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Mr Popodopolous

The Championship FFP Thread (Merged)

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On 15/08/2019 at 10:39, Mr Popodopolous said:


“Over the past 10 years or so the club’s average finishing position in the Championship was around 12th and the wage bill when Andrea first came here was in line with that,” Kinnear says. “We’ve done a lot of analysis of this.

“There’s always the odd exception but, in general, a wage bill of £15 million or £16 million will get you a mid-table place. A wage bill of £25 million will get you into the play-offs. And over £30 million will get you promoted.”

How much is our wage bill ? 

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16 minutes ago, Mr Popodopolous said:

Read something quite interesting.

Villa Park? Registered as an asset of community value. Didn't realise this.

Under the LAW- not FFP, the LAW, such a transaction needs a 6 month window to be purchased by the community before any private buyer can do so.

Such a transaction done in the manner it was seems to break both the spirit of FFP and of quite a bit more importance, potentially it may break the law. Amazing. Had a 5 year deal on it as of January 2018...

It would all depend upon how the deal was done. The first step would be does the transaction even fall within one where the option to community group needs to be conferred - s.96 of Localism Act 2011, and I believe there is actually only a 6 week initial moratorium, which goes to 6 months only if there is an interested bidder. 

Plus there is are exemptions, including for transfers between group companies. I'd be surprised if there was something here. 

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18 minutes ago, 29AR said:

It would all depend upon how the deal was done. The first step would be does the transaction even fall within one where the option to community group needs to be conferred - s.96 of Localism Act 2011, and I believe there is actually only a 6 week initial moratorium, which goes to 6 months only if there is an interested bidder. 

Plus there is are exemptions, including for transfers between group companies. I'd be surprised if there was something here. 

Thanks.

Unconvinced they did it in 6 weeks though- they needed to rush it through in order to avoid breaching FFP, would be surprised if it was so long in the planning.

Good point- transfers for between group companies. Is a transfer between group companies applicable as a cash/or paper transaction then? Makes perfect sense from a tax POV though I reckon.

I really, really really dislike that club though, the last 12 months or so!

https://www.astonvillanewsandviews.co.uk/villa-sell-villa-park-to-themselves-for-56-7-million-why-so-cheap/

Quote

 

The same principle applies when accounting for transactions between group companies, as below:

 

Selling company Purchasing company Group impact
Records the sale and the profit and reduces inventory. Records the purchase and increases inventory. Inventory moves from one company to another but remains in the group so there is no overall change.
Edited by Mr Popodopolous

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Final bit on it for now.

Burges Salmon are a reputable firm correct?

Assuming it was an asset transfer:

Carrying value, surely means zero profit or loss- the two cancel each other out no? Book value would be whatever it was at the time of transfer, which was undoubtedly <£56m! £56m may well have been double or nearly double the book value which appears to have been around £28m in terms of value minus accumulated depreciation, while factoring in revaluations or similar.

Seems to depend on the circs though.

Quote

5. Business/asset transfers

Business/asset transfer agreements will be used to transfer businesses/assets from those companies which are being eliminated to the companies which are being retained in the group structure.

  • Price: These transfers normally take place at book value using the carrying value shown in the company’s accounts (assuming that the company transferring the assets has distributable reserves). In other circumstances the transfer must take place at market value. Advice should be taken as to what value is used for each transfer.
Edited by Mr Popodopolous

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On 03/09/2019 at 10:43, Major Isewater said:

How much is our wage bill ? 

Reckon it'll be somewhere between £25-30m.

I'm not sure how much the position to place theory holds at this time tbh- certainly at the top end, I think there are probably quite a few wage bills of £25m+. More than 6 in other words, but we should be playoff contenders!

Just take a look at Sheffield Wednesday accounts for 2017/18! Granted that was a 14 month period but even once adjusted for that...think they finished 15th. Nottingham Forest I think had £25m that season and were 17th.

Let alone Birmingham and Reading who nearly went down, plus Sunderland who did!

Edited by Mr Popodopolous

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Was just thinking earlier.

What if..."sliding doors moment"- What if when Gibson put his vote to the EFL 75% of Championship clubs had voted for it by the required margin, ie the 18/24. Because let's face it about that ratio seem to comply!

Might Aston Villa, Derby and Sheffield Wednesday have been docked points?

A creative solution might have been that if clubs said clubs had got awkward legally, a vote of Championship clubs whether to allocate them any fixtures. Not expulsion but suspension.

Edited by Mr Popodopolous

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Well well well well well!!

https://mobile.twitter.com/TimesSport/status/1169311409609613314

Shows how inadequate a CEO Mr. Harvey was but things could be getting interesting.

The irony of course, is that procedurally and in terms of loss offsetting, their transaction seems the least offensive of the 3 in many ways.

Edited by Mr Popodopolous
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15 minutes ago, Mr Popodopolous said:

Well well well well well!!

https://mobile.twitter.com/TimesSport/status/1169311409609613314

Shows how inadequate a CEO Mr. Harvey was but things could be getting interesting.

The irony of course, is that procedurally and in terms of loss offsetting, their transaction seems the least offensive of the 3 in many ways.

@DerbyFan this looks interesting!

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1 hour ago, chinapig said:

By the EFL's standards they have moved with breathtaking speed. Not that I have any confidence in the outcome.

In a sense this is about the time of the year.

Last year actual sanctions threats first came to light for Birmingham late August, early September. 

In 2014 when QPR were the first big ones to be stung by it for 2013/14 results, was looking back at it, first arose around September time.

Add in the fact Jevans appears to be an upgrade on Harvey- mind you who isn't- and it could be interesting.

Here's what I think happens. If an inflation is found to have taken place, then the ground transaction profit gets readjusted to whatever the independent valuers decide. RPTs you can do that with if applicable 

The one puzzling aspect of the article is that it mentions Reading and Sheffield Wednesday too.

Which is great but one notable side is missing- the worst of the lot, Purslow's Aston Villa!! I guess until they come back down?

Edited by Mr Popodopolous
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10 minutes ago, Mr Popodopolous said:

In a sense this is about the time of the year.

Last year actual sanctions threats first came to light for Birmingham late August, early September. 

In 2014 when QPR were the first big ones to be stung by it for 2013/14 results, was looking back at it, first arose around September time.

Add in the fact Jevans appears to be an upgrade on Harvey- mind you who isn't- and it could be interesting.

Here's what I think happens. If an inflation is found to have taken place, then the ground transaction profit gets readjusted to whatever the independent valuers decide. RPTs you can do that with if applicable 

The one puzzling aspefr of the article is that it mentions Reading and Sheffield Wednesday too.

Which is great but one notable side is missing- the worst of the lot, Purslow's Aston Villa!! I guess until they come back down?

Possibly passed on to PL to investigate....out of EFL jurisdiction at the mo?

Just imagine if it’s valued less that £40m 😱😱😱

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Said it before and will do again.

Pride Park. Calculations of additions, depreciation, net book value and yeah work done so far make me think £50-55m. £60m at a push- thinking £50-55m however!

Edited by Mr Popodopolous
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22 minutes ago, Mr Popodopolous said:

In a sense this is about the time of the year.

Last year actual sanctions threats first came to light for Birmingham late August, early September. 

In 2014 when QPR were the first big ones to be stung by it for 2013/14 results, was looking back at it, first arose around September time.

Add in the fact Jevans appears to be an upgrade on Harvey- mind you who isn't- and it could be interesting.

Here's what I think happens. If an inflation is found to have taken place, then the ground transaction profit gets readjusted to whatever the independent valuers decide. RPTs you can do that with if applicable 

The one puzzling aspefr of the article is that it mentions Reading and Sheffield Wednesday too.

Which is great but one notable side is missing- the worst of the lot, Purslow's Aston Villa!! I guess until they come back down?

I have been rooting for Villa's opponents every week and will continue to do so! Naturally I was distressed about their disallowed goal at Palace.:whistle:

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47 minutes ago, Davefevs said:

@DerbyFan this looks interesting!

