The Daily ITK Discussion Thread - 10th August

[StanSpur]

I can't imagine that Spurs are demanding a fee for Lloris. I wonder if the holdup is him demanding a loyalty payment in order to cover the drop in wages.

I would suspect Lloris is waiting on other options given Lazio is likely to be as a No2. Whilst he may be happy to leave he probably still wants a No1 slot if possible. I think that if nobody else comes in then he will take Lazio in the last day of the window as there is more chance of fighting for first team football there than here.

 

[fishhhandaricecake]

He's got no choice now if he wants them gone and off the wage bill. I'm far from Levy's biggest fan but I'm confident he understands this and will lower his expectations. Whether it will be enough or in a timely enough manor to get any more business incomings wise is the question now imo.

Thanks for sharing Trix and yep its just how much we can do in the remaining time.

Lets see how it plays out but I'm no where near as worried as in previous seasons as we now have a Manager who is strongminded and knows exactly what he wants so will put just the right amount of pressure on Levy however Ange also is ready to be flexible and still work to achieve something no matter the outcome, he literally said as much in his last press conference. Ange also said he hopes that we will have got the majority of what we wanted to do done. Its the first transfer window as part of a 4 year project, I'm hopeful we will get a good 3-4 out before the end of the window and bring in 1-2 more, if we manage to do that I think that will be good enough until the January window especially considering we have no European football this season.

 

[StanSpur]

The Levy mindset around this would from my point of view be to setup our FFPs numbers for a potential buyer that has alot of money and want to invest able to do so. #Levy logic $$$$$$$

This is a good point, sell to an owner who can immediately spend 500m in a window if they wanted - though chelsea are showing ways around this regardless. It isn't all about FFP though as other posters have put in here there is a squad size issue and an operating budget in regards to salaries that needs to be addressed for the sustainable operations of the club. FFP doesn't necessarily come into that thought process.

 

[floydiohead]

It depends, that isn't something that is written into a contract and so will need to be negotiated on an individual basis. Legally we will owe them the remainder of their contract, but of course if the player/agent want the move because they'll actually gain with signing on fee's etc they may waiver some or all of that. There is no one size fits all.

From the legal perspective, if the player moves to another club and is being paid, assuming the amount is equal to or more than his pay under the contract with us then the player would have a difficult if not impossible time showing loss under the contract with us. Therefore we wouldn't have to pay him anything. If on the other hand his new earnings were less, then I can see an argument that we would have to make up the difference.

 

[RobjDerby]

Wow, this new series of Billions is a bit crap.

 

[pal90]

Yeah the amortisation of the transfer fee hits the P&L on a yearly basis over the length of the initial contract. Technically and what I'm hoping for in terms of Chelsea in particular is they crack down on this and have a 25% amortisation rate which will close that loophole.

Actually UEFA have and for clubs involved in Europe competition the maximum write-off is now 5 years.The FA otoh haven't (yet?) hence Chelsea still doling out 8 year contracts.

If a player still has value on the books, ie, his transfer fee hasn't been amortised over the length of his contract then that value has to be replaced.
So, if Ndombele has a year left of his 5 year deal and we bought him for £60 million there will be a £12 million loss which is not allowed in accountancy terms so we would have to sell him for this.

Perfectly possible in accounting terms to write off the value of an asset - if the value is regarded as permanently impaired it is required. In the case on Ndombele I would argue this point has been reached if I was THFC's auditor. Not sure about the FFP rules though as these can easily be different to the legal accounts (but AFAIK FFP isn't an issue for Spurs atm).

 

[Meds]

When I saw six unread ITK pages I figured it was going to be a tedious repetition of why we all hate Levy. But I actually learned something interesting, so thanks to the accountants out there.


still… would be nice to sell and/or sign someone, wouldn’t it?

 

[elfy]

I'd be interested in getting an accountants view of this as I'm assuming their transfer fee is no longer "on the books" or it's minimal debt, whereas the wage commitment is huge.

I think even Levy could see the economics of this. He just needs to get over his pride about doing a good "deal".

Amortisation is just an accounting thing though, and it is a way of paying/writing off expenditure over a period of time.

For example, if a sparky buys a brand new van they can write off the cost over say 5 years instead of one large lump sum.

After 5 years, the 'amortised' value of the van is 0. But, that doesn't mean the value of the van is 0: you don't see a glut of 5 year old vans being scrapped because they have been 'amortised'.

There is a big difference between real world and accounted world: even if a players transfer has been accounted for in the accounts and satisfied, said player still holds a value even if that value is only nominal.

 

[The Scarecrow]

There's no club like Spurs so comfortable with writing off entire seasons. From chairman to fans, hiring caretakers for the majority of a season, to treating the competition we exist to compete in like a training exercise for a year.

