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Taz

Derby charged for a breach of spending rules

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10 hours ago, kit said:

I have to say I think Derby have a case. It feels very much a case of the proverbial bolting of the door. 

It seems obvious that they have found a way around the rules but I don't think it has been swept under the carpet at all from Derbys side of things.

Unless there its something more to this I would be very surprised if there was any retrospective punishment for Derby once it's all played out, they've been open and transparent taking at face value that the efl signed off their transactions at the time. It seems to me that the efl have little basis for the charge. 

Sheffield Wednesdays is a little different because of the timings as they seem to have commenced after their year end but who knows what conversations were had with the efl.

It just seems barmy to me that a set of rules allow infrastructure expenditure not to count towards ffp but the sale of infrastructure does count towards ffp. Sort the rules out first then start punishing clubs.

 

11 minutes ago, Mr Popodopolous said:

Was reading a few of the articles. 

Interesting line in the one by David Conn, especially relevant to all the ground sales I'd have thought. 

'and the league is understood to have had its own independent valuation of Pride Park carried out, using different criteria according to its rules'. 

I'm assuming that at least in part is referring to valuation methods. I'd have thought that Depreciated Replacement Cost or Value In Use would be the only acceptable ones for this type of transaction. Certainly for FFP purposes.

While it might appear that the EFL is attempting to bolt the proverbial stable door, I don't think that is the case.

Yes, we and the clubs know the EFL created this loophole with their inept drafting of the new ffp rules. It also looks pretty clear that Derby ( and Wednesday I believe) discussed the sale of their stadia with the EFL before proceeding , and indeed got the OK to do so. This is not the clubs getting round the rules, but merely being aware of the loophole inadvertently created. We would all agree that they broke the spirit of the rules, but did not  break the rules from a legal standpoint.

However, unless their is evidence to the contrary, what the EFL did not sanction was clubs using "inflated " valuations on the stadia in order to maximise the "sale" profit and avoid ffp sanctions, and let's be honest that is the only reason any of these clubs "sold" their stadiums.

As I've mentioned previously, I think the clubs thought they were home and dry once they had the OK from the EFL and once their ffp accounts had been approved last season. The EFL realised that the furore this has caused risks ffp lacking any future credibility and being blown out of the water ( no doubt prompted by Steve Gibson's that of legal action against the EFL).  As Mr P says, it is the valuations not being at fair value that the EFL are pursuing, and the question of fair value is, I believe , contained with the EFL rules regarding sale of assets and I think t also contained within UEFA's ffp rules.

There is no vindictiveness about wanting the EFL to be successful, but when you see that 2 of the clubs involved in stadium sales ( Villa and Derby) not only squeezed asset of the play offs, but in Villa's case , secured promotion, then unless the EFL can bring clubs in line on ffp and punish offenders, then what is the point in us, or any other club, operating prudently in order to comply when there clubs put 2 fingers up to the EFL and other clubs to gain an advantage i.e. cheating.

 

 

 

 

 

 

 

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Probably already been said here but the points deduction amount is thought to be 21.

The trouble the Football League find themselves in is that they like to belittle themselves, hence feeling the need to inexplicably prefix English to 'The Football League', and then equally meekly dish out pathetically weak penalties; thus leaving themselves open to ridicule whereby they now want to dish out a slightly larger one leaving themselves much more open to an appeal. 

If they had exact written constitutional penalties for all to see in the first place it would be balanced, fair and a deterrent. Since they do not they are the subject of ridicule and rightly so leaving clubs to continually flout weak rules. Sadly the only way to do a u turn here is to do it slowly or risk the wraith and costly appeals of many clubs. 

Frankly when a rule like this is broken the club should be automatically relegated and start the season at 0 points from now. There is even a slot ready for them picking up the already organised fixtures of Bury. 

Edited by havanatopia

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38 minutes ago, Mr Popodopolous said:

Yeah, good point. They apparently had big plans for a roof and concerts on a rolling basis, not just the summer. Hats off if they actually manage that but I have my doubts as to the feasibility. 

Very true. Yet maybe it's not so much the executive of the EFL who approved it, as a certain Ex EFL CEO. 

Unsure that would stand unless it was approved by a sufficient number. Surely if he himself approved it, he would risk having exceeded his authority.

I wonder if thus might indeed be the case.  Shaun Harvey said “yeah, it’s fine’, not the EFL.  Similar to Villa claiming it’s all been agreed by the EFL, when perhaps it was Harvey.

Some sort of legal claim against said ex EFL CEO might be a wise move by the EFL if there is evidence that he has excreded his authority. Could certainly strengthen their case?

If @DerbyFan still reads this site, very interested to know their take on the latest goings on.

Oh yeah, that Derby statement neglected two key details:

1. Which company carried out the valuation?

I thought we already had established it was a company owned by a self-proclaimed Derby fan (or was that Wednesday).

2. Which method was used. I'm surprised that accounts are exempt from disclosure of this now...or they seem to if these sales are anything to go by.

Comments above

16 minutes ago, havanatopia said:

Probably already been said here but the points deduction amount is thought to be 21.

The trouble the Football League find themselves in is that they like to belittle themselves, hence feeling the need to inexplicably prefix English to 'The Football League', and then equally meekly dish out pathetically weak penalties; thus leaving themselves open to ridicule whereby they now want to dish out a slightly larger one leaving themselves much more open to an appeal. 

If they had exact written constitutional penalties for all to see in the first place it would be balanced, fair and a deterrent.

They were published as part of the Birmingham verdict.  We (the public) just hadn’t seen them before.

Since they do not they are the subject of ridicule and rightly so leaving clubs to continually flout weak rules. Sadly the only way to do a u turn here is to do it slowly or risk the wraith and costly appeals of many clubs. 

Frankly when a rule like this is broken the club should be automatically relegated and start the season at 0 points from now. There is even a slot ready for them picking up the already organised fixtures of Bury.

That penalty should be available if rule breaking severe enough.

Comments above

13 minutes ago, bcfcredandwhite said:

Will FFP go for Villa when they are back in the Championship next season?

Villa are already under some form of investigation by the Premier League.  The Villa owners gone a bit quiet since, having previously been very bullish that everything was in order and agreed by the EFL, even though there appears to be nothing in writing.

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49 minutes ago, bcfcredandwhite said:

Will FFP go for Villa when they are back in the Championship next season?

If there is an ffp issue carried over from the last 3 seasons, then the answer has to be yes.

If that is the case, then it beggars the question as to why Villa were able to gain promotion, if, as we were led to understand, one of the purposes being the new ffp rules was that assessment could be carried out, and, where appropriate, punishment applied during in the same season. The new rules, and penalties it allows, would enable a points deduction to be given that could then prevent a team gaining promotion  and prevent them gaining from breaking the financial rules, as has beneath case in the past with Bournemouth, QPR and Leicester.

If Villa did breach ffp last season, and would then be punished if relegated, then why wasn't this addressed last season before they gained promotion?

While we know these clubs took advantage of a loophole inadvertently created, but I also have that horrible feeling that had the offending clubs been us, Wigan and Millwall the EFL would have been out of the staring blocks quicker than Roadrunner. That Derby and Villa are big clubs, and were both in contention for promotion, makes me think the EFL were loath to open pandora's box ( Rudolph was probably there first anyway!), especially having given the clubs the OK to sell their stadia, with the risk of a complex legal dispute that could throw the end of the season into disarray.