Does it? As has been said many times, the club told everyone when the accounts were released that they got an independent valuation to determine the market value. I assume they have all the evidence of this valuation. The valuations they obtained in the past were from reputable companies, they were mentioned in the accounts.

Should the valuation the EFL obtain prove different to the clubs, then I'm not sure what could happen as I'm not sure what makes their independent valuation any more correct than the club obtained one? They're both independent valuations after all, and they can surely both argue that theirs is correct.

The club have been open about the sale and it was sold to outside of the group of companies, unlike Reading, I believe they sold theirs to their parent company. I can't remember the situation with Sheffield Wednesday and Villa now, whether they sold in or out of group.

I don't know whether market value is different to depreciated replacement cost value, quotes from websites that I've posted in this thread before make me think it is. The quote below being one of them, I'm sure there was another, I'd have to re-find it though. I think it mentioned a valuation only being used for accounting purposes, so presumably that means the valuation for other purposes would be different, whether that is more or less I'm not sure.

https://www.lsh.co.uk/explore/services/valuation

Quote

Sports stadia and football ground assets are valued in different ways, depending on the purpose of the valuation. As each approach may produce different figures, it’s essential to understand the purpose of the valuation.

We offer an experienced valuation service in this specialist area for both private sector and public sector bodies.

 

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55 minutes ago, DerbyFan said:
2 hours ago, Davefevs said:

 

Does it? As has been said many times, the club told everyone when the accounts were released that they got an independent valuation to determine the market value. I assume they have all the evidence of this valuation. The valuations they obtained in the past were from reputable companies, they were mentioned in the accounts.

Should the valuation the EFL obtain prove different to the clubs, then I'm not sure what could happen as I'm not sure what makes their independent valuation any more correct than the club obtained one? They're both independent valuations after all, and they can surely both argue that theirs is correct.

The club have been open about the sale and it was sold to outside of the group of comp

Mel Morris is still a related party though and therefore a company owned by him though outside of the group, would be treated as such, FFP regs would confirm this.

RPTs can be adjusted downwards under FFP regulations- I think the EFL are doing the right thing here but may lose out as they should have got an independent valuer in when it was first mooted.

Property experts though- I think the valuation by the EFL might take precedence but who knows- vote of the 24 clubs for each of the valuations?

The 2013 revaluation- there are a few queries here, Revaluation Reserve perhaps? Which you mentioned IIRC.

Definitely questions to answer if the independent auditor hired for and paid independently of a club, has it under £81m or more accurately, substantially under £81m.

Anyway if all is well, then the £81m will stand won't it.

They owe it to the competiition and the integrity of it to get it valued independently, paid for by the League not by a club- for all of the transactions that are being investigated. I'd suggest a ground valuation easier to challenge than RPT sponsorship.

On a general note, I remember the extra work done in the future to enhance/release the value now. It sounds a bit questionable.

I agree with this unnamed Senior figure.

Quote

A senior figure at a rival Championship club dismissed plans for a new roof at Pride Park as “irrelevant” when it had not been built at the time of the purchase by Morris.

This is from that Times article.

Edited by Mr Popodopolous
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Maybe just maybe, there will be benchmarking along the lines of the first.

ie The acceptable profit would be the ratio that Reading got in 2017/18 which appeared to be around 32.5%- so a 25-35% ratio.

You adjust the profit down IF NECESSARY and remove it from the FFP calcs- and then reassess the Fair Play result.

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Derby County could yet face sanctions for possible breaches of financial regulations after the English Football League ordered an independent valuation of their Pride Park stadium.

Derby are among a number of clubs who have been accused by rivals of exploiting a loophole in the rules that has allowed them to buy their own stadium to make themselves financially compliant.

That has prompted the EFL to commission property experts to provide a valuation of the Sky Bet Championship club’s ground, The Times can reveal. Sources have told this newspaper that independent stadium valuations have also been commissioned for Sheffield Wednesday and Reading.

In Derby’s case, owner and chairman Mel Morris used a separate company to buy the ground for £80 million — with a deal to then lease it back to the club — when it was listed as an asset on the club’s books with a value of just £41 million.

It meant Derby reported a pre-tax profit of £14.6 million earlier this year when losses in excess of £13 million per year over a three-year period amount to a breach of the EFL’s profit and sustainability rules.

Last season Birmingham were docked nine points after recording total losses of £48.8 million from 2015-16 to 2017-18, taking them close to £10 million more than the £39 million limit.

It remains possible that Pride Park’s valuation could be boosted by a proposal to build a roof that would make the stadium a multipurpose venue. But the 24 planning application documents currently listed on Derby City Council’s website appear to be focused on a two-storey extension for a food court.

One property expert with knowledge of Pride Park believes it could be valued even lower than the £41 million previously stated in Derby’s books.

A senior figure at a rival Championship club dismissed plans for a new roof at Pride Park as “irrelevant” when it had not been built at the time of the purchase by Morris.

Derby, who have made a slow start to the season under new manager Phillip Cocu and sit 19th in the Championship table, are already under renewed scrutiny after signing Wayne Rooney as part of a controversial £100,000 a week player/coach deal in collaboration with a major betting firm.

Clubs have already accused Derby, among others, of breaching financial fair play rules, with Middlesbrough even reportedly considering legal action. The Middlesbrough owner Steve Gibson levelled such accusations at both Aston Villa and Derby at the Championship’s March meeting and the Leeds United owner Andrea Radrizzani argued that Derby should have faced sanctions for selling their ground to their owner.

“We should revisit the rules,” said Radrizzani at the Financial Times Business of Football Summit. “We were judged as a cheating club when we sent a scout to watch [Derby] training, so they should take a similar view on what I would say is greater cheating by these clubs.

“For me if it’s cheating to send a scout in a public street, what should be the punishment of selling the stadium to a sister company to increase income of the clubs?”

Derby, Sheffield Wednesday and Reading have consistently said they have not breached any regulations.

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17 minutes ago, Mr Popodopolous said:

Mel Morris is still a related party though, FFP regs would confirm this.

RPTs can be adjusted downwards under FFP regulations- I think the EFL are doing the right thing here but may lose out as they should have got an independent valuer in when it was first mooted.

Property experts though- I think the valuation by the EFL might take precedence but who knows- vote of the 24 clubs for each of the valuations?

The 2013 revaluation- there are a few queries here, Revaluation Reserve perhaps? Which you mentioned IIRC.

Definitely questions to answer if the independent auditor hired for and paid independently of a club, has it under £81m or more accurately, substantially under £81m.

Anyway if all is well, then the £81m will stand won't it.

They owe it to the competiition and the integrity of it to get it valued independently, paid for by the League not by a club- for all of the transactions that are being investigated. I'd suggest a ground valuation easier to challenge than RPT sponsorship.

On a general note, I remember the extra work done in the future to enhance/release the value now.

I agree with this unnamed Senior figure.

This is from that Times article.

Yes he is, which is exactly why it is mentioned under Related party transactions in the accounts, 'companies under common ownership'.

But we also got an independent valuer in to get the sale price/market value.

'Property experts though', who exactly do you think did our valuation? Do you think we just got a random person in off the street?

You're not happy with our independent valuation, done by a presumably qualified professional, but want to potentially put it to unqualified people who have no knowledge of the subject to decide if it's right, that is quite frankly absurd, if you do that you might as well have got in that random person off the street.

Neither the revaluation reserve, nor the book values, changed with the 2013 valuation although as far as I can remember, all of the work I mentioned previously has been done after this valuation, ie. since Mel Morris bought the club.

The actual wording in the accounts is

Quote

As required under FRS 11 'Impairment of fixed assets and goodwill' the freehold buildings with a historical cost of £20,852,867 known as Pride Park Stadium were valued by independent valuers Jones Lang LaSalle on 23 May 2013  The valuation was prepared on a depreciated replacement cost basis and was made in accordance with the Royal Institution of Chartered Surveyors Asset Statements of Valuation Practice and Guidance Notes  Based on this valuation the Directors have assessed the carrying value of the freehold buildings and determined that the current value is appropriate

...

