Mr Popodopolous Posted June 3, 2019 Author Report Share Posted June 3, 2019 19 minutes ago, DerbyFan said: I need to check the accounts, but basically we started to spend more on players in the summer of 2015, when we appointed Clement, we bought Thorne before that, in summer 2014, but I seem to remember it being mentioned that he was basically paid for with what we earned from the Play Offs in 2014. I've found this in the accounts for this year about how we value players: I forgot to mention, things that have happened to the stadium (that I can remember) since the 2007 valuation, I've no idea how much these affect the valuation, but they have been done, and surely can only affect it in a positive way: big screen inside 2 big screens outside new hybrid pitch that included new full undersoil heating and all of the works and the artificial pitch perimeter (included digging it all up rather than making the pitch higher as some do, not sure when the last major pitch works was before that) new led perimeter boards (they're all led now, including the top of the stand facing part, I think there was also a previous set of led boards since 2007) new PA system (it was said at the time to be the best one you could get) new led floodlights painted the entire roof steel black (it was previously white) all the other painting works and general tidying up the club took back space that had been let out and made a new restaurant (The Yard) then took back what was a Starbucks and made an in house coffee shop (The Back Yard) full overhaul of the ticket office (I think this has been done a few times) we have our own Rams TV studio in the stadium (not the one for Sky) we use a 10 camera mix for Rams TV broadcasts, so theres been work done to make all of the camera locations - I believe this also includes basically the stuff that's in the portable vans that Sky use in a room near to the Rams TV studio - so all the camera views and all the technology that that requires major overhaul of the directors box area major overhaul of the boxes and hospitality area heating in the concourse 8 small screens (making 2 big screens of 4 each) in both the ticket office window and the megastore windows. new screens in all of the concourses and hospitality areas that's just the things I can remember, and the vast majority is very recent, ie. since Mel Morris. Re. The disciplinary commission, that's only a problem if you've broken the rules, they can investigate but if the rules are not broken they have no mandate to punish. As the EFL already okayed the sale before it happened I don't see how the commission can find we've done anything wrong, there would surely be comeback on the EFL if that was the case. The amortisation thing is interesting, because the way I've read it it is about residual value, yet that sounds a lot like standard amortisation to me! Revaluation through the year, definitely open to abuse and manipulation as a tool. I've looked through some of your accounts and the Net book value of "Freehold Property" by 30th June 2017 was £51.6m. Presumably that represents Pride Park and would have taken into account all of the improvements that you list- and there have been many! Derby 2017/18 accounts, 11. Tangible Fixed Assets. You disposed of under Leasehold property & improvements assets to the value of £56,205,091. However once Depreciation factored in, this value surely drops. Under Depreciation, it said Disposals (£14,523,854). That'd be the depreciation on Pride Park I believe- unless you disposed of any other Tangible Fixed Assets in 2017/18 period. So yes, £41-42m seems about right for Pride Park. Based on those accounts. Possibly the EFL screwed up- again- by seemingly just waving it through and instead not putting approval on hold while they conducted a thorough investigation, plus hiring truly independent surveyors and valuers. 11 minutes ago, DerbyFan said: Am I missing something, how can 5+5+5=14, and (3)+(5)=(9)? Am assuming it was after rounding it up or having rounded it up or down, as in a number £x rather than £x.y- would have to look at the figures in all depth though to work out whether it should be rounded up or down. Quote Link to comment Share on other sites More sharing options...
martnewts Posted June 3, 2019 Report Share Posted June 3, 2019 Not an area in which I have massive expertise but is the required stamp duty land tax being paid over on these “sales” eg on an £80m sale of non residential property there is approximately £4m of stamp duty due Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 3, 2019 Author Report Share Posted June 3, 2019 (edited) Oh yeah just seen your academy post. Well it's funny you should mention that. Sevco 5112 for 2017/18 season shows Academy Expenditure to be £4,624,162 and for 2016/17 to be £3,961,509. The one that is missing- is 2015/16...Derby's accounts actually are relatively transparent in some respects unlike a fair few clubs it seems, but could that missing number be squaring the circle- neither Derby County or Sevco 5112 accounts though show Youth Expenditure in 2015/16- but then your Sevco accounts for that season were made up until until 31st August 2016 so that could have affected it! Your Global Derby accounts for that season don't show it either. Would be amusing if Mel Morris sold you but kept the ground though- maybe you could share with Coventry! Edited June 3, 2019 by Mr Popodopolous Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 3, 2019 Report Share Posted June 3, 2019 4 minutes ago, Mr Popodopolous said: Am assuming it was after rounding it up or having rounded it up or down, as in a number £x rather than £x.y- would have to look at the figures in all depth though to work out whether it should be rounded up or down. Maybe, but when all the other figures seem to add up it was a tad confusing, especially when I think I've seen the various finance people say that a figure of £5m is normally assumed for a Cat 1 academy. In reply to your earlier comment about us using the academy, that has always been the long term plan, Mel Morris has been working on improving it since he took control, it's been something of a pet project for him I think, it's just that it takes time for the best ones to come through, we do have some good players at U23 level who may also see game time, some of the ones who have been out on loan such as Max Lowe (as we have released Cole and Olsson - although we have Forsyth he has become sadly very prone to ACL injuries - up to 3 now I think), Luke Thomas and Kyle McAllister, but it is quite obvious that our U18's are where they're starting to really show some promise, that has taken some time to come to fruition, but now looks very good indeed, hopefully some will be involved next season. I think if you asked most of our fans, they would say the same thing, that we are really looking forward to having these lads break through into the team. I don't think as a fanbase we have ever been so enthused with the academy as a whole, most of us don't want to sign players just for the sake of it as it blocks their pathway, the only reason I could see us signing some is if either a lot of our older players go and we want some experience (not quite as old as the ones leaving) to help them out, or we think ours are not quite ready, so we sign some who are that can play immediately and hopefully turn a quick profit on them when ours are ready, or we sign loanees than are slightly older for the season to bridge the gap. We'll see, I guess. Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 3, 2019 Report Share Posted June 3, 2019 15 minutes ago, Mr Popodopolous said: Would be amusing if Mel Morris sold you but kept the ground though- maybe you could share with Coventry! I keep seeing other clubs fans saying this! He may well keep the ground if he sells us, it may depend on who buys us and whether they want the ground as part of the sale, there are lots of clubs that rent their stadium, including a lot of the big boys, so they may not care, we have a long term lease, and it's owned by a fan, I'm not sure it really matters. Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 3, 2019 Author Report Share Posted June 3, 2019 7 minutes ago, DerbyFan said: I keep seeing other clubs fans saying this! He may well keep the ground if he sells us, it may depend on who buys us and whether they want the ground as part of the sale, there are lots of clubs that rent their stadium, including a lot of the big boys, so they may not care, we have a long term lease, and it's owned by a fan, I'm not sure it really matters. Yeah, ultimately you're right. It is the case that he owns it, he is a fan- fans who own grounds even if they sell up club, don't tend to leave their club in the lurch with nowhere to play! Banter aside it's actually not an issue I make light of. Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 3, 2019 Report Share Posted June 3, 2019 1 minute ago, Mr Popodopolous said: Yeah, ultimately you're right. It is the case that he owns it, he is a fan- fans who own grounds even if they sell up club, don't tend to leave their club in the lurch with nowhere to play! Banter aside it's actually not an issue I make light of. I know what you mean, some clubs have been left in a right mess with theirs, Coventry as you mentioned, I wouldn't like to be in their situation, it can't be fun not knowing where you're playing next season, every season as it now seems. I do think the EFL can do more to help clubs who are genuinely in a mess, owner wise, that is definitely where the focus needs to be in my opinion. As long as an owner can prove they will continue to fund every piece of business they do, fee and wages, I can't see the problem personally, although that should maybe be within reason, as fees and wages are already sky high (is it just me or has this gotten WORSE since FFP came into play? I presume as everyone wants to maximise fees due to FFP, and as wages are generally connected to the size of the fee, they naturally go up too) even if that means putting the funds for this in a holding account prior to the season. Surely it is more damaging for football as a whole when clubs go out of business (or close to) because they are spending money their owners aren't prepared to fund. Then there was the situation with Bolton and FGR to do with Doidge, that should never have been allowed to happen, I presume that really messed up FGR's budget, it was a huge amount of money for a club at their level. Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 3, 2019 Report Share Posted June 3, 2019 6 hours ago, Mr Popodopolous said: Interesting- Derby related- tweet. Any ideas on this one @DerbyFan ? I mentioned earlier that I thought this could be to do with their residual values and FFP and that I expected the release of them to be into July, whilst it could still be that, at least partly, I've just seen a tweet from a local journalist saying that the protecting their value part was down to sending them out on loan or in Johnson's case him becoming quite important for us at the end of the season. If they impressed, they would at least have value for us to utilise, rather than being out of contract, and therefore having no value to us. I can see the logic given they were 'vastly reduced terms', it will be interesting to see when they get released. In Johnson's case I still expect him to stick around, unless someone makes us an offer we can't refuse. Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 10 hours ago, DerbyFan said: I know what you mean, some clubs have been left in a right mess with theirs, Coventry as you mentioned, I wouldn't like to be in their situation, it can't be fun not knowing where you're playing next season, every season as it now seems. I do think the EFL can do more to help clubs who are genuinely in a mess, owner wise, that is definitely where the focus needs to be in my opinion. As long as an owner can prove they will continue to fund every piece of business they do, fee and wages, I can't see the problem personally, although that should maybe be within reason, as fees and wages are already sky high (is it just me or has this gotten WORSE since FFP came into play? I presume as everyone wants to maximise fees due to FFP, and as wages are generally connected to the size of the fee, they naturally go up too) even if that means putting the funds for this in a holding account prior to the season. Surely it is more damaging for football as a whole when clubs go out of business (or close to) because they are spending money their owners aren't prepared to fund. Then there was the situation with Bolton and FGR to do with Doidge, that should never have been allowed to happen, I presume that really messed up FGR's budget, it was a huge amount of money for a club at their level. Agree on EFL oversight of owners. Coventry situation seems a shocker. Many bad EFL owners. Don't agree on FFP- if the system changes in a few years, that is different. However as it stands now, can't see why there should be exceptions or mitigating factors for clubs- supposing the other 21 compliant clubs did not wish to play the ground sale clubs- just supposing an organised joint action- then the EFL would have to act on yourselves and if proven to have done the same, Birmingham and Sheffield Wednesday. Hard to say- has it got worse because of FFP or despite it? If the rules were enforced correctly, with things like as promised in-season points deductions then we may see a different story. Another argument is that without some form of restraint the problem will be worse still- seems like limitation of losses than break even- if we want to go down that road, a breakeven requirement from footballing operations is the way to go- problem is what would it do to the Championship? Most clubs would have to have a firesale in the short to medium term but in the long term wage rationalisation would work. Simple solution- show proof of break even with zero owner investment or no license to play that season! Same goes for each and every season. There are arguments for and against FFP though granted and profit on transfers is an increasing factor which pushes wages up. Again part 2 of that solution, clubs that look like breaking their own financial plans put in at start of season by sudden expansive player expenditure, soft embargo- no ifs, no buts, rule clear. On the other hand, your solution also has its merits- that's for a future plan though, as of now I look at the Championship owners and they don't see the sort in many cases to take this lightly. My idea of strict breakeven and automatic transfer embargoes- well it would financially stabilise but it would also likely wreck the 'product' though so it isn't feasible- though it is the most financially sane solution. Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 9 hours ago, DerbyFan said: I mentioned earlier that I thought this could be to do with their residual values and FFP and that I expected the release of them to be into July, whilst it could still be that, at least partly, I've just seen a tweet from a local journalist saying that the protecting their value part was down to sending them out on loan or in Johnson's case him becoming quite important for us at the end of the season. If they impressed, they would at least have value for us to utilise, rather than being out of contract, and therefore having no value to us. I can see the logic given they were 'vastly reduced terms', it will be interesting to see when they get released. In Johnson's case I still expect him to stick around, unless someone makes us an offer we can't refuse. Planning to watch some clips of Mel Morris now- your model doesn't sound like standard amortisation, the asset off the books incurring a big cost isn't usually the case? Sounds like keeping annual amortisation cost down is the upside, taking the hit the downside- not one that should be ducked through questionable asset sales from one hand to the other! Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 4, 2019 Report Share Posted June 4, 2019 (edited) 59 minutes ago, Mr Popodopolous said: Agree on EFL oversight of owners. Coventry situation seems a shocker. Many bad EFL owners. Don't agree on FFP- if the system changes in a few years, that is different. However as it stands now, can't see why there should be exceptions or mitigating factors for clubs- supposing the other 21 compliant clubs did not wish to play the ground sale clubs- just supposing an organised joint action- then the EFL would have to act on yourselves and if proven to have done the same, Birmingham and Sheffield Wednesday. Hard to say- has it got worse because of FFP or despite it? If the rules were enforced correctly, with things like as promised in-season points deductions then we may see a different story. Another argument is that without some form of restraint the problem will be worse still- seems like limitation of losses than break even- if we want to go down that road, a breakeven requirement from footballing operations is the way to go- problem is what would it do to the Championship? Most clubs would have to have a firesale in the short to medium term but in the long term wage rationalisation would work. Simple solution- show proof of break even with zero owner investment or no license to play that season! Same goes for each and every season. There are arguments for and against FFP though granted and profit on transfers is an increasing factor which pushes wages up. Again part 2 of that solution, clubs that look like breaking their own financial plans put in at start of season by sudden expansive player expenditure, soft embargo- no ifs, no buts, rule clear. On the other hand, your solution also has its merits- that's for a future plan though, as of now I look at the Championship owners and they don't see the sort in many cases to take this lightly. My idea of strict breakeven and automatic transfer embargoes- well it would financially stabilise but it would also likely wreck the 'product' though so it isn't feasible- though it is the most financially sane solution. Of course I was talking about in the future, I know that is not currently how it works, just how I think it should work. It's the only way I can see clubs not getting into situations such as Bolton, and the knockdown effect that produces to other clubs and to businesses in general who also lose money from the situation. If the club (or rather the owner) cannot or will not put the money in then you cannot buy, as simple as that. However if they can, and they put that money aside, which cannot be used for anything other than it's intended purpose, ie. for player costs - that would be either until the player leaves 1. At the end of their contract (so all the money set aside is gone) or 2. Is sold (the remaining money set aside for them can then be repurposed) then you can go ahead and buy them without issue. It's ok talking about a breakeven requirement, and that it would require firesales from most clubs to get into line, however, that doesn't leave many clubs to then actually buy the players that most clubs have to sell! Again, a club can only sell a player if there is a club to sell to, if most of them have to sell, theres not many able to buy and the transfer window would grind to a halt. There would have to be somewhat of an amnesty on current players and their current contracts (not re-contracts that happen further down the line after the change) to stop this from happening. And yes, I can't see it happening as you're correct, it would wreck the product and I cannot see how anyone connected with the EFL (or any other league that considers taking it up) would want that to happen, and that includes the clubs, as it would leave them in an extremely weak bargaining position for absolutely everything, including TV rights and sponsorship, which then in turn further harms the amounts clubs can spend and creates a vicious circle. And anyway there would still be clubs who find the loopholes, ie. selling a player to a 'friendly club' (one they have other links to who do not operate to the same rules as ours) they would just be different loopholes. There are loopholes in everything, you just have to find them, I guess it's actually seen as a skill in itself to be able to do that. Edited June 4, 2019 by DerbyFan Quote Link to comment Share on other sites More sharing options...
Olé Posted June 4, 2019 Report Share Posted June 4, 2019 1 hour ago, Mr Popodopolous said: your model doesn't sound like standard amortisation, the asset off the books incurring a big cost isn't usually the case? Sounds like keeping annual amortisation cost down is the upside, taking the hit the downside Putting aside the stadium thing, I still think this basic accounting twist on amortisation is already highly dubious. @DerbyFan I do appreciate you sharing the club's definition of how you handle player costs as I'd not seen it officially laid out, which is helpful. I have no specific axe to grind with Derby, I have friends who are Derby fans, always find Derby fans decent when we cross paths on trains on match days, and very much enjoy my trips to the area (well, okay, specifically the Brunswick!) However I just can't get my head round this practice being fair (it seems like an obvious attempt to "game" compliance) and as in bold above, kicking the can down the road to "take the hit" later seems to be incredibly reckless and exactly what FFP is meant to be putting a stop to. That the definition from Derby even explicitly includes provision to negotiate new contracts and re-amortise an existing prior player cost further into the future is barmy to me, as is self evaluating impairment charges. It seems to me to be continually deferring a lot of real terms costs from the balance sheet until you can get into the Premiership and then release all these accounting anomalies when you can "take the hit" far more comfortably. It's pure accounting sleight of hand. That alone should bring everything else Morris does into question. If the EFL had half a brain they'd define accounting rules so that the whole process of FFP is comparing like for like and not allowing clubs to write their own rules. Don't get me wrong, the logic of Derby's model is valid - I've often pointed out on this board myself that paying silly money for a young player is something I think SL would do IF wages were achievable, as it's wages that are our real terms drag on the balance sheet and where we get beaten to players by most of our peers. £10m transfer fee amortised (straight line) followed by a likely profit on sale of exciting young player, is simply asset management to a lifelong share trader like Lansdown. Therefore one could argue that we should use Derby's residual value accounting. SL doesn't, I assume because it would be very misleading and very dangerous. Players get injured, players don't work out, and most of all players nowadays will run a contract down if they can get a big signing on fee at a future club. Derby's accounting implies certainty that none of this will happen and there is a guaranteed market and return for their players, allowing them to keep their costs off the balance sheet. It's a neat trick to comply with FFP limits, but it's just a time bomb done in the hope of securing Premier League football before it goes off. And seeing the definition of how Derby handle re-negotiated contracts with re-amortisation of existing costs that still haven't hit the balance sheet, I can see even more there is a process here to keep deferring costs. You could actually give a **** player a new contract on meager terms to artificially defer their cost. And on current form I suspect Morris would. 2 Quote Link to comment Share on other sites More sharing options...
downendcity Posted June 4, 2019 Report Share Posted June 4, 2019 28 minutes ago, DerbyFan said: Of course I was talking about in the future, I know that is not currently how it works, just how I think it should work. It's the only way I can see clubs not getting into situations such as Bolton, and the knockdown effect that produces to other clubs and to businesses in general who also lose money from the situation. If the club (or rather the owner) cannot or will not put the money in then you cannot buy, as simple as that. However if they can, and they put that money aside, which cannot be used for anything other than it's intended purpose, ie. for player costs - that would be either until the player leaves 1. At the end of their contract (so all the money set aside is gone) or 2. Is sold (the remaining money set aside for them can then be repurposed) then you can go ahead and buy them without issue. It's ok talking about a breakeven requirement, and that it would require firesales from most clubs to get into line, however, that doesn't leave many clubs to then actually buy the players that most clubs have to sell! Again, a club can only sell a player if there is a club to sell to, if most of them have to sell, theres not many able to buy and the transfer window would grind to a halt. There would have to be somewhat of an amnesty on current players and their current contracts (not re-contracts that happen further down the line after the change) to stop this from happening. And yes, I can't see it happening as you're correct, it would wreck the product and I cannot see how anyone connected with the EFL (or any other league that considers taking it up) would want that to happen, and that includes the clubs, as it would leave them in an extremely weak bargaining position for absolutely everything, including TV rights and sponsorship, which then in turn further harms the amounts clubs can spend and creates a vicious circle. And anyway there would still be clubs who find the loopholes, ie. selling a player to a 'friendly club' (one they have other links to who do not operate to the same rules as ours) they would just be different loopholes. There are loopholes in everything, you just have to find them, I guess it's actually seen as a skill in itself to be able to do that. Unfortunately, in the real world things change. The Villa owner, Xia, was financially able to support them and had been doing so, until last summer when he was unable to get money out of his country to here. As a result Villa had major cash flow problems, had not paid their tax bill for a few months and were on the verge of a winding up order from HMRC. It was as a result of the situation that befell Pompey, following their relegation from the premier league, that FFP was introduced to protect clubs from owners overcommitting the club financially and beyond it's means. I am sure many clubs can make an argument as to why they should be "exempt" from such limitations, because their owner is a fan and is committed to supporting the club, but as in Villa's situation last year, it only needs the unexpected to occur and all those securities go out of the window. As I think has already been mentioned on here, the championship is the division with the biggest financial issues, as almost every club needs the support of it's owner to stay afloat. The attraction of the riches in the premier league is such a lure that some owners seem prepared to risk anything to gain promotion - there is a strong suspicion that had they not gained promotion this time around, financial chickens would have come home to roost at Villa. That both Villa and West Brom Brom borrowed against their third year parachute payment during year two following relegation, shows how badly clubs want/need promotion back to the premier league and the financial risks they are prepared to take. Against this background, ffp protects clubs from themselves and their owners, notwithstanding the owners financial wherewithal and allegiance to the club. Before we start looking at huge changes, dismantling the ffp rules and introducing new ones ( or removing controls completely, as you seem to indicate) I would have though the first step is to get the EFL to make the current rules work properly. The situation with Derby's ground sale shows the problems that currently exist and that club's are prepared to "bend" the rules or break the spirit of the rules. You mentioned that is not until the benefit of hindsight that loopholes can be identified i.e. once a club exploits a loophole, and because that will always be the case perhaps the EFL need to reinforce that clubs must operate within the spirit of the rules, and that breaches in this respect will also be subject to penalty. The problem, as has been discussed so often on here, is the doubts that many doubt the EFL has the balls to take on big clubs, for fear that they will be dragged into legal disputes. Apart from the fact that Morris carried out the ground sale to avoid a major ffp breach, the real issue with your ground sale is not that Morris did it, but that, given the chance, the EFL did not recognise the loophole and close it before he could use it. I suspect they bottled it because they were worried that if they bought Derby to book for a ffp breach, Derby would argue that the EFL prevented them from remedying the situation by selling the ground. At the moment the EFL have dismally failed the many clubs that have worked hard to address ffp, even if it has made them less competitive. 