Anyway we are where we are, so it's better late than never!

 

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On 16/01/2020 at 13:29, RidgeRed said:

Is that the Famous Club rule? You do know Derby were once famous don't you? If that's escaped your notice I believe Bailey & Fam will have to carry the can.

I know. 

I harbour slim (and perhaps misguided) hope that the EFL may find some balls of their own now their distant cousins at the RFU have effectively relegated Saracens due to similar financial failings. If rugby can effectively kick one of its biggest teams out of the top division, with a total points deduction of 70 and a fine of over £5million, then surely the EFL can make a statement decision at some point.

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5 minutes ago, ExiledAjax said:

I know. 

I harbour slim (and perhaps misguided) hope that the EFL may find some balls of their own now their distant cousins at the RFU have effectively relegated Saracens due to similar financial failings. If rugby can effectively kick one of its biggest teams out of the top division, with a total points deduction of 70 and a fine of over £5million, then surely the EFL can make a statement decision at some point.

Exactly this. Financial doping. 

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2 hours ago, downendcity said:

 

However, unless their is evidence to the contrary, what the EFL did not sanction was clubs using "inflated " valuations on the stadia in order to maximise the "sale" profit and avoid ffp sanctions, and let's be honest that is the only reason any of these clubs "sold" their stadiums.

 

This is probably the key point i.e. what was the sign off given by the f.a. I haven't seen anything that says with any certainty what it was.

I also think if you have an independent valuation that can argue that the ground was worth that value and even if it seems high but the assumptions used have some sort of credence then I think it's tough for the efl to prove this.

There just isn't a market for football grounds in derby to test the value against. The land is relatively easy, the stadium is not. I think there is wide spectrum of values you could land on, it boils down to poor legislation again it should have something along the lines of related party sales are to be reviewed by independent parties agreed by efl and club.

Fix the legislation and move on.

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30 minutes ago, kit said:

This is probably the key point i.e. what was the sign off given by the f.a. I haven't seen anything that says with any certainty what it was.

I also think if you have an independent valuation that can argue that the ground was worth that value and even if it seems high but the assumptions used have some sort of credence then I think it's tough for the efl to prove this.

There just isn't a market for football grounds in derby to test the value against. The land is relatively easy, the stadium is not. I think there is wide spectrum of values you could land on, it boils down to poor legislation again it should have something along the lines of related party sales are to be reviewed by independent parties agreed by efl and club.

Fix the legislation and move on.

You are right that there is no established and active market for football stadia, so no evidence of sales for comparable in the way there would be in the residential market. This I think is one of the things Derby ( and the other clubs) banked on as not only is there a massive variation between the lowest valuation ( Reading at £28m I think) to Derby's at £81m, but in each case the valuation, and subsequent profit from sale was sufficient to avoid ffp penalty. The cynic in me doesn't believe in truly independent valuation so that I would have expected all clubs' valuations to have come in at the figure the respective owner needed and wanted!

If the EFL are really naive and obtain one valuation, then it will just become a legal argument as to who valuation is the correct one and given they approved the stadium sales in the first place, and if Derby have a half decent lawyer, I would expect the EFL to lose. I would hope that the EFL would "belt and braces" their case by obtaining more than one valuation, and hopefully all would be in the same ball park and well below Derby's valuation, as this would give Derby little wriggle room.

 

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Just listened to what I assume was the Simon Jordan interview on TalkSport that was referred to earlier in the thread.

He is I suspect right about FFP being the future of football, it's a matter of opinion but I believe it is likely that it would need a big club to get really hammered it to be a big game-changer.

He made a variety of factual errors though plus a couple of omissions- bit unlike him on these matters! He rightly stated that selling a ground isn't like selling a player.

He said something about Mel Morris justifying it via roof and concerts- well I remember that Morris interview and he (Morris) said £180m would have been the outcome! Derby are I believe stating that their valuation was correct, regardless of future work- and tbh under certain methods of valuation, maybe it is in the right ballpark- problem is, different methods of valuation can throw up different results it appears!

He also stated that the EFL valuer had revalued it to £60m...nope, it was £49-50m.

He also neglected to mention, though this is an omission rather than an error that a) The EFL have a mechanism for fair value rules and b) That different methods of valuation can throw up different results- already covered on here, but I thought he might have mentioned it!

If there is a longer version though, that certainly would be worth a listen.

Edited by Mr Popodopolous

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On 17/01/2020 at 10:25, Bar BS3 said:

Exactly this. It’s getting a bit tiresome that clubs are getting away with breaking the rules (cheating) to succeed and then getting a token punishment (at most) after they’ve enjoyed the fruits of that cheating. 
Even worse is that if the cheating gets you into the Premier League (Villa, Bournemouth) then it’s just forgotten about and allowed to pass. 
It should mean automatic demotion - or evening better, on promotion, all clubs should be looked into and any breach of fair play should deny them the step up and also have to begin the new season with a points deduction. 
Then watch clubs spending suddenly come in line with the rules..! 

It doesn’t get forgotten about, it gets shelves until said club is back under the elf’s control,

qpr being an example  

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3 hours ago, Monkeh said:

It doesn’t get forgotten about, it gets shelves until said club is back under the elf’s control,

qpr being an example  

QPR is a pretty woeful example then, imo. 
The only team that we’re properly punished, that I can remember, albeit for different breaches, under different rules, were Swindon. Denied promotion and Demoted to the division below. 

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2 hours ago, Bar BS3 said:

QPR is a pretty woeful example then, imo. 
The only team that we’re properly punished, that I can remember, albeit for different breaches, under different rules, were Swindon. Denied promotion and Demoted to the division below. 

Not really they had a harsh punishment under the rules of ffp at the time,

hence why they’ve changed the rules making it harsher

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On 17/01/2020 at 14:13, Vincent Vega said:

It's not the selling of the ground, more the valuation put on the grounds by the clubs themselves. 

Yes I realise that. What I was asking is; what's to stop all the other Championship clubs (including City) now selling their grounds to themselves, as long as their valuation is considered fair? It would be a massive FFP boost for everyone and would restore the level playing field against Derby, Sheff Wed and Reading.

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9 minutes ago, fgrsimon said:

Yes I realise that. What I was asking is; what's to stop all the other Championship clubs (including City) now selling their grounds to themselves, as long as their valuation is considered fair? It would be a massive FFP boost for everyone and would restore the level playing field against Derby, Sheff Wed and Reading.

My view is that it's best to punish them, and close the loophole. 

Or. 

As you say once each. Reading's only went for £26.5m so they were probably at fairing rate. Birmingham at £23m or thereabouts, £24m- again can't say that is over inflated and thy seem to have made some cutbacks AND be charging rent on realistic commercial terms. 

The ones I really want to see in the dock, up before the beak are Aston Villa! Decent chunk of their fans, Purslow and that they did this DESPITE parachute payments.

Didn't really sell any key players either, some decent foreign ones who wouldn't fancy this League aside perhaps.

Edited by Mr Popodopolous

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Unsure it can be forbidden as such, you simply make it pointless by excluding it from the FFP calculations.

Nit just grounds either, but training grounds, academies- any Tangible Fixed Assets in fact.

There COULD be cases in which it is legitimate but these would be specific and clear.