The directors are not aware of any material change in the valuations of freehold land and buildings and the current valuation above reflects their best assessment of the existing open market value of the property

this is interesting for two reasons 1. as it says 'the current valuation above' which presumably is the 'Cost or valuation' figure, rather than the net book value? 2. it says 'reflects their best assessment of the existing open market value of the property' - this confuses me a little because of the quote in my previous post where it suggests the valuation is different for different purposes.

I don't know whether it will or not, I can only go by what the club say, I have no reason to doubt them, they have been very clear about the whole thing. They obviously had a valuation saying £81m, which is the figure they have worked on.

I don't know if you've ever watched property shows on tv, there are times when the valuations vary quite wildly, but they are all done by professionals, how do you know which one is correct?

Can you remember Mel Morris being on Talksport? He mentioned the potential of a roof but I'm sure he said that the stadium was taken out of the club because it will cost (which is obviously FFP exempt, infrastructure improvements) and be worth a lot more than £81m when that is done. I think it was £180m that he said? I'm not sure if that interview is still around anywhere, but I think he said something about how they would all have a problem if it was sold for £180m (the value after the roof) instead of the £81m, something along those lines.

Should the EFL's valuation not match that of the club I imagine the club would fight it all the way given they also had an independent valuation at the time of the sale. They could not be expected to know the valuation, it's not their field of knowledge, getting a valuation done is all they can do in that situation.

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One more interesting (possibly) aspect. This aspect is raising a question about Sheffield Wednesday specifically.

Profit of course is Sale Price Minus current Carrying Value. Cash Flow is the Gross Price paid.

Derby'. "Profit on disposal of tangible fixed assets" appears as £39,940,387. Appears as £81,100,000 on the Cash Flow Statements. Commensurate with each other, no problem there!

Reading'. "Profit on disposal of fixed assets" appears as £6,518,222. Appears in Net Cash Outflow Statements as £26,500,000 ie "Proceeds on Disposal of Fixed Assets". Once checked against Tangible Fixed Assets Disposals Minus Depreciating Eliminated in Respect of- it's all commensurate and the two stack up.

Sheffield Wednesday. "Profit on disposal of tangible fixed assets" appears as £38,061,000. Nothing in the Cash Flow Statements, yet under Debtors "Amounts falling due within one year" £7.5m. "Amounts falling due after more than one year £52.5m".

That is roughly in line with the valuation- one year is 1/8 (roughly) yet it appears in the Profit on  Disposal of Fixed Assets in one go. Unlike the other 2! Maybe all legit but there are a lot of interesting aspects to their transaction...

If he wants to spread it out over his own time period, all well and good- provided Sheffield Wednesday don't profit twice or have £7.5m in year 1 and each of the subsequent 7 offsetting FFP when a £37-38m profit appeared in 2017/18 accounts!

Edited by Mr Popodopolous

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1 hour ago, cheshire_red said:

Derby County could yet face sanctions for possible breaches of financial regulations after the English Football League ordered an independent valuation of their Pride Park stadium.

Derby are among a number of clubs who have been accused by rivals of exploiting a loophole in the rules that has allowed them to buy their own stadium to make themselves financially compliant.

That has prompted the EFL to commission property experts to provide a valuation of the Sky Bet Championship club’s ground, The Times can reveal. Sources have told this newspaper that independent stadium valuations have also been commissioned for Sheffield Wednesday and Reading.

In Derby’s case, owner and chairman Mel Morris used a separate company to buy the ground for £80 million — with a deal to then lease it back to the club — when it was listed as an asset on the club’s books with a value of just £41 million.

It meant Derby reported a pre-tax profit of £14.6 million earlier this year when losses in excess of £13 million per year over a three-year period amount to a breach of the EFL’s profit and sustainability rules.

Last season Birmingham were docked nine points after recording total losses of £48.8 million from 2015-16 to 2017-18, taking them close to £10 million more than the £39 million limit.

It remains possible that Pride Park’s valuation could be boosted by a proposal to build a roof that would make the stadium a multipurpose venue. But the 24 planning application documents currently listed on Derby City Council’s website appear to be focused on a two-storey extension for a food court.

One property expert with knowledge of Pride Park believes it could be valued even lower than the £41 million previously stated in Derby’s books.

A senior figure at a rival Championship club dismissed plans for a new roof at Pride Park as “irrelevant” when it had not been built at the time of the purchase by Morris.

Derby, who have made a slow start to the season under new manager Phillip Cocu and sit 19th in the Championship table, are already under renewed scrutiny after signing Wayne Rooney as part of a controversial £100,000 a week player/coach deal in collaboration with a major betting firm.

Clubs have already accused Derby, among others, of breaching financial fair play rules, with Middlesbrough even reportedly considering legal action. The Middlesbrough owner Steve Gibson levelled such accusations at both Aston Villa and Derby at the Championship’s March meeting and the Leeds United owner Andrea Radrizzani argued that Derby should have faced sanctions for selling their ground to their owner.

“We should revisit the rules,” said Radrizzani at the Financial Times Business of Football Summit. “We were judged as a cheating club when we sent a scout to watch [Derby] training, so they should take a similar view on what I would say is greater cheating by these clubs.

“For me if it’s cheating to send a scout in a public street, what should be the punishment of selling the stadium to a sister company to increase income of the clubs?”

Derby, Sheffield Wednesday and Reading have consistently said they have not breached any regulations.

I presume this is the full article? I have never created an account with the Times so haven't actually read past the beginning, so thanks for pasting it in here.

It says a lot without actually saying a lot doesn't it that article and once again, it is the Times writing a negative article about us, funny that!

'Could yet face sanctions', 'possible breaches' and 'it remains possible', great so Mr Journalist, you don't actually know if we will face sanctions, you don't actually know if we have breached the financial regulations and you have absolutely no idea whether the valuation was 'boosted' by the proposal to build the roof, wonderful stuff.

Ahh yes, lets quietly mention Sheffield Wednesday - who he neglects to mention had a much much larger percentage increase on book value, a sale price of around £60m but a valuation that was made in 2014 for only £22.25m(!) - and Reading - who only made a £6.5m or so was it profit on book value? A book value that seemed very low in the first place (although I notice from their accounts they don't appear to have ever had their stadium revalued since it was built). Why do they require an independent valuation for that one, it's not like it was excessive?

Could it be that they're getting valuations for every stadium sale and they don't necessarily expect to find anything awry with any of them? That doesn't make for a good story does it?

'One property expert with knowledge of Pride Park believes' - brilliant, would that be Pride Park the area, or Pride Park the stadium I wonder? Unless they're a property expert with experience of valuing stadiums then I'm not sure how it helps that they have knowledge of Pride Park, a stadium is a bit different to an office block or a car showroom.

Great let's just mention the Rooney deal while we're at it. But let me get this right, can't sell the stadium for the independent valuation we obtained even though fixed asset sale profits are within the rules, can't sign a big name player with a great sponsorship deal for the club. What pray tell can we do to increase our revenues that isn't frowned upon?

And to finish it all off, let's just quote the Leeds owner from months back!

🙄

Sorry for the rant, I got carried away! 😂

Edited by DerbyFan

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Interesting Reading being investigated. They were under a soft transfer embargo for most of the summer then suddenly managed to persuade the EFL that they had a new business plan which resulted in them spending £12m plus on players in the last few days of the window! I wondered how they managed it, especially as they still have high earners on their payroll who they've basically frozen out and told (unsuccessfully) to find new clubs (Gunther, McCleary, Baldock etc). Not normally that bothered about Reading other than the fact that they're my wife's team!!

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Think it is the prices as opposed to the actual deals that are being investigated, and it's legal accounting wise probably, related party for FFP purposes though more questionable.

If anything, £26.5m for Madejski seems low! Can't see £26.5m gross, so a profit of £6.5m or so being inflated however.

