The Unreliable Rumours Discussion Thread (Part 1)

[Mascot]

@AnfieldRdDreamer

I know it’s not cash I’ve said so in several posts. It is however an expense, THE expense alongside wages that is the only way squad investment shows. It is not just for tax it is how a club determines if they are profitable (something that matters a lot to FSG) and is used to determine compliance for FFP (if it does continue). Under the current climate anyone who thinks FSG will allow the amortisation figure to increase isn’t paying enough attention. If we want to recruit then room has got to be generated within that expense to accommodate any new player amortisation being added onto the books.

Cash is a whole other matter but a lot aren’t realising that we could be in a good way with that. Most of our Cash liabilities will now be resolved as we won the CL and PL back to back almost certainly triggering nearly every outstanding clause and not likely to have triggered much more this season. The last two heavy seasons of recruitment were 4 and 3 financial set of accounts ago and totalled over £300m combined. The last set of books released would have included Cash commitments of somewhere over £100m from those two seasons and the ones we are waiting on will probably include roughly around £50m as the last set of annual payments from the second of those two years. If the owners allow us to keep our cash commitments the same as they were for last year that could be the equivalent of £150-200 depending on if we can agree payment plans of 3 years (like we used to do) or 4 years (like we apparently did last summer). That’s before any incoming cash from player sales is taken into account.

[Kopstar]

How is amortisation an expense? It’s simply a book value calculation. None of our income each year goes towards servicing amortisation. It’s simply a way of accounting for an asset that depreciates (with the player being valueless at the end of their contract). The initial value is what is paid for the player and this value is taken to depreciate in a linear way each year until the player’s contract expires (whether the original term or any extended term). It is this player’s value that impacts upon the profit and loss accounts if the player is sold during the term of his contract. So a player bought for 60 million on a 5 year contract, his value will then be 36 million after two years. If he is sold at that point for 70 million this is a plus of 34 million in the profit and loss account.

Is this a confusion between amortisation and paying a transfer fee by instalments? That £60m transfer fee can be spread out across the term of the player’s contract but the actual expense incurred will be whatever has been agreed by way of instalments falling in the years in which they are paid.

[AnfieldRdDreamer]

@Kopstar

How is amortisation an expense? It’s simply a book value calculation. None of our income each year goes towards servicing amortisation. It’s simply a way of accounting for an asset that depreciates (with the player being valueless at the end of their contract). The initial value is what is paid for the player and this value is taken to depreciate in a linear way each year until the player’s contract expires (whether the original term or any extended term). It is this player’s value that impacts upon the profit and loss accounts if the player is sold during the term of his contract. So a player bought for 60 million on a 5 year contract, his value will then be 36 million after two years. If he is sold at that point for 70 million this is a plus of 34 million in the profit and loss account.

Is this a confusion between amortisation and paying a transfer fee by instalments? That £60m transfer fee can be spread out across the term of the player’s contract but the actual expense incurred will be whatever has been agreed by way of instalments falling in the years in which they are paid.

I’ve tried to explain it several times but as nobody seems to respect me enough and everyone respects Swiss Ramble maybe they’ll listen to his explanation of how it works;

https://twitter.com/SwissRamble/status/1302855346038411270?s=09

https://twitter.com/SwissRamble/status/1302855352329875457?s=09

https://twitter.com/SwissRamble/status/1302855360416542720?s=09

https://twitter.com/SwissRamble/status/1302855367928557568?s=09

So the difference between how FSG and FFP determine a profit or Loss compared to cashflow which is when the payments actually leave the club;

https://twitter.com/SwissRamble/status/1302855330351677440?s=09

https://twitter.com/SwissRamble/status/1302855340267114497?s=09

Feel free to read the whole twitter thread if you like. But amortisation is an expense. It has a huge effect on determining if the club is running at a loss or a profit. FSG will almost certainly not let that expense increase. However there are plenty of opportunities to drive the expense down before adding new players onto it.

[Kopstar]

But amortisation is only an expense in that it is set against profits for tax purposes, no? Writing down the value of a player by £12 million (say) is a paper exercise to reduce the tax liability, it doesn’t actually leave you with £12 million less in the bank.

I’ve only glanced at this thread but I understood that you were suggesting that lowering the amount that is amortised each year would leave us with greater reserves of cash to finance new purchases. Is that what you’re saying?

[AnfieldRdDreamer]

@Kopstar

But amortisation is only an expense in that it is set against profits for tax purposes, no? Writing down the value of a player by £12 million (say) is a paper exercise to reduce the tax liability, it doesn’t actually leave you with £12 million less in the bank.

