Villa owe us money for JK?

[Davefevs]

9 hours ago, Mr Popodopolous said:

Not uncommon for amortisation to spread payment over the length of the contract- if we've managed to get it up front we have done well, and MA would deserve credit!

Bottled it at Wembley? Given Fulham are the better side, would say it went roughly as expected tbh- though failing vs 10 a big fail on their part.

 

8 hours ago, Mr Popodopolous said:

Think we're a bit cross purposes maybe.

Agreed- we all get the methods and agreed the issues is that Villa are missing the amortised payments. However for me the question is, did we get the fee (excluding possible add ons) in one chunk or was it amortised? If it was the former then well done Mark Ashton, if the latter then we'll be a bit stymied financially...

I think you’re getting amortisation confused, although I'm sure @LondonBristolian will confirm.  Amortisation is an accounting principle that all clubs in England follow in reporting players fees, wages etc spread over the term of the contract.  This feeds into the profit and loss account.  How Villa pay for Kodjia will be agreed as part of the deal, and the money will go into the cash account as and when they pay.  Villa don’t pay their money to in line with the amortisation of the contract.

This is why any business can be profitable but go bust because of cash flow, e.g. made Kodjia for £3m, and sold him for £11m, that’s £8m profit (simplistically).  However until Villa pay that £11m, you’re sat with a £3m deficit in your cash account.  In fact most businesses fail for cash flow reasons, especially new businesses / start-ups, who can’t secure credit (overdrafts / loans) to cover cash flow issues.

Hope that makes sense and not condescending.

[BristolIsRed]

Although I could be wrong, see on below link, then click on "full accounts made up to 31st May 2017" , then on page 8, under profit on disposal of player contracts. I could be wrong, but that says a profit of £13m which I guess is inclusive of the £11m upfront from Kodjia.

https://beta.companieshouse.gov.uk/company/03230871/filing-history

[Davefevs]

1 hour ago, BristolIsRed said:

Although I could be wrong, see on below link, then click on "full accounts made up to 31st May 2017" , then on page 8, under profit on disposal of player contracts. I could be wrong, but that says a profit of £13m which I guess is inclusive of the £11m upfront from Kodjia.

https://beta.companieshouse.gov.uk/company/03230871/filing-history

It doesn’t mean they received £11m straight off.  The invoice might be for £11m, but the terms maybe payable over a number of years / instalments.  You can still count the whole amount as transfer profit.

Lets say Kodjia cost us £3m and £10k pw.  I think it was a 3 year deal with 1 year option.  Let’s ignore the 1 year because I'm not sure whether City will have amortised over 3 or 4 years....so let’s go with 3 years....to help the maths.

So, £3m + £1.5m wages = £4.5m over 3 years.  After year 1 when we sold him, his worth to us was £3m (£2m left of his fee, £1m left of his wages).  We sell him for £11m (cannot count the add-ons until they are near guaranteed / achieved).  So £8m profit on the remaining contract so far..  We owe Angers 20% (guess) of the sell on fee profit, coincidentally also £8m, so £1.6m less....so total profit from Villa deal was £6.4m....that’s what will show in the P&L.  Complicated by Bolassie and Adomah add-ons and other transfers, so you cannot see the granularity of the Kodjia deal.

Assume Villa agreed terms and paid £5m up front, another £3m at end of 16/17, and £3m due now, then we will have paid Angers pro-rata their £1.6m (5/11ths straight away, 3/11ths at end of 16/17 and the final 3/11ths now).

Villa haven’t paid us their final year, so we can’t really pay Angers until they do.

[Mr Popodopolous]

3 hours ago, Davefevs said:

 

I think you’re getting amortisation confused, although I'm sure @LondonBristolian will confirm.  Amortisation is an accounting principle that all clubs in England follow in reporting players fees, wages etc spread over the term of the contract.  This feeds into the profit and loss account.  How Villa pay for Kodjia will be agreed as part of the deal, and the money will go into the cash account as and when they pay.  Villa don’t pay their money to in line with the amortisation of the contract.

This is why any business can be profitable but go bust because of cash flow, e.g. made Kodjia for £3m, and sold him for £11m, that’s £8m profit (simplistically).  However until Villa pay that £11m, you’re sat with a £3m deficit in your cash account.  In fact most businesses fail for cash flow reasons, especially new businesses / start-ups, who can’t secure credit (overdrafts / loans) to cover cash flow issues.

Hope that makes sense and not condescending.

Thanks- that does make more sense, yeah that's easy to understand- accounting principle as opposed to hard and fast rules of how a deal must be structured- cash flow issues yeah kinda get that too.