The safest ground for the EFL would be to look afresh at the FFP figures based on the independent valuation- can't disallow it but tbh the EFL should have got an independent set of valuers in paid for by them as soon as news of these transactions took place.

Like I've said from Day One, I'm not wholly convinced Derby breached regardless but Sevco 5112 and Derby County accounts of course have some differences, bigger losses in the former but bigger allowable costs too. (Slightly less income one year in Sevco 5112 than Derby, curiously).

Put another way if you subtract the transaction price profit from that which an independent valuation throws up, quite possible they pass anyway.

Reading, £26.5m, £20m valuation roughly- seems legit.

The big 2 are Aston Villa and Sheffield Wednesday!

Of course, then you have questions about whether it's an aggravated breach, an attempt to deceive the regulations and whether that needs an independent Disciplinary Commission- but right now it should be about the numbers as a first step.

I believe a precedent can be set for investigation of past results. See QPR, on a UEFA level see UEFA investigating Man City for results from years back.

Interesting post on the Sheffield Wednesday forum.

Quote

Refuse them access to the ground. The sale has already been approved so what are they going to do about it really. The EFL have treated us like mugs for years. It's time to fire back.

In which case, I say refuse to allocate them fixtures- it's a non starter but if they did- do as with Bury and suspend fixtures while the stand off is in place.

Edited by Mr Popodopolous

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On the Aston Villa transaction, it was notable that Purslow said the following at a Fans Parliament or whatever equivalent- Q and A?

Quote

Aston Villa’s assets – the football club, stadium, training ground, Academy, retail store etc. are commonly owned by companies controlled by Nassef Sawiris and Wes Edens. The Club and our owners have no intention whatsoever of selling the stadium to a third party.”

Which raises the question, was it a true transaction or an asset transfer?

If it was the latter, I am puzzled as to how it's classed as a profit when it comes to the P&L.

Because unlike the company that purchased Pride Park, or Sheffield 3 in Sheffield Wednesday's case- both companies set up for this purpose but still owned by the owner- this was purchased by NSWE Limited. This was an existing company within the group, just renamed. From Recon Football Limited to this.

Originally incorporated as Vilden Limited, changed to Aston Villa Limited- Recon Football Limited and finally NSWE Stadium Limited.

Internal asset transfer or RPT?

Admittedly, ownership changes may supersede all of this, but it wasn't set up as a specific new company to purchase the ground it would appear. Was already an existing company within the group.

0_LR-docPNG.png

Company details and history

https://library.croneri.co.uk/cch_uk/gaapuk/21-10-1

Will read that in due course, maybe that it's all above board and on the level. Fair value or Book/Carrying Value? At least seems a little puzzling to me.

Edited by Mr Popodopolous
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For a bit of fun, here's a potential loophole or 2- is it permitted or is it forbidden? Honestly don't know!

Selling a ground to a 3rd party is perhaps okay for sale and leaseback purposes, but whether a commercial company would go for it is a different matter.

What if there's a deal to free up cash, to extract some of the value of the ground- club sells say 40% of the value of and by extension the rights to their ground to a 3rd party- independently valued, properly independently valued- but not a high enough % sold to risk homelessness.

The sponsor receives rent and gets some of the commercial revenue- the club receives the revenue which helps take them over the line to promotion.

Against the regs or not? I honestly don't know! How would that sit with FFP, on the balance sheet.

Edited by Mr Popodopolous

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12 minutes ago, Davefevs said:

At least we’ll get closure on this one at some point.

Indeed- we're getting closer to that point IMO.

One bit in the article did throw me.

Quote

The Telegraph has learnt the 2016 rule change was never intended to open the door to such a practise, which was branded “cheating” in May by Leeds United owner Andrea Radrizzani and saw Middlesbrough threaten to sue Derby.

Well what on earth did they change it for then?? What did they expect!

Good news though on this bit but tbh I hope that the EFL would see through a ruse.

Quote

Moves are afoot to close it again amid concerns a club could sell their stadium to balance the books and buy it back again without breaching rules which also exempt investment in facilities.

 

Quote

Villa declined to comment last night but a source with knowledge of Villa Park’s sale to owners Nassef Sawiris and Wes Edens, via a group subsidiary company called NSWE Stadium, has told the Telegraph the EFL had already approved it after the club commissioned three independent valuations of the ground.

As I recall, Purslow wanted a public statement from the EFL- he got none!

How can they deem that independent of the club commissioned them??

A subsidiary- wasn't aware that an internal transaction, as this is a commonly owned company within the group could yield £28m profit. NSWE predated these owners- just renamed and admittedly owner changed.

Edited by Mr Popodopolous

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2 hours ago, Mr Popodopolous said:

For a bit of fun, here's a potential loophole or 2- is it permitted or is it forbidden? Honestly don't know!

Selling a ground to a 3rd party is perhaps okay for sale and leaseback purposes, but whether a commercial company would go for it is a different matter.

What if there's a deal to free up cash, to extract some of the value of the ground- club sells say 40% of the value of and by extension the rights to their ground to a 3rd party- independently valued, properly independently valued- but not a high enough % sold to risk homelessness.

The sponsor receives rent and gets some of the commercial revenue- the club receives the revenue which helps take them over the line to promotion.

Against the regs or not? I honestly don't know! How would that sit with FFP, on the balance sheet.

Yeah sounds like mortgage really, just low LTV and payments being the value of the sponsorship. I would guess - as things stand - the toothless regs wouldn’t be worth the paper they are written on if you were to arbitrarily value either the interest rate or value of the sponsorship. 

I have in mind Man City have an extortionate value on the Etihad sponsorship. 

Where I think we miss (missed) a trick - perhaps - is the kits. Imagine normal commerce, you appoint a young company with no manufacturing credentials but naturally you would say ‘okay yes you can have exclusivity to manufacture our kits. But obviously because you don’t have standing, you are going pay through the nose for exclusivity because it’s our risk of stock outage from your inexperience’. We could have had a few quid there and it would have been harder to challenge. 

To be honest I’m surprised HMRC aren’t more interested in the ground sales. Especially if they allow corporate tax deductions on the purchase in NewCo. If NewCo are never going to enforce their debts - in reality - have they bought anything? If there is no obvious profit motive in NewCo, is it really a trading business? Blah blah blah 

Edited by 29AR

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14 minutes ago, Mr Popodopolous said:

Indeed- we're getting closer to that point IMO.

One bit in the article did throw me.

  Quote

The Telegraph has learnt the 2016 rule change was never intended to open the door to such a practise, which was branded “cheating” in May by Leeds United owner Andrea Radrizzani and saw Middlesbrough threaten to sue Derby.

Well what on earth did they change it for then?? What did they expect!

They certainly didn't expect the Spanish Inquisition! :) 

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20 minutes ago, Mr Popodopolous said:

How can they deem that independent of the club commissioned them??

Because they are commissioned as a qualified professional to provide a service.

The EFL have today announced that they have commissioned an independent review of the regulations and procedures concerning the financial sustainability of EFL clubs.

It's exactly the same situation.

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41 minutes ago, Mr Popodopolous said:

Indeed- we're getting closer to that point IMO.

One bit in the article did throw me.

Well what on earth did they change it for then?? What did they expect!

Good news though on this bit but tbh I hope that the EFL would see through a ruse.

 

As I recall, Purslow wanted a public statement from the EFL- he got none!

How can they deem that independent of the club commissioned them??

A subsidiary- wasn't aware that an internal transaction, as this is a commonly owned company within the group could yield £28m profit. NSWE predated these owners- just renamed and admittedly owner changed.

Makes you wonder whether they passed on details to the Premier League to deal with, perhaps knowing they couldn’t do anything about it during last season..

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28 minutes ago, downendcity said:

They certainly didn't expect the Spanish Inquisition! :) 

TBF..

