ffp penalties, it is based on proper valuation principles,. This point has been debated on here in relation to Derby's sale of Pride Park. The crucial factor is that there is no established and active market in football stadium sales so no comparative evidence of values so it gives a lot of leeway, even if club's appoint professionally qualified and independent valuers. 

That you only just scraped in by hitting form late in the season thanks to Grealish's return from injury, misses the point completely. Ffp  runs over a rolling 3 year cycle and even if the first 2 years were under different ownership, if the club operated outside the ffp limits over those 3 years it gained an advantage over every other club that had managed it's finances in order to comply. Notwithstanding the problems of shifting players out of the club, lets not forget that Villa had 3 years notice of the ffp deadline last March and during those 3 years had the benefit   ( and advantage) of parachute payments to make the transition less painful. That Xia chose to use parachute payments as a  war chest to boost Villa's promotion chances, is the reason for the problems that followed. Had promotion been achieved within the first 2 years, as was expected, all the financial problems would have been resolved in an instance. It wasn't and predicated all that followed , including the sale of VP where " the sale figure was most likely determined by how much was needed to ensure the club was compliant"

Again, QED.

 

 

 

Quite so, @downendcity .

Can't respond to these posts in full but definitely agree that it was a) A cockup that most norticed and that some did and b) 3 years all with parachute payments and c) Valuations are very subjective! Football stadia are unique, specialised assets which have no active market and are as such very hard to value- hence DRC. Yet Villa Park at £56.7m doesn't feel exorbitant on some level- but indeed proper valuation principles, no established market- and who is to say that different valuation methods don't throw up drastically different results!

@Delta Will respond to your post in full later but what is/was Villa Park if not a Tangible Fixed Asset? I see no reference to it stated separately so it must have been Impaired to some extent...indeed the total Tangible Fixed Assets at the time of relegation were stated within the group as £41-42m, this maybe before Depreciation but how is the Depreciation treated in terms of this- both historic and post Impairment? This is why it needs significant investigation and validation or otherwise before approval.

Plus the spirit of the rules...this is stated within the regulations, as to whether to consider cases and whether there is an attempt to circumvent the regulations, this is or can be factored in- check rule 11.3.1 on the EFL website! Question is, whether this still holds under the new regs, it certainly should!

Lastly, NSWE Stadium Limited was hastily created in May 2019 or so it showed at CH. Actually, it was more complex- it was removed from the NSWE Group (formerly Recon Group) having been created in 2017 and stuck under the direct control of the owners. Rule 11.3.1 could well be applicable here as well!

https://www.efl.com/-more/governance/efl-rules--regulations/appendix-5---financial-fair-play-regulations/

I'd be surprised if there isn't a thorough investigation, put it that way...there surely are grounds! What's good for Derby and Sheffield Wednesday especially...these cases can be reopened!

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One more note- possibly interesting, possibly not?

I see that the Impairment in 2015/16 was included in subsequent years bundled in under Accumulated Depreciation, ie all classed as that- is that a standard treatment? Can potentially muddy the waters certainly I'd have thought!

@Coppello you surely have views on this, from an accounting POV- would be fascinating to hear them!

Could just as easily have contained a series of errors too, different owners, not accounting for issues correctly- not impossible, is it? Doesn't mean it wouldn't be classed as a breach still but owners may have believed their sale price was just and fair- 3 different owners, 4 if you include co-owners, all from different financial backgrounds, 3 of them with different accounting standards- Lerner and Edens, USA, Sawiris- Egypt, Xia- China.

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1 hour ago, downendcity said:

....but this is the core of the problem.

The whole ethos of ffp is that a club's day to day financial management enables it to stay within the financial parameters set down within the rules i.e. it lives within it's financial means and doesn't have to rely on metaphorically finding a few million down the back of the sofa at the 11th hour to bail itself out. We all know that it was the EFL's cock up when drafting the new rules that left the inadvertent loophole that enabled clubs to sell their stadia. You previously referred to the number of clubs that voted for the new rules, but I wonder whether the majority realised this loophole existed when voting, as sale of stadia to a related third party was not allowed under the previous rules?

It's a bit like a couple living a lifestyle beyond their incomes,  but being secure in the knowledge that at the end of 3 years of financial reckless living they can "balance the books " by selling their home to one of their children to raise the money to pay off loans and credit cards. The problem is that they don't own the home anymore, so won't be able to do the same thing when they next get into financial difficulty.

The other factor is your statement that " the sale figure was most likely determined by how much was needed to ensure the club was compliant". Fair value isn't determined by the amount the club needed to avoid ffp penalties, it is based on proper valuation principles,. This point has been debated on here in relation to Derby's sale of Pride Park. The crucial factor is that there is no established and active market in football stadium sales so no comparative evidence of values so it gives a lot of leeway, even if club's appoint professionally qualified and independent valuers. 

That you only just scraped in by hitting form late in the season thanks to Grealish's return from injury, misses the point completely. Ffp  runs over a rolling 3 year cycle and even if the first 2 years were under different ownership, if the club operated outside the ffp limits over those 3 years it gained an advantage over every other club that had managed it's finances in order to comply. Notwithstanding the problems of shifting players out of the club, lets not forget that Villa had 3 years notice of the ffp deadline last March and during those 3 years had the benefit   ( and advantage) of parachute payments to make the transition less painful. That Xia chose to use parachute payments as a  war chest to boost Villa's promotion chances, is the reason for the problems that followed. Had promotion been achieved within the first 2 years, as was expected, all the financial problems would have been resolved in an instance. It wasn't and predicated all that followed , including the sale of VP where " the sale figure was most likely determined by how much was needed to ensure the club was compliant"

Again, QED.