1) If you sell an old training ground or even ground as you're moving to a genuine new build, isn't that a legitimate profit? Clue is in the term 'disposal'- disposal as opposed to sale and leaseback of a fixed asset. 

2) Has to be to a genuine arms length, third party. Elland Road to their owner went for £20m or thereabouts I believe, not long ago. Land prices in Leeds are higher than Sheffield I suspect as Leeds quite a commercial city, yet Hillsborough 3 times that?? I know it's not quite so simple and Elland Road surely cheap, but that's a bit of a klaxon surely

3) If, if a sale and leaseback was to be legit, how about selling it to a finance company, a bank or similar. That's a controversial yet truly arms length (subject to checks and tests) transaction and you wouldn't expect any favours.

Edited by Mr Popodopolous
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54 minutes ago, fgrsimon said:

Yes I realise that. What I was asking is; what's to stop all the other Championship clubs (including City) now selling their grounds to themselves, as long as their valuation is considered fair? It would be a massive FFP boost for everyone and would restore the level playing field against Derby, Sheff Wed and Reading.

It's not so much about levelling the playing field with Derby, Wednesday and Reading, it's the relegated clubs with massive parachute payments that skew the championship massively.  The pressure to compete financially with these clubs is, I think, what has driven the likes of Derby et al yo do what they did.

45 minutes ago, Mr Popodopolous said:

My view is that it's best to punish them, and close the loophole. 

Or. 

As you say once each. Reading's only went for £26.5m so they were probably at fairing rate. Birmingham at £23m or thereabouts, £24m- again can't say that is over inflated and thy seem to have made some cutbacks AND be charging rent on realistic commercial terms. 

The ones I really want to see in the dock, up before the beak are Aston Villa! Decent chunk of their fans, Purslow and that they did this DESPITE parachute payments.

Didn't really sell any key players either, some decent foreign ones who wouldn't fancy this League aside perhaps.

 

32 minutes ago, Mr Popodopolous said:

Unsure it can be forbidden as such, you simply make it pointless by excluding it from the FFP calculations.

Nit just grounds either, but training grounds, academies- any Tangible Fixed Assets in fact.

There COULD be cases in which it is legitimate but these would be specific and clear.

1) If you sell an old training ground or even ground as you're moving to a genuine new build, isn't that a legitimate profit? Clue is in the term 'disposal'- disposal as opposed to sale and leaseback of a fixed asset. 

2) Has to be to a genuine arms length, third party. Elland Road to their owner went for £20m or thereabouts I believe, not long ago. Land prices in Leeds are higher than Sheffield I suspect as Leeds quite a commercial city, yet Hillsborough 3 times that?? I know it's not quite so simple and Elland Road surely cheap, but that's a bit of a klaxon surely

3) If, if a sale and leaseback was to be legit, how about selling it to a finance company, a bank or similar. That's a controversial yet truly arms length (subject to checks and tests) transaction and you wouldn't expect any favours.

I don;t see any problem with genuine open market commercial sales, as these will almost certainly be to unrelated third parties. For example, had we obtained permission for Ashton Vale and sold the Gate to Sainsburys, the sale price would be driven by the market. Not only that but the sale proceeds would have been used to pay for the new stadium.

If they are still going to allow sale of fixed assets to related third party companies, then a sensible way to go would be that clubs need to obtain approval first from the EFL and the EFL then instructs it's own independant valuation ( I'd actually suggest a minimum of 2 valuations in case the club disputes the validity of one valuation!). The EFL's valuation can then be used to determine the "profit" the club can apply to it's accounts. All the problems at the moment are because the disputes have been created after the event. If the club is not happy with the valuation, they can dispute it with no problem, but until the issue is resolved they haven't got any profit to put into the accounts, which would present a problem if the reason for doing this was an ffp issue!

I  do think the bigger issue to come out of this is that the new ffp rules failed to do what we were told they would, i.e. enable the the ffp assessment and any penalties to be applied during the same season. Had they done so it is quite possible that Villa would not now be playing in the premier league and we might have been playing in last season's play offs. 

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10 hours ago, Mr Popodopolous said:

My view is that it's best to punish them, and close the loophole. 

Or. 

As you say once each. Reading's only went for £26.5m so they were probably at fairing rate. Birmingham at £23m or thereabouts, £24m- again can't say that is over inflated and thy seem to have made some cutbacks AND be charging rent on realistic commercial terms. 

The ones I really want to see in the dock, up before the beak are Aston Villa! Decent chunk of their fans, Purslow and that they did this DESPITE parachute payments.

Didn't really sell any key players either, some decent foreign ones who wouldn't fancy this League aside perhaps.

Once again, you want us in the dock despite the fact, that at the moment we haven't been charged with doing anything wrong.

We sold many key players some of whom didn't want to be at the club, others whom we had to sell to balance the books.

Players like Adama Traore, Jordan Ayew, Scott Sinclair, Jordan Veretout, Idrissa Gana, Jordan Amavi, Ciaran Clark and Nathan Baker.

You can not begrudge us the opportunity to replace them.

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2 hours ago, AnAstonVillafan said:

Once again, you want us in the dock despite the fact, that at the moment we haven't been charged with doing anything wrong.

We sold many key players some of whom didn't want to be at the club, others whom we had to sell to balance the books.

Players like Adama Traore, Jordan Ayew, Scott Sinclair, Jordan Veretout, Idrissa Gana, Jordan Amavi, Ciaran Clark and Nathan Baker.

You can not begrudge us the opportunity to replace them.

We'll see what the 2018/19 accounts say I guess. Remember the ground sale valuation can be looked at afresh, as we've seen with Derby- though Villa Park seems more realistic.

I understand the sentiment so can't begrudge it as such, but pretty well all clubs, certainly at this level, sell key players and don't necessarily replace them- to stick within the limits. Have Birmingham adequately replaced Jota or Adams yet eg?

The idea is that if you need to sell key players to hit 39 million plus allowables then that's what it takes- like most clubs do.

Or you replace cheaper, you develop- yes those are some decent players tbh, who have indeed gone on to PL or other top tiers in Europe in a number of cases.

If it means the side getting weaker for a bit, then so be it- it's the reality for a lot of clubs.

Different sport entirely but...

Look at Saracens! Docked 35 points, docked another 35- equivalent of 7 x bonus point wins and then the same again for not hitting January targets- if EFL could enforce January deadline then this would solve the problems we've seen, as Saracens had until February or late January to get in line for this season, in addition to their punishment for the last 3 years.

That's the equivalent of a 42 point deduction in football btw! Fine was £5.6m, on a turnover of about £17.92m in 2017/18. Around 31.25% of turnover...somewhere between 1/5 and 30% anyway assuming income has grown.

Nonetheless, I WILL reserve judgement until the accounts are out, as a starting point- but bear in mind that for example if it shows say £50m of debt written off in the P&L, then it shows a lower loss, but it doesn't count as income under FFP, or profit for that matter. So it's a starting point but not necessarily decisive.

Edited by Mr Popodopolous

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12 hours ago, Mr Popodopolous said:

The ones I really want to see in the dock, up before the beak are Aston Villa! Decent chunk of their fans, Purslow and that they did this DESPITE parachute payments.

Didn't really sell any key players either, some decent foreign ones who wouldn't fancy this League aside perhaps.

Relegation back to the Championship will do for starters, Mr P.

They'd be spitting feathers having to mix with the likes of us again, the entitled pr1cks.