"NOBODY expects the Spanish Inquisition!
 Our chief weapon is surprise...surprise and fear...fear and surprise.... Our two weapons are fear and surprise...and ruthless efficiency.... Our *three* weapons are fear, and surprise, and ruthless efficiency...and an almost fanatical devotion to the Pope.... Our *four*...no... *Amongst* our weapons.... Amongst our weaponry...are such elements as fear, surprise.... I'll come in again".
 😇

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28 minutes ago, DerbyFan said:

Because they are commissioned as a qualified professional to provide a service.

The EFL have today announced that they have commissioned an independent review of the regulations and procedures concerning the financial sustainability of EFL clubs.

It's exactly the same situation.

Well I'd have had more faith in the veracity and independence of the Villa Park valuation, transaction had the EFL commissioned it.

When it's commissioned by the club, still that element of doubt...

Hsf the EFL come out and publicly stated as Mr. Purslow was seemingly keen on that FFP was passed- then that would've been case closed.

Sources close go the transaction are claiming it but nothing from sources close to the EFL itself as far as I can see.

Edited by Mr Popodopolous

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8 minutes ago, 1960maaan said:

TBF..

"NOBODY expects the Spanish Inquisition!
 Our chief weapon is surprise...surprise and fear...fear and surprise.... Our two weapons are fear and surprise...and ruthless efficiency.... Our *three* weapons are fear, and surprise, and ruthless efficiency...and an almost fanatical devotion to the Pope.... Our *four*...no... *Amongst* our weapons.... Amongst our weaponry...are such elements as fear, surprise.... I'll come in again".
 😇

I cross them into the box, confident that there will be a striker on hand to stick it in the back of the net !!

Nobody expects the EFL!

Their chief weapon is  surprise that they missed that loophole and fear that more clubs will take advantage.....Their two weapons are  surprise that they missed that loophole and fear that more clubs will take advantage and ruthless ineptitude... their three weapons are surprise that they missed that loophole and fear that more clubs will take advantage and ruthless ineptitude.... Amongst their weaponry are surprise that they missed that loophole and fear that more clubs will take advantage and ruthless ineptitude.

Perhaps they should go out and not bother to come back in again!

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12 minutes ago, Mr Popodopolous said:

Well I'd have had more faith in the veracity and independence of the Villa Park valuation, transaction had the EFL commissioned it.

When it's commissioned by the club, still that element of doubt...

Hsf the EFL come out and publicly stated as Mr. Purslow was seemingly keen on that FFP was passed- then that would've been case closed.

Sources close go the transaction are claiming it but nothing from sources close to the EFL itself as far as I can see.

Why would the EFL be commissioning stadium valuations? They're only doing it now because our clubs have sold them and people are questioning it, they wouldn't have done it on a whim.

It was the clubs property, they are the ones that wanted to sell, so they are the ones that got a valuation, the same as selling a house.

Did you read the Sky article from earlier today? Looks like it's very expensive to get valuations done.

https://www.skysports.com/football/news/11696/11802891/derby-defend-80m-pride-park-value

Quote

The Midlands club have also told Sky Sports News they believe the cost of that independent review into their stadium and others will be a six-figure sum and something all 24 Championship clubs will be expected to share, which has also been met with concern from at least one other Championship club.

 

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9 minutes ago, DerbyFan said:

Why would the EFL be commissioning stadium valuations? They're only doing it now because our clubs have sold them and people are questioning it, they wouldn't have done it on a whim.

It was the clubs property, they are the ones that wanted to sell, so they are the ones that got a valuation, the same as selling a house.

Did you read the Sky article from earlier today? Looks like it's very expensive to get valuations done.

https://www.skysports.com/football/news/11696/11802891/derby-defend-80m-pride-park-value

 

Can't trust it fully if the club has it commissioned. There is a vested interest, whereas with the EFL there is not- they are (or should be) thoroughly neutral.

Agree, it's the property of the club, they get the valuation but when it comes to potentially circumnavigating FFP regs through it then it IMO becomes the League's business!

Because it seems that the bulk of clubs comply correctly and it distorts the competition 

A part of the article that beggars belief is the claim by a source that the EFL lifted it, but didn't expect clubs to actually pull such moves off- that bit is baffling and maybe an attempt to cover themselves legally.

Six figure sum? Well Shaun Harvey eaent a lot- they could've paid him quite a bit less and valued at the tine- the valuations likely would've worked out cheaper than a big investigation now.  He was hardly good value...

EFL have accounts, their turnover would he interesting, think over 2 seasons they could've saved themselves a lot of time and hassle had they done this at the time.

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45 minutes ago, DerbyFan said:

Why would the EFL be commissioning stadium valuations? They're only doing it now because our clubs have sold them and people are questioning it, they wouldn't have done it on a whim.

It was the clubs property, they are the ones that wanted to sell, so they are the ones that got a valuation, the same as selling a house.*

Did you read the Sky article from earlier today? Looks like it's very expensive to get valuations done.

https://www.skysports.com/football/news/11696/11802891/derby-defend-80m-pride-park-value

 

The same as buying a house?

So the purchaser accepts the vendors valuation - because that's what you are suggesting, if Derby County obtained the valuation ( *It was the clubs property, they are the ones that wanted to sell, so they are the ones that got a valuation, the same as selling a house.)

It's a mess, because we now know that the EFL cocked up the new ffp rules as far as stadium sales are concerned, so the sale itself did not breach the rules. However the issue of valuation is a hot potato. Because the sale was a paper transaction, and to another of the owner's companies, there is a strong suspicion that the sole motivation was to enable the club to avoid a ffp breach and the "strong" valuation enabled this.

That being the case, and I know it's with the benefit of hindsight,  it would have at least been better had independent valuations been instructed by both the club and the company buying Pride Park, and from separate valuation firms ( which would almost certainly have been the case were the stadium have been sold on the open market to an unrelated company) The cynic in me suspects that as Morris owns the club and the company buying, both valuations would have still been the same, or within a gnat's whisker of each other, but at least there would a better element of independence than appears the case at the moment.

 

 

Edited by downendcity

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16 minutes ago, downendcity said:

The same as buying a house?

So the purchaser accepts the vendors valuation - because that's what you are suggesting, if Derby County obtained the valuation ( *It was the clubs property, they are the ones that wanted to sell, so they are the ones that got a valuation, the same as selling a house.)

It's a mess, because we now know that the EFL cocked up the new ffp rules as far as stadium sales are concerned, so the sale itself did not breach the rules. However the issue of valuation is a hot potato. Because the sale was a paper transaction, and to another of the owner's companies, there is a strong suspicion that the sole motivation was to enable the club to avoid a ffp breach and the "strong" valuation enabled this.

That being the case, and I know it's with the benefit of hindsight,  it would have at least been better had independent valuations been instructed by both the club and the company buying Pride Park, and from separate valuation firms ( which would almost certainly have been the case were the stadium have been sold on the open market to an unrelated company) The cynic in me suspects that as Morris owns the club and the company buying, both valuations would have still been the same, or within a gnat's whisker of each other, but at least there would a better element of independence than appears the case at the moment.

 

 

No, I'm talking about it from the vendors point of view. If you wanted to sell your house you'd get a valuation and put it on the market at the market rate. That was my comparison of the situations.

In the clubs case, the purchaser has accepted the valuation as when it's a RPT you'd have no need to get a valuation because you know that you've just had it valued and you trust the valuation, it would be a huge waste of money and completely unnecessary, the only people that gain in that situation are the valuers.

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23 hours ago, DerbyFan said:

Can you remember Mel Morris being on Talksport? He mentioned the potential of a roof but I'm sure he said that the stadium was taken out of the club because it will cost (which is obviously FFP exempt, infrastructure improvements) and be worth a lot more than £81m when that is done. I think it was £180m that he said? I'm not sure if that interview is still around anywhere, but I think he said something about how they would all have a problem if it was sold for £180m (the value after the roof) instead of the £81m, something along those lines.

Sorry to quote my own post, but I've found the interview on youtube, one of our fans had put it on, the video below should start at the beginning of the stadium discussion.