 

 

 

Villa did not make up the rules - We simply adhered to them.  It is irrelevant if we "found a few million down the back of the sofa" if it was permitted.  We had the ability to lose £50 million lawfully and within the parameters of EFL regulations.  Our situation is nothing like a couple living beyond their means because our owners could afford the comparative drop in the ocean (to them) that was required to keep the club competitive. You yourselves appear to benefit from 3rd party stadium ownership.  I don't see the difference.

It was actually 1 year of reckless living, not 3.

I very much doubt that the majority of owners did not realise what they were agreeing to.

Regarding the stadium - It was owned by NSWE.  They can sell it to who they like for whatever they like.  The fact that it was probably sold for less than its market value is also irrelevant.  The only time the EFL can comment/intervene is if it was sold for more than its market value.

 

Mr P - VP was/is a tangible asset but its value would not depreciate greatly by change of circumstances of the club ie relegation.  It would still host football matches, still had the pub & leisure centre and also the ability to host other events like pop concerts, rugby matches etc, as I believe your stadium does.  There are also regular stadium tours.  Furthemore, the hospitality areas are used during the week for conferences, business seminars etc as well as being hired out for functions such as weddings.  None of that would change with relegation.

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31 minutes ago, Delta said:

Villa did not make up the rules - We simply adhered to them.  It is irrelevant if we "found a few million down the back of the sofa" if it was permitted.  We had the ability to lose £50 million lawfully and within the parameters of EFL regulations.  Our situation is nothing like a couple living beyond their means because our owners could afford the comparative drop in the ocean (to them) that was required to keep the club competitive. You yourselves appear to benefit from 3rd party stadium ownership.  I don't see the difference.

It was actually 1 year of reckless living, not 3.

I very much doubt that the majority of owners did not realise what they were agreeing to.

Regarding the stadium - It was owned by NSWE.  They can sell it to who they like for whatever they like.  The fact that it was probably sold for less than its market value is also irrelevant.  The only time the EFL can comment/intervene is if it was sold for more than its market value.

 

Mr P - VP was/is a tangible asset but its value would not depreciate greatly by change of circumstances of the club ie relegation.  It would still host football matches, still had the pub & leisure centre and also the ability to host other events like pop concerts, rugby matches etc, as I believe your stadium does.  There are also regular stadium tours.  Furthemore, the hospitality areas are used during the week for conferences, business seminars etc as well as being hired out for functions such as weddings.  None of that would change with relegation.

In which case, what was the £44.8m Impairment all about in 2015/16? Of Tangible Fixed Assets...an Impairment means that a Fixed Asset is written down to its recoverable amount- Recoverable amount= the Greater of Value-in-use or Fair Value.

If the Impairment was not necessarily justified, then the profit on the transaction is open to question- and I agree, relegation does not have a tendency to slash assets in that manner- no other club that I can think of has done anything similar! Maybe a small Impairment of 1-2% but never anything like that.

The point is though that with an Impairment such as this, the asset should not be carried at a greater amount than its Recoverable Amount- it's all there in Accounting Standards and given that Tangible Assets in 2015/16 ie during the relegation season, were listed as being £41-42m in Total...£56.7m for one of them a few years later is...interesting?

May all be fine, but OTOH it is also possible that either the price needs looking at afresh, the valuation method- or the new Book Value to determine the new £56.7m-X=Profit. May all be fine but definitely needs thorough Investigation. That's all I'm saying...thorough investigation and stress testing.

They can sell it to who they like provided it's Fair value/market value- but has the correct valuation method been chosen? That's another issue to consider- could be part of the reason behind the EFL revision of Pride Park value...down from £81.1m to £50m I believe! Also 2 weeks or so before the end of the Reporting Period in terms of the removal of NSWE Stadium Limited from the group and putting them as the new controlling party- see the below line.

Also even if it's fine under Accounting terms, the FFP reg in question could still come into play- consideration of whether an attempt has been made to circumvent the objectives of FFP!

How come the PL seem not to have signed off the transaction yet if all okay? Do we know that EFL approval was sought and provided?

So many unknown factors in play here! Happy to go with Innocent until proven guilty...

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2 hours ago, Delta said:

Firstly, apologies.  It was Lerner who paid £120 million for the club.  Xia got it for around£60 million (if I recall correctly) with, as you say, a clause if promotion was achieved within 3 years.

I don't think the PL loss had any impact whatsoever on the value of VP.  The club's value may have dropped but the stadium is a separate entity.

We could not have sold players without offers coming in and players being willing to move.  It is not that simple.  We were likely one of the highest payers in the Championship with most aging players on good contracts.  It's noteworthy that upon our promotion ;last year, something like 10 players left the club for nothing, either by way of mutual agreement or because their contracts had run down.  In the final days of Xia, every player was available for transfer but as I say, without bids, nothing could be done.  Apart from Grealish and Chester (who was linked to Stoke) nobody really had a resale value of note.  Furthermore, it would appear that the EFL did not instruct Villa to make any sales, as has been the case in other similar issues.

It was only once the club was sold that we were able to buy a couple of players and bring in loans.  This would have certainly been after obtaining the green light from the EFL to do so.  I know it makes good reading to claim that Villa were a law unto themselves, our fans are arrogant, Prince William had clout etc, etc but all that is rather silly.  The bottom line is that discussions would have taken place that summer and even at that point, the sale of VP would have been discussed and factored in.

I am confident that we are compliant because the owners would not have risked a points deduction and potential hefty fine by blithely carrying on in the transfer market unless cleared to do so by the EFL.  The sale of VP was a fair price when factoring in the other buildings/businesses that form part of the estate.  The ground is iconic with a wide array of modern hospitality areas.  I would imagine (and this is just me) that the sale figure was most likely determined by how much was needed to ensure the club was compliant.  During that summer, promotion looked a distant goal.  We only really scraped it, hitting form for the last 3 months of the season, thanks almost entirely to the return of Grealish after injury.