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2 hours ago, AnAstonVillafan said:

Once again, you want us in the dock despite the fact, that at the moment we haven't been charged with doing anything wrong.

We sold many key players some of whom didn't want to be at the club, others whom we had to sell to balance the books.

Players like Adama Traore, Jordan Ayew, Scott Sinclair, Jordan Veretout, Idrissa Gana, Jordan Amavi, Ciaran Clark and Nathan Baker.

You can not begrudge us the opportunity to replace them.

....but it appears you didn't balance the books - why else would your owners  have sold Villa Park to a related third party?

From Derby's situation it is clear that without the "sale" of Pride Park they would have breached ffp last season, and Wednesday's situation appears similar, even to the extent that Wednesday even resorted to backdating the sale. Commenting about the sale of Pride Park, Derby's owner said that the problem selling the better players is that it would have made them less competitive, and therein lies the real issue. The only logical reason most fans can see for a club selling it's stadium in such a way, is that it is the only option left to avoid a ffp breach.

On relegation, Villa had 3 years advance notice of the ffp assessment under the new rules and during that time had the benefit of 3 years' worth of parachute payments. Not only did that give you a significant financial advantage over the rest of the championship clubs, but also more than enough time to adjust your finances in order to comply with ffp. With hindsight it seems that rather than pruning the squad sufficiently to achieve ffp compliance, parachute payments were used to fund a push to gain quick promotion ( which is understandable) so even though player might have been sold, Villa still maintained a squad that over the 3 years was unaffordable under ffp rules. 

I think I'm right in saying  that Villa even borrowed against the third years' parachute payment during the second season back in the championship, as did West Brom, in order to maintain that competitive edge.

That Villa hasn't been charged with anything at the moment, is only down to the fact that the sale of a fixed asset wasn't breaking the rules, due to the loophole the EFL inadvertently created. However, as with Derby, the question of fair value is the issue they are now pursuing and which is within the rules. Of course, the fact that Villa secured promotion has made the EFL's task more complicated if they want to pursue a similar action and the cause of frustration to many fans looking in from the outside.

 

 

 

 

 

 

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1 hour ago, downendcity said:

....but it appears you didn't balance the books - why else would your owners  have sold Villa Park to a related third party?

From Derby's situation it is clear that without the "sale" of Pride Park they would have breached ffp last season, and Wednesday's situation appears similar, even to the extent that Wednesday even resorted to backdating the sale. Commenting about the sale of Pride Park, Derby's owner said that the problem selling the better players is that it would have made them less competitive, and therein lies the real issue. The only logical reason most fans can see for a club selling it's stadium in such a way, is that it is the only option left to avoid a ffp breach.

On relegation, Villa had 3 years advance notice of the ffp assessment under the new rules and during that time had the benefit of 3 years' worth of parachute payments. Not only did that give you a significant financial advantage over the rest of the championship clubs, but also more than enough time to adjust your finances in order to comply with ffp. With hindsight it seems that rather than pruning the squad sufficiently to achieve ffp compliance, parachute payments were used to fund a push to gain quick promotion ( which is understandable) so even though player might have been sold, Villa still maintained a squad that over the 3 years was unaffordable under ffp rules. 

I think I'm right in saying  that Villa even borrowed against the third years' parachute payment during the second season back in the championship, as did West Brom, in order to maintain that competitive edge.

That Villa hasn't been charged with anything at the moment, is only down to the fact that the sale of a fixed asset wasn't breaking the rules, due to the loophole the EFL inadvertently created. However, as with Derby, the question of fair value is the issue they are now pursuing and which is within the rules. Of course, the fact that Villa secured promotion has made the EFL's task more complicated if they want to pursue a similar action and the cause of frustration to many fans looking in from the outside.

 

 

 

 

 

 

Quite so, @downendcity .

Bit busy now so can';t comment on this post and your other but agree fully- estimates of overspend online over the 3 years were in the region of £25-30m! Kieran Maguire, Swiss Ramble and @yorkshireavfc on Twitter who was a good FFP poster, all had it in that range. My workings too. Any additional exceptional costs like say Lerner getting paid £30m on promotion obviously would be excluded, as would promotion bonuses but taking into account allowable costs and assuming they're the same last season, falling parachute payments, even with some falling wages, it's a problem! A quite possibly FFP failing problem!

PL are meant to be enforcing and this could yet happen...in July investigation announced, in September it emerged that Villa Park would be checked for fair value and the fact that no definitive all clear makes me wonder...these rules were aligned from 2016/17 onwards, the first full 3 year period of it in the Championship was to last season- the trade off should be that the PL act for the EFL and vice versa!

Edited by Mr Popodopolous

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These football bodies need authentic cojones. The Rugby boys seem to know how to eke out punishment. 

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2 hours ago, downendcity said:

....but it appears you didn't balance the books - why else would your owners  have sold Villa Park to a related third party?

From Derby's situation it is clear that without the "sale" of Pride Park they would have breached ffp last season, and Wednesday's situation appears similar, even to the extent that Wednesday even resorted to backdating the sale. Commenting about the sale of Pride Park, Derby's owner said that the problem selling the better players is that it would have made them less competitive, and therein lies the real issue. The only logical reason most fans can see for a club selling it's stadium in such a way, is that it is the only option left to avoid a ffp breach.

On relegation, Villa had 3 years advance notice of the ffp assessment under the new rules and during that time had the benefit of 3 years' worth of parachute payments. Not only did that give you a significant financial advantage over the rest of the championship clubs, but also more than enough time to adjust your finances in order to comply with ffp. With hindsight it seems that rather than pruning the squad sufficiently to achieve ffp compliance, parachute payments were used to fund a push to gain quick promotion ( which is understandable) so even though player might have been sold, Villa still maintained a squad that over the 3 years was unaffordable under ffp rules. 

I think I'm right in saying  that Villa even borrowed against the third years' parachute payment during the second season back in the championship, as did West Brom, in order to maintain that competitive edge.

That Villa hasn't been charged with anything at the moment, is only down to the fact that the sale of a fixed asset wasn't breaking the rules, due to the loophole the EFL inadvertently created. However, as with Derby, the question of fair value is the issue they are now pursuing and which is within the rules. Of course, the fact that Villa secured promotion has made the EFL's task more complicated if they want to pursue a similar action and the cause of frustration to many fans looking in from the outside.

 

 

 

 

 

 

Norwich, Middlesborough, Hull and Cardiff also had the benefit of those parachute payments, the former having been relegated in the same season as Villa.

Villa fans questioned Dr Xia about the parachute payments on Twitter and he replied that he had not spent a penny of the payments on 2016/17 transfers. At the same time there was a lot of frustration from the fans after a toothless friendly performance about the lack of a striker. The Manager did a U-turn and signed Ross McCormack. We would eventually spend over £50m in that window (Ironically at the time I warned of FFP to fellow fans who laughed at me), but good players left too. Some on 50 and 60k a week contracts.

Local press did report that we borrowed against parachute payments but this wasn't maintaining a competitive edge. It was about paying tax bills, staying afloat and without the new owners cash input James Chester and Jack Grealish were being lined up to be sold. That would have happened. In fact if Tottenham Hotspur had offered fair market value for Grealish and not tried to take advantage of a distressed seller, he would have gone. I understand your frustration looking in from the inside but there was a determination to try to be competitive to achieve promotion. I have heard you or others say that Villa fans are entitled and yes many of us are but consider that over a hundred people lost their jobs, the club shop was closed and part of the stadium was sectioned off too.