He did mention £180m, it's not clear whether that would be because of the roof construction cost, or because of the extra money holding the events it would allow brings, but I guess as that only happens because of the roof then they're interlinked.

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Listening to it now.

Which company purchased it? One of the Gellaw Newco ones wasn't it?

On a general note, before I get back into it fully I do think the EFL will be looking to do something.

These bits of the article give me some reasons for cautious optimism.

Quote

Villa, Derby, Wednesday and Reading all exploited an EFL rule change that ended a ban on its clubs using profits earned from selling their stadiums to comply with its financial fair play regulations.

Who made/authorised this decision? Would legal proceedings be possible against that individual if indeed it was an individual for opening the door to this whole mess!

Quote

The Telegraph has learnt the 2016 rule change was never intended to open the door to such a practise, which was branded “cheating” in May by Leeds United owner Andrea Radrizzani and saw Middlesbrough threaten to sue Derby.

Possibly a certain individual who is no longer with the EFL? Can't speculate too much on an open forum obviously. The mess and interclub warfare is evident in the views of the 2 clubs cited.

Regardless of whether it's said individual, he made a real mess of his last few years- what was the point of those few years?? Debbie Jevans certainly isn't wildly impressive but in fairness to her she's been left a huge in-tray by her predecessor, most of it bad- "a tidal wave of shite"!

I also think that because the rule was never intended for this purpose, supposedly, if true then yes the EFL now they are under a new regime will be properly scrutinising clubs that did this- the previous CEO was deeply unimpressive, especially in his final season.

Quote

Moves are afoot to close it again amid concerns a club could sell their stadium to balance the books and buy it back again without breaching rules which also exempt investment in facilities.

I think the EFL would indeed do something about it if there was pisstaking e.g. if a club brought it for a nominal fee and then sold it again but yes technically a club could buy it back without impacting on FFP. This should've been changed as soon as it was spotted or as soon as the first asset sale and leaseback or asset sale to a related party occurred!! They should have been looking at this in summer 2017 if not sooner!

Quote

Premier League profit and sustainability rules, with which the EFL’s own regulations were harmonised three years ago, do not prohibit clubs using cash earned from stadium sales to comply with them.

Classic case of not reading the small print and tailoring a clause appropriate?

Quote

However, Uefa’s Financial Fair Play rules, on which the EFL’s original regulations were based, do, acting as a deterrent for top-flight clubs.

I wonder if UEFA have had a quiet word? Especially given that Aston Villa have reached the PL and could theoretically qualify for Europe before 2021/22. Plus one of Derby, Reading or Sheffield Wednesday could via a Cup.

Also think an element of this is attempted damage limitation post Bury, perhaps to stave off some external regulation.

Edited by Mr Popodopolous
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Should be 3 stages to this set of investigations IMO.

Stage One- Test the value and whatever comes out is the value. If correct or broadly so then fair enough, if not. we escalate to the next stage...

Stage Two- If the values are deemed to be vastly overinflated- and I don't think the Madejski is, £26.5m for a modern ground built in late 1990s seems reasonable, capacity 24,161. The others are less clear. Anyway Stage Two should then be deduction of the surplus between sale price and independent valuation from the FFP calculations- with current, and past FFP results recalculated on this revised basis. Has to pass the duck test /reasonableness test to avoid this stage!

Stage Three- If applicable by which I mean if the readjustment pushes a club over the limits then it's an EFL independent Disciplinary Commission Birmingham style. Even if it doesn't push them to this stage, the "profit" still must be readjusted accordingly with the readjusted FFP results the new starting point.

With an additional possibility of deliberate/aggravated breaches coming into the equation if applicable. Attempts to deceive, distort the competition etc.

Edited by Mr Popodopolous
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1 hour ago, Mr Popodopolous said:

Should be 3 stages to this set of investigations IMO.

Stage One- Test the value and whatever comes out is the value. If correct or broadly so then fair enough, if not. we escalate to the next stage...

Stage Two- If the values are deemed to be vastly overinflated- and I don't think the Madejski is, £26.5m for a modern ground built in late 1990s seems reasonable, capacity 24,161. The others are less clear. Anyway Stage Two should then be deduction of the surplus between sale price and independent valuation from the FFP calculations- with current, and past FFP results recalculated on this revised basis. Has to pass the duck test /reasonableness test to avoid this stage!

Stage Three- If applicable by which I mean if the readjustment pushes a club over the limits then it's an EFL independent Disciplinary Commission Birmingham style. Even if it doesn't push them to this stage, the "profit" still must be readjusted accordingly with the readjusted FFP results the new starting point.

With an additional possibility of deliberate/aggravated breaches coming into the equation if applicable. Attempts to deceive, distort the competition etc.

From the EFL's point of view that's probably how they will look at it, but from the clubs point of view (those that got valuations anyway) they will likely look at it a very different way.

Stage One - Why would the clubs just accept the EFL's independent valuations if they vary from the independent ones they obtained? You can't just argue that the EFL obtained one is the correct one simply because they are the ones that obtained it. If the clubs have also obtained their own independent valuations then they will argue that theirs are the correct ones too, no? Is that not the whole point of getting them in the first place?

Stage Two - Again, if the EFL's were lower they could argue that the clubs were overinflated, but the clubs could counter argue that the EFL's were undervalued.

After all are any of the people involved in a club actually qualified to know their stadiums valuations? Presumably this is why they get in companies to provide them with it. They will surely have taken that valuation in good faith?

With ours particularly, given the £55m valuation in 2007 (presumably it was similar in 2013? Given the wording in the accounts mentioned previously), with them knowing all the work they've done since (pretty sure most if not all was also after the 2013 revaluation) and how much that has cost etc, I can't imagine that anyone would think anything wrong of a valuation of £81m around 11 (or 5 if that one was similar) years later?

You actually have no idea whether Reading's was at the correct value either, but as it was lower you're making it the benchmark??

The book value of an asset actually doesn't necessarily mean a lot does it, unless it was very recently revalued?

I notice from looking through Reading's accounts that they didn't appear to have ever revalued their stadium from the time it was built to the time it was sold, doesn't this mean the book value means very little to the actual valuation of the stadium? Don't forget when we revalued Pride Park it (the net book value) went from around £21m to around £60m, nothing had changed bar the stadiums valuation. The depreciation also went down, so the revaluation had obviously taken this into account, as the link I posted yesterday seems to suggest happens.

If this is the case you cannot judge Reading's stadium value on the book value given that was only relevant to its construction cost (and any additions made). The only reason their value changed (upwards) through any of the accounts was because of those additions, which were every year from the year their stadium value was reclassified from 'Assets in the course of construction', the largest of which was around £4.7m.

I notice it appears they disposed of another asset in 2015, on the books for around £5.6m, I think profit on disposal was listed as £11m, but this was before the FFP regulations changed to allow the profit in 2016. They actually made more profit on the disposal of this asset (I'm not actually sure what it was) compared to their stadium.

Stage Two and Three - If the EFL's valuations were to come back different to (ie. lower than) the clubs, the scenario you mention above assumes that the clubs knew that the valuations were too high and they have knowingly gone over FFP limits.

If you adjust the allowed spending in line with a potentially lower EFL valuation which subsequently means the clubs have gone over the allowed limit and would then be punished, then they will surely argue they would not have done this if they knew at the start that the valuation would need to be queried as they took it in good faith?

I'm not sure how you could punish a club based on a further valuation providing they have all the evidence of the valuation they obtained themselves at the time?

I'm sure if the above happened there would be a legal challenge from the clubs involved, and it would be a very long and drawn out process.

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1 hour ago, DerbyFan said:

From the EFL's point of view that's probably how they will look at it, but from the clubs point of view (those that got valuations anyway) they will likely look at it a very different way.

Stage One - Why would the clubs just accept the EFL's independent valuations if they vary from the independent ones they obtained? You can't just argue that the EFL obtained one is the correct one simply because they are the ones that obtained it. If the clubs have also obtained their own independent valuations then they will argue that theirs are the correct ones too, no? Is that not the whole point of getting them in the first place?