1 Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 (edited) I'll read the latest posts in full later but one interesting note. Mike Thornton- another FFP writer, specialises in Leeds but also FFP has the following interesting and pertinent Tweet- whole thread is decent but going to pull this one out. I think he's dead wrong about Aston Villa, but he might be right on Derby- I've always had doubts about their failing of FFP as there are some grey areas. Aston Villa though, just a question of by how many million but provided you use Derby accounts as opposed to Sevco 5112 then maybe...just maybe. If excluded from calculations though, they would be right up against it- and tbh even Lampard may have hinted to this when he said other day that they would be heavily reliant on loan signings once again. If there is sufficient provision within the rules to exclude profit on stadium- and remember in UEFA FFP regs, property revenue does not count under FFP- then there may well be sufficient doubt and vagueness to reopen this case. Those are 2 posts- the thread itself is worth a look. One of my takes on their ground sale from Mel Morris who owns Derby to- er- Mel Morris- is that as well as commercial development- and @DerbyFan putting other points and sides across has been interesting to read- it is to cushion the blow from their amortisation policy and to give Lampard a modest amount to spend. As opposed to an out and out epic FFP fail like say Aston Villa. To me, a just outcome in the Middlesbrough-Derby case would be Derby paying the £39m profit to the EFL in a fine, or it being excluded from the calculations- if it's a real transaction brings them back to parity, if it is a paper one it brings them back to parity! Edited June 4, 2019 by Mr Popodopolous Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 (edited) The two rules which seem to contradict each other, which means there is an element of doubt and interpretation- pulled off Kieran Maguire's Twitter. This one suggests it IS legit. This one suggests it is in doubt- and I would also add in 11.3.4 to that for consideration! 111.1 would help cover it Quote (a) Assessment of transactions with Related Party(ies) above or below fair value. That single rule opens it up again. Let alone the highlighted bits. Agree with @Olé that the accounting method for players etc could be worth a look too, it definitely has the effect of kicking the can down the road. Agree with @downendcity about the detrimental impact to clubs who have complied or worked hard to do so- at the expense of their own competitiveness. @DerbyFan You're right about loopholes but good governance can close them before they are breached. Like I said before, I doubt UEFA would have waved this through, personally- and they are not great but they're a lot more clued up on this than the EFL appear to be. Possible Loopholes in EFL FFP, just a few examples. Example- Solution Stadium sold to Owner or any form of related party- Make it the case that profit excluded from FFP calculations- still comes up on their accounts but not their FFP figure. Player sold to Chinese League club owner may have a stake in- Reading mooted to have done this with Aluko. Exclude the profit and only have their remaining amortisation and obviously wages being removed from the books. Loan fee with big fee to sister club- Wages maybe off book, but loan fee not counted. Over inflated sponsorship by related party- say £10m per season for shirts when the going rate for that club size at this level is say £2m. Simple- it may come up as £10m on published account but refuse to class it as income in FFP submissions. I think they do this already though. Loopholes can be closed and quickly, and well too- just depends if your organisation- in this case the EFL- is run in any way adequately. Edited June 4, 2019 by Mr Popodopolous Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 4, 2019 Report Share Posted June 4, 2019 17 minutes ago, Olé said: Putting aside the stadium thing, I still think this basic accounting twist on amortisation is already highly dubious. @DerbyFan I do appreciate you sharing the club's definition of how you handle player costs as I'd not seen it officially laid out, which is helpful. I have no specific axe to grind with Derby, I have friends who are Derby fans, always find Derby fans decent when we cross paths on trains on match days, and very much enjoy my trips to the area (well, okay, specifically the Brunswick!) However I just can't get my head round this practice being fair (it seems like an obvious attempt to "game" compliance) and as in bold above, kicking the can down the road to "take the hit" later seems to be incredibly reckless and exactly what FFP is meant to be putting a stop to. That the definition from Derby even explicitly includes provision to negotiate new contracts and re-amortise an existing prior player cost further into the future is barmy to me, as is self evaluating impairment charges. It seems to me to be continually deferring a lot of real terms costs from the balance sheet until you can get into the Premiership and then release all these accounting anomalies when you can "take the hit" far more comfortably. It's pure accounting sleight of hand. That alone should bring everything else Morris does into question. If the EFL had half a brain they'd define accounting rules so that the whole process of FFP is comparing like for like and not allowing clubs to write their own rules. Don't get me wrong, the logic of Derby's model is valid - I've often pointed out on this board myself that paying silly money for a young player is something I think SL would do IF wages were achievable, as it's wages that are our real terms drag on the balance sheet and where we get beaten to players by most of our peers. £10m transfer fee amortised (straight line) followed by a likely profit on sale of exciting young player, is simply asset management to a lifelong share trader like Lansdown. Therefore one could argue that we should use Derby's residual value accounting. SL doesn't, I assume because it would be very misleading and very dangerous. Players get injured, players don't work out, and most of all players nowadays will run a contract down if they can get a big signing on fee at a future club. Derby's accounting implies certainty that none of this will happen and there is a guaranteed market and return for their players, allowing them to keep their costs off the balance sheet. It's a neat trick to comply with FFP limits, but it's just a time bomb done in the hope of securing Premier League football before it goes off. And seeing the definition of how Derby handle re-negotiated contracts with re-amortisation of existing costs that still haven't hit the balance sheet, I can see even more there is a process here to keep deferring costs. You could actually give a **** player a new contract on meager terms to artificially defer their cost. And on current form I suspect Morris would. All of the finance people I've seen say that whilst unusual for a football club, it is a perfectly valid method of accounting. I'm not sure whether we're the only club that utilises it or not. Yes, it means that we have to take the hits at the end of contracts, but we're obviously going to be aware of that, and yes promotion would allow us to do that, however, that doesn't seem to be the only thing we are banking on as we have been taking steps to lower the future wage bill (I'm aware it went up in the last accounts, and may well have gone up again this year - but the players we are bringing in will be on lower wages than the ones that will be going out), but obviously this is a gradual process, helped by players going out of contract, although we then have to take the hit on their residual values, although the wages cut somewhat offset this. I believe that as a club we feel we can do this because we're pretty stable in terms of income, our crowds, while very slightly down, are still pretty stable for a club that has been in this league as long as we have, we're a loyal bunch. I also expect our turnover for this season to have increased probably fairly substantially again, partly due to having Frank as manager, and the associated coverage and increased sponsorship revenues that could bring, but also due to 1. Having cup runs in both competitions including ties at Man Utd, Chelsea, Southampton and Brighton, 2. Getting into the Play Offs again but then also getting to the final - it is said there's normally a gentleman's agreement that the losing finalist takes all of the share of receipts for the match, which is not an insignificant amount. Also, due to season ticket holders for next season being included in the first period of sale for final tickets, I believe this will have the knock on effect of helping the income for next season, I'm aware of people that bought one on the basis of being able to secure a ticket for the final. This can only help the financial situation. 13 minutes ago, downendcity said: Unfortunately, in the real world things change. The Villa owner, Xia, was financially able to support them and had been doing so, until last summer when he was unable to get money out of his country to here. As a result Villa had major cash flow problems, had not paid their tax bill for a few months and were on the verge of a winding up order from HMRC. It was as a result of the situation that befell Pompey, following their relegation from the premier league, that FFP was introduced to protect clubs from owners overcommitting the club financially and beyond it's means. I am sure many clubs can make an argument as to why they should be "exempt" from such limitations, because their owner is a fan and is committed to supporting the club, but as in Villa's situation last year, it only needs the unexpected to occur and all those securities go out of the window. As I think has already been mentioned on here, the championship is the division with the biggest financial issues, as almost every club needs the support of it's owner to stay afloat. The attraction of the riches in the premier league is such a lure that some owners seem prepared to risk anything to gain promotion - there is a strong suspicion that had they not gained promotion this time around, financial chickens would have come home to roost at Villa. That both Villa and West Brom Brom borrowed against their third year parachute payment during year two following relegation, shows how badly clubs want/need promotion back to the premier league and the financial risks they are prepared to take. Against this background, ffp protects clubs from themselves and their owners, notwithstanding the owners financial wherewithal and allegiance to the club. Before we start looking at huge changes, dismantling the ffp rules and introducing new ones ( or removing controls completely, as you seem to indicate) I would have though the first step is to get the EFL to make the current rules work properly. The situation with Derby's ground sale shows the problems that currently exist and that club's are prepared to "bend" the rules or break the spirit of the rules. You mentioned that is not until the benefit of hindsight that loopholes can be identified i.e. once a club exploits a loophole, and because that will always be the case perhaps the EFL need to reinforce that clubs must operate within the spirit of the rules, and that breaches in this respect will also be subject to penalty. The problem, as has been discussed so often on here, is the doubts that many doubt the EFL has the balls to take on big clubs, for fear that they will be dragged into legal disputes. Apart from the fact that Morris carried out the ground sale to avoid a major ffp breach, the real issue with your ground sale is not that Morris did it, but that, given the chance, the EFL did not recognise the loophole and close it before he could use it. I suspect they bottled it because they were worried that if they bought Derby to book for a ffp breach, Derby would argue that the EFL prevented them from remedying the situation by selling the ground. At the moment the EFL have dismally failed the many clubs that have worked hard to address ffp, even if it has made them less competitive. I'm aware that things change, which is why my suggestion is to have the money in a holding account, there HAS to be enough in there to cover both fee and wages for the player (for the duration of their contract) otherwise you cannot buy them, lets face it - the players are inevitably the highest costs a club has to cover, this could be offset against income in the same way as normal, so when it comes to the end of the season and the accounts or upon the sale of said player, you can free up an amount in the holding account for future purchases (providing all other club costs have been met for the season) but no club can ever end up in a situation where they cannot afford a player they have on their books. This would mean that a situation such as happened at Villa and Portsmouth could not occur again, as the money will already be in an account ready for use, and if that means an owner taking a hit on a purchase, then it's better than the club taking one. It may encourage crazy spending or it may do the opposite and owners may look carefully at what would be the maximum they would personally like to lose, but a reckless owner can't leave a club high and dry. As I said I'm not trying to make an argument that this should be the case now, and clubs somehow deserve leniency if they have rich or benevolent owners, only that I think it would work as a change to the FFP rules in the future. I'm also not suggesting removing controls completely, I'm not sure how you got that from my suggestion, there is still control over how much a club can spend, but it is decided by the owner of the club and how much they are prepared to spend and potentially lose, not by the league and other clubs. You could make the argument that this disadvantages the poorer owners, and yes it does, but the rules as they are now have the same effect, if an owner is not prepared to put money into the club then they can only spend a small amount anyway, but they are still allowed to lose money, and this can only lead to problems somewhere further down the line, it can and does lead to normal businesses losing a lot of money when they inevitably end up in administration, all because a club was allowed to go beyond it's (or it's owners) means and try to achieve the big time. I personally don't think a club should be allowed to lose money, the owner has to make sure they can cover it fully by putting money into the holding account, either from their own pocket, and this cannot be in the form of loans that need repaying, or from player sales. It may not work, it may be flawed, but what we have now is also flawed and I don't see any way to change it (other than making sure there can be no financial loss for a club) that wouldn't cause untold harm to the EFL's brand, which to be fair is happening anyway because of all the bad press about the state clubs find themselves in, which only seems to be getting worse with each passing season. 