Timing of sales and signings

[The Bard]

This is more a question to the likes of @Davefevs  , @Mr Popodopolous and the other FFP nerds from a trainee FFP nerd.

Best way to ask it is by presenting an imaginary scenario:-

• Massengo is sold to Southampton in early June for £10 million on a 4 year deal to with various add ons etc. 
• Brownhill is sold to VIlla for £28 million in August.  A profit of £19 million.  We had a 20% sell on fee.

How would that effect our FFP for 2021/22 and 2022/23?

How is the fee for Massengo accounted for?  Is it divided in the same way a transfer fee is dealt with as a cost over the length of the deal or is it only included based on when the monies are received?  

Similarly with the sell on for Brownhill (£3.8 Million) is this accounted for as received?

 

[Davefevs]

1 hour ago, The Bard said:

This is more a question to the likes of @Davefevs  , @Mr Popodopolous and the other FFP nerds from a trainee FFP nerd.

Best way to ask it is by presenting an imaginary scenario:-

• Massengo is sold to Southampton in early June for £10 million on a 4 year deal to with various add ons etc. 
• Brownhill is sold to VIlla for £28 million in August.  A profit of £19 million.  We had a 20% sell on fee.

How would that effect our FFP for 2021/22 and 2022/23?

How is the fee for Massengo accounted for?  Is it divided in the same way a transfer fee is dealt with as a cost over the length of the deal or is it only included based on when the monies are received?  

Similarly with the sell on for Brownhill (£3.8 Million) is this accounted for as received?

 

Nice and simple Q!!!

The key thing is that our accounts run to 31st May, so both bullets would actually be in the accounts that run from 1st June 22 to 31st May 23.

Now I suspect you really wanted to ask what would happen if Massengo fell into this year’s accounts so here goes!  What you are hypothesising is exactly what happened with Kelly, when he was sold to Bournemouth in the month of May.

Massengo (sold 31st May)

Lets say we bought him for £3m and Monaco on a 4 year deal and have a 20% sell-on.  We sell him for £10m to Palace with a 20% sell-on (forget other odd-ons for simplicity).  The 4 year contract he signs is irrelevant to us, that’s for Palace to sort out in their books.  Palace also pay £5m immediately and £5m summer 23.

So the first thing we work out is how much is due to Monaco:

£10m minus £3m equals £7m @ 20% therefore we owe Monaco £1.4m

Then we need to work out transfer profit for FFP / Accounts:

£10m minus current book value is 1/4 of his initial fee, so £0.75m.  Therefore “pure” transfer profit is £9.25m in the accounts.

Ultimately we have made £7.85m in the accounts / FFP (£9.25m minus £1.4m)

What I’m trying to find out is where in the accounts that £1.4m is put….but we are £7.85m better off on the deal in this season’s accounts.

(there will be a bit of variation because actually if he’s sold in May, he’s not quite into his final year he’s 35/48ths through, but I can’t get into difficult fractions!!!)

That £7.85m according to my figures would bring us back inside FFP, and give us plenty of wiggle room.

Brownhill

I have him at £7m sell price, so I’m going with a £21m profit @ 20%, therefore quite simply we get £4.2m into our transfer profit number in next season’s accounts.  That might be paid equally over the contract length at Villa, but we account for it on day 1, and then hold it as a Debtor (money owed to us).

 

As a simple principle, staged payments make no difference to FFP.  Often staged payments actually push the price up, e.g. £9m up-front, or £10m made up of 4 x £2.5m payments….e.g. you are charging them credit!

 

Hope that all makes sense.

 

[Davefevs]

1 hour ago, Davefevs said:

What I’m trying to find out is where in the accounts that £1.4m is put….but we are £7.85m better off on the deal in this season’s accounts.

I asked Kieran Maguire, he said there is no set way, can reduce transfer profit or be added to amortisation.