Stage Two - Again, if the EFL's were lower they could argue that the clubs were overinflated, but the clubs could counter argue that the EFL's were undervalued.

After all are any of the people involved in a club actually qualified to know their stadiums valuations? Presumably this is why they get in companies to provide them with it. They will surely have taken that valuation in good faith?

With ours particularly, given the £55m valuation in 2007 (presumably it was similar in 2013? Given the wording in the accounts mentioned previously), with them knowing all the work they've done since (pretty sure most if not all was also after the 2013 revaluation) and how much that has cost etc, I can't imagine that anyone would think anything wrong of a valuation of £81m around 11 (or 5 if that one was similar) years later?

You actually have no idea whether Reading's was at the correct value either, but as it was lower you're making it the benchmark??

The book value of an asset actually doesn't necessarily mean a lot does it, unless it was very recently revalued?

I notice from looking through Reading's accounts that they didn't appear to have ever revalued their stadium from the time it was built to the time it was sold, doesn't this mean the book value means very little to the actual valuation of the stadium? Don't forget when we revalued Pride Park it (the net book value) went from around £21m to around £60m, nothing had changed bar the stadiums valuation. The depreciation also went down, so the revaluation had obviously taken this into account, as the link I posted yesterday seems to suggest happens.

If this is the case you cannot judge Reading's stadium value on the book value given that was only relevant to its construction cost (and any additions made). The only reason their value changed (upwards) through any of the accounts was because of those additions, which were every year from the year their stadium value was reclassified from 'Assets in the course of construction', the largest of which was around £4.7m.

I notice it appears they disposed of another asset in 2015, on the books for around £5.6m, I think profit on disposal was listed as £11m, but this was before the FFP regulations changed to allow the profit in 2016. They actually made more profit on the disposal of this asset (I'm not actually sure what it was) compared to their stadium.

Stage Two and Three - If the EFL's valuations were to come back different to (ie. lower than) the clubs, the scenario you mention above assumes that the clubs knew that the valuations were too high and they have knowingly gone over FFP limits.

If you adjust the allowed spending in line with a potentially lower EFL valuation which subsequently means the clubs have gone over the allowed limit and would then be punished, then they will surely argue they would not have done this if they knew at the start that the valuation would need to be queried as they took it in good faith?

I'm not sure how you could punish a club based on a further valuation providing they have all the evidence of the valuation they obtained themselves at the time?

I'm sure if the above happened there would be a legal challenge from the clubs involved, and it would be a very long and drawn out process.

Stage One- More reliable from a neutral Governing body than a club- it just is. EFL should have been involved in the valuation process from the start IMO. Well I say more reliable, it's actually 2 valuers who may have a different view but justice must be seen to be done as well as being done- principles applicable here.

Stage Two- Yes, this aspect is true. The two separate valuations, unclear how you would go about settling that part of it. Taken in good faith, yes- but it is awfully interesting that clubs who have done it were largely near or over the line with FFP without it. Why don't other fully compliant clubs do it for example as a revenue boost? Suggests a slight vested interest here...agree that an outside company is necessary.

Yeah, additions cover work done do they not? Additions under Tangible Fixed Assets- certainly the cost involved. On the other hand, we have depreciation. All needs to be factored in.

£55m in 2007- what has enhanced the value other than work on the ground? Is it to the tune of nearly 50% even factoring in depreciation since this time?

Reading's looks more realistic but yes without checking their accounts for the last 15-20 years it'll be hard to tell- not done that yet, could have been revalued, written down, written up in that time- had a load of additions.

Book value means little agreed- read some of that link, will do so in full. Where was the £60m, was this the 2013 revaluation?

Assets in the course of construction- that could mean training ground, infrastructure or whatever else would be classed as a Tangible Fixed Asset though unless specifically stated as such. The interesting but doubtless perfectly legit thing is that I see no reference to the amount that the 2013 revaluation came to, unlike the 2007 one. Been looking at assets under construction and still doesn't explain the uplift.

Probably an old training ground or something, the Reading disposal. In all honesty, part of me isn't 100% against disposal of fixed assets even stadia regarding FFP if it is to a verifiable 3rd party, open and transparent and full market rent is paid though it is simpler and probably best to just disallow it from the calculations end of. Maybe the old Elm Park site?

Found it from 2016:

Quote

Yes, the club's accounts also include an £11m gain in disposal of fixed assets which in this case is the value of the land around the Stadium to the 'RFC Prop Co' who will be developing Royal Elm Park. While that's all well and good on the balance sheet, Dave points out that it can't be factored into FFP rules. Fortunately we didn't break FFP rules overall as with other factors such as youth development and depreciation meant that we came in above the £6m loss threshold.

Stage Two and Three- Not inconceivable that a club knowingly exceed FFP limits- look at Birmingham and their idiotic purchase of Pedersen when under a soft embargo! Admittedly, none of you, Aston Villa, Reading or Sheffield Wednesday have acted like this! Pure idiocy that act...but they surely knew they were over but did it anyway!

I can see that argument but there are not a huge number of loopholes to exploit that aside.

Because a further valuation from the EFL is more neutral and therefore justice is more easily seen to have been done than if commissioned by a club!

I would suspend the clubs who take legal action if I had my way. It can be done- these arbitration panels are pretty binding- QPR nearly got refused re-entry to the FL in 2015 when threatening court etc, and that was a real risk until they decided to go in and fight their case internally within the arbitration process. Vote of the 24 Championship clubs to suspend membership of legal action- maybe something within the regs or small print, articles of association? Would be interesting to see how clubs would vote in this scenario even if it had no effect! EFL commission on this matter can issue anything from a warning to expulsion from the Football League, it's an independent Commission and they have a very wide remit of powers! Pretty sure in 2014/15 there was a risk that the EFL would allocate QPR no fixtures if it came to it with regards that FFP scenario on their return.

You talk about legal action, I'm convinced there would be plenty of clubs lined up on the other side. Wouldn't surprise me if the many compliant clubs have looked at legal action and that this has helped to bring this about!

Oh yeah the EFL Independent Disciplinary Commission. Provide a warning, expel a club- and pretty well anything in between. Full list on the EFL site!

Different club by club too- Aston Villa were too far gone before Villa Park, save for the sale of Grealish. You I'm not wholly convinced were in breach, Reading's £6.5m- margins must've been tight! Sheffield Wednesday well their transaction was very, very questionable for multiple reasons.

Edited by Mr Popodopolous

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I pretty out of my depth. With some of the discussion here (although it makes a fascinating read). But with regard to the valuation I would have thought you would need a chartered surveyor valuation to ensure no foul play if part of Derby County's valuation process used an a accredited chartered surveyor valuation it would be hard to disbute the valuation. It regularly used when parties may have and interest in inflating or deflating value - eg. Obtaining a value of property to pay off loans  in tge gov help to buy scheme. 

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1 hour ago, Mr Popodopolous said:

Stage One- More reliable from a neutral Governing body than a club- it just is. EFL should have been involved in the valuation process from the start IMO. Well I say more reliable, it's actually 2 valuers who may have a different view but justice must be seen to be done as well as being done- principles applicable here.

Stage Two- Yes, this aspect is true. The two separate valuations, unclear how you would go about settling that part of it. Taken in good faith, yes- but it is awfully interesting that clubs who have done it were largely near or over the line with FFP without it. Why don't other fully compliant clubs do it for example as a revenue boost? Suggests a slight vested interest here...agree that an outside company is necessary.

Yeah, additions cover work done do they not? Additions under Tangible Fixed Assets- certainly the cost involved. On the other hand, we have depreciation. All needs to be factored in.

£55m in 2007- what has enhanced the value other than work on the ground? Is it to the tune of nearly 50% even factoring in depreciation since this time?

Reading's looks more realistic but yes without checking their accounts for the last 15-20 years it'll be hard to tell- not done that yet, could have been revalued, written down, written up in that time- had a load of additions.