It was a lack of ambition and the sale of key players which caused relegation, and there was an expectation of a fightback, although I do feel we went about it in the wrong way.

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50 minutes ago, AnAstonVillafan said:

Norwich, Middlesborough, Hull and Cardiff also had the benefit of those parachute payments, the former having been relegated in the same season as Villa.

Villa fans questioned Dr Xia about the parachute payments on Twitter and he replied that he had not spent a penny of the payments on 2016/17 transfers. At the same time there was a lot of frustration from the fans after a toothless friendly performance about the lack of a striker. The Manager did a U-turn and signed Ross McCormack. We would eventually spend over £50m in that window (Ironically at the time I warned of FFP to fellow fans who laughed at me), but good players left too. Some on 50 and 60k a week contracts.

Local press did report that we borrowed against parachute payments but this wasn't maintaining a competitive edge. It was about paying tax bills, staying afloat and without the new owners cash input James Chester and Jack Grealish were being lined up to be sold. That would have happened. In fact if Tottenham Hotspur had offered fair market value for Grealish and not tried to take advantage of a distressed seller, he would have gone. I understand your frustration looking in from the inside but there was a determination to try to be competitive to achieve promotion. I have heard you or others say that Villa fans are entitled and yes many of us are but consider that over a hundred people lost their jobs, the club shop was closed and part of the stadium was sectioned off too.

It was a lack of ambition and the sale of key players which caused relegation, and there was an expectation of a fightback, although I do feel we went about it in the wrong way.

I can understand why some think that Villa fans feel entitled, but that is not the reason for much of this debate. It is more about the hard financial facts of life clubs like us have to live with.

The tough part of the financial rules is when it affects a club's ability to be competitive. Last summer we sold  half our pretty good defence for a combined £33m because we need/have to in order to balance the books for ffp. We replaced them with £11m or so worth of defenders ( who were on loan here last season anyway) and one of our own young players and although injuries have come in to play, we now have the worst defence of any top half championship club.

Has that affected our competitiveness - bloody right it has?

Was there an alternative - yes, keep them, breach ffp and take a penalty, which because we are not a big club would be a swingeing points deduction and 6 match suspensions for Bailey Wright and Famara Diedhiou ( in joke for City fans!)?

While the determination to be competitive and achieve promotion is understandable, and almost certainly applies to most championship clubs, the tough part is trying to do so but staying within the financial limits ffp imposes. 

You mention that Norwich, Hull Boro and Cardiff all benefitted from parachute payments, but as far as I am aware none of them has resorted to selling their stadium, so would presume that they have taken appropriate action (player sales, bringing in more affordable players etc) to bring their finances in line with championship ffp. The fact that Norwich apart, the other three haven't been tearing up trees in the championship and neither are Stoke and Huddersfield, suggests that falling in line with championship financial constraints has an impact and can make a club less competitive.

That all these clubs have the cushion of parachute payments for 3 years makes it alls the more difficult for other clubs to be as competitive. So while we, and many other championship clubs work hard to stay within the financial limits even if it makes us less competitive , with all respect, I don't think there will be a lot of sympathy for Villa on here, or probably from fans of other clubs, if it was a struggle to get costs down over the last 3 years because it would have adversely affected your promotion aims. 

Edited by downendcity
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Saw this in the Times tonight, this is Lawton's tweet on it, on his story.

https://mobile.twitter.com/Lawton_Times/status/1219528832643932160

Seem to recall you raising the alarm on it last summer @Coppello the whole residual value for players thing. Or at least calling it into question

Seems the difference maybe was £30m to June 2018!! :o :o

Which coincidence of all coincidences, is the difference between the two Pride Park valuations, roughly? 

Unless these are on top of the ones already mentioned?

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

Saw this in the Times tonight, this is Lawton's tweet on it, on his story.

https://mobile.twitter.com/Lawton_Times/status/1219528832643932160

Seem to recall you raising the alarm on it last summer @Coppello the whole residual value for players thing. Or at least calling it into question

Seems the difference maybe was £30m to June 2018!! :o :o

Which coincidence of all coincidences, is the difference between the two Pride Park valuations, roughly? 

Unless these are on top of the ones already mentioned?

In Mel’s head his valuation is all fine, suspect Shaun said it was fine too.

We debated with Derbyfan earlier this season how much it could affect their books...specifically in the aftermath of Lawrence, Keogh and the other one whose name escapes me.  Artificially keep their value high, means less amortisation.  No wonder Mel changed his accounting method.

Seems to be trying every fudge under the table, perhaps the prospective buyers didn’t like what they saw.

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3 minutes ago, Davefevs said:

In Mel’s head his valuation is all fine, suspect Shaun said it was fine too.

We debated with Derbyfan earlier this season how much it could affect their books...specifically in the aftermath of Lawrence, Keogh and the other one whose name escapes me.  Artificially keep their value high, means less amortisation.  No wonder Mel changed his accounting method.

Seems to be trying every fudge under the table, perhaps the prospective buyers didn’t like what they saw.

Yep, Shaun wouldn't have objected I'm sure. His reign looks less adequate by the day, yet it is in its own right a legitimate accounting policy. Unique in the EFL apparently!

Yes, we did indeed. I did wonder at one point if the ground sale wasn't for June 2018 but to cover for a year or maybe 2 in the future. 

Perhaps when a lot of players contracts ended, to cover one or two big hits in summer 2019 and 2020.

Worth noting that when Derby sacked Sam Rush, they were suing him for nearly £7m... 

Suspect that was another way of trying to get round FFP. Wonder what their projected overspend was- £7m perhaps?

Ah yes, on that note the investment is in doubt due to the FFP charge, was either in Off the Pitch or The Athletic.

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@downendcity @Davefevs @Coppello

https://www.dailymail.co.uk/sport/football/article-7917941/Premier-League-probe-Aston-Villas-56million-stadium-sale.html

You might be interested too, @AnAstonVillafan

While not yet technically guilty or charged of anything, it's definitely a live issue...remember Matt Hughes is one of the 3 most credible FFP journos, along with Matt Lawton and John Percy!

David Conn is also excellent on Football finance but his work seems to cover different areas.

A section of their fanbase is that entitled- granted online can and will amplify and I'm not including our visitor who is a fan, but a section that they actually locked their FFP thread, closed it just before Christmas, clearly what they think of it in terms of relevance or applicability to them!!

https://www.villatalk.com/topic/16585-villa-and-ffp-201789/page/108/

Edited by Mr Popodopolous
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Could be quite interesting I reckon- a real test case for the PL here!

If they let Aston Villa off or defer back to the EFL, they've basically let them win promotion in defiance of the regs- and that sends out a terrible message.

Probably opens the door to more legal wrangling too.

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On 20/01/2020 at 13:24, Monkeh said:

It doesn’t get forgotten about, it gets shelves until said club is back under the elf’s control,

qpr being an example  

Not sure what LJ has to do with other clubs FFP?

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20 hours ago, Mr Popodopolous said:

@downendcity @Davefevs @Coppello

https://www.dailymail.co.uk/sport/football/article-7917941/Premier-League-probe-Aston-Villas-56million-stadium-sale.html

You might be interested too, @AnAstonVillafan

While not yet technically guilty or charged of anything, it's definitely a live issue...remember Matt Hughes is one of the 3 most credible FFP journos, along with Matt Lawton and John Percy!