19 minutes ago, Mr Popodopolous said: The two rules which seem to contradict each other, which means there is an element of doubt and interpretation- pulled off Kieran Maguire's Twitter. This one suggests it IS legit. This one suggests it is in doubt- and I would also add in 11.3.4 to that for consideration! 111.1 would help cover it That single rule opens it up again. Let alone the highlighted bits. Agree with @Olé that the accounting method for players etc could be worth a look too, it definitely has the effect of kicking the can down the road. Agree with @downendcity about the detrimental impact to clubs who have complied or worked hard to do so- at the expense of their own competitiveness. @DerbyFan You're right about loopholes but good governance can close them before they are breached. Like I said before, I doubt UEFA would have waved this through, personally- and they are not great but they're a lot more clued up on this than the EFL appear to be. Possible Loopholes in EFL FFP, just a few examples. Example- Solution Stadium sold to Owner or any form of related party- Make it the case that profit excluded from FFP calculations- still comes up on their accounts but not their FFP figure. Player sold to Chinese League club owner may have a stake in- Reading mooted to have done this with Aluko. Exclude the profit and only have their remaining amortisation and obviously wages being removed from the books. Loan fee with big fee to sister club- Wages maybe off book, but loan fee not counted. Over inflated sponsorship by related party- say £10m per season for shirts when the going rate for that club size at this level is say £2m. Simple- it may come up as £10m on published account but refuse to class it as income in FFP submissions. I think they do this already though. Loopholes can be closed and quickly, and well too- just depends if your organisation- in this case the EFL- is run in any way adequately. As far as I'm aware the rules you have quoted above are the old rules prior to 2016/17, I do not know if those rules form the basis of the new rules, but they reference previous seasons. As below, all of those rules quotes are from part 1 of the rules, not part 2, part 2 is much further down the page. Quote Appendix 5 - Financial Fair Play Regulations APPENDIX 5 FINANCIAL FAIR PLAY RULES PART 1 – CHAMPIONSHIP FAIR PLAY RULES Notes: Capitalised Terms have the meanings ascribed to them in Regulation 1 or 16 of the Regulations of The League unless otherwise indicated. The following Rules are supplemental to the Regulations. This Part consists of the Championship Fair Play Rules which continue to apply for the purposes of reporting in respect of Season 2015/16, and the consequences arising from those reports. Part 2 contains the Profitability and Sustainability Rules which are applicable for Season 2016/17 onwards. Looking at the appropriate sections of the rules: Quote 1.1.2 Adjusted Earnings Before Tax means Earnings Before Tax adjusted to exclude costs (or estimated costs as the case may be) in respect of the following: (a) depreciation and/or impairment of tangible fixed assets, amortisation or impairment of goodwill and other intangible assets (but excluding amortisation and/or impairment of the costs of players’ registrations); It mentions depreciation and/or impairment, but not profit. Quote 1.1.8 Fair Market Value means the amount for which an asset could be sold, licensed or exchanged, a liability settled, or a service provided, between knowledgeable, willing parties in an arm’s length transaction. Fair Market Value - I believe the independent valuation the club obtained to satisfy this. And the club sold an asset, so that seems to fit. Quote 1.1.10 Related Party Transaction means a transaction: (a) disclosed in a Club’s Annual Accounts as a related party transaction; The club have made no secret about this being a Related Party Transaction. Quote 2.3 The Executive shall determine whether consideration included in the Club’s Earnings Before Tax arising from a Related Party Transaction is recorded in the Club’s Annual Accounts at a Fair Market Value. If it is not, the Executive shall restate it to Fair Market Value. 2.4 The Executive shall not exercise its power set out in Rule 2.3 without first having given the Club reasonable opportunity to make submissions as to: 2.4.1 whether the said consideration should be restated; and/or 2.4.2 what constitutes its Fair Market Value. Fair enough, there is the scope for them to do this, if they believe they are required to. I guess we will find out in the next years accounts whether the value has been restated or not, if not, then I assume the valuation was accepted as being correct, and as the club have stated they had an independent valuation, then I presume they have all the evidence they need for this. I make a point of bolding the word independent as I'm not sure what else the club can be expected to do in this situation, they have stated it was an independent valuation, if people don't believe this then I'm not sure what else they can do, making them pay for multiple independent valuations to make sure they are within the same range seems counterintuitive to keeping costs down to me. In fact I still wonder if this is why they okayed it with the EFL beforehand, to make sure the valuation was acceptable to them. Obviously if the EFL get their own valuation done, this adds to their costs (or would they bill the club for this?) when they may already trust the one obtained by the club. Quote 4.3 Without prejudice to the right of The League to refer any breach of rules to the Disciplinary Commission in accordance with section 8 of the Regulations, where any Club is in breach of any requirement of these Rules relating to the provision of information, the Executive may refuse any application by that Club to register any Player or any new contract of an existing Player of that Club. 4.4 Each Club shall, at all times and in all matters within the scope of these Rules, behave with the utmost good faith both towards The League and the other Clubs (provided always that only The League shall have the right to bring any action whatsoever for any alleged breach of this requirement). Without prejudice to the generality of the foregoing, Clubs shall not manage their affairs or submit information which is intended to seek to or take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the requirements of the Rules. I presume as we have been able to both sign Shinnie on a pre-contract and hand out new contracts to those already within the club (I know Roos' was done recently, the other 3 seem to have been done earlier) then we are ok as far as this goes? Of course loopholes can be closed quickly after the fact, but if they are not then clubs WILL take advantage of them, clubs have been doing this for ages, and I cannot see it stopping now. What you cannot do is close it afterwards and then retrospectively punish clubs who used it, as they: May not have used it if they knew they would be punished - regardless of whether you think it should be or not if something was NOT against the rules as they were stated at the time then it was simply not against the rules. May have done business differently - you cannot turn back time, if they knew something was against the rules and would not be allowed then they would not do it and would find another way around it that was, you may be punishing them for something that would not have happened if they knew they could not do it, and they no longer have the ability to change the outcome. ie. they may have failed FFP without it, but they may also have found a way NOT to fail FFP without it, you're no longer giving them that option and they have therefore failed FFP even though what they did was not actually against the rules when they did it. Do you see where I'm going with this? It's a minefield, and one that I doubt the EFL will want to enter, unless something is explicitly against the rules. Everyone needs to know precisely what rules they are working to, that includes loopholes they may decide take advantage of, you cannot change the goalposts after the fact. 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Coppello Posted June 4, 2019 Report Share Posted June 4, 2019 I thought I'd dip my toe back into this thread. Thanks for contributing @DerbyFan, it's always good to have opposing fans views on here and it allows for better debate. I don't want to turn this into a dick waving contest (as I know you already mentioned that you're female ) but I feel I'm reasonably qualified to comment. I was an audit manager at a big four accounting firm having worked there for 6 years, currently work in the football finance world, have worked on a stadium valuation over the last couple of months and have also discussed the Pride Park debacle with a surveyor who has conducted four different stadium valuations in a variety of locations in the UK. I've commented on here in the past that the organisation that I have a problem with is the EFL for leaving these pretty obvious loopholes open but I think Derby's actions are pretty unethical. I also have a problem with some of the professionals engaged by Derby to conduct the valuation and sign off the accounts. The fair valuing of the players registrations is also questionable practice. I'll start with the stadium valuation, I apologise if you have already responded to some of these points to Mr P. but I've quickly scanned over this thread as there is a lot of posts! I appreciate that you have conducted an 'independent valuation' but it is clearly out of line with the market valuations. The club I work for has had its stadium valued over the past few weeks and the final value was considerably less than Pride Park. The club that I work at is London based and therefore I would've expected the land value to give the London club a significant head start before even considering the stadium itself. This raises a few concerns for me personally. Another club who revalued their stadium per their most recent set of accounts is Middlesbrough. The combined value of their stadium, training ground and headquarters has been revalued at £49.7m also using the depreciated cost method. The notes from their accounts is as follows: This is an excellent benchmark given they were built three years apart and have almost identical capacities. Whilst this does not consider all of the work performed on the stadium during their 20-25 year lives, the values are remarkably different. Middlesbrough is a notoriously cheaper area, I will admit, but this does include the stadium, training ground and other buildings. This does call into question the integrity of the surveyor who performed the valuation. The auditor has a duty to review the report and, whilst they're not experts at valuing stadiums themselves, should consider the credentials of those performing the survey and also perform a benchmarking exercise comparing against other stadiums in the area. As @Mr Popodopolous states, the right thing to do would be for the EFL to conduct its own review but they are completely inept as an organisation and that ship has sailed. Personally I wouldn't sue Derby in the way that Gibson has; as you state you've just exploited a loophole and, whilst unethical, is not against the rules. I was not aware of the way in which you account for the player registrations until I read the thread this morning. I can't fathom how this could be allowed by the auditor having looked at the financial statements. As stated previously, accounting guidance allows the fair valuing of assets in many circumstances and this is not a situation where it is applicable. In the most simplistic terms, there is a 'fair value hierarchy' which considers the reasonableness and the level of judgement exercised. The hierarchy is as follows: - Level 1 inputs: This is where there is an identical asset in an active market. Players are not like barrels of oil where they are homogeneous and there is not an active market of Jack Marriott's being traded daily. Players are all different and would not meet the level 1 input criteria. - Level 2 inputs: These are quoted prices for similar assets in active markets or quoted prices for identical assets which are from inactive markets. In reality, footballers are not really similar assets as the sales prices are so volatile and cannot be reliably measured. Form, contract length, medical history, nationality and age all haze the situation further. The willingness of other clubs to buy a player has a massive impact on the valuation rather than the individual player himself. - Level 3 inputs: These are values which determined from observable sources. For example, Mel Morris' excel model or an in-house assessment of other forwards etc. These are the least reliable and is what the player values are based on. As you go down the hierarchy the relevance of the valuation decreases. The value of players are volatile and are hugely determined by form, injury etc. For example, say Bristol City sign Assombalonga for £20m and in 19/20 he scores 1 goal. This would result in a massive impairment charge of probably about 80% of his value (I say probably because it is impossible to value!). If he then scored 29 goals in 20/21 he would be revalued up to £20 million again, causing massive volatility in the financial statements. If I told my auditor that I was going to use this method, he would laugh his way out of the door before resigning. It is clearly a piece of creative accounting by the Derby County finance team. If I were the audit partner of Smith Cooper Audit Ltd, who sign off the accounts of DC, I'd be sweating that the accounts were going to be reviewed by the governing body as there's some very concerning issues in the accounts. What is even more interesting is that the lead audit partner is a Derby County fan which probably impairs his independence somewhat. As I mentioned previously, it's not the club itself that are completely at blame, there's many other 'professionals' that are failing to perform their duties properly. Apologies all for the length - I'm not sure how many will make it to the end! 4 3 2 Quote Link to comment Share on other sites More sharing options...