One of the things a couple of us have questioned is “Sean Harvey”.  By that I mean we wonder whether club owners have spoken to him about their plans, he’s said “yes, that’s fine”, but not formally agreed by the EFL.

There have been a few quotes from Villa, Derby, etc (interestingly all the clubs now being questioned officially, in Villa’s case the PL) saying the EFL agreed it, but never (to my understanding) being able to get the actual EFL to confirm in writing.  Hence our thinking that Sean said it was ok, but that he may have been operating out of his jurisdiction and therefore giving a bum steer.  If that’s the case, it’s probably a bigger mess.

Think on either side it’s all or nothing.

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11 minutes ago, Mr Popodopolous said:

In which case, what was the £44.8m Impairment all about in 2015/16? Of Tangible Fixed Assets...an Impairment means that a Fixed Asset is written down to its recoverable amount- Recoverable amount= the Greater of Value-in-use or Fair Value.

If the Impairment was not necessarily justified, then the profit on the transaction is open to question- and I agree, relegation does not have a tendency to slash assets in that manner- no other club that I can think of has done anything similar! Maybe a small Impairment of 1-2% but never anything like that.

The point is though that with an Impairment such as this, the asset should not be carried at a greater amount than its Recoverable Amount- it's all there in Accounting Standards and given that Tangible Assets in 2015/16 were listed as being £41-42m in Total...£56.7m for one of them is...interesting?

May all be fine, but OTOH it is also possible that either the price needs looking at afresh, the valuation method- or the new Book Value to determine the new £56.7m-X=Profit. May all be fine but definitely needs thorough Investigation. That's all I'm saying...thorough investigation and stress testing.

They can sell it to who they like provided it's Fair value/market value- but has the correct valuation method been chosen? That's another issue to consider- could be part of the EFL revision of Pride Park...down from £81.1m to £50m I believe! Also 2 weeks or so before the end of the Reporting Period in terms of the removal of NSWE Stadium Limited from the group and putting them as the new controlling party,- see the below post.

Also even if it's fine under Accounting terms, the FFP reg in question could still come into play- consideration of whether an attempt has been made to circumvent the objectives of FFP!

How come the PL seem not to have signed off the transaction yet if all okay? Do we know that EFL approval was sought and provided?

So many unknown factors in play here! Happy to go with Innocent until proven guilty...

I have no idea what the £44.8m included but Villa own several pieces of land and bizarrely, properties.  The training ground alone covers several acres and is worth a pretty penny.  In the 4 years between 2015 and 2019, the value of football clubs has increased in any case.  Look at the size of the transfer fees in the Championship for 2015-2016 for example and then look at them for 2019-2020 (Webster being a prime example) TV money has increased considerably and this has a domino effect, filtering through to tangible assets.  What may have been worth £44m in 2016 will undoubtedly be worth considerably more in 2019.

Not too bothered about the PL signing off the transaction - Not sure exactly what they could find wrong?  West Ham sold their ground recently and benefited from a free hand out.  Subsequently, tickets are almost given away and their fan base has almost doubled overnight.  If that was acceptable then they're hardly likely to gripe over a sale that took place whilst Villa were not even members if the PL.

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32 minutes ago, Delta said:

Villa did not make up the rules - We simply adhered to them.  It is irrelevant if we "found a few million down the back of the sofa" if it was permitted.  We had the ability to lose £50 million lawfully and within the parameters of EFL regulations.  Our situation is nothing like a couple living beyond their means because our owners could afford the comparative drop in the ocean (to them) that was required to keep the club competitive. You yourselves appear to benefit from 3rd party stadium ownership.  I don't see the difference.

It was actually 1 year of reckless living, not 3.

I very much doubt that the majority of owners did not realise what they were agreeing to.

Regarding the stadium - It was owned by NSWE.  They can sell it to who they like for whatever they like.  The fact that it was probably sold for less than its market value is also irrelevant.  The only time the EFL can comment/intervene is if it was sold for more than its market value.

 

Mr P - VP was/is a tangible asset but its value would not depreciate greatly by change of circumstances of the club ie relegation.  It would still host football matches, still had the pub & leisure centre and also the ability to host other events like pop concerts, rugby matches etc, as I believe your stadium does.  There are also regular stadium tours.  Furthemore, the hospitality areas are used during the week for conferences, business seminars etc as well as being hired out for functions such as weddings.  None of that would change with relegation.

I stand to be corrected by City fans with greater financial knowledge than I, but I'm pretty certain that  "third party" ownership of Ashton Gate occurred prior to the current ffp rules. I am pretty certain it was done by the owner when he reorganised the club under the Bristol Sport umbrella ( it may even have preceded that) and not for any financial motivation i.e. Bristol City FC did not benefit financially from the change of ownership.

 

 

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14 minutes ago, Davefevs said:

One of the things a couple of us have questioned is “Sean Harvey”.  By that I mean we wonder whether club owners have spoken to him about their plans, he’s said “yes, that’s fine”, but not formally agreed by the EFL.

There have been a few quotes from Villa, Derby, etc (interestingly all the clubs now being questioned officially, in Villa’s case the PL) saying the EFL agreed it, but never (to my understanding) being able to get the actual EFL to confirm in writing.  Hence our thinking that Sean said it was ok, but that he may have been operating out of his jurisdiction and therefore giving a bum steer.  If that’s the case, it’s probably a bigger mess.

Think on either side it’s all or nothing.

I would assume that Purslow knew what he was doing given that he sat on the original FFP committee.  That said, it is worrying that others appear to have spoken with Harvey.  You would think they all speak with each other about these matters.

The fact that Villa were never given a soft embargo suggests (to me anyway) that they were always in communication and compliant with the EFL and their regulations.