David Conn is also excellent on Football finance but his work seems to cover different areas.

A section of their fanbase is that entitled- granted online can and will amplify and I'm not including our visitor who is a fan, but a section that they actually locked their FFP thread, closed it just before Christmas, clearly what they think of it in terms of relevance or applicability to them!!

https://www.villatalk.com/topic/16585-villa-and-ffp-201789/page/108/

Most Aston Villa supporters simply do not understand FFP. Many think it's a system to keep the big clubs rich and stop their dominance from being challenged.

Until we were relegated the majority didn't know what it was. (My wife is a Nottingham Forest fan so I had a little heads up). I have spent a lot of time explaining it to members of my Facebook group.

I hate what we've done with the stadium. It could backfire on us very badly in ways a lot of people don't realise.

As for entitled fans, I'm 41 years old. Anyone my age or older than me will remember "the good times". Cup Final wins and European nights.

That generation finds relegation, sustainability, pragmatism, restraint, etc very hard to accept. I can understand it, but the club was at the top table for 27 years consecutively, run well and kept solvent until Lerner arrived. They need to get used to a different reality.

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Will reply properly to the Aston Villa post later but it seems a fair and balanced perspective.

https://www.accountingweb.co.uk/business/finance-strategy/derby-charged-under-financial-fair-play-rules

@Coppello @Davefevs @chinapig @downendcity

What makes this interesting is that it seems to be getting noted beyond mere football?

There was an article by Rav Cheema linked last year by Bristol Rob...Property Weekly about the Pride Park transaction.

Wonder if these clubs deals are making waves among accounting, auditing, valuing industries?

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51 minutes ago, Mr Popodopolous said:

Will reply properly to the Aston Villa post later but it seems a fair and balanced perspective.

https://www.accountingweb.co.uk/business/finance-strategy/derby-charged-under-financial-fair-play-rules

@Coppello @Davefevs @chinapig @downendcity

What makes this interesting is that it seems to be getting noted beyond mere football?

There was an article by Rav Cheema linked last year by Bristol Rob...Property Weekly about the Pride Park transaction.

Wonder if these clubs deals are making waves among accounting, auditing, valuing industries?

So let’s take Tom Lawrence, signed for £5m in 2017 on a 5 year deal.

As we currently stand, 2.5 (1/2) years into his contract, his value would be £2.5m.  Let’s take that to the end of the season, and now valued at £2m.

Each season has cost Derby £1m in amortisation.  However Mel might undertake an end of season valuation and say he’s still work £5m.  In that scenario Lawrence hasn’t cost Derby anything in the book.  Multiply that across several players, or on shorter contracts, and you can see how advantageous that is....when comparing it to the accounting policies of the other 70 EFL clubs.

Now imagine sacking Lawrence for his drink-driving:

- EFL method, Derby write off £2.5m

- Mel method, Derby write off £5m 👀

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10 minutes ago, Davefevs said:

So let’s take Tom Lawrence, signed for £5m in 2017 on a 5 year deal.

As we currently stand, 2.5 (1/2) years into his contract, his value would be £2.5m.  Let’s take that to the end of the season, and now valued at £2m.

Each season has cost Derby £1m in amortisation.  However Mel might undertake an end of season valuation and say he’s still work £5m.  In that scenario Lawrence hasn’t cost Derby anything in the book.  Multiply that across several players, or on shorter contracts, and you can see how advantageous that is....when comparing it to the accounting policies of the other 70 EFL clubs.

 

Mel Morris's version of sustainability!

Edited by downendcity

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45 minutes ago, Davefevs said:

So let’s take Tom Lawrence, signed for £5m in 2017 on a 5 year deal.

As we currently stand, 2.5 (1/2) years into his contract, his value would be £2.5m.  Let’s take that to the end of the season, and now valued at £2m.

Each season has cost Derby £1m in amortisation.  However Mel might undertake an end of season valuation and say he’s still work £5m.  In that scenario Lawrence hasn’t cost Derby anything in the book.  Multiply that across several players, or on shorter contracts, and you can see how advantageous that is....when comparing it to the accounting policies of the other 70 EFL clubs.

Now imagine sacking Lawrence for his drink-driving:

- EFL method, Derby write off £2.5m

- Mel method, Derby write off £5m 👀

Agreed...a potentially notable advantage right there! 100%.

I suppose it has to be accounted for at some point, which is what I assumed the stadium sale and leaseback was to cover...summers 2019 and summers 2020- because though @DerbyFan mentioned the residual method etc, it feels a bit like kicking the can down the road.

Perhaps their plan was to reach PL and then take the hit in summer 2019 or 2020- or sooner in the PL or with Parachute Payments..if there is no big writeoff or big loss on residual value or similar then definitely alarm bells should be ringing! Even if you spread it out, it all has to be amortised eventually?

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11 hours ago, Mr Popodopolous said:

Will reply properly to the Aston Villa post later but it seems a fair and balanced perspective.

https://www.accountingweb.co.uk/business/finance-strategy/derby-charged-under-financial-fair-play-rules

@Coppello @Davefevs @chinapig @downendcity

What makes this interesting is that it seems to be getting noted beyond mere football?

There was an article by Rav Cheema linked last year by Bristol Rob...Property Weekly about the Pride Park transaction.

Wonder if these clubs deals are making waves among accounting, auditing, valuing industries?

Cheers @Mr Popodopolous, I had a read this morning on the way into work it's a good article but there's a couple of points I'd disagree with.

Ultimately, when signing the directors report in the financial statements, management have to take responsibility for the accounting judgements. They've signed the report stating they're required to do the following:

  • Select suitable accounting policies for the Company's financial statements and apply them consistently
  • Make judgments and accounting estimates that are reasonable and prudent;
  • State whether UK accounting standards have been followed, subject to any material departures disclosed in the FS;

They haven't selected suitable accounting policies expected of a Company of its nature, given they've departed from the common practice in industry. The key judgments related to the amortisation and the stadium valuation are not reasonable and prudent. Based on this, I struggle to see how they've complied with UK Companies Act requirements. 

Secondly, I struggle to see how the stadium transaction has complied with the relevant accounting standards given that related parties transactions are required to be at an arms length. I appreciate that an 'independent valuer' was engaged but the auditor should've challenged this as it is clearly extortionate compared to any of revaluations which were conducted in recent years by other clubs. I think a further investigation would no doubt show that it's not an arm length and a significantly smaller gain should be recognised. 

The EFL should've moved a lot quicker than this given that Sheffield Wednesday, Villa, Reading and Birmingham had time to get their stadium valued and finalise all of the paperwork to complete the transaction. The whole sage is a complete mess and does highlight how inept the EFL have been under Harvey's tenure with regards to financial sustainability. I don't have a problem with stadium revaluations in general given that they often get written down significantly despite them still being in use. Selhurst Park had a carrying value of around £4m in the prior year set of financial statements but it's clearly worth a lot more. The sale and leaseback transactions are clearly against the spirit of sustainability and it's something both the EFL and the directors need to be accountable for. 