downendcity Posted June 4, 2019 Report Share Posted June 4, 2019 42 minutes ago, Coppello said: I thought I'd dip my toe back into this thread. Thanks for contributing @DerbyFan, it's always good to have opposing fans views on here and it allows for better debate. I don't want to turn this into a dick waving contest (as I know you already mentioned that you're female ) but I feel I'm reasonably qualified to comment. I was an audit manager at a big four accounting firm having worked there for 6 years, currently work in the football finance world, have worked on a stadium valuation over the last couple of months and have also discussed the Pride Park debacle with a surveyor who has conducted four different stadium valuations in a variety of locations in the UK. I've commented on here in the past that the organisation that I have a problem with is the EFL for leaving these pretty obvious loopholes open but I think Derby's actions are pretty unethical. I also have a problem with some of the professionals engaged by Derby to conduct the valuation and sign off the accounts. The fair valuing of the players registrations is also questionable practice. I'll start with the stadium valuation, I apologise if you have already responded to some of these points to Mr P. but I've quickly scanned over this thread as there is a lot of posts! I appreciate that you have conducted an 'independent valuation' but it is clearly out of line with the market valuations. The club I work for has had its stadium valued over the past few weeks and the final value was considerably less than Pride Park. The club that I work at is London based and therefore I would've expected the land value to give the London club a significant head start before even considering the stadium itself. This raises a few concerns for me personally. Another club who revalued their stadium per their most recent set of accounts is Middlesbrough. The combined value of their stadium, training ground and headquarters has been revalued at £49.7m also using the depreciated cost method. The notes from their accounts is as follows: This is an excellent benchmark given they were built three years apart and have almost identical capacities. Whilst this does not consider all of the work performed on the stadium during their 20-25 year lives, the values are remarkably different. Middlesbrough is a notoriously cheaper area, I will admit, but this does include the stadium, training ground and other buildings. This does call into question the integrity of the surveyor who performed the valuation. The auditor has a duty to review the report and, whilst they're not experts at valuing stadiums themselves, should consider the credentials of those performing the survey and also perform a benchmarking exercise comparing against other stadiums in the area. As @Mr Popodopolous states, the right thing to do would be for the EFL to conduct its own review but they are completely inept as an organisation and that ship has sailed. Personally I wouldn't sue Derby in the way that Gibson has; as you state you've just exploited a loophole and, whilst unethical, is not against the rules. I was not aware of the way in which you account for the player registrations until I read the thread this morning. I can't fathom how this could be allowed by the auditor having looked at the financial statements. As stated previously, accounting guidance allows the fair valuing of assets in many circumstances and this is not a situation where it is applicable. In the most simplistic terms, there is a 'fair value hierarchy' which considers the reasonableness and the level of judgement exercised. The hierarchy is as follows: - Level 1 inputs: This is where there is an identical asset in an active market. Players are not like barrels of oil where they are homogeneous and there is not an active market of Jack Marriott's being traded daily. Players are all different and would not meet the level 1 input criteria. - Level 2 inputs: These are quoted prices for similar assets in active markets or quoted prices for identical assets which are from inactive markets. In reality, footballers are not really similar assets as the sales prices are so volatile and cannot be reliably measured. Form, contract length, medical history, nationality and age all haze the situation further. The willingness of other clubs to buy a player has a massive impact on the valuation rather than the individual player himself. - Level 3 inputs: These are values which determined from observable sources. For example, Mel Morris' excel model or an in-house assessment of other forwards etc. These are the least reliable and is what the player values are based on. As you go down the hierarchy the relevance of the valuation decreases. The value of players are volatile and are hugely determined by form, injury etc. For example, say Bristol City sign Assombalonga for £20m and in 19/20 he scores 1 goal. This would result in a massive impairment charge of probably about 80% of his value (I say probably because it is impossible to value!). If he then scored 29 goals in 20/21 he would be revalued up to £20 million again, causing massive volatility in the financial statements. If I told my auditor that I was going to use this method, he would laugh his way out of the door before resigning. It is clearly a piece of creative accounting by the Derby County finance team. If I were the audit partner of Smith Cooper Audit Ltd, who sign off the accounts of DC, I'd be sweating that the accounts were going to be reviewed by the governing body as there's some very concerning issues in the accounts. What is even more interesting is that the lead audit partner is a Derby County fan which probably impairs his independence somewhat. As I mentioned previously, it's not the club itself that are completely at blame, there's many other 'professionals' that are failing to perform their duties properly. Apologies all for the length - I'm not sure how many will make it to the end! I did! 2 Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 4, 2019 Report Share Posted June 4, 2019 (edited) 1 hour ago, Coppello said: I thought I'd dip my toe back into this thread. Thanks for contributing @DerbyFan, it's always good to have opposing fans views on here and it allows for better debate. I don't want to turn this into a dick waving contest (as I know you already mentioned that you're female ) but I feel I'm reasonably qualified to comment. I was an audit manager at a big four accounting firm having worked there for 6 years, currently work in the football finance world, have worked on a stadium valuation over the last couple of months and have also discussed the Pride Park debacle with a surveyor who has conducted four different stadium valuations in a variety of locations in the UK. I've commented on here in the past that the organisation that I have a problem with is the EFL for leaving these pretty obvious loopholes open but I think Derby's actions are pretty unethical. I also have a problem with some of the professionals engaged by Derby to conduct the valuation and sign off the accounts. The fair valuing of the players registrations is also questionable practice. I'll start with the stadium valuation, I apologise if you have already responded to some of these points to Mr P. but I've quickly scanned over this thread as there is a lot of posts! I appreciate that you have conducted an 'independent valuation' but it is clearly out of line with the market valuations. The club I work for has had its stadium valued over the past few weeks and the final value was considerably less than Pride Park. The club that I work at is London based and therefore I would've expected the land value to give the London club a significant head start before even considering the stadium itself. This raises a few concerns for me personally. Another club who revalued their stadium per their most recent set of accounts is Middlesbrough. The combined value of their stadium, training ground and headquarters has been revalued at £49.7m also using the depreciated cost method. The notes from their accounts is as follows: This is an excellent benchmark given they were built three years apart and have almost identical capacities. Whilst this does not consider all of the work performed on the stadium during their 20-25 year lives, the values are remarkably different. Middlesbrough is a notoriously cheaper area, I will admit, but this does include the stadium, training ground and other buildings. This does call into question the integrity of the surveyor who performed the valuation. The auditor has a duty to review the report and, whilst they're not experts at valuing stadiums themselves, should consider the credentials of those performing the survey and also perform a benchmarking exercise comparing against other stadiums in the area. As @Mr Popodopolous states, the right thing to do would be for the EFL to conduct its own review but they are completely inept as an organisation and that ship has sailed. Personally I wouldn't sue Derby in the way that Gibson has; as you state you've just exploited a loophole and, whilst unethical, is not against the rules. I was not aware of the way in which you account for the player registrations until I read the thread this morning. I can't fathom how this could be allowed by the auditor having looked at the financial statements. As stated previously, accounting guidance allows the fair valuing of assets in many circumstances and this is not a situation where it is applicable. In the most simplistic terms, there is a 'fair value hierarchy' which considers the reasonableness and the level of judgement exercised. The hierarchy is as follows: - Level 1 inputs: This is where there is an identical asset in an active market. Players are not like barrels of oil where they are homogeneous and there is not an active market of Jack Marriott's being traded daily. Players are all different and would not meet the level 1 input criteria. - Level 2 inputs: These are quoted prices for similar assets in active markets or quoted prices for identical assets which are from inactive markets. In reality, footballers are not really similar assets as the sales prices are so volatile and cannot be reliably measured. Form, contract length, medical history, nationality and age all haze the situation further. The willingness of other clubs to buy a player has a massive impact on the valuation rather than the individual player himself. - Level 3 inputs: These are values which determined from observable sources. For example, Mel Morris' excel model or an in-house assessment of other forwards etc. These are the least reliable and is what the player values are based on. As you go down the hierarchy the relevance of the valuation decreases. The value of players are volatile and are hugely determined by form, injury etc. For example, say Bristol City sign Assombalonga for £20m and in 19/20 he scores 1 goal. This would result in a massive impairment charge of probably about 80% of his value (I say probably because it is impossible to value!). If he then scored 29 goals in 20/21 he would be revalued up to £20 million again, causing massive volatility in the financial statements. If I told my auditor that I was going to use this method, he would laugh his way out of the door before resigning. It is clearly a piece of creative accounting by the Derby County finance team. If I were the audit partner of Smith Cooper Audit Ltd, who sign off the accounts of DC, I'd be sweating that the accounts were going to be reviewed by the governing body as there's some very concerning issues in the accounts. What is even more interesting is that the lead audit partner is a Derby County fan which probably impairs his independence somewhat. As I mentioned previously, it's not the club itself that are completely at blame, there's many other 'professionals' that are failing to perform their duties properly. Apologies all for the length - I'm not sure how many will make it to the end! It's interesting to get the input of someone with some knowledge of the subject that can back it up with examples, however I would imagine there will be vast differences in the various stadia and it's not a one size fits all valuation. As you mention, they were built 3 years apart and actually ours is based on Middlesbrough's, but I have no knowledge of the work that has been undertaken on theirs since it opened, but I do know, to some extent at least, the work that has happened on ours, so I wouldn't like to say that they should be anything like the same value now, and as you point out, property values in Middlesbrough are much less than in Derby, in fact I believe Derby is one of the places that prices have gone up rather a lot over the years, it helps that we are very central and it's pretty easy to get to anywhere from here I guess. I notice that our remaining tangible assets amount to around £14.5m, I can only guess that this is the book value of the training ground, I don't think the valuation of this on the books has changed recently either as the book value of them all including the ground from the previous year was £59.3m (and this had been going down at a similar rate for years from what I can see) so minus the £41m we're told was the book value of the stadium at the time of the sale and you're not too far off what's left, presuming the current figure is minus the years depreciation. I imagine the training ground will now in actuality be valued a lot higher as since Mel Morris bought the club a lot of work has happened on it, including the acquisition of and work to further land (which was maybe a 60-70% increase on the original size - guesstimate from looking at a map) to create more pitches to keep us up to Cat 1 standard, and there is planning permission in place for even more work to take place, which I believe also adds value. I know that Middlesbrough's training ground is also Cat 1, so I imagine a similar size and probably standard, this maybe gives an idea of the difference in value of the clubs assets. (As an aside, I assume the Hall and golf course aren't included in Middlesbrough's asset valuation - 'other properties' from that quote? I believe Gibson also owns these - surely the value would be even higher if they were.) As far as I can see the accounts don't mention who did the most recent stadium valuation for the sale, but the previous accounts do mention who did the last two, and having just Googled the most recent one, it seems that the two companies merged in 2011, so they were effectively done by one and the same. I don't know how it works in relation to the clubs accounts, I've no inside knowledge of them, but others have said that it's a perfectly acceptable method of accounting, just different to use it for a football club. As far as I'm aware having seen discussions on the subject on our own forum, once a player is valued down they cannot then be up valued again, so your Assombalonga example is not how it would actually be done on the books. There is a section in the accounts that says: Quote In the period since the end of the financial year the Company has entered into agreements to dispose of first team players with a net book value of £12,819,777 for £11,704,300 Yes it is a loss on residual values, however it does seem from that they were at least fairly accurate. *I forgot to ask, from someone in the business would the market rate of a stadium, be the valuation with the depreciation removed, or the value before that is taken into account? Edited June 4, 2019 by DerbyFan *Added the question Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 (edited) A very interesting post that @Coppello I'll get into it all the most recent posts from you and DerbyFan properly later the most recent posts etc, but I wonder a few things on this. 1) The integrity of the surveyor- yes I have wondered this for a while, without necessarily stating it. 2) The auditors- believe