03-03-2019, 03:09 PM
Per my understanding of FFP, Carvalho’s transfee fee of £13.2mio gets amortised over the 5 year contract. So for the end of this season’s accounts (as of May?) his asset value will go down to £10.56mio, ie we’ll book a loss of £2.64 mio this financial year. Next season it will be a loss of a further £2.64mio and so on.
So if we sell in May we need to recoup £10.56mio just to not incur a further loss this year.
If we sell him in June/July/August, we know for the financial year of that (next) season we’re gonna have to write his value down by a further £2.64 mio on the balance sheet, so a sale price of £7.92mio would be necessary not to take a further loss. Even if we got that price, for example, we’d get cash in the hand, but from an accounting / FFP point of view it wouldn’t help relative to keeping him, other than meaning we wouldn’t take the £2.64mio wrote-down in subsequent years.
But how low will his value go...? I assume liquidity isn’t the binding constraint on us, so the accounting methodology for FFP may add another argument for being patient with him.
So if we sell in May we need to recoup £10.56mio just to not incur a further loss this year.
If we sell him in June/July/August, we know for the financial year of that (next) season we’re gonna have to write his value down by a further £2.64 mio on the balance sheet, so a sale price of £7.92mio would be necessary not to take a further loss. Even if we got that price, for example, we’d get cash in the hand, but from an accounting / FFP point of view it wouldn’t help relative to keeping him, other than meaning we wouldn’t take the £2.64mio wrote-down in subsequent years.
But how low will his value go...? I assume liquidity isn’t the binding constraint on us, so the accounting methodology for FFP may add another argument for being patient with him.