PSR (FFP) & Creative use of Academy Players

With clubs having to submit their accounts by 30 June (the end of the PL financial year) so effectively its an accounting deadline & only just a few days away.

As it stands when a club sells a player any profit is recorded in its 'entirety' in that year's accounts with homegrown academy players generating 'pure' profit'.

In contrast, the amount paid by the buying club is spread out - using an accounting practice called 'amortisation' over the length of the contract.

Then we have the distortions that PSR player 'book-value' represents. Profit & loss on a player transfer is calculated from the difference between the transfer fee & the book value of a player.

Book value generally 'depreciates consistently' across the length of a player’s contract, up to a maximum now of 5 years.
So if a club buys a player for £100m that club will show a loss of £20m per year for the next 5 years.

But distortions of said book values comes when players are sold as Academy players have a book value of zero ££££'s.
So if Chelsea therefore sold Connor Gallagher for £50 million it would be recorded as £50 million pure profit towards PSR !

So, if two clubs agree to sell players to each other, particulary Academy players, then it can provide a significant financial boost, obviously.

So, on the other side of the coin questions have been raised over whether all this highlights the risk that clubs will now use their Academies to only produce players that can then simply be 'traded' to help meet PSR - rather than developing them for their first team squad, more so for smaller clubs who don't have the financial clout of the big guns.

I know the Players Union are saying that this is the latest example of players being used partly as commercial assets rather than employees. The PFA is understood to share 'concern' that the current regulations could 'encourage' even more clubs to find furter creative ways to stay within the rules which will inevitably impact players & the game it's self.

Obviously PSR is highly contentious creating many opinions with a growing list of clubs falling foul of it. 🤐
The sense is that recent Academy deals are the first wave of 'gaming' the system which could result in clubs becoming even more divisive in ways that are already quite creative, wrongly or rightly. 😮

The Times reported today that the PL is keeping a close eye on player transfers amid concerns that some deals are being used to exploit loopholes in the Profit and Sustainability Rules (PSR).
Yeah, i bet they are !

Quote:

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Originally Posted by Monaco_Totty

With clubs having to submit their accounts by 30 June (the end of the PL financial year) so effectively its an accounting deadline & only just a few days away.

As it stands when a club sells a player any profit is recorded in its 'entirety' in that year's accounts with homegrown academy players generating 'pure' profit'.

In contrast, the amount paid by the buying club is spread out - using an accounting practice called 'amortisation' over the length of the contract.

Then we have the distortions that PSR player 'book-value' represents. Profit & loss on a player transfer is calculated from the difference between the transfer fee & the book value of a player.

Book value generally 'depreciates consistently' across the length of a player’s contract, up to a maximum now of 5 years.
So if a club buys a player for £100m that club will show a loss of £20m per year for the next 5 years.

But distortions of said book values comes when players are sold as Academy players have a book value of zero ££££'s.
So if Chelsea therefore sold Connor Gallagher for £50 million it would be recorded as £50 million pure profit towards PSR !

So, if two clubs agree to sell players to each other, particulary Academy players, then it can provide a significant financial boost, obviously.

So, on the other side of the coin questions have been raised over whether all this highlights the risk that clubs will now use their Academies to only produce players that can then simply be 'traded' to help meet PSR - rather than developing them for their first team squad, more so for smaller clubs who don't have the financial clout of the big guns.

I know the Players Union are saying that this is the latest example of players being used partly as commercial assets rather than employees. The PFA is understood to share 'concern' that the current regulations could 'encourage' even more clubs to find furter creative ways to stay within the rules which will inevitably impact players & the game it's self.

Obviously PSR is highly contentious creating many opinions with a growing list of clubs falling foul of it. ��
The sense is that recent Academy deals are the first wave of 'gaming' the system which could result in clubs becoming even more divisive in ways that are already quite creative, wrongly or rightly. ��

The Times reported today that the PL is keeping a close eye on player transfers amid concerns that some deals are being used to exploit loopholes in the Profit and Sustainability Rules (PSR).
Yeah, i bet they are !

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Financial engineering has been undertaken in business (which is clearly what football at professional levels now is) for decades. As an example of the changing landscape, "computers" used to be capitalised, their value written off over 3 - 5 years (application of the amortising you refer to) and set against profit so as to reduce tax burden. Now, such items are deemed (in the main) "consumables" their value written off in the year they were purchased and the P & L reflects that.

Football is (or should be) no different in reacting (and acting) in concert with what the regulations/laws of the land stipulate, and as I've said in other threads, expecting any kind of philanthropy is (in the vast majority of cases) cloud cuckoo land. It's a long time since players were used as anything OTHER than "commercial assets", whether that be on the field of play or the wheeler dealing on the transfer market.