I’ve only glanced at this thread but I understood that you were suggesting that lowering the amount that is amortised each year would leave us with greater reserves of cash to finance new purchases. Is that what you’re saying?

No it’s not only for tax purposes it has a huge impact on whether the club is running at a loss or profit. Which matters for FSG and FFP. Its how investment into the squad shows on the books, over the life of the contract equally not when the actual cash is paid.

No I’m not saying it means we have cash to use. I’m saying amortisation is an expense that probably won’t be allowed to increase, certainly not a lot. We could have loads of cash selling players with no or very little amortisation value on the books such as Minamino, Matip, Wilson, Origi etc. an it won’t mean we cam invest in the squad. We need to free up room in the amortisation expenses too.

[Draexnael]

I’m pretty sure a few weeks ago ARD started his new crusade with the salient point of he was no expert… and here we are…

[Iftikhar]

This thread . I come for some transfer snippets, all I get is Accounting 101.

[Lowton_Red]

An excellent post @The_Hermit. Clear, concise and an accurate description of the purpose and application of amortisation.

May I be the first to welcome you to the ranks of those of us who have tried, and failed to explain how amortisation actually works to @AnfieldRdDreamer.

[AnfieldRdDreamer]

It’s funny. I’m getting mocked and the piss taken out of me on here but Swiss Ramble is widely recognised as the one of the best independent experts on club finances but explains how amortisation of players works in the exact same way I do.

[rab]

Unless we’re signing some accountants this summer can I suggest this move to an Unreliable Accountancy Rumours thread so those of us who don’t care about bookkeeping can get back to chatting about players we may or may not be amortizing over the next few years.

For the love of God when did we get to this being part of talking about the team you support. Beyond tedious.

[ILLOK]

If anyone fancies a new and interesting discussion instead of this accountancy business, over the last few days I’ve seen us linked with a lad in Spain called Nabil Fekir.

Anyone seen him play?

[Draexnael]

Well that’s a knee jerk reaction to the bad accountancy malarkey tbh.

[KY_TNRed]

No. It is not the same exact way you explain it.

Swiss ramble explains it correctly, you explain it like you’re about 8 pints in and with a couple years of FM experience

[The_Hermit]

Let me ask it this way: if LFC shows a net loss of 10M but has an amortization expense of $20M, is the club profitable? Of course it is…to the tune of 10M. By its very nature is a non-cash expense and has nothing to do with profitability. If that expense wasn’t there, the club would show a 10M net income in this example. Either way, the club is profitable by 10M. How much is amortization doesn’t matter.

[RedOverTheWater]

@AnfieldRdDreamer

It’s funny. I’m getting mocked and the piss taken out of me on here but Swiss Ramble is widely recognised as the one of the best independent experts on club finances but explains how amortisation of players works in the exact same way I do.

I just want to offer up the viewpoint that you are a well respected poster and you have good views in all things Liverpool to bring to the pot. Don’t despair because you are getting slapped down a bit on the one issue, accounting.

Peace.

[The_Hermit]

Agreed. I actually have a lot of respect for @AnfieldRdDreamer. But I can disagree with him and that’s ok.

[legalalien]

No, not just you. Take the money and run. I think one of Keira and Oxlade-Chamberlain will be sold and IMO we should keep the one that has match winning potential. That isn’t Keira.

I see there’s a rumour Inthe BBC page that we have “reignited” our interest in Fekir. Is he worth going for? Possibly a Minamino replacement?

[gasband]

@Hope.in.your.heart

fighting spirit

He does have that, in more ways than one.

[Sweeting]

@legalalien

No, not just you. Take the money and run. I think one of Keira and Oxlade-Chamberlain will be sold and IMO we should keep the one that has match winning potential. That isn’t Keira.

I see there’s a rumour Inthe BBC page that we have “reignited” our interest in Fekir. Is he worth going for? Possibly a Minamino replacement?

Oxlade-Chamberlain is dogshit now to be honest, those injuries have robbed him of any kind of athleticism. Keita is a significantly better player and has been a consistent goal threat from midfield when he is on the pitch.

[cynicaloldgit]

Enough of this accounting bollocks; here’s an actual transfer rumour…

From today’s BBC gossip column:

Liverpool are considered the favourites to land PSV Eindhoven forward Donyell Malen, despite interest in the 22-year-old Dutchman from Italian giants Juventus and AC Milan. (Gazzetta Dello Sport via Goal)

Over to you, @Dutch …