- Jul 24, 2005
- 30,605
- 46,856
If you have £100 in cash and buy an asset for £100 then after that transaction you have £0 in cash and an asset with a book value of £100. Now if you depreciate the asset over 5 years (the maximum permitted period for FFP calculations) then in the next accounting period you incur an additional cost of £20 in your profit and loss account and the book value of your assets falls to £80.
Chelsea are engaged in a desperate game of kicking the can down the street. The massive transfer fees they are incurring are increasing their costs and to stay in line with FFP/PSR rules they have to sell players at a profit or devise accounting tricks.
It’s getting harder and harder for them to make a profit on player trading - they have sold off their best academy players and are going to find in hard to move on the players they are now buying at high prices at a profit.
And the accounting loopholes are being closed.
They might have been hoping that the FFP rules would have been declared a restraint on trade and illegal but the government is about to legislate to give an independent regulator the power to set and enforce them.
It’s only a matter of time till they crash.
You don't pay £100 in cash though. Not straight away.
Agree that they'll crash, it's just when.
And you'll have liabilities equal to your cash. Net value unchanged.
Then next year your net value will go down as your asset depreciates.
Buying loads of assets does not increase your value on its own.
Which is why he said about selling items that didn't cost you anything.