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2 minutes ago, Delta said:

I would assume that Purslow knew what he was doing given that he sat on the original FFP committee.  That said, it is worrying that others appear to have spoken with Harvey.  You would think they all speak with each other about these matters.

The fact that Villa were never given a soft embargo suggests (to me anyway) that they were always in communication and compliant with the EFL and their regulations.

We will find out shortly. ?

Interestingly, Andy Holt (ASFC) stated he’d never had the opportunity to review and vote on those changes.

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25 minutes ago, Delta said:

I have no idea what the £44.8m included but Villa own several pieces of land and bizarrely, properties.  The training ground alone covers several acres and is worth a pretty penny.  In the 4 years between 2015 and 2019, the value of football clubs has increased in any case.  Look at the size of the transfer fees in the Championship for 2015-2016 for example and then look at them for 2019-2020 (Webster being a prime example) TV money has increased considerably and this has a domino effect, filtering through to tangible assets.  What may have been worth £44m in 2016 will undoubtedly be worth considerably more in 2019.

Not too bothered about the PL signing off the transaction - Not sure exactly what they could find wrong?  West Ham sold their ground recently and benefited from a free hand out.  Subsequently, tickets are almost given away and their fan base has almost doubled overnight.  If that was acceptable then they're hardly likely to gripe over a sale that took place whilst Villa were not even members if the PL.

Villa Park will be amongst those Tangible Fixed Assets in the Group Accounts! It's bound to be...unless it was owned by a different company?

Upton Park, based in London- sold for £40m in 2016 or 2017. Despite being a PL side at that time- having said that people wonder whether it may have been undersold?

I'm not so sure on the Tangible Assets- and this Tangible Fixed Assets includes not just Villa Park but all- all- Tangible Fixed Assets! Anything under Tangible Fixed Assets will be included in that- you are not factoring in Recoverable Value and adjustments to this here! Cannot be carried at more than the Recoverable Value but that said, there are questions about whether Depreciation incurred on a historic/an accumulated basis may increase the Recoverable Value significantly, The training ground, the land and maybe the properties- though the latter could've been stated separately in the accounts- will all have been included under Tangible Fixed Assets, even if not all were necessarily Impaired.

If the PL don't sign it off and haven't approved of it, then that means that it has technically not been approved- which means that the risk of punishment is there, the right to investigate further is there! That's what it means- and given the rules are Harmonised I suspect the EFL might follow the PL lead if not carry out their own investigations on return.

The West Ham case is irrelevant in a sense- a bit of whataboutery. Firstly this was genuinely disposed of ie sold from the club to Galliard Homes I believe. A genuine third party, and an actual out and out removal of the ground from anything to do with the club- not a sale and leaseback to a commonly owned company! They are not the same, even if in terms of profit on disposal they are- but for FFP it's less clearcut!

Ah yes, but the FFP rules in the PL and Championship are now joined up- or are meant to be. So the EPL absolutely have the right to examine this in depth and if necessary, disallow or adjust the profit, perhaps in coordination with the EFL- this was the first full 3 year cycle of the Harmonised Regulations. The old system was if in one year breach, a team will go up, pay a fine, stay down- Transfer embargo.

This all changed effective from 2016/17 in full, with some transitional arrangements from 2014/15-2016/17 3 year rolling period.

Edit: The Properties may come under Fixed Asset Investments.  Worth checking the Reform Acquisitions Limited accounts (old name under Lerner- now NSWE Sports Limited) for 2015/16...there's a major Impairment there! Or worth checking Aston Villa Limited for the same season- there is an Impairment of £35m there that season! Aston Villa Limited was at that time categorised as the principal activity being Property Investment!

We're all going round in circles tbh though- I'm happy enough to call it quits until the 2018/19 Accounts are published!

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3 minutes ago, Delta said:

I have no idea what the £44.8m included but Villa own several pieces of land and bizarrely, properties.  The training ground alone covers several acres and is worth a pretty penny.  In the 4 years between 2015 and 2019, the value of football clubs has increased in any case.  Look at the size of the transfer fees in the Championship for 2015-2016 for example and then look at them for 2019-2020 (Webster being a prime example) TV money has increased considerably and this has a domino effect, filtering through to tangible assets.  What may have been worth £44m in 2016 will undoubtedly be worth considerably more in 2019.

Not too bothered about the PL signing off the transaction - Not sure exactly what they could find wrong?  West Ham sold their ground recently and benefited from a free hand out.  Subsequently, tickets are almost given away and their fan base has almost doubled overnight.  If that was acceptable then they're hardly likely to gripe over a sale that took place whilst Villa were not even members if the PL.

West Ham sold their ground on the open market - not by a paper transaction transferring ownership to a related third party, generating  profit needed to avoid a financial problem . It is their good fortune that they were able to negotiate a phenomenal deal on the Olympic Stadium  which has given them a huge financial benefit, but that does not justify  the actions of any other club, if that club is breaking the rules ( I accept that neither Villa, Derby or Wednesday have been found guilty of rule breaking as yet)

The increase in player's value will affect the value of a football club because they are a club's assets, however, while the value of players increases I can't see how this would lead to an increase in the value of a club's stadium. Revenue has a big effect on a club's ( business's) value so if Villa stay up this season and were to be sold in the summer  it's value would be much greater than if it were to be sold say in a couple of years time if you had then been relegated to the championship. I don't know the figures for Villa's worth, but  lets say as a premier league club ACFC is worth £150m but as a championship club it would be worth £100m, would that also mean Villa Park value falls by a third when they are in the championship?

Conversely, if Birmingham Council decided to designate the area for housing development and Villa decided to selll and build a brand new stadium elsewhere ( Unlikely I know) then it is quite possible that Villa's value as a club could go down if they were relegated to the championship while the value of VP could increase because of it's potential for housing development.