Book value means little agreed- read some of that link, will do so in full. Where was the £60m, was this the 2013 revaluation?

Assets in the course of construction- that could mean training ground, infrastructure or whatever else would be classed as a Tangible Fixed Asset though unless specifically stated as such. The interesting but doubtless perfectly legit thing is that I see no reference to the amount that the 2013 revaluation came to, unlike the 2007 one. Been looking at assets under construction and still doesn't explain the uplift.

Probably an old training ground or something, the Reading disposal. In all honesty, part of me isn't 100% against disposal of fixed assets even stadia regarding FFP if it is to a verifiable 3rd party, open and transparent and full market rent is paid though it is simpler and probably best to just disallow it from the calculations end of. Maybe the old Elm Park site?

Found it from 2016:

Stage Two and Three- Not inconceivable that a club knowingly exceed FFP limits- look at Birmingham and their idiotic purchase of Pedersen when under a soft embargo! Admittedly, none of you, Aston Villa, Reading or Sheffield Wednesday have acted like this! Pure idiocy that act...but they surely knew they were over but did it anyway!

I can see that argument but there are not a huge number of loopholes to exploit that aside.

Because a further valuation from the EFL is more neutral and therefore justice is more easily seen to have been done than if commissioned by a club!

I would suspend the clubs who take legal action if I had my way. It can be done- these arbitration panels are pretty binding- QPR nearly got refused re-entry to the FL in 2015 when threatening court etc, and that was a real risk until they decided to go in and fight within the arbitration process. Vote of the 24 Championship clubs to suspend membership of legal action- maybe something within the regs or small print, articles of association? Would be interesting to see how clubs would vote in this scenario even if it had no effect! EFL commission on this matter can issue anything from a warning to expulsion from the Football League, it's an independent Commission and they have a very wide remit of powers! Pretty sure in 2014/15 there was a risk that the EFL would allocate QPR no fixtures if it came to it with regards that FFP scenario on their return.

That's my point though, it's a different person giving their valuation, nothing about it makes it more likely to be right than the one from the club. Just as an aside, what would happen if the valuation actually found it to be worth more?

Well yes, to help FFP compliance would likely be why they've been sold, but that doesn't mean they were overvalued. Clubs with no need (or no wish) to sell aren't likely to do it as a revenue boost so they don't need to get a valuation.

Yes, it does need to be factored in, which is what the accounts do.

What enhanced the value on the books from £21m to £60m the first time it was revalued? I can only assume that market changes have affected the valuation as well as the work done to it. As I mentioned, the depreciation seemed to be included in the original revaluation as it changed from £5.6m to £1.3m with that, so any further revaluation would I assume also take into account the depreciation.

Reading's doesn't appear to have been revalued (there was no revaluation reserve listed after the stadium appeared), written down or written up during that time, there were however additions each year. I made a note of the figures from the 'Freehold land and buildings' section, and checked for the other bits like revaluation reserve elsewhere, hope this helps as a starting point (and I'm really, really hoping this shows up ok when I post! 🤞)

            COST/VALUATION  DEPRECIATION    NET BOOK VALUE    ADDITIONS    RECLASSIFICATION    DISPOSALS    PROFIT ON DISPOSAL    REVALUATION RESERVE

1996    2,424,539                173,917                  2,250,622                   -                       -                                       -                        -                                          1,750,000
1997    3,492,355                192,355                  3,300,000                   -                       -                                       -                        -                                          2,727,566
1998    3,492,355                199,986                  3,292,369                   -                       -                                       -                        -                                          2,727,566
1999    30,284,529              403,790                 29,880.739                 -                      30,284,529^                   (3,492,355)     674,343                              -
2000    30,285,513              1,009,015              29,276,498                 984                  -                                      -                        4,250,000+                         -
2001    30,195,564              1,610,528              28,585,306                (89,949)           -                                      -                         -                                          -
2002    30,756,172              2,217,179              28,538,993                 560,608           -                                     -                         -                                          -
2003    32,108,199              2,880,227              29,227,972                1,352,028         -                                     -                         -                                          -
2004    32,657,449              3,597,711              29,059,738                549,250            -                                     -                         -                                          -
2005    33,517,935              4,315,204              29,202,731                860,486            -                                     -                         -                                          -
2006    33,676,456              5,195,931              28,480,525                173,725            -                                    (15,204)            -                                          -
2007    36,604,151              6,061,510              30,542,641                2,927,695         -                                    -                          -                                          -
2008    41,309,673              6,936,345              34,373,328                4,705,522         -                                    -                          -                                          -
2009    41,514,968              8,409,454              33,105,514                264,523            -                                    (59,228)             -                                         -
2010    41,574,629              9,947,932              31,626,697                59,661               -                                    -                          -                                         -
2011    41,566,830             11,494,789             30,072,041                27,944               -                                   (35,743)            -                                          -
2012    42,786,641             13,044,124             29,742,517                1,219,811          -                                   -                          -                                          -
2013    45,899,086             14,717,695             31,181,391                3,112,445         -                                    -                          -                                          -
2014    45,749,698             16,159,042             29,590,656                870,920             -                                   (1,020,308)       -                                          -
2015    42,434,216             17,670,997             24,763,219                2,330,873          -                                   (5,646,355)      11,000,000                        -
2016    43,336,478             19,036,759             24,299,719                902,262              -                                   -                          -                                         -
2017*   38,689,077            17,516,376             21,172,701                246,399              -                                   -                          -                                          -
2018~  2,864,247               2,216,071              648,176                      551,237              -                                  (36,376,068)     6,518,222                         -

^ From 'Assets in the course of construction'
+ During the year, the company granted a 125 year lease for part of its land to Madejski Stadium Hotel Limited for £4,250,000
* 'Training ground improvements' split off from 'Freehold land and buildings'
~ Sale not listed under 'Related party transactions', sale was to their immediate parent company Renhe Sports Management Co Limited, so presumably they used FRS 102 not to disclose it.

The £60m I was referring to was when the net book value in the accounts jumped up from £21.6m to £60.1m with the revaluation in the 2008 accounts.

The 'Assets in the course of construction' I was referring to was Reading's stadium, not to do with our accounts, see above. I assumed the 2013 valuation of our stadium was similar to the 2007 one due to the wording I quoted yesterday, where it said about 'material change'?

Ahh thanks, that explains that, I didn't make a note, so obviously didn't see that mentioned. That's quite high? £11m profit just on the land?

Yes, I know Birmingham ignored it, but we have said all along that we will abide by it, there has never been a time when we've said anything other than that, I assume the others are the same.

What I meant about the valuation and not having gone over otherwise was because it's perfectly allowed to use the profit from a stadium sale (that is clear in the rules and doesn't seem to be disputed) the issue being mentioned at the moment is the valuation. The clubs will have worked out their figures on the valuation they were given. Had this valuation been lower, they would have adjusted their future spending to counteract that, in our case, I don't believe we needed to post a £14.6m profit? In which case, say the stadium was valued at £61m for example, the £5.4m loss posted instead should still have seen us under FFP for that period as I don't believe we were over from the 2 years before, but we would adjust future spending to account for that. Surely as it is we will have worked our future seasons planning on the valuation we were given, so if the valuation is lowered it might see us over, where we wouldn't have been if we had known that was the case in the first place.

It's still entirely possible that the EFL's valuation is the same/very similar as the clubs anyway, given that they have both commissioned independent valuations.

They'd be perfectly entitled to take legal action (and that's also why there's an appeals process). It would be a very different situation for a club that knows they've not kept to the rules and have made no attempt not to, to a club that knows they have and have the proof of that, ie. an independent valuation stating the value they worked to.

Edited by DerbyFan
Showing up not too bad thankfully! Shame 'reserve' is on the next line down though!
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(Potentially) very interesting Tweet by Andy Holt here- or is it that only Championship clubs would've voted on the regulation about asset sales counting towards FFP?

Certainly makes you wonder...

Edited by Mr Popodopolous

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