you said the Lead Auditor a Derby County fan? Independence and objectivity surely must be considered in a different light with that info? 3) Not too late for the EFL or its members I should say to conduct its own review. How about interested parties- so therefore Messrs Lansdown, Gibson, Marinakis et al pool resources hire a set of bona fide top independent auditors, bona fide top independent accountants, top independent land valuers and top independent corporate lawyers to launch a genuine review into Derby's finances. Take it to the CAS in Lausanne if necessary to seek access to the fine detail of the accounts. Yes, there is precedent on this, see AC Milan at the CAS in August 2018- related to here, I suspect Gibson turning down the offer of viewing accounts was him making sure he had all his ducks lined up in a row. I would be surprised if owners were not bang up for this, the only question is the EFL as a Governing body themselves- as you say they're very much inept as an organisation...However were it to be left with the owners, the chairmen this could be a goer! Keep Shaun Harvey away from it though- he didn't even know who owned Leeds when he was there!! I think there would be a lot and I mean a lot of owners up for this. Though not like the Birmingham situation in many ways, one way is similar- them signing Pedersen under embargo got a lot of clubs very antsy- and this move though not necessarily outside the letter of the law, has had exactly the same effect I feel. God knows how Shaun Harvey got the gig though- Clubs appointing a patsy they can run rings round?? Also think the first 2 should be officially reported to their Professional Bodies over this, to check thoroughly their integrity and judgement in this matter. EFL or the above owners should do it. I'm not so concerned about the sign off of players in the wake that the players were worth x but sold at a loss- that assuages some of those concerns at least IMO. The other thing too before I forget. It is possible- and I hadn't considered this- but not to be a case of simply letting bigger clubs off, but it is possible that because clubs obeyed during the period under embargo and didn't do anything stupid- unlike Birmingham's ludicrous signing of Pedersen- that it satisfied the EFL. The fact they showed some willing in the case of Derby for example by signing loanees...and Sheffield Wednesday that they didn't try anything outside of conditions that it meant a points deduction was off the table. That might have satisfied the EFL. If it is the case- entirely possible on their track record- then it shows how inadequate the EFL are and have been in all honesty. Quite blatant gaming of the system though- that alone deserves a punishment I feel. Edited June 4, 2019 by Mr Popodopolous 1 Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 (edited) If anyone has access to RICS isurv, valuation examples and methods maybe interesting- football stadia included on there incidentally. Taking all the posts into account. £40-50m? I could believe. £81.1m...laughed out the room! Ohhhh and an interesting Tweet. Or 2. If Aston Villa- now officially promoted- are potentially having this issue, then it follows that Derby who are still in the EFL can be hammered- or at least punished for this- if an investigation finds they merit it. Edited June 4, 2019 by Mr Popodopolous 1 1 Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 4, 2019 Report Share Posted June 4, 2019 16 minutes ago, Mr Popodopolous said: A very interesting post that @Coppello I'll get into it all the most recent posts from you and DerbyFan properly later the most recent posts etc, but I wonder a few things on this. 1) The integrity of the surveyor- yes I have wondered this for a while, without necessarily stating it. 2) The auditors- believe you said the Lead Auditor a Derby County fan? Independence and objectivity surely must be considered in a different light with that info? 3) Not too late for the EFL or its members I should say to conduct its own review. How about interested parties- so therefore Messrs Lansdown, Gibson, Marinakis et al pool resources hire a set of bona fide top independent auditors, bona fide top independent accountants, top independent land valuers and top independent corporate lawyers to launch a genuine review into Derby's finances. Take it to the CAS in Lausanne if necessary to seek access to the fine detail of the accounts. Yes, there is precedent on this, see AC Milan at the CAS in August 2018- related to here, I suspect Gibson turning down the offer of viewing accounts was him making sure he had all his ducks lined up in a row. I would be surprised if owners were not bang up for this, the only question is the EFL as a Governing body themselves- as you say they're very much inept as an organisation...However were it to be left with the owners, the chairmen this could be a goer! Keep Shaun Harvey away from it though- he didn't even know who owned Leeds when he was there!! I think there would be a lot and I mean a lot of owners up for this. Though not like the Birmingham situation in many ways, one way is similar- them signing Pedersen under embargo got a lot of clubs very antsy- and this move though not necessarily outside the letter of the law, has had exactly the same effect I feel. God knows how Shaun Harvey got the gig though- Clubs appointing a patsy they can run rings round?? Also think the first 2 should be officially reported to their Professional Bodies over this, to check thoroughly their integrity and judgement in this matter. EFL or the above owners should do it. I'm not so concerned about the sign off of players in the wake that the players were worth x but sold at a loss- that assuages some of those concerns at least IMO. You want to report people to their Professional Bodies and you are questioning their integrity and objectivity? Why on earth would anyone jeopardise their career for that, even if they do support the club in question? Unbelievable. The accounts and the stadium valuation are clear for everyone to see, presumably anyone with an accounting background can go through them and find out what they need to, no one has tried to hide anything, they've told people how they amortise the players, and they've told everyone how much the stadium was valued at, if people don't believe that value then there is not much they can do about that one, but presumably they will have all the evidence they need to back it up. Steve Gibson was actually invited by Mel Morris to view the clubs accounts, with his finance people I believe, twice, and he apparently didn't even bother to reply, according to a Sky article (I think it was the one I referenced yesterday), if he was so concerned then why would he not take up that offer? And if there was anything to hide why would the club make that offer to him - anything amiss would be spotted instantly by his people? Also according to recent articles with quotes from Mel Morris, that were released just before the final, absolutely no one voted for Gibson's proposal at the EFL meeting, not one person, including, apparently, his own representative! 2 minutes ago, Mr Popodopolous said: On the valuation front- I'm no surveyor, but a very interesting article. If anyone has access to this, this will be very interesting- fits almost perfectly Pride Park description!! https://www.isurv.com/info/1076/valuation_calculations/3866/depreciated_replacement_cost_worked_examples/8 Where to start... Quote The football club has been relegated and they never managed to more than half-fill the stadium. That fits almost perfectly Pride Park description? Ok. Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 (edited) 54 minutes ago, DerbyFan said: You want to report people to their Professional Bodies and you are questioning their integrity and objectivity? Why on earth would anyone jeopardise their career for that, even if they do support the club in question? Unbelievable. The accounts and the stadium valuation are clear for everyone to see, presumably anyone with an accounting background can go through them and find out what they need to, no one has tried to hide anything, they've told people how they amortise the players, and they've told everyone how much the stadium was valued at, if people don't believe that value then there is not much they can do about that one, but presumably they will have all the evidence they need to back it up. Steve Gibson was actually invited by Mel Morris to view the clubs accounts, with his finance people I believe, twice, and he apparently didn't even bother to reply, according to a Sky article (I think it was the one I referenced yesterday), if he was so concerned then why would he not take up that offer? And if there was anything to hide why would the club make that offer to him - anything amiss would be spotted instantly by his people? Also according to recent articles with quotes from Mel Morris, that were released just before the final, absolutely no one voted for Gibson's proposal at the EFL meeting, not one person, including, apparently, his own representative! Where to start... That fits almost perfectly Pride Park description? Ok. Done nothing wrong, nothing to worry about I'd say- so let's get them reported to clear it all up. I think there is a lot that is very creative here so yeah I'd say so. Do I think they would truly let Derby support influence their judgement...doubt it but I believe the EFL should report them yes, especially if a valuation of an independent surveyor who maybe hired by the EFL would differ significantly to that of the ones appointed by Derby. Coppello's post about the valuation of a London stadium being significantly less than this sounded most interesting. If they get reported and they're totally on the level, then case will be laughed out of the room and all good. The valuation is not so clear- the revaluation as of 2013 is not so clear- it states that it was revalued in 2013 but to what? The valuation is either what was sold in the 2017/18 accounts excluding depreciation or that what was sold in 2017/18 inclusive of depreciation. Steve Gibson wanting to make sure his ducks were lined up in a row- we don't know the context of the offer, only what Mel Morris said. Was it a case of "an offer to view accounts (as presented) in return for an undertaking you drop it". Can well see Gibson's grounds for reservations here. Or maybe the "offer" was the case that Morris took the piss- "Haha, we've passed FFP and there's nothing you can do- look- look at these accounts! Stadium profit!" Lack of votes also makes me wonder what other clubs are hiding...then again on this however, the distinct a) Lack of votes and b) Gibson's own rep not bothering, we only have the word of Mel Morris, hardly a neutral party. Why don't you produce some sources some actual proof of some of your more recent claims- you seem to be rather passionate about this story and sometimes I wonder- are you Derby "Fan" or Derby "Something Else"? Also where is your proof that the EFL approved the transaction pre purchase? You have none unless you can link us to it, in the public domain of course...unless of course you are "Derby Something Else"- be it employee, auditor etc. In which case you shouldn't be posting about it on a forum- should you. I mean, you seem awfully worked up for a random fan because of one or 2 slight technical errors and you seem awfully keen to obfuscate, from the original point which is that your club overspent and used very creative accounting to (so far) get round the regs. Yeah, quick searches will do that- that clearly was not quite the right one...then again I'm not a Chartered surveyor. Oh and a quick search for comparison. Walkers Stadium completed in 2002 I believe, valued at May 2018 or May 31 2018- their accounts actually lay out the individual Tangible Assets you see- £38,211,000. Now I can believe it is somewhere between £40-50m given work on it but much beyond that? Edited June 4, 2019 by Mr Popodopolous 1 Quote Link to comment Share on other sites More sharing options...
Davefevs Posted June 4, 2019 Report Share Posted June 4, 2019 Out of interest @DerbyFan, what is your reason for joining our forum? I understand posters of other clubs forums, coming onto OTIB to discuss players / recruitment, or best pub to drink in type stuff....but I’ve never seen anyone join to post about FFP....that’s pretty niche! 1 Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 4, 2019 Report Share Posted June 4, 2019 (edited) 1 hour ago, Mr Popodopolous said: Done nothing wrong, nothing to worry about I'd say- so let's get them reported to clear it all up. I think there is a lot that is very creative here so yeah I'd say so. Do I think they would truly let Derby support influence their judgement...doubt it but I believe the EFL should report them yes, especially if their valuation differs significantly to "Derby's". Coppello's valuation of a London stadium being significantly less than this sounded most interesting. The valuation is not so clear- the revaluation as of 2013 is not so clear- it states that it was revalued in 2013 but to what? The valuation is either what was sold in the 2017/18 accounts excluding depreciation or that what was sold in 2017/18 inclusive of depreciation. Steve Gibson wanting to make sure his ducks were lined up in a row- we don't know the context of the offer, only what Mel Morris said. Was it a case of "an offer to view accounts (as presented) in return for an undertaking you drop it". Can well see Gibson's reservations here. Lack of votes also makes me wonder what other clubs are hiding...again we only have the word of Mel Morris, hardly a neutral party. Why don't you produce some sources some actual proof of some of your more recent claims- you seem to be rather close to this story and rather keen to pump out PR on it- are you "DerbyFan" or "Derby Something Else"? Also where is your proof that the EFL approved it pre-purchase? You have none...unless of course you are "Derby Something Else"- be it employee, auditor etc. In which case you shouldn't be posting it on a forum- should you. I mean, you seem awfully worked up for a random fan because of one or 2 slight technical errors and you seem awfully keen to obfuscate, from the original point which is that your club overspent and used very creative accounting to (so far) get round the regs. Yeah, quick searches will do that- that clearly was not quite the right one...then again I'm not a Chartered surveyor. I was just very surprised that you'd openly stated that, I've been lurking on forums for long enough to have seen people getting themselves in hot water for casting aspersions on people before. What if the EFL's valuation matches that of the club? I don't know which club the other poster works for - you may know as a fellow fan of theirs(?) so I can't know which stadium it is they have worked on a valuation for, there may be reasons why it differs from ours? I wouldn't like to make assumptions on that as I don't know anything about how to value a stadium, the only thing I do assume is that the only people who know how they come to a valuation are the people that have all the facts of why they have done so. I don't know what the 2013 valuation was, it doesn't appear to say, and the book value didn't appear to change either. From the notes I took it to be an exercise that had to be undertaken, as it said something about FRS 11, but maybe they didn't have to actually change the book value? Again, I don't know, I'm guessing, like everyone else is. Maybe you're right and that was Gibson's aim, I guess only he knows, all I know is what the club (or Mel Morris) have communicated to us fans. I have no reason not to believe what they're saying, especially on things that can be proved or disproved quite easily. Until anyone comes out with anything different to what's already been said then that's all I've got I'm afraid. You're right, we do only have Mel