The EFL should create it's own accounting guidance to ensure that we have a one size fits all policy for all clubs. It should be their interpretation of the UK accounting framework and outline the principles in which the clubs prepare their financial statement from a UK accounting standards perspective (UK GAAP) and a the FFP requirements. The EFL should appoint the independent valuer on their behalf to ensure that we have a consistent application across the board. I could go on but I'm pretty certain we were all saying this 12 months ago! 

 

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Sorry for being late to the party. The two issues in this case being the stadium and amortisation. I was going to reply to a few comments in particular but a more general post may be more appropriate. Apologies in advance to the essay 😅

Stadium - independently valued by Jones Lang LaSalle who are the “the second largest company of its kind in the world” which suggests they won’t simply ‘help their mate Mel out’ (seem this on other forums) by overvaluing the stadium. The stadium was valued in 2007 at £55m (c£80m in today’s money) with depreciation of £1,375,000 per year. It was revalued to the same standard in 2013, with the book value depreciating at the same rate. Since 2007, a lot of improvements have been made including: big screens, pitch, concourse heating, cafe, bar/restaurant. 
The EFL were involved in every step of the transaction, and even told us to make adjustments for P&S purposes before approving our accounts. The only issue here could be if Derby misled the EFL, but given the club’s transparency through the process, you’d expect the to be flagged up when the accounts were submitted. 

Amortisation - This is more concerning issue for us due to the unusual policy within football since the Bosman Ruling came in to play - one of the practices being used was assigning a residual value equivalent to amortising a players value over the period until he reached 33 (typical retirement age of the time?). Potentially we’re doing similar now which is a bit dodgy. The method of assigning the residual values can only be guessed, but it’s reasonable to assume when signed, the assigned value at the start of the final year would represent typically value for a player of similar age. This has also been used since the 15/16 - this is where the following statement comes into play. “Had the EFL not given the green light in writing in respect of both charges, the Club would have reacted accordingly.” This is fairly obvious. If we weren’t given approval to use this accounting policy, recruitment and player retention would have differed greatly. We’ve acted in good faith believing we had done nothing wrong, and this remained the same until 2 weeks ago when the EFL made their statement. Over the duration of a player’s contract, there is no difference, but a big advantage is achieved for those first few years. The advantage we had is now gone, and the benefit is at a ‘breakeven point’.

If we are found guilty for one of these two issues, we’d most likely pass P&S for the periods ending June 2018 and 2019, but fail 2020. If guilty of both, it would likely be a small fail for 2018, big for 2019 and extremely large for 2020 (and potentially 2021 too). However, given the “green light” comment from above, I struggle to believe the courts (if it went that far) would see fit for us to be punished. Personally, I believe we’ll end up getting a suspended points penalty (resulting in a big punishment if we fail P&S in the next couple of years), and the rules will be rewritten to prevent ‘unusual account policies’, and a set code for selling stadiums.

Given the quality of our academy, the prospect of a transfer embargo is far from worrying. A couple of frees and/or loans (as allowed under the rules) in the 2 areas we lack depth is all we’ll be looking for - 1 CB out of contract in the summer is close to agreeing terms already.

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On 28/01/2020 at 08:39, Coppello said:

Cheers @Mr Popodopolous, I had a read this morning on the way into work it's a good article but there's a couple of points I'd disagree with.

Ultimately, when signing the directors report in the financial statements, management have to take responsibility for the accounting judgements. They've signed the report stating they're required to do the following:

  • Select suitable accounting policies for the Company's financial statements and apply them consistently
  • Make judgments and accounting estimates that are reasonable and prudent;
  • State whether UK accounting standards have been followed, subject to any material departures disclosed in the FS;

They haven't selected suitable accounting policies expected of a Company of its nature, given they've departed from the common practice in industry. The key judgments related to the amortisation and the stadium valuation are not reasonable and prudent. Based on this, I struggle to see how they've complied with UK Companies Act requirements. 

Secondly, I struggle to see how the stadium transaction has complied with the relevant accounting standards given that related parties transactions are required to be at an arms length. I appreciate that an 'independent valuer' was engaged but the auditor should've challenged this as it is clearly extortionate compared to any of revaluations which were conducted in recent years by other clubs. I think a further investigation would no doubt show that it's not an arm length and a significantly smaller gain should be recognised. 

The EFL should've moved a lot quicker than this given that Sheffield Wednesday, Villa, Reading and Birmingham had time to get their stadium valued and finalise all of the paperwork to complete the transaction. The whole sage is a complete mess and does highlight how inept the EFL have been under Harvey's tenure with regards to financial sustainability. I don't have a problem with stadium revaluations in general given that they often get written down significantly despite them still being in use. Selhurst Park had a carrying value of around £4m in the prior year set of financial statements but it's clearly worth a lot more. The sale and leaseback transactions are clearly against the spirit of sustainability and it's something both the EFL and the directors need to be accountable for. 

The EFL should create it's own accounting guidance to ensure that we have a one size fits all policy for all clubs. It should be their interpretation of the UK accounting framework and outline the principles in which the clubs prepare their financial statement from a UK accounting standards perspective (UK GAAP) and a the FFP requirements. The EFL should appoint the independent valuer on their behalf to ensure that we have a consistent application across the board. I could go on but I'm pretty certain we were all saying this 12 months ago! 

 

Could it be the case for example, that the stadium valued at X under One method and at X under another? However that the EFL chosen method, which all clubs signed up to or enough clubs under FFP might have it at £50m whereas £81.1m might yet be more acceptable under a different method- still seems a big shift though!

Definitely seems to be a big divergence from the Industry standard, for football accounting- in terms of clubs using that method of amortisation, they are the only one of the 92 to do so over here.

Agreed!

Agree on the rest of your post, in fact all of it in general for that matter. A one size fits all should've been in place from the get-go- or even maybe a one size fits all with respect to FFP, whereas the other accounting methods are still acceptable in accounting terms? I don't know...one method for all clubs seems the best by far.

EDIT: In terms of methods, for a unique and specialised fixed asset such as a football stadium. I'm no valuer or accountant 😆 but I'd have thought that Depreciated Replacement Cost seems quite standard and secondary to that, Value-In-Use? Something I know little about in the case of the latter...beyond that, I don't see how many other valuation methods stack up and certainly not for FFP unless it's actually disposed of, to a genuine third party, in a genuinely arms length transaction?

Edited by Mr Popodopolous

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At the end of the day to use a method that inflated the player value at end of contract (and therefore reduce amortisation) is wrong. We all know since Bosman that the value is £0 (unless u24).

 

 

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On 02/02/2020 at 00:32, AnotherDerbyFan said:

Sorry for being late to the party. The two issues in this case being the stadium and amortisation. I was going to reply to a few comments in particular but a more general post may be more appropriate. Apologies in advance to the essay 😅

Stadium - independently valued by Jones Lang LaSalle who are the “the second largest company of its kind in the world” which suggests they won’t simply ‘help their mate Mel out’ (seem this on other forums) by overvaluing the stadium. The stadium was valued in 2007 at £55m (c£80m in today’s money) with depreciation of £1,375,000 per year. It was revalued to the same standard in 2013, with the book value depreciating at the same rate. Since 2007, a lot of improvements have been made including: big screens, pitch, concourse heating, cafe, bar/restaurant. 
The EFL were involved in every step of the transaction, and even told us to make adjustments for P&S purposes before approving our accounts. The only issue here could be if Derby misled the EFL, but given the club’s transparency through the process, you’d expect the to be flagged up when the accounts were submitted. 