 

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One more note- and I promise to leave it after this.

However I did look back to their 2006-07 accounts when Lerner took over Aston Villa. There was a Fair Value Adjustment to Tangible Fixed Assets at that time...

At that time of takeover:

Quote

Book Value                            Revaluation   Provisional Fair Value

£'000                                      £'000                    £'000 

Tangible Fixed Assets            

41,731                                 54,292                  96,023

This is the most recent Fair Value Adjustment, save for the Impairment. This suggests to me that Fixed Assets maybe were being carried around Fair Value- or that the 2015/16 Impairment was doing this process correctly and found that it was no longer worth x!

The Depreciation Clock did reset around this time, so I'm still struggling to see how it all pieces together.

Talking of Depreciation, looked again at Sheffield Wednesday- two notable things.

a) Even if Depreciation Eliminated on Disposal in terms of Depreciated Replacement Cost it's only £8-9m in total- and that's not including the Depreciation Clock resets on valuation but all of the Depreciation listed from Beginning to sale!.

b) Talking of Historic, I note that pre 2001-02 they neglected to carry out any Depreciation of Hillsborough- feeling it's about £25-30m overvalued in total!

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On 17/01/2020 at 08:16, Davefevs said:

@Mr Popodopolous not sure if you’re on Twitter but follow this bloke if so. 

 

£10m seems excessive for the players wwhose contract will expire at the end of the season.
Forsyth - £200k signing in 2013, so little impact when released. likely £10-15k pw.
Huddlestone - £2m signing. Small P&S impact when released. c£25k pw
Bennett - Academy graduate, so little P&S impact when released. Low £1,000's pw.
Anya - £4m signing and a big impact on P&S when released. c£30k pw.
Martin - Free transfer, so little impact when released. c£40k pw.

The worst case being what ever it costs to wipe out the amortisation remaining, will be balanced out by reduced wages. This also ignores the reduction in wages over the past 2 years, estimated to be £10m lower since the 17/18 season ended.

20 hours ago, Mr Popodopolous said:

Good post @Davefevs

I see comments underneath stating that the EFL authorised it. EFL...or Harvey? Two very different things!

Besides which, maybe they authorised the actual transaction in respect of 'Yes, you can sell and leaseback the stadium...' but that's it! Price can be adjusted, cases can be reopened retrospectively- or maybe there was an ambiguity- those conversations in summer 2018 would be fascinating to have seen, heard- have been a fly on the wall at.

Oh yeah, the Amortisation method thing- suppose the flipside might be that profits on players sold are lower under residual value though...definitely seems like it was more of a boost for Derby than not though.

In the case of Derby (club statement), the EFL Executive was involved in all stages of the stadium sale, as well as giving approval and signing it off in writing. The EFL also gave us written approval for the use of our amortisation policy.

17 hours ago, Mr Popodopolous said:

Forgot to add, for any club who has been proven to have been guilty of breaching FFP and perhaps cheating enroute to promotion. 

In addition to the appropriate points penalty- overspend, mitigation, aggravating etc, based on the tariff system they should also forfeit their parachute payments or the right to have them count as FFP income. 

Perhaps on a sliding scale, ie the bigger the breach the bigger the removal!

At the moment clubs with parachute payments seem to spend that money in the hope of going up before the tap's turned off. Once one of these club's is heavily punished, I expect the attitude of relegated clubs to change.
Stoke are the ones to watch as they need to offload the high earners to reduce their spend on wages. But, at the same time, they can't sell anyone without making a loss on them, and harming their P&S results in the process. It's why they've loaned so many out rather than selling them. Instead of selling them for a bit of cash, P&S actually encourages them to do otherwise... that sounds like the opposite to what P&S is supposed to achieve. 

2 hours ago, Davefevs said:

One of the things a couple of us have questioned is “Sean Harvey”.  By that I mean we wonder whether club owners have spoken to him about their plans, he’s said “yes, that’s fine”, but not formally agreed by the EFL.

There have been a few quotes from Villa, Derby, etc (interestingly all the clubs now being questioned officially, in Villa’s case the PL) saying the EFL agreed it, but never (to my understanding) being able to get the actual EFL to confirm in writing.  Hence our thinking that Sean said it was ok, but that he may have been operating out of his jurisdiction and therefore giving a bum steer.  If that’s the case, it’s probably a bigger mess.

Think on either side it’s all or nothing.

See my reply to the second quote above. 

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13 minutes ago, AnotherDerbyFan said:

£10m seems excessive for the players wwhose contract will expire at the end of the season.
Forsyth - £200k signing in 2013, so little impact when released. likely £10-15k pw.
Huddlestone - £2m signing. Small P&S impact when released. c£25k pw
Bennett - Academy graduate, so little P&S impact when released. Low £1,000's pw.
Anya - £4m signing and a big impact on P&S when released. c£30k pw.
Martin - Free transfer, so little impact when released. c£40k pw.

The worst case being what ever it costs to wipe out the amortisation remaining, will be balanced out by reduced wages. This also ignores the reduction in wages over the past 2 years, estimated to be £10m lower since the 17/18 season ended.

In the case of Derby (club statement), the EFL Executive was involved in all stages of the stadium sale, as well as giving approval and signing it off in writing. The EFL also gave us written approval for the use of our amortisation policy.

At the moment clubs with parachute payments seem to spend that money in the hope of going up before the tap's turned off. Once one of these club's is heavily punished, I expect the attitude of relegated clubs to change.
Stoke are the ones to watch as they need to offload the high earners to reduce their spend on wages. But, at the same time, they can't sell anyone without making a loss on them, and harming their P&S results in the process. It's why they've loaned so many out rather than selling them. Instead of selling them for a bit of cash, P&S actually encourages them to do otherwise... that sounds like the opposite to what P&S is supposed to achieve. 