As to all this and how it affects LUFC? So far, the evidence is that we don't have a clue (Lewis Bate and Jamie Shackleton haven't exactly "benefitted" the club after considerable efforts involved in their development). I suspect more will follow, with equally mediocre return on investment.

Fair points WTF.👍

But the concept of 'human capital' recognizes that not all labour is equal. But employers can improve the quality of that capital by investing in employees via education, experience & abilities of said employees.
So not disputing 'all of this with regard to Academies' which has greater economic value for employers but how do we or any club outside the top 6 establish a football dynasty then nowadays ?

For decades, the orthodox, long-range formula was to establish ''excellence within the youth team'' & recruit complementary talent & then facilitate those with club values 'within their veins' to set standards & help to run the dressing room for a Coach or Manager.

Chelsea brought the idea into a new dimension for wider public consciousness by splashing big bucks on global youth talent but obviously they're not reinventing the wheel biz wise but added a twist.
But where Chelsea differed originally was in handing out 8 year deals.

Those long deals where a risk but what if such a signing fails to produce ?
What if you are stuck with an underperforming player for 8 years ?
Of course Chelsea will feel that putting their new young signings on relatively modest wages would guard against them being lumbered with flops so they've also signed a few players who they hope will improve too.

The immediate problem for Chelsea now, however, is that Uefa reacted last summer, 2023, by shutting the loophole. European football’s governing body decided that from last summer onwards clubs will still be able to offer long deals but will be limited to spreading out the cost of fees to a 5 year period leaving Chelsea needing a new ploy to indulge into again.

Football Academy set-up's have changed into today’s globalised industry, so now it's all geopolitics & venture capital, so the chances of a Beckham or going further back a Lorimer, to have gone on to the first team are zero as they would have been sold well before they reached their peak.

Are our youth teams now a revenue stream rather than the fundament of the former "glory game" thus becoming big business rather than the sporting community endeavour i'm now concluding.

So for balance how do you assess our Academy now & how do you measure & value football academies across the board too. 🤔

Just saying.

Quote:

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Originally Posted by Monaco_Totty

Fair points WTF.👍

But the concept of 'human capital' recognizes that not all labour is equal. But employers can improve the quality of that capital by investing in employees via education, experience & abilities of said employees.
So not disputing 'all of this with regard to Academies' which has greater economic value for employers but how do we or any club outside the top 6 establish a football dynasty then nowadays ?

For decades, the orthodox, long-range formula was to establish ''excellence within the youth team'' & recruit complementary talent & then facilitate those with club values 'within their veins' to set standards & help to run the dressing room for a Coach or Manager.

Chelsea brought the idea into a new dimension for wider public consciousness by splashing big bucks on global youth talent but obviously they're not reinventing the wheel biz wise but added a twist.
But where Chelsea differed originally was in handing out 8 year deals.

Those long deals where a risk but what if such a signing fails to produce ?
What if you are stuck with an underperforming player for 8 years ?
Of course Chelsea will feel that putting their new young signings on relatively modest wages would guard against them being lumbered with flops so they've also signed a few players who they hope will improve too.

The immediate problem for Chelsea now, however, is that Uefa reacted last summer, 2023, by shutting the loophole. European football’s governing body decided that from last summer onwards clubs will still be able to offer long deals but will be limited to spreading out the cost of fees to a 5 year period leaving Chelsea needing a new ploy to indulge into again.

Football Academy set-up's have changed into today’s globalised industry, so now it's all geopolitics & venture capital, so the chances of a Beckham or going further back a Lorimer, to have gone on to the first team are zero as they would have been sold well before they reached their peak.

Are our youth teams now a revenue stream rather than the fundament of the former "glory game" thus becoming big business rather than the sporting community endeavour i'm now concluding.

So for balance how do you assess our Academy now & how do you measure & value football academies across the board too. 🤔

Just saying.

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All but your last paragraph are not much more than wishful thinking. Whether it relates to billionaire owners or sovereign states, those who own the most prestigious clubs (Citeh, PSG etc), and many in somewhat less hallowed echelons, regard players as nothing more and nothing less than corporate assets, pretending or asserting otherwise is delusional.

And to the last paragraph.......

The LUFC academy specifically has shown itself capable of developing first class young talent, however the club has demonstrated a long-standing inability, common across almost all clubs in the top three tiers of the English professional game, to provide the opportunity of those your players to blossom into the true talented professionals they could be. It has fallen to other clubs, perhaps with a more enlightened view, to make that possible.

"Across the board".......club's with the financial wherewithall hoover up junior talent in order to prevent them being acquired by "lesser" clubs, they consistently stifle opportunity just as LUFC do internally, and we end up with the various national leagues delivering next to nothing for young players, whether from the home nations or brought in from abroad as talented youngsters.

Show me what England can do to demonstrate that the national team can make what they do and how they perform that makes any of what I have said above as being even faintly inaccurate.