I can only hope and assume Ange himself wouldn't accept it.

No one's saying we should write the season off, ffs. Guardiola didn't win anything in his first season at City. It took Klopp three full seasons before he won anything with Liverpool. And Arsenal were dreadful under Arteta until last season.
Lasting success takes time to build.

 

[KingNick]

From the legal perspective, if the player moves to another club and is being paid, assuming the amount is equal to or more than his pay under the contract with us then the player would have a difficult if not impossible time showing loss under the contract with us. Therefore we wouldn't have to pay him anything. If on the other hand his new earnings were less, then I can see an argument that we would have to make up the difference.

These considerations don't apply in the same way as managers' contracts do (or fixed term contracts in other industries). A club cannot unilaterally terminate a contract without just cause and then rely on the player having to go out and secure an alternative contract in order to minimise their liability. They have to pay the contract up in full. That's why clubs don't do it and instead try and reach a mutually acceptable settlement - the outcome of which is entirely dependent on the player's attitude to risk, not playing, and what he knows he might have lined up.

 

[bbunc]

If a player still has value on the books, ie, his transfer fee hasn't been amortised over the length of his contract then that value has to be replaced.
So, if Ndombele has a year left of his 5 year deal and we bought him for £60 million there will be a £12 million loss which is not allowed in accountancy terms so we would have to sell him for this.

I believe players such as Lloris, Dier, Tanganga have no value so would not need a fee to cover their value.

In the past I've had to mothball £100,000's of Capex equipment in offsite storage for years because of this.

This is not accurate. The value does not have to be “replaced.” You can absolutely sell him for less than that or even tear up the contract - it’s just that you have to take that loss (difference between amortized book value and sale price) onto the P&L in the current period. We should have plenty of room to absorb a P&L “loss” like that.

 

[andyp8080]

Amortisation is just an accounting thing though, and it is a way of paying/writing off expenditure over a period of time.

For example, if a sparky buys a brand new van they can write off the cost over say 5 years instead of one large lump sum.

After 5 years, the 'amortised' value of the van is 0. But, that doesn't mean the value of the van is 0: you don't see a glut of 5 year old vans being scrapped because they have been 'amortised'.

There is a big difference between real world and accounted world: even if a players transfer has been accounted for in the accounts and satisfied, said player still holds a value even if that value is only nominal.

the difference is that after 5 years (or whatever the contract length is) the Van can't walk out for free, but a player can

So after 5 years the Van has a value to a business still

but a players does not have any value to a club at the end of its contract

 

[DiVaio]

I don't mind some of the finance talk while we're waiting for new ITK but once we get some, we should probably leave this topic.

Having said that, isn't out "FFP budget" something like £500m now? It was over £400m before we sold Kane. I don't see Levy being able to please FFP poverty here.

Ńo it wasn't. 400m available without breaking FFP was based on financial accounts from 2020 when it included 3 years when we had records of profit and money spent on stadium were exempt from FFP. That doesn't count anymore and since that we had 3 years of losses

 

[Neon_Knight_]

I'd be interested in getting an accountants view of this as I'm assuming their transfer fee is no longer "on the books" or it's minimal debt, whereas the wage commitment is huge.

I think even Levy could see the economics of this. He just needs to get over his pride about doing a good "deal".

Definitely not the opinion of an accountant, but this is my understanding...

In terms of FFP:
I believe we have approx. £22m of amortisation / debt left for Ndombele's transfer fee, as 2/5 years of his contract remains.
If we were to sell him for £10m, my understanding is that it would go on the books for this year as a £12m loss, rather than a £10m profit, as the remaining amortisation would all be added to the year that he's sold in. However, any loss on his sale would be offset by any savings on his salary. His salary is a maximum of £10.4m p.a., so selling him might only be a £1.6m loss for this year. We don't know how much of the reported £200k p.w. is basic salary and how much is appearance / performance bonuses. If it's a basic salary of £150k p.w. (£7.8m p.a.), which seems realistic, we'd be incurring a loss of £4.2m for 2023-24 and no loss in 2024-25.
If we were to allow him to join another club for £0 (without terminating his contract), we'd be incurring a loss of £14.2m for 2023-24 and no loss in 2024-25.
If we loan him out for free and the other club pays 50% of his wages, we'd be incurring a loss of £14.9m for 2023-24 (assuming £11m p.a. amortisation & £7.8m p.a. basic salary). We'd still have further loss to come for 2024-25.
If we were to terminate his contract and pay off his basic salary in full, I believe we would be incurring a loss of £37.6m for 2023-24, then no loss for 2024-25.
If we continue paying him to do nothing, I believe that would be an £18.8m dent in our finances for both 2023-24 and 2024-25.