See my reply to the second quote above. 

Ta.  Makes me wonder even more what is gonna come out, if the above is so, yet EFL still pressing ahead with their charge.

As I said, it’s an all or nothing situation.  You’re either innocent, egg on EFL’s face or guilty, book thrown at you.

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19 minutes ago, Davefevs said:

Ta.  Makes me wonder even more what is gonna come out, if the above is so, yet EFL still pressing ahead with their charge.

As I said, it’s an all or nothing situation.  You’re either innocent, egg on EFL’s face or guilty, book thrown at you.

According to Derby's statement, the EFL have even admitted to making a "mistake". It makes me think we'll be found innocent due to the EFL's incompetence, but rules re-written to prevent this happening in future.

The only problem with that being the rules will no longer be aligned with the Premier League. Would we need to wait for them to change their P&S rules at the same time?

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14 minutes ago, AnotherDerbyFan said:

According to Derby's statement, the EFL have even admitted to making a "mistake". It makes me think we'll be found innocent due to the EFL's incompetence, but rules re-written to prevent this happening in future.

The only problem with that being the rules will no longer be aligned with the Premier League. Would we need to wait for them to change their P&S rules at the same time?

Won’t it be the EFL re-aligning back to the PL?

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15 minutes ago, Davefevs said:

Won’t it be the EFL re-aligning back to the PL?

The EFL currently is aligned, is it not? That's why we were able to sell our stadium for a P&S profit... PL rules allowed it but the EFL's (for Championship clubs) previously didn't. The rules were aligned so promoted clubs failing P&S would be punished by the PL (QPR being a prime example). Some obviously didn't check the rules before giving them the thumbs up..

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12 minutes ago, AnotherDerbyFan said:

The EFL currently is aligned, is it not? That's why we were able to sell our stadium for a P&S profit... PL rules allowed it but the EFL's (for Championship clubs) previously didn't. The rules were aligned so promoted clubs failing P&S would be punished by the PL (QPR being a prime example). Some obviously didn't check the rules before giving them the thumbs up..

I might be wrong then.  I thought when the EFL and PL aligned, some doughnut in the EFL forgot to take out the stadium sale rules, hence PL restricts it, EFL allows it.  So I thought the EFL would need to change their rules by removing them?

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Been looking again at the Birmingham one.

Is it possible that their Transaction should cancel out, negate profit/loss/cash flow at the Group level?

Birmingham City FC PLC- Controlled by Birmingham City PLC.

Birmingham City PLC- The overall company is of course Birmingham Sports Holdings Limited (incorporated in Cayman Islands, listed on HKSE).

The assumption- but it could be wrong- but an assumption is that Birmingham City Stadium Ltd brought St Andrews (don't know if anything on the Land Regustry yet).

Persons with Significant Control listed as?

Birmingham Sports Holdings Limited.

Certainly no profit listed in their HKSE results with regards this transaction- not listed in fact, at all!

Their value seems fine, their rent seems fair and they also sold Adams, Jota and seem to have been quite muted in the transfer market but I wonder if it's possible that the transaction should cancel out?

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Swansea released their headline account figures today- don't need to be at CH for ages but we'll see.

https://www.swanseacity.com/news/swansea-city-confirm-latest-accounts

West Brom's will be interesting.

Should also add, Swansea have been getting their house in order quite well.

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1 hour ago, Mr Popodopolous said:

Swansea released their headline account figures today- don't need to be at CH for ages but we'll see.

https://www.swanseacity.com/news/swansea-city-confirm-latest-accounts

West Brom's will be interesting.

Should also add, Swansea have been getting their house in order quite well.

They will be able to sell it one of their owner's other companies to raise a few bob towards ffp then!

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21 hours ago, Mr Popodopolous said:

Been looking again at the Birmingham one.

Is it possible that their Transaction should cancel out, negate profit/loss/cash flow at the Group level?

Birmingham City FC PLC- Controlled by Birmingham City PLC.

Birmingham City PLC- The overall company is of course Birmingham Sports Holdings Limited (incorporated in Cayman Islands, listed on HKSE).

The assumption- but it could be wrong- but an assumption is that Birmingham City Stadium Ltd brought St Andrews (don't know if anything on the Land Regustry yet).

Persons with Significant Control listed as?

Birmingham Sports Holdings Limited.

Certainly no profit listed in their HKSE results with regards this transaction- not listed in fact, at all!

Their value seems fine, their rent seems fair and they also sold Adams, Jota and seem to have been quite muted in the transfer market but I wonder if it's possible that the transaction should cancel out?

On the surface, Birmingham appear to be hard done by.  However, none of us know what goes on behind the scenes.

I think we all accept that the EFL intervened 2 years ago and placed them on a soft embargo whilst investigations were completed.  The fact that Birmingham ignored this embargo and carried on buying players resulted in their points deduction last season.

I have read (and have no idea of the validity of this claim) that the EFL suggested that Birmingham should sell players in January 2019.  Birmingham failed to do so despite several offers on the table for their prize asset Adams (notwithstanding any other offers we don't know about for Jota etc).  The fact that Birmingham again appear to have ignored direct requests from the EFL could explain why they are once again under scrutiny.

Part of Birmingham's woes are stemming from the Harry Redknapp period where big money signings and unsustainable wage agreements were a regular occurrence.  Jota being a prime example who we acquired for peanuts just so they could offload his wages.

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4 hours ago, Delta said:

On the surface, Birmingham appear to be hard done by.  However, none of us know what goes on behind the scenes.

I think we all accept that the EFL intervened 2 years ago and placed them on a soft embargo whilst investigations were completed.  The fact that Birmingham ignored this embargo and carried on buying players resulted in their points deduction last season.