Morris' word for it, but given that there were supposed to be representatives from every club in the league there, and none of them have come out and said anything different, then I believe it to be true, I don't get why anyone would think any different when it's something that every club could disprove if they so wished? What claims would you like me to provide sources on? I'll try my best to find them if you let me know. Re. The EFL approving pre-purchase, I have already provided the link to the Sky article referencing this in a previous post, yes it has obviously come from the club, so you will probably choose not believe it, but where else is that information going to come from? If it is not true then I would imagine the EFL would have come out by now and said this. It doesn't say on the article, but the information seemed to come from Rob Dorsett, he is the local Sky reporter, if the club want to put information out there, this is one of the ways they do it, one of the others being via the Derby Telegraph. Sky Article Quote Sky Sports News has been told that Derby are bemused by Boro's complaint, saying they cleared the stadium sale with the EFL before the deal was done, and they remain convinced it is within the rules. They also had the stadium independently valued before the sale, and are currently investigating whether they can put a roof on Pride Park, to make it more commercially viable outside of match days. Quote Sky Sports News has seen two emails, sent to Middlesbrough by Derby's bosses, inviting officials from the North East to come and view Derby's financial accounts. Boro did not reply to either offer. You can tell from the second quote that it is obviously the club who have told Sky this, otherwise why would they have seen the emails, they've not just been told about them by a third party, they've seen them, the wording is obviously deliberate. Derby Telegraph Article Quote Derby County chairman Mel Morris has hit back at Championship rivals Middlesbrough and their owner Steve Gibson. Quote Derby are adamant they have been fully compliant. They invited Middlesbrough to take a look at their accounts. The invitation was declined. "Middlesbrough were offered by us in writing to come with their advisors to go through our submissions for profitability and sustainability, [but] they declined," Morris told DerbyshireLive last month. Quote Asked for his thoughts on the latest reported stance by Middlesbrough, Morris said: "I’ll call it out there because I think it needs calling out. "Sale of fixed assets is allowed in the rules. "In 2016 a club [Middlesbrough) got promoted who chose to sell the tax loss from the football club to the parent company, because that then makes it revenue which is a positive towards profit to help remain within Financial Fair Play. "When I raised that at a meeting (in March) where all the Championship clubs met to debate this, the representative from the club said it was allowed in the rules at that time. "So is this! What is different? You set the mould and we copied your lead, now you’re bitching. He [Gibson] had the hypocrisy to do that. "Even his own fans called it out on their forums and said ‘how dare we do this with our own history’. "We discussed this issue again and there wasn’t a single vote for the motions being put forward on this thing, not one, including the club that raised the issue. They didn’t even vote for their own motion. "It needs calling out because unfortunately I didn't write the rules. It is absolutely hypocritical. "I consider the timing of their action to be cynical, an open attempt to try and steal our focus ahead of a crucial game. Fortunately, we are motivated by such actions. "I find this to be entirely out of character for Boro, and their chairman." Derby Telegraph Article Quote Derby County invited Middlesbrough to look at their accounts in private, but the offer was declined. This was in March when Middlesbrough owner Steve Gibson voiced concern over the finances of Derby, Aston Villa and Sheffield Wednesday. Quote The Rams insist they have complied fully with the regulations. Morris told DerbyhireLive: "Middlesbrough were offered by us in writing to come with their advisors to go through our submissions for profitability and sustainability, they declined." Championship clubs met at Nottingham Forest's City Ground yesterday and voted against proposals for an independent review and for changing the EFL's financial rules. The meeting was said to have lasted for five hours and both Morris and Derby's chief executive, Stephen Pearce, attended. Are those quotes satisfactory? Yes, you have to trust the words of Mel Morris, there are plenty of people who can come out and claim something different if they would like to, but as they don't appear to have... You're clearly very suspicious minded, I'm just a fan of my club, any 'PR' you think I'm 'pumping out' is just me being a fan, you can believe or disbelieve that if you like, it makes no difference to me as I know who I am. I've been visiting your forum for some time as a lurker to see what your fanbase has to say, as I do with every club, yours is more active than most, so I lurked more often, it's an interesting way to pass the time. I'd noticed your repeated mention of the 'double and double again' of the value in this thread, it seemed this was really irking you as you kept mentioning it and having looked through the clubs accounts recently out of interest, even though I don't understand most of it, I saw this bit was wrong from the notes underneath and when I'd seen that you had mentioned it again I wanted to point it out, if only to put your mind at rest that that wasn't actually the case. You and others then replied to me, so I carried on replying, if I was wrong to do that then I apologise, I thought your forum might appreciate an alternative view, especially from a fan of one of the clubs that it seems are frustrating you the most re. FFP. Obviously I can only go on the information put out into the public domain, as that's all I'm aware of, like yourselves, but I thought I may be aware of things you are not as I obviously follow things at my club more closely than you would, and I watch the fans forums the club do and then subsequently put out on Rams TV, where things have been mentioned, directly, by Mel Morris and various people from the club. It's a subject I find interesting, as most people (like myself) have a pretty strong opinion on it, even if they don't (also like myself) seemingly actually understand the full ins and outs of it - no one but the clubs involved can actually understand the clubs positions with regard to FFP, as there are so many variables, so many things can be excluded, the values of which I would assume vary wildly club by club. I'm not worked up at all, I'd actually thought you were, hence pointing that out in the first place, and then I was just engaged in the conversation, I can leave if you'd rather this thread be an echo chamber? I don't mind either way. Edited June 4, 2019 by DerbyFan Quote Link to comment Share on other sites More sharing options...
Coppello Posted June 4, 2019 Report Share Posted June 4, 2019 2 hours ago, DerbyFan said: It's interesting to get the input of someone with some knowledge of the subject that can back it up with examples, however I would imagine there will be vast differences in the various stadia and it's not a one size fits all valuation. As you mention, they were built 3 years apart and actually ours is based on Middlesbrough's, but I have no knowledge of the work that has been undertaken on theirs since it opened, but I do know, to some extent at least, the work that has happened on ours, so I wouldn't like to say that they should be anything like the same value now, and as you point out, property values in Middlesbrough are much less than in Derby, in fact I believe Derby is one of the places that prices have gone up rather a lot over the years, it helps that we are very central and it's pretty easy to get to anywhere from here I guess. I notice that our remaining tangible assets amount to around £14.5m, I can only guess that this is the book value of the training ground, I don't think the valuation of this on the books has changed recently either as the book value of them all including the ground from the previous year was £59.3m (and this had been going down at a similar rate for years from what I can see) so minus the £41m we're told was the book value of the stadium at the time of the sale and you're not too far off what's left, presuming the current figure is minus the years depreciation. I imagine the training ground will now in actuality be valued a lot higher as since Mel Morris bought the club a lot of work has happened on it, including the acquisition of and work to further land (which was maybe a 60-70% increase on the original size - guesstimate from looking at a map) to create more pitches to keep us up to Cat 1 standard, and there is planning permission in place for even more work to take place, which I believe also adds value. I know that Middlesbrough's training ground is also Cat 1, so I imagine a similar size and probably standard, this maybe gives an idea of the difference in value of the clubs assets. (As an aside, I assume the Hall and golf course aren't included in Middlesbrough's asset valuation - 'other properties' from that quote? I believe Gibson also owns these - surely the value would be even higher if they were.) As far as I can see the accounts don't mention who did the most recent stadium valuation for the sale, but the previous accounts do mention who did the last two, and having just Googled the most recent one, it seems that the two companies merged in 2011, so they were effectively done by one and the same. I don't know how it works in relation to the clubs accounts, I've no inside knowledge of them, but others have said that it's a perfectly acceptable method of accounting, just different to use it for a football club. As far as I'm aware having seen discussions on the subject on our own forum, once a player is valued down they cannot then be up valued again, so your Assombalonga example is not how it would actually be done on the books. There is a section in the accounts that says: Yes it is a loss on residual values, however it does seem from that they were at least fairly accurate. *I forgot to ask, from someone in the business would the market rate of a stadium, be the valuation with the depreciation removed, or the value before that is taken into account? Yeah but I'm sure that we can agree that the land value difference between Middlesbrough and Derby is not significant enough to create a £40-50m difference. As mentioned, i've spoken to various professional in and around the sports industry and they think it's a bit of a sham. This includes the surveyor who works for a large firm who have become a leader for valuing sports facilities. Whilst I'm sure that the property prices are rising in Derby, it's not exactly London or Monaco in terms of land value. I saw your explanation of the development works that have gone on at Pride Park over the last few years but I seriously doubt the capital expenditure will be anywhere near enough to have significant boost (>40%) to the stadium value. As a side note, we levelled a three stands at Ashton Gate a few years ago, added in boxes, top media facilities, a desso pitch, increased our capacity by £8,000, added in a coffee shop/sports bar/new club shop and landscaped the whole area and it still only cost £45m. This value would then have been depreciated if we to do a depreciated replacement cost valuation today. This is where myself, finance professionals in the sports industry and experienced surveyors are slightly confused and why the 'independent' valuation might not be all that it seems. I am sure you can appreciate this? Regarding your point about reversing impairments, you can only reverse an impairment up the amount of the initial impairment. So my calculations were correct when I said that you can reduce a players value from £20m, down to £2m and back up to £20m. There is a reason why no other football club (that I can think of anyway) accounts for player valuations in the same way. Your point about the accuracy of the accounting valuations on disposals compared to their market value is actually quite a simple one. If you sell a player on the 10th August 2019 for £20 million for example, you would have performed an revaluation exercise as at '30th June 2019'. Whilst this is the book date, this will actually be performed a lot later, ie around September/October time when the company is audited. This will allow you to accurately account for the players sold and you will adjust said players value to the £20m he was sold for. There is no better indication of a player's value than its actual selling price. This will limit the loss/gains on player trading because it will always been fairly accurate, you would've already recognise an impairment or valuation gain pre-disposal. The vast majority of losses would actually be made in the January transfer window as they would've been revalued several months earlier. The big issue will be for players who are not sold in the summer and therefore the accounting valuation is based on an internal assessment. These will fluctuate significantly season-on-season and will result in impairments and reversals all over the shop. As I mentioned, player registrations are not an asset which should be fair valued, it doesn't really follow accounting guidance, creates a lot of risk and makes an auditor shit their pants. Any reputable audit firm would have a real issue with it. Regarding your query about the stadium valuation, the depreciated replacement cost method is basically what it would be to build the stadium now and then depreciate to the current level of wear and tear. So it would be the value with the depreciation removed. Also, what do the two owners in dispute have to called Mel Morris and Steve Gibson. I keep thinking your owner is called Mel Gibson! 