In terms of cashflow:
This is simpler. The huge transfer fee that we paid has already been spent, so there is no further impact of this on our cashflow. Any transfer fee and/or saving on his salary would directly improve our cashflow.
If we were to terminate his contract and pay off his basic salary in full, that would cost us £15.6m this year. We'd simply be shifting two years of salary into a single year, rather than spreading it between now and summer 2025. Therefore, terminating his contract only makes financial sense if we can negotiate a reduced buyout cost.
Keeping him rotting in the reserves would cost us £7.8m p.a., which equates to £15.6m over the next two years.
Allowing him to join another club on free transfer would improve our cashflow by £15.6m. Any transfer fee received would directly improve our cashflow.
If we loan him out for free and the other club pays 50% of his wages, that improves our cashflow for the year by a £3.9m, compared to paying him to do nothing. If we get a loan fee and/or the other club pays more of his wages...even better.

 

[Led's Zeppelin]

Amortisation is just an accounting thing though, and it is a way of paying/writing off expenditure over a period of time.

For example, if a sparky buys a brand new van they can write off the cost over say 5 years instead of one large lump sum.

After 5 years, the 'amortised' value of the van is 0. But, that doesn't mean the value of the van is 0: you don't see a glut of 5 year old vans being scrapped because they have been 'amortised'.

There is a big difference between real world and accounted world: even if a players transfer has been accounted for in the accounts and satisfied, said player still holds a value even if that value is only nominal.

Yes. Otherwise Harry Kane would have been worth nothing.

 

[Jaddas]

More information from Dragon 1 on COYS

Daniel is more sensitive over wages than transfer fees

incomings will depend heavily on shifting Tanguy who is on 200k a week , Loris 100k and Sanchez 80k a week

get movement on them then we may have one or max two buys

The bold part just seems to be another re-occurring smokescreen to me. Our wages to turnover at the start of 2023 was 47% according to Swiss Ramble. FFP rules state that you can be 70%, so there is plenty of scope to manoeuvre, should the club wish to show ambition.

Our wages to turnover is 20th highest in Europe and there were 8 EPL clubs ahead of us. Bear in mind that we are the most profitable football club in the world and 9th largest in Europe. Oh well, I'm sure our chairman's wages are probably only the 20th highest........

 

[RobjDerby]

The bold part just seems to be another re-occurring smokescreen to me. Our wages to turnover at the start of 2023 was 47% according to Swiss Ramble. FFP rules state that you can be 70%, so there is plenty of scope to manoeuvre, should the club wish to show ambition.

Our wages to turnover is 20th highest in Europe and there were 8 EPL clubs ahead of us. Bear in mind that we are the most profitable football club in the world and 9th largest in Europe. Oh well, I'm sure our chairman's wages are probably only the 20th highest........

If Danny boy is so sensative to wages, mabye he should reconsider his £3.5m!

 

[Led's Zeppelin]

The bold part just seems to be another re-occurring smokescreen to me. Our wages to turnover at the start of 2023 was 47% according to Swiss Ramble. FFP rules state that you can be 70%, so there is plenty of scope to manoeuvre, should the club wish to show ambition.

Our wages to turnover is 20th highest in Europe and there were 8 EPL clubs ahead of us. Bear in mind that we are the most profitable football club in the world and 9th largest in Europe. Oh well, I'm sure our chairman's wages are probably only the 20th highest........

We also have possibly the highest level of borrowing which, however soundly backed by sound revenues and asset values, will have a whole lot of financial covenants attached that we know very little about.

By and large we take an unrealistically simplistic view of the club’s financial operations.

 

[KingNick]

The bold part just seems to be another re-occurring smokescreen to me. Our wages to turnover at the start of 2023 was 47% according to Swiss Ramble. FFP rules state that you can be 70%, so there is plenty of scope to manoeuvre, should the club wish to show ambition.

Our wages to turnover is 20th highest in Europe and there were 8 EPL clubs ahead of us. Bear in mind that we are the most profitable football club in the world and 9th largest in Europe. Oh well, I'm sure our chairman's wages are probably only the 20th highest........

I Presume that profitability stat is based on profit as a percentage of turnover rather than pure level of profit?

It certainly doesn’t mean that we have enough profit to have the largest wage bill in the world

 

[nicdic]

I'm not sure I understand what the argument from people is, we should be termintating players contracts? Asking for less money?

It seems so far that players are getting offers, we're accepting offers, but players don't want to move to I'm assuming smaller teams with lower salaries?

I get that some of that can be leveled at Levy in terms of signing players that haven't worked out, but it seems to me as if he is actively, or we are actively looking to offload players. And last year saw us cancel contracts for at least Doherty's move, and seemingly we've been willing to do the same for Lloris?