Where has the money gone

[STAR Liaison]

The article that appeared in the Whiff is now available for download on http://www.star-reading.org

[Royal Rother]

Good stuff.

Just one thing - re Intangible Asssets - i.e. the value of the players. The article suggests that these are difficult to value because who know how much a player is worth at any given time which further suggests valuation might be open to discussion. This could lead cynics to believe it is a way in which the numbers could be fudged. I believe that would be an incorrect assumption.

It is my understanding that the value of the players is set by how much they cost the club (i.e. signing on fees, not inclusive of ongoing wages or any other contractual commitment) and the length of their contract.

e.g. if a player cost £1m as a transfer fee and signed a 4 year contract, his value on the Balance Sheet (i.e. in Intangible Fixed Assets) would be reduced by £250k each year.

What happens if said player then signs an extended contract mid way through the 4 year term, I'm not entirely sure, but I would assume that whatever his remaining value is in the Intangible Assets and the time the new contract was signed would then be written off over the new term.

I do not think a revaluation can be made of players based on perceived market value. i.e although at the end of last year we had Gylfi with a substantial market value but minimal (if any) value in Intangible Assets, that would not have been reflected on the Balance Sheet. The fact that that "discrepancy" between reality and Balance Sheet value existed might well have been disclosed in the notes to the accounts, as might the fact that he was subsequently sold - events occurring after the date of the Balance Sheet that might effect the judgement of the person reading the snapshot accounts do need to be disclosed.

[weybridgewanderer]

Leeds got into so much trouble partly because, when assessing the value of the club, they valued players at significantly more than people were prepared to pay.

Teams typically do not include transfer fees in one year that they bought the player, but write them off over the length of their contract.

for example say we signed a new star striker on a 4 year contract for £1M. This is unlikely to be classed as a £1M expenditure this year. Rather this would be £250K each year over the 4 years of their contract.

[Royal Rother]

Ermm, didn't I just say that...?

[weybridgewanderer]

you did say costs were written off over the length of the contract yes but that would not be an intangable asset.
However that would be a cost on the P&L and is not intangable.

the valuation on the intangable assets for the same player may be significantly different giving the club a higher or lower perceived value

shane long's value as an intangable asset now might be on the books for far more than we paid for him.

matt mills valuation as an intangable asset? higher or lower than the £2M we paid

[Royal Rother]

Hmm. Not only have you totally misread / misunderstood my post (I made no mention of the P&L a/c in my explanation of what an Intangible Asset is) you also have your main point totally wrong. Players are not revalued on the Balance Sheet as their perceived value increases / decreases.

Shane Long's value on the Balance Sheet will, almost certainly, be Nil, and it will remain that way because whatever signing on fee there may have been initially will have been written off over the term of his initial contract.

Doyle's valuation on our Balance Sheet would never have been anymore than £78k...

The intangible asset is the remaining value on the Balance Sheet - the "amortisation" (25% of £1m in the e.g. we gave) is the write off to the P&L a/c.

[Barry the bird boggler]

So from that it would appear Reading are about as well run as it's possible for a club to be.

If only all clubs would run themselves along the same lines then much of the problems we see would go away.

Just waiting for hell to freeze over so we'll all have a rough idea when clubs will be run on the same lines.