I have read (and have no idea of the validity of this claim) that the EFL suggested that Birmingham should sell players in January 2019.  Birmingham failed to do so despite several offers on the table for their prize asset Adams (notwithstanding any other offers we don't know about for Jota etc).  The fact that Birmingham again appear to have ignored direct requests from the EFL could explain why they are once again under scrutiny.

Part of Birmingham's woes are stemming from the Harry Redknapp period where big money signings and unsustainable wage agreements were a regular occurrence.  Jota being a prime example who we acquired for peanuts just so they could offload his wages.

I'm not sure they're that hard done by- it's more that others have so far not been dealt with accordingly IMO.

I think they could've been docked points regardless tbh- they did overspend by the amount they did, but perhaps a lesser deduction? The ignoring of a soft embargo undoubtedly escalated it but who knows- maybe they wouldn't have been docked points- or as many.

Agreed- £12m was a mooted bid from Burnley- Birmingham fans seem to say it was £8m, £9m- depending on what and where you read even less than those figures.

Well yes, absolutely. 

My point was though, is their ground transaction fully valid or could it cancel out at the Group level? Because if it's sold from one part of the group, ie the most senior compoany in the UK (Birmingham City PLC)- but not the biggest overall, Birmingham Sports Holdings Limited- is that not more of an asset transfer than a proper sale- and how would the profit be accounted for? Group structure goes something like this:

Birmingham Sports Holdings Limited- Listed on HKSE, domiciled in Cayman Islands.

Birmingham City PLC- Biggest UK Company, Group until BSH got involved.

Birmingham City FC PLC- Presumably the football operations, or the bulk- the above some small Holding stuff in addition.

Birmingham City Stadium Limited- The new owners of the ground- believe it to be a subsidiary that was setup last May for that purpose!

Birmingham City PLC or Birmingham City FC PLC sold the ground to Birmingham City Stadium Limited- both in one way come under the control of Birmingham Sports Holdings Limited, but one is controlled or listed at CH as controlling party being the owners/directors- think that would be Birmingham City Stadium Limited- whereas Birmingham City PLC is by BSH.

I've been looking online for the answer but nothing yet! Contradictory answers at least...

In short, should we be using the HKSE listing as the relevant group company- in which case it cancels out, or the BCFC PLC in which case it's listed as a profit? Nothing on the Land Registry yet either!

Reading also sold the Madejski apparently in 2017/18- at a similar price- to the group/parent company. Again, how come this does not cancel out- granted the ultimate company is in China but for FFP, bit questionable surely?

Nothing at all on the Land Registry and this was in 2017/18 season!

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Birmingham had their EFL Hearing today. 

https://www.telegraph.co.uk/football/2020/02/12/birmingham-city-state-case-battle-avoid-second-points-deduction/

They were stating their case anyway. It's only up to 3 points, part of their defence is that or maybe a large part of it is that they were told to sell players in January. 

They did on deadline Day January 2019 though turn down £12m for Adams from Burnley.

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Apparently, the EFL can't legally force clubs to sell players.  The problems stem from an agreement the club entered into (with the EFL) in 2018.  This was at the end of the 3 year monitoring period (ending 2017/18). 

A business plan was agreed with the EFL in which the club committed to, ensuring that running costs would be cut and new income would be generated in order to steer the club back into line regarding P&S.  Player sales was an option but it wasn't an exclusive option. (Realistically, other than sponsorship, it was the only viable option). 

However, the fact that no additional revenue had been generated at or around the end of January, coupled with the offer(s) on the table for Adams appears to have prompted the EFL to arrive at the assumption that Birmingham did not adhere to the agreement they entered into 5 months previously.

Adams of course was eventually sold in the summer for £16m (I believe).  The EFL have to be very careful here - If they are implementing P&S then surely clubs who are struggling ought to be encouraged and supported in obtaining fair prices for players.  January is a traditionally hard window with clubs often paying over the odds for players.  In the Adams case, the offer received was significantly under his eventual transfer fee.  The 2 big questions for me are firstly, what time scale were Birmingham realistically expected to begin inroads?  Secondly, were they justified in holding out for fair market value?

Personally, I believe that having made adjustments within 12 months of committing to cut running costs (by selling potentially their 2 highest earners) for the best price should mean that there is no breach on this occasion.

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Is this bit true, about the EFL and player sales? Depends on what was in a Business Plan- how do we know Birmingham e.g. didn't promise to sell players ot raise income?

Agreed- they had a Business Plan to stick to.

Adams was sold after the period in question- sale went through on 1st July 2019 though there is still some uncertainty here- as they sold the stadium in the Reporting Period to

Here's the thing, there's a lot of claims and counterclaims about how big the bids were- a fairly widely reported one was £12m on Deadline Day in January 2019- Birmingham fans claiming £8-9m are well out, or are making it up based on this. How big a differential is an unacceptable level is a key question I guess- and remember...

Not selling Adams gained them a sporting advantage over sides who stuck to the regulations and made big efforts to stick to them- I'm not actually in many ways all that bothered about Birmingham on the FFP front right now, this seems fairly pointless in some ways- not as if EFL doesn't have a large in-tray with regards FFP and 3 points...regulations or not I don't know if it's worth it! Adams and Jota sold, Morrison not renewed, Mahoney gone- traded out two players to loan Hogan and seem to be moving in the right direction? Stadium sale price looked fair as well, as did the rent yield %.

Here's the other thing to consider as well- Che Adams had a sell on clause due to Sheffield United, so £12m or £15m as I believe the fee to have been the latter, how big a difference is it when that factored in? Because to the best of my knowledge, if you sell a player then the profit is only after the sell on clause deducted in the books.

Best example...sign player for £4m on a 4 year contract, sell for £10m halfway in- £8m profit but sell on clause of 20% of fee...

Fee-NBV-Sell on Clause=Accounting Profit.

£10m-£2m--£2m=-£6m.