Amortisation - This is more concerning issue for us due to the unusual policy within football since the Bosman Ruling came in to play - one of the practices being used was assigning a residual value equivalent to amortising a players value over the period until he reached 33 (typical retirement age of the time?). Potentially we’re doing similar now which is a bit dodgy. The method of assigning the residual values can only be guessed, but it’s reasonable to assume when signed, the assigned value at the start of the final year would represent typically value for a player of similar age. This has also been used since the 15/16 - this is where the following statement comes into play. “Had the EFL not given the green light in writing in respect of both charges, the Club would have reacted accordingly.” This is fairly obvious. If we weren’t given approval to use this accounting policy, recruitment and player retention would have differed greatly. We’ve acted in good faith believing we had done nothing wrong, and this remained the same until 2 weeks ago when the EFL made their statement. Over the duration of a player’s contract, there is no difference, but a big advantage is achieved for those first few years. The advantage we had is now gone, and the benefit is at a ‘breakeven point’.

If we are found guilty for one of these two issues, we’d most likely pass P&S for the periods ending June 2018 and 2019, but fail 2020. If guilty of both, it would likely be a small fail for 2018, big for 2019 and extremely large for 2020 (and potentially 2021 too). However, given the “green light” comment from above, I struggle to believe the courts (if it went that far) would see fit for us to be punished. Personally, I believe we’ll end up getting a suspended points penalty (resulting in a big punishment if we fail P&S in the next couple of years), and the rules will be rewritten to prevent ‘unusual account policies’, and a set code for selling stadiums.

Given the quality of our academy, the prospect of a transfer embargo is far from worrying. A couple of frees and/or loans (as allowed under the rules) in the 2 areas we lack depth is all we’ll be looking for - 1 CB out of contract in the summer is close to agreeing terms already.

Very quick response.

Stadium

May not be a dodgy valuation- maybe the case that the different methods can throw up vastly different results- ie no blame as such in this respect, save for using the incorrect method. In 2007 and 2013, I believe Pride Park was valued using DRC- 2018, we have no idea.

Improvement would add value, but which method was used for the valuation? This can be crucial- not just for Derby but in general. Additionally, value added would also increase the Depreciation charge by the equivalent, applicable rate, would it not? Well not rate but total amount assumng the same %.

Again, maybe the EFL approved the transaction in principle but had a different interpretation on the valuation, the valuation method or even the profit for FFP purposes. Perfectly possible...Accounting or so I've read, a lot of this can come down to judgements albeit within the framework and valuation methods possibly similar? In other words, it might be possible that there are two valuation methods both legitimate in their own right, with two different figures- but that the EFL one takes precedence for FFP purposes?

Amortisation

This bit is certainly quite interesting. So does this method basically amortise until age 33 and if they leave before then, this remaining value goes against the accounts and if they leave at or beyond age 33, then the value is zero? Probably got this one quite a bit wrong though!

I did wonder previously if the stadium sale wasn't so much for the 3 years to June 2018, but either of the three to June 2019 or more likely to June 2020, to absorb the hit of the out of contract players with remaining value- there is a big advantage as you say for the first few years, but the 'break-even point' feels like a big hit in either summer 2019, 2020- or both.

2020 I always assumed might be the big fail for not only yourselves, but also Reading and Sheffield Wednesday. Possibly Birmingham again and Aston Villa who knows. The stadium sale would fall off for 2021 in any case, the 3 year period beginning 2018-19 so I'd have thought a big fail is possible in one of these years.

Courts is an interesting threat, but all clubs must agree in writing to arbitration as part of their membership- it's notable that neither Birmingham or QPR went down the Court route beyond the EFL procedures so I wonder how it would affect an agreement of membership to take it to external courts? FIFA would be quite interested too...not in the FFP case but the court element, it could go well beyond FFP.

Depends...if the amortisation method allowed to stand, how big a hit would come in summers 2019 and 2020? A downvalue of the profit on Pride Park of 30 million or so would have a significant impact here!

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On 24/01/2020 at 09:31, AnAstonVillafan said:

Most Aston Villa supporters simply do not understand FFP. Many think it's a system to keep the big clubs rich and stop their dominance from being challenged.

Until we were relegated the majority didn't know what it was. (My wife is a Nottingham Forest fan so I had a little heads up). I have spent a lot of time explaining it to members of my Facebook group.

I hate what we've done with the stadium. It could backfire on us very badly in ways a lot of people don't realise.

As for entitled fans, I'm 41 years old. Anyone my age or older than me will remember "the good times". Cup Final wins and European nights.

That generation finds relegation, sustainability, pragmatism, restraint, etc very hard to accept. I can understand it, but the club was at the top table for 27 years consecutively, run well and kept solvent until Lerner arrived. They need to get used to a different reality.

Hi, finally got around to responding.

Might be something in that...nonetheless we shall see, I read that Real Madrid were looking to offload to comply, with the secondary FFP reg of 100 million euros net spend, I think they comply with the loss limits, and you don't get much bigger than them! AC Milan too have offloaded quite a lot this January- they've tried challenging FFP but maybe looking to try to comply for now...7 European Cups, we all know their size! They've sold players, loaned with option/obligation to buy- reducing cost base? Loaning out Ricardo Rodriguez. Whether it's a ruse or not, I think a lot of clubs take it seriously regardless of size.

Fair. It's not really had much PL coverage tbh, not least as it's almost impossible to fail in the PL- see 105 million loss limits, plus some costs too and TV money- I don't see how it can be failed if a side is in the PL for 3 seasons or more...how such high loss limits have anything to do with profitability or sustainability is beyond me!

In sense of owners selling it for housing/commercial property or similar?  Many pitfalls are possible when club and stadium separated though and not even necessarily through malevolence- e.g. if an owner owns the ground and has serious cash issues, that can go wrong? Plus the malevolence or arrogance...see SISU.

It's probably online.

I think Doug Ellis (RIP) may have stuck to FFP? Possibly Lerner too even. Will be interesting to see how things progress.

Edited by Mr Popodopolous

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I forgot to add to @AnotherDerbyFan

You mention the uptick factors and rightly so, but I note that Pride Park has no naming rights now.

Which is quite fine and probably good for football tbh in terms of a lack of ground naming rights, but the Ricoh Arena fell from £60m in one years accounts to £51m the next...for this very reason, no long term sponsorship in place. Should be factored in one of the possible reasons for the differential in prices IMO. Over several years, could this be multiplied- both up to the present and moving forward? November 2016, you terminated the iPro deal.

Edited by Mr Popodopolous

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On 03/02/2020 at 16:50, Mr Popodopolous said:

I forgot to add to @AnotherDerbyFan

You mention the uptick factors and rightly so, but I note that Pride Park has no naming rights now.

Which is quite fine and probably good for football tbh in terms of a lack of ground naming rights, but the Ricoh Arena fell from £60m in one years accounts to £51m the next...for this very reason, no long term sponsorship in place. Should be factored in one of the possible reasons for the differential in prices IMO. Over several years, could this be multiplied- both up to the present and moving forward? November 2016, you terminated the iPro deal.

That may not be applicable in our case. The previous valuation was May 2013, whereas we didn’t complete the iPro deal until December 2013. Due to the unexpected collapse of the deal in 2017, I often wondered if we were given extra legroom for P&S for a year or two. I guess we’ll never know the answer to that though. 

  • Hmmm 1

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