RFC finances - The Facts

[Thaumagurist*]

I can't remember who we brought in and who we sold up to June 2008 tbf. I just seem to remember that our transfer dealings have always seemed to bring in more money than we've paid out.

I don't think we sold Kitson, Shorey and Sonko before June 2008.

[STAR Liaison]

Having talked about this with someone I have realised that it may not be obvious to everyone that the purchase of fixed assets has to paid for out of taxed income - it does not reduce the profit.

Also as JM holds so many shares he could have long ago taken this out of the public domain by purchasing the handful he doesn't own, making the club a private company and then STAR and others would not have access to any more than the very basic figures.

When we asked questions about finance at the start of last season we were told that the club was going to keep everything in place as if we were a premiership club and so not even the parachute payments were enough to make a profit last season, and the bank will not allow the club to have the overdraft of £6 mill it had in the figures posted by strap so it does not even have to be about profit but the basic cash flow and enforced prudent accounting.

I would hope that after the next managment meeting we will be able to give out more information about the season to June 2009, but from what I have gleaned it is more like the last season in the Championship than either of the Premiership years.

[Yellowcoat]

Despite all the snide comments from RL and others there is no evidence that SJM has yet taken back any of his loans to the club (and probably not actually yet drawn as cash any interest on them either). Judging from comments from the Manager it looks as though efforts have been made to clear the bank overdraft which may have been requested in the current financial climate. If you consider that the club only made small profits in both the Premier League seasons it is clear that the football club alone is losing money every other year (so ignore the nonsense about transfer fees because I suspect they are amortised over the length of contracts). The reason RFC have diversified into the hotel etc. is to try and achieve an additional revenue stream because of the losses in football. I agree the next set of accounts will be interesting and should further help to destroy the myth that there are hundreds of millions of pounds available but not being used (or even taken out). The costs of running the club on a day to day basis are much greater than most people realise.

[gazzer, loyal royal]

apparently at the end of the year we got relegated, if the bank had called in our overdraft, the loan to SJM would have been even bigger as we had no money to pay it

[Yellowcoat]

Good point and yet some think we have millions swilling around!

[Hoop Blah]

I can't remember who we brought in and who we sold up to June 2008 tbf. I just seem to remember that our transfer dealings have always seemed to bring in more money than we've paid out.

http://www.soccerbase.com/transfers_by_team.sd?teamid=2125

The internet is a wonderful thing...

[bigmike]

I can't remember who we brought in and who we sold up to June 2008 tbf. I just seem to remember that our transfer dealings have always seemed to bring in more money than we've paid out.

http://www.soccerbase.com/transfers_by_team.sd?teamid=2125

The internet is a wonderful thing...

only issue with that is for the undisclosed figures it assumes nothing came in

[Royal Rother]

Having talked about this with someone I have realised that it may not be obvious to everyone that the purchase of fixed assets has to paid for out of taxed income - it does not reduce the profit.

That's not strictly correct.

Lump sum payments made for player registrations (i.e. transfer fees) are treated as an Intangible Fixed Asset on the Balance Sheet and amortised (written off as a cost in the Profit & Loss a/c) of the football club over the period of the initial contract in accordance with FRS10. (Financial Reporting Standards)

Tax allowances are given for the exact amounts of the amortisation.

So, if a player is signed for £6m (Ha!) on a 3 year contract, the cost of that transfer fee will be written off as a cost in the Profit and Loss account of the club in equal instalments of £2m each year. And those amounts will be treated as a Tax allowable expense in each of the years.

The amortisation costs of these transfer fees will be included, in the accounts reported, as a part of Operating Expenses so they are not visible in the numbers produced at the start of this thread.

When a player is sold, the remainder of his transfer fee that has not been amortised, is then offset against the incoming fee, and that is shown as a Profit or Loss on Disposal of Player Registrations in the Profit & Loss account. (That will also be included in the final calculations of Taxable Profit / Loss.)

This treatment was introduced in 2002 I believe - prior to that the whole of transfer fees paid out were treated as allowable against Tax in the year in which the player was purchased.

[Royal Lady]

When we asked questions about finance at the start of last season we were told that the club was going to keep everything in place as if we were a premiership club and so not even the parachute payments were enough to make a profit last season,

well, they didn't keep salaries in place "as if we were a premiership club" did they? Were we not told that the players all had a wage cut?

[Barry the bird boggler]

Transfers between 1 July 2008 and 30 Jun 2009 I believe look something like this.....

SOLD

Kitson - 5.5m (probably 4m down plus 1.5m based on various addons which presumably he's never go anywhere near fulfulling!)
Shorey - 3m
Fae - 2.5m
Sonko - 2.5m

BOUGHT

Armstrong - 0.5m
Hunt - 0.6m
Tabb - 0.5m (think it was 350k down plus extra on promotion).

[Who Moved The Goalposts?]

Transfers between 1 July 2008 and 30 Jun 2009 I believe look something like this.....

