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Soaring transfer fees hit football final scores

With more than £1bn spent on football players in England in the August transfer window alone, William Hughes looks at the challenges facing accountants as they try to avoid a financial own goal.


October 2018

Last year the footballing world saw the first ever £100m plus transfer fee and 2018 has seen this feat reached twice. In August the summer transfer window closed with £1.27bn spent on players in England alone, the third summer in a row that this has passed the £1bn mark.

The growth in transfer fees is driven by investors injecting cash into clubs to remedy mediocre performance. This is because the success of the team so closely matches the performance of the business and can save clubs from going into administration.

Unique transactions such as transfer window bids pose questions for accountants on how to accurately represent these positions, especially as these businesses are under such scrutiny from the public.

Upon purchasing a player, clubs will make the decision to capitalise their player’s contract including:

  • The transfer fees
  • Agents fees 
  • Levies to the league and governing bodies
  • Bonus fees for appearances, goals, qualifications etc. may also be capitalised. 

However, clubs must decide what they believe is prudent to capitalise given the players contract and expected role in the team.

These capitalised player contracts can then cause more complex questions when it comes to impairment, revaluations and amortisation:

  • Clubs will amortise players over the life of their contracts, leading to large expenses in the profit and loss account 
  • Contracts are reviewed annually for impairment, but this can be a very judgmental area. What if a player gets injured? Or if a player returns to form?
  • Clubs will often not revalue players upwards and this can mean that some home-grown stars can be valued at next to nothing in the books. This can lead to large gains when these players move on. 

Such is the magnitude of player trading, many major football clubs split out their profit and loss account into ‘operations excluding players’ and ‘player trading’ columns. This allows single transfers to not distort the underlying performance of the business.

As each contract is wildly different and can include any number of clauses, the accounting for these can involve a great deal of judgment. With fees increasing and contracts becoming more complex, it appears scrutiny of this treatment will only develop for accountants over time.

For more information on the industry please see the ICAEW industry guide

William Hughes is chair of CASSL, London’s student accountants society

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