I'm unsure- remember as well, the Stadium sale and leaseback still needs looking at- is a sale to a subsidiary of the group acceptable for FFP purposes? Not saying I know the answer- indeed accounting can be quite big on judgement and interpretation but it at least needs looking at!

As though the price seems fair, the rent certainly seems fair, there's nothing on the Land Registry, no cash received in the Cash Flow that season, and my slight nagging question about whether such transactions could cancel out at a Group level therefore zero net gain?

In terms of the fee differentials for Adams, the difference might be- and I'm unsure what the remaining NBV is/was:

£15m-£3m-NBV=£12m-NBV

Vs

£12m-£2.4m-NBV=£9.6m-NBV.

How big a fee or profit differential is acceptable? Look at Saracens...no cuts by January 2020 and points deduction doubled in rugby!

Because selling to a commonly owned company and a subsidary...quite different! Nothing on the Land Registry for Reading either, they sold to the parent company which is curious!

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It is certainly the case that the EFL cannot force a club to sell players.  However, there is a possibility that Birmingham were given a date of 1st February in order to implement this business plan (something they agreed to) so if true, it amounts to the same thing and something that I would challenge.  I'm not convinced that a regulation was breached by failing to adhere to the plan either so no sporting advantage was gained by rule breaking.

If a sell on clause takes priority then this further strengthens Birmingham's argument as other than Adam's wages, they would not have put any sort of dent in the business plan.  You cannot say that by keeping Adams that Birmingham had a sporting advantage - It is impossible to prove.  There is no requirement to prove a sporting advantage in any case.

Birmingham were punished adequately for their rule breaking - They were placed on a soft embargo (that admittedly they breached by signing 1 player), they had a 9 point deduction and had to pay substantial costs.  It would be completely wrong to further punish them for refusing to sell a player for under market value in order to chalk of a few hundred thousand (in wages).  This FFP has yo be fair and proportionate, not a witch hunt.

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It means that Birmingham would've missed out on say £2.4m. Or 20%, if the Buirnley bid of £12m was accurate- the question is, how proportionate is this, is the differential enough to justify? I'd say possibly but arguable either way.

Where is this stated? See Saracens in RUGBY- they were docked 35 points for salary cap breaches and fined a reasonable % of turnover and then when they didn't open their books properly they got a further 35 points- as they were still in breach by the end of January- not unlawful is it? Perhaps rugby regulations have different provisions- but look it up.

Sporting advantage? By holding your best players for a further 4-5 months, what is that if not a sporting advantage? It's a simplification but to me if you sell key players you are ceding a bit of a sporting advantage at the expense of compliance and if you hold on and breach, then points penalties and other sanctions are an absolute must.

How is it a witch hunt?

It isn't a witch hunt, it is enforcing the regulations correctly and in a way that shows that clubs who have adhered- see us- that they are doing the right thing and proves it to a wider audience- something I'm broadly in favour of.

Might it be possible that some people who consider it to be a witch hunt, maybe they are those who struggle to stick to the regulations? 

You still haven't answered any questions about whether a profit to a wholly owned subsidary should be carried forward for FFP or cancel out at the Group level? I think it's debatable unless there's a specific accounting rule that allows for it.

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I'm not sure either way about their ground sale so can't really comment - I will just have to wait and see on that one.  On the surface, it doesn't seem smooth and cans of worms have been opened, likewise Sheffield Wed.

The rent they are paying for the stadium appears to be more than they are receiving from Coventry so this is certainly not undervalued.

I take the stance that no sporting advantage was gained from the final decision in the Birmingham case (Paragraph 27):

Quote

......that approach financial fair play rules operate by reference to the failure to comply with financial restrictions, not by any analysis of the degree to which any overspending by clubs has had the effect of improving the performance of an offending club in competition. Excessive spending on players is clearly designed to achieve an enhancement of sporting performance, but whether in practice it does enable a particular club at a particular point in time to achieve better results than it would have achieved if it had complied with the rules is practically impossible to assess.

To enable a 3rd party (ie the EFL) to insist on player sales, there must be a clause/condition or regulation permitting the 3rd party to do so.  In the absence of such, it's a pretty safe bet that it would be unlawful to do so.  The Feb 1st deadline appears to be the way around it for the EFL (if indeed there is substance in that date being relevant).

There certainly seems to be a witch hunt on here (to me anyway).  I believe this is for a number of reasons.  Villa & Derby cop for most of it (not coincidentally the 2 teams who were in direct competition with you) Sheff Wed & Birmingham (who were no threat to you) get off lighter.  For most on this thread, Villa & Derby are already guilty without anyone knowing the facts.  In Villa's case, there was the Kodjia purchase that undoubtedly ruffled feathers on here.  Furthermore there is the "big club" factor and most football fans like to see a big club suffering in the lower leagues.  All of these factors mean that Villa And to a lesser extent Derby will always be subject to a witch hunt on here - Even if found not to have breached FFP, I still expect the animosity to continue.  Part of it is human nature.

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Nice posts @Delta and @Mr Popodopolous

E18B13E7-5A16-4613-8E97-E3FB3150BD30.thumb.png.afd0e6cf83cc661291d84b1327a65ef7.png

if we ignore the stadium sale, a £29m loss offset by £4m Transfer profit - so a £25m loss, doesn’t look like the best attempt to stay within the business plan.

I do agree to an extent re EFL not forcing a player to be sold, but was the stipulation by Feb 1st or by 30th June.  It happened on 1st July....after the end of their financial year.  If you’re going to allow clubs to say “well we sold him eventually” you might as well not have rules.  What is deal fell through, no guarantees.  We sold Kelly in May to not just let Bournemouth get it done before further interest, but to improve our accounts.  Clubs need to think smarter!!

Will be interesting to see how this one pans out.

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