SOLD

Kitson - 5.5m (probably 4m down plus 1.5m based on various addons which presumably he's never go anywhere near fulfulling!)

Actually, I would imagine we have now received most of this as I can vaguely remember that the majority of the add-ons were dependent on Stoke remaining a PL club, which of course they did.

[Who Moved The Goalposts?]

Having talked about this with someone I have realised that it may not be obvious to everyone that the purchase of fixed assets has to paid for out of taxed income - it does not reduce the profit.

That's not strictly correct.

Lump sum payments made for player registrations (i.e. transfer fees) are treated as an Intangible Fixed Asset on the Balance Sheet and amortised (written off as a cost in the Profit & Loss a/c) of the football club over the period of the initial contract in accordance with FRS10. (Financial Reporting Standards)

Tax allowances are given for the exact amounts of the amortisation.

So, if a player is signed for £6m (Ha!) on a 3 year contract, the cost of that transfer fee will be written off as a cost in the Profit and Loss account of the club in equal instalments of £2m each year. And those amounts will be treated as a Tax allowable expense in each of the years.

The amortisation costs of these transfer fees will be included, in the accounts reported, as a part of Operating Expenses so they are not visible in the numbers produced at the start of this thread.

When a player is sold, the remainder of his transfer fee that has not been amortised, is then offset against the incoming fee, and that is shown as a Profit or Loss on Disposal of Player Registrations in the Profit & Loss account. (That will also be included in the final calculations of Taxable Profit / Loss.)

This treatment was introduced in 2002 I believe - prior to that the whole of transfer fees paid out were treated as allowable against Tax in the year in which the player was purchased.

This is useful to know - thanks RR. Is one result of what you're saying that given the very fluid nature of football, it is quite difficult to know the true picture at any one time? I only have a very small business so have very limited knowledge, but in your experience are the accounts of a football club any more difficult to assess than a medium sized business?

[Royal Rother]

Not really, because everything is declared in the financial statements filed at Companies House in the same amount of detail required for any medium / large company. There's always more we'd like to know but if you understand the reports there's as much meat in them as for most other companies. The Companies Acts and disclosure requirements apply in the same way to Football Clubs as any other companies and, in fact, there are some Financial Reporting Standards that have quite specific clauses for football and sporting clubs to ensure that conformity is universal and ambiguity eliminated as far as possible.

Unfortunately, as we see on here every bleedin' week, the thing is with Football Clubs, most people view the published accounts with a mixture of scepticism and downright ignorance, and those of us who probably know what we are talking about are often labelled naive!

With all due respect it is difficult for the layman to understand I suppose. A club might spend £50m on players in a season, all of them on 5 year contracts and then at the year end report that they broke even, even though they got relegated. It is "hidden" from many people's perception that the club is still carrying 4 years' worth of the players' transfer fees on the Balance Sheet that are still to be released as costs in the Profit & Loss account as amortisation of their transfer fees. Cash wise, they might already have paid out the money (probably funded by the Board, thus sitting as a loan owed) but they still have to release costs of £40m over the next 4 years. They might be able to sell the players but are unlikely to get close to full reovery of the remaining £40m as they have been relegated, etc. etc.

So, if they do sell the players, what happens to the money? The fans would be up in arms if the money were not made available to the manager to reinvest in the team, but the Board are due their money back if they funded the initial transfers when they were in the higher league, so they should damn well get their money back... prompting cries of "Where Has All The Money Gone!!!?"

[Harpers So Solid Crew]

Good points RR, except that we did not bust the bank on transfers that would take 5 years to pay off, and we got more than our money back on those that did go.

[Royal Rother]

I have not mentioned RFC once in either of my posts on this subject.

[Harpers So Solid Crew]

We are talkng about RFC tho, i have no idea if there is money or not, I would guess they have set the budgets with regards to what there is and is expected to be, seems the way it has always been done.

As others say the drop in ST sales has had a an effect on cash in hand, tho hopefully they will get it back later.

Any way you look at it two years of profit has to be a good thing.

[Royal Rother]

We are talkng about RFC tho,

I quite obviously wasn't. I was using an extreme example with easy numbers to answer the general question raised by WMTG about Football Clubs' accounts.

[Harpers So Solid Crew]

I knew that I was just trying to cloud the waters

[Stranded]

When we asked questions about finance at the start of last season we were told that the club was going to keep everything in place as if we were a premiership club and so not even the parachute payments were enough to make a profit last season,

well, they didn't keep salaries in place "as if we were a premiership club" did they? Were we not told that the players all had a wage cut?

At least two, Doyle and Hunt got payrises to keep them here.

[Sun Tzu]

Interesting that the club said they were keeping things 'as in the Premiership' last season.

How do the people who were made redundant feel about that I wonder ?

I have to say from my experience there was a fair bit of tightening of the purse strings last season, a lot of it probably sensible rather than knee jerk. It was back office stuff and i think it would probably be more accurate to say they trried to keep the playing side geared up to Premiership standards.....