1 1 Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 (edited) 54 minutes ago, DerbyFan said: I was just very surprised that you'd openly stated that, I've been lurking on forums for long enough to have seen people getting themselves in hot water for casting aspersions on people before. What if the EFL's valuation matches that of the club? I don't know which club the other poster works for - you may know as a fellow fan of theirs(?) so I can't know which stadium it is they have worked on a valuation for, there may be reasons why it differs from ours? I wouldn't like to make assumptions on that as I don't know anything about how to value a stadium, the only thing I do assume is that the only people who know how they come to a valuation are the people that have all the facts of why they have done so. I don't know what the 2013 valuation was, it doesn't appear to say, and the book value didn't appear to change either. From the notes I took it to be an exercise that had to be undertaken, as it said something about FRS 11, but maybe they didn't have to actually change the book value? Again, I don't know, I'm guessing, like everyone else is. Maybe you're right and that was Gibson's aim, I guess only he knows, all I know is what the club (or Mel Morris) have communicated to us fans. I have no reason not to believe what they're saying, especially on things that can be proved or disproved quite easily. Until anyone comes out with anything different to what's already been said then that's all I've got I'm afraid. You're right, we do only have Mel Morris' word for it, but given that there were supposed to be representatives from every club in the league there, and none of them have come out and said anything different, then I believe it to be true, I don't get why anyone would think any different when it's something that every club could disprove if they so wished? What claims would you like me to provide sources on? I'll try my best to find them if you let me know. Re. The EFL approving pre-purchase, I have already provided the link to the Sky article referencing this in a previous post, yes it has obviously come from the club, so you will probably choose not believe it, but where else is that information going to come from? If it is not true then I would imagine the EFL would have come out by now and said this. It doesn't say on the article, but the information seemed to come from Rob Dorsett, he is the local Sky reporter, if the club want to put information out there, this is one of the ways they do it, one of the others being via the Derby Telegraph. Sky Article You can tell from the second quote that it is obviously the club who have told Sky this, otherwise why would they have seen the emails, they've not just been told about them by a third party, they've seen them, the wording is obviously deliberate. Derby Telegraph Article Derby Telegraph Article Are those quotes satisfactory? Yes, you have to trust the words of Mel Morris, there are plenty of people who can come out and claim something different if they would like to, but as they don't appear to have... You're clearly very suspicious minded, I'm just a fan of my club, any 'PR' you think I'm 'pumping out' is just me being a fan, you can believe or disbelieve that if you like, it makes no difference to me as I know who I am. I've been visiting your forum for some time as a lurker to see what your fanbase has to say, as I do with every club, yours is more active than most, so I lurked more often, it's an interesting way to pass the time. I'd noticed your repeated mention of the 'double and double again' of the value in this thread, it seemed this was really irking you as you kept mentioning it and having looked through the clubs accounts recently out of interest, even though I don't understand most of it, I saw this bit was wrong from the notes underneath and when I'd seen that you had mentioned it again I wanted to point it out, if only to put your mind at rest that that wasn't actually the case. You and others then replied to me, so I carried on replying, if I was wrong to do that then I apologise, I thought your forum might appreciate an alternative view, especially from a fan of one of the clubs that it seems are frustrating you the most re. FFP. Obviously I can only go on the information put out into the public domain, as that's all I'm aware of, like yourselves, but I thought I may be aware of things you are not as I obviously follow things at my club more closely than you would, and I watch the fans forums the club do and then subsequently put out on Rams TV, where things have been mentioned, directly, by Mel Morris and various people from the club. It's a subject I find interesting, as most people (like myself) have a pretty strong opinion on it, even if they don't (also like myself) seemingly actually understand the full ins and outs of it - no one but the clubs involved can actually understand the clubs positions with regard to FFP, as there are so many variables, so many things can be excluded, the values of which I would assume vary wildly club by club. I'm not worked up at all, I'd actually thought you were, hence pointing that out in the first place, and then I was just engaged in the conversation, I can leave if you'd rather this thread be an echo chamber? I'm not openly stating that I believe they are bent or similar- simply that if the EFL reported them to their bodies, they should welcome an investigation as they clearly have done nothing wrong. Just a bit of a believer in the saying "Nothing to hide, nothing to fear"- in the same way Man City claimed they welcome the investigation by UEFA then perhaps those should welcome a report to their professional bodies? I think it would be good for transparency anyway- who doesn't like transparency after all. That paragraph perhaps reads a bit flippant though- but there are sufficient questions I think for some sort of report but particularly if there are substantive valuation differences for example. If the EFL's valuation matches the club? Then we have to go with it. It sticks in the craw but we would have to accept it for what it is. A thorough investigation by top of the range accountants, auditors, corporate lawyers and land valuers should take place though and I dare say most Championship owners would agree. I dare say most owners are very rich at this level so would gladly fund it too if they pooled resources- they certainly easily could. The same would go for Birmingham and Sheffield Wednesday too incidentally if they have attempted this. Don't know- wouldn't be prudent for them to put that sort of thing on a public forum, PL in London IIRC? Though again can't remember entirely, definitely a London club- wouldn't presume to speak for them beyond that. On valuation- and I know this aspect isn't so relevant in building valuations, land let alone stadia- you mentioned house price inflation in Derby. House prices rising- well as it goes, Leicester- which is a good comparison- has higher house prices but a lower stadium valuation. Interesting, but perhaps not so relevant. FWIW, Zoopla- Average Property Price Derby- £210,436...Leicester £232,777. Now I know property valuation has little relation to that of stadia, but Walkers Stadium valued in the accounts at around £38m yet Pride Park goes for more than double!? Bit funny no- it isn't London, Monaco or New York- with respect. Hell it isn't even Bristol (£331,554)- yet AG a fair bit less as pointed out by @Coppello . Well that is interesting in itself- see when Villa Park was revalued in 2016, the amount lopped off it was put into the accounts and was down as the cost of impairment. Maybe it isn't obligatory with compulsory revaluations that take place over a given time period, but it is with ones by choice. Only Steve Gibson knows Steve Gibson's motivations. Playing the long game maybe, who knows. Or maybe Morris offered it in a mocking way- only Gibson will know his reasons but I dare say he believes in them. A fair bit doesn't stack up with it- not pointing the finger at Derby here (for once!), but I was under the impression that as well as Gibson, my club were pretty angry over the FFP issues, so too were Nottingham Forest and it goes without saying Leeds. Are they too playing a long game- maybe canvassing support and planning an ambush in the form of a vote at this summer's EFL conference? That would be great! I'll read these articles again now- thanks. Well so they did- EFL should have got in independent auditors and lawyers appointed by them before approving- look at Man City now facing a possible CL ban, to think old cases cannot be reopened is patently a view that is held on shaky ground. Haha suspicious minded? On some things perhaps...on this- yeah. I believe that there are clubs who have been very close to the rules- and actually FWIW I have always had Derby down as being just about in compliance before any such transaction- I have claimed it on this thread pretty often in recent months. Yeah though, I believe clubs may well have flouted the regs or seriously tested the spirit of them, while we and lots more have sold players and abided and it ain't right. It is still possible with a big youth expenditure in 2015-16, that the 3 years to 2017/18 might have had you in compliance, albeit narrowly incidentally! I think it is tight either way, but my main bugbear is that I think given you sold 7 players in that period- 4 or 5 first team and the remainder squad, that if you had breached then the EFL should have applied more mitigation i.e. removed a few from any potential points penalty if guilty due to said sales. Whereas Aston Villa I'd say should have the book thrown, Sheffield Wednesday no real mitigations either but a smaller breach so less punishment. Birmingham got punished and should be watching this with interest. Agreed- I from time to time will look up other forums, interesting to see perspective- Aston Villa the most odious of them all IMO at this level. Yeah fair enough- looks inflated though, £81.1m which while not doubled and doubled again. 50%,, double maybe- something like that. Yeah, input is good- that is the point of forums after all. They certainly can vary club by club and it is definitely an interesting subject- why else would I make this thread after all! Think it's interesting in itself and also interesting from a competitive advantage/disadvantage tbh. Wouldn't say I'm so worked up as such. Passionate about it yes, and if honest quite angry at the EFL- they're a disgrace. Echo chambers are no good though, the input has helped stimulate the thread- different perspective always positive I find. Edited June 4, 2019 by Mr Popodopolous 3 1 Quote Link to comment Share on other sites More sharing options...
CyderInACan Posted June 4, 2019 Report Share Posted June 4, 2019 Yet again this thread is absolutely required reading. Lots of interesting, healthy and intense - yet well mannered - debate. As it should be guys. Love it. 4 Quote Link to comment Share on other sites More sharing options...
Mr Popodopolous Posted June 4, 2019 Author Report Share Posted June 4, 2019 On a light side note, given it appears to be in the rules. Why don't Gibson and Lansdown do a ground swap- Lansdown purchases Riverside, Gibson does the same with AG and relevant guarantees about the future of the 2 stadia- with equivalent rent charged, given they get on so well! No rule against...no loophole forbidding- if you can't beat them etc! Quote Link to comment Share on other sites More sharing options...
DerbyFan Posted June 4, 2019 Report Share Posted June 4, 2019 11 minutes ago, Coppello said: Yeah but I'm sure that we can agree that the land value difference between Middlesbrough and Derby is not significant enough to create a £40-50m difference. As mentioned, i've spoken to various professional in and around the sports industry and they think it's a bit of a sham. This includes the surveyor who works for a large firm who have become a leader for valuing sports facilities. Whilst I'm sure that the property prices are rising in Derby, it's not exactly London or Monaco in terms of land value. I saw your explanation of the development works that have gone on at Pride Park over the last few years but I seriously doubt the capital expenditure will be anywhere near enough to have significant boost (>40%) to the stadium value. As a side note, we levelled a three stands at Ashton Gate a few years ago, added in boxes, top media facilities, a desso pitch, increased our capacity by £8,000, added in a coffee shop/sports bar/new club shop and landscaped the whole area and it still only cost £45m. This value would then have been depreciated if we to do a depreciated replacement cost valuation today. This is where myself, finance professionals in the sports industry and experienced surveyors are slightly confused and why the 'independent' valuation might not be all that it seems. I am sure you can appreciate this? Regarding your point about reversing impairments, you can only reverse an impairment up the amount of the initial impairment. So my calculations were correct when I said that you can reduce a players value from £20m, down to £2m and back up to £20m. There is a reason why no other football club (that I can think of anyway) accounts for player valuations in the same way. Your point about the accuracy of the accounting valuations on disposals compared to their market value is actually quite a simple one. If you sell a player on the 10th August 2019 for £20 million for example, you would have performed an revaluation exercise as at '30th June 2019'. Whilst this is the book date, this will actually be performed a lot later, ie around September/October time when the company is audited. This will allow you to accurately account for the players sold and you will adjust said players value to the £20m he was sold for. There is no better indication of a player's value than its actual selling price. This will limit the loss/gains on player trading because it will always been fairly accurate, you would've already recognise an impairment or valuation gain pre-disposal. The vast majority of losses would actually be made in the January transfer window as they would've been revalued several months earlier. The big issue will be for players who are not sold in the summer and therefore the accounting valuation is based on an internal assessment. These will fluctuate significantly season-on-season and will result in impairments and reversals all over the shop. As I mentioned, player registrations are not an asset which should be fair valued, it doesn't really follow accounting guidance, creates a lot of risk and makes an auditor shit their pants. Any reputable audit firm would have a real issue with it. Regarding your query about the stadium valuation, the depreciated replacement cost method is basically what it would be to build the stadium now and then depreciate to the current level of wear and tear. So it would be the value with the depreciation removed. Yes I agree it shouldn't make that much of a difference on it's own, I was just thinking of reasons by there might be a difference, even if not that large a one. I don't know why it was valued so high, all I know is that it was according to everything that we've been told. Only the valuers can know the reasons why they gave it the value they did. I think the reason I find it hard to believe that £80m is excessive is simply because you hear for example that it's costing over £1bn for Spurs' stadium and you think, well ok, I can easily see how it would cost less than a tenth of that to replace ours. Even if that's not actually the case, it's how my mind seems to compute it! Those figures seem crazy for Spurs, I get that it's good but blimey, it's very, very expensive isn't it! I do think you're vastly over complicating the way we deal with player amortisation I can't remember where it originally came from, but if you read on our forum, everyone is of the same belief (so it must have been said somewhere in the past, I just don't know when or who said it, maybe at a fans forum(?) I'm not sure on that one) that once we amortise a player down, we cannot (or maybe it was do not rather than cannot?) then revalue them upwards in future accounts. It's been said that we cannot (do not?) put a value higher on a player than they were in the last accounts, and we cannot (do not?) put a value on players that had no value in the first place, ie. Free transfers or youth players, hence when we sell one of them it is pure profit for the books (unless they are a youth player that was actually purchased at some point, rather than fully homegrown, then there might be sell on fees). It could be wrong, but that is how we all understand it to be, no one talks about putting a value back up again from year to year, only carrying a higher value towards the end of the contracts than straight line amortisation would. ie. a player bought for £4m on a 4 year contract would normally be £1m each year, we might make it £0.5m, £0.5m, £1m and then £2m over the 4 years, so we take a larger hit in the last year, unless we extend their contract, in which case say we gave them a 1 year contract extension at the end of year 3 then we amortise the remaining £2m over years 4 and 5 instead of taking the full £2m in year 4. It may not be quite as simple as that, but I'm not sure if it's quite as complicated as you make it. Unless we are all under the wrong impression of how we deal with it, which could be a possibility, I just wish I could remember why it is that we are of this belief. 39 minutes ago, Coppello said: Also, what do the two owners in dispute have to called Mel Morris and Steve Gibson. I keep thinking your owner is called Mel Gibson! Quote Link to comment Share on other sites More sharing options...
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