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Let's All Laugh At... Let's all laugh at Chelsea thread

nailsy

SC Supporter
Jul 24, 2005
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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.
 

brasil_spur

SC Supporter
Aug 25, 2006
13,396
18,873
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.
This is accounting book values though, not company / asset values.

Firstly you buy a £100 asset in your example using only £20 cash. So you’ve spent £20 but in year 1 increased your asset worth by £100. That means that 3 players who you bought last year for £100 each and who have £60 of cash payments due this year are paid for and you have £20 left over to buy another £100 player, so in this process you’ve paid off last year’s player purchases and increased the asset value by £200 by only spending £100 cash.

On top of this you hope that the £300 worth of players you purchased last year are now worth more than they were before and are valued at £500.

Now this process has nothing to do with PPR and football accounting, but it does allow you to continually increase the asset value of your business (football club).

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.

It’s only a matter of time till they crash.
Agree with this 👍
 

RJR1949

Well-Known Member
Jan 31, 2013
1,296
7,178
This is accounting book values though, not company / asset values.

Firstly you buy a £100 asset in your example using only £20 cash. So you’ve spent £20 but in year 1 increased your asset worth by £100. That means that 3 players who you bought last year for £100 each and who have £60 of cash payments due this year are paid for and you have £20 left over to buy another £100 player, so in this process you’ve paid off last year’s player purchases and increased the asset value by £200 by only spending £100 cash.

On top of this you hope that the £300 worth of players you purchased last year are now worth more than they were before and are valued at £500.

Now this process has nothing to do with PPR and football accounting, but it does allow you to continually increase the asset value of your business (football club).


Agree with this 👍
You can only buy a £100 asset for £20 if you can borrow the other £80; you can do this either by getting credit from the person selling you the asset or by borrowing from a bank (for most businesses this is a problem but Chelsea seems to have access to unlimited funds from Saudi).

Anyway this is what the balance sheet entries would be:

Year 0:
Assets: £100 (all cash)
Liabilities: £0
Net Assets £100

Year 1:
Assets: £180 (Cash £80, Player £100)
Liabilities £80 (Trade Credit or Bank Loan)
Net Assets: £100

Year 2:
Assets: £160 (Cash £80, Player £80 (amortising the purchase over 5 years)
Liabilities £80 (Loan)
Net Assets £80

You’d have to generate £20 extra in profits to cover the amortisation.

These sums multiply up in line with the number of players bought.

Now if you’ve been very clever in your recruitment you might be able to sell the player at a profit but Chelsea seem to be paying top of the market prices for experienced players and gambling that the high priced younger players will come good
 

brasil_spur

SC Supporter
Aug 25, 2006
13,396
18,873
You can only buy a £100 asset for £20 if you can borrow the other £80; you can do this either by getting credit from the person selling you the asset or by borrowing from a bank (for most businesses this is a problem but Chelsea seems to have access to unlimited funds from Saudi).
Well basically every club offers every other club interest free credit when buying players - hence majority of purchases being made in instalments. Occasionally the club pushes for cash up front it this is now very rare and almost only with release clauses.

Anyway this is what the balance sheet entries would be:

Year 0:
Assets: £100 (all cash)
Liabilities: £0
Net Assets £100

Year 1:
Assets: £180 (Cash £80, Player £100)
Liabilities £80 (Trade Credit or Bank Loan)
Net Assets: £100

Year 2:
Assets: £160 (Cash £80, Player £80 (amortising the purchase over 5 years)
Liabilities £80 (Loan)
Net Assets £80

You’d have to generate £20 extra in profits to cover the amortisation.

These sums multiply up in line with the number of players bought.

Now if you’ve been very clever in your recruitment you might be able to sell the player at a profit but Chelsea seem to be paying top of the market prices for experienced players and gambling that the high priced younger players will come good
The thing that’s being missed here is that a player doesn’t become worthless as asset once their purchase fee is amortised. So whilst the “on the books accounting” numbers look like the above, the asset value of the company is still much higher.

e.g. buy 10 players at £100 each now and amortise them over 5 years. At the end of the 5 years you don’t end up with £0 assets, you end up with whatever the current value of those 10 players is. Assume some go up in value and others go down, it’s likely if you’re clever enough that you could end up with £,1500 of assets after 5 years.

Basically you’re right about the liabilities in your calcs, but the assets don’t decrease in value, int theory, they increase overall.

This is the game that Chelsea are playing.

However I think they’ve overplayed it massively and it will still back fire.

But all it really takes, or at least took in the past, was for one of their signings to turn into the next Neymar / Mbappe etc… and they can wipe out 3-5 years of operating like this.
 

UncleBuck

Well-Known Member
Aug 20, 2003
10,347
13,419
What I don’t understand is why they haven’t been buying any young, English talent as surely that’s where they’d make the money?
Archie Grey is a prime example, instead they are hoovering up lads who won’t be classed as home grown which will then effect what they can get for them.
 

Trix

Well-Known Member
Jul 29, 2004
22,697
373,548
What I don’t understand is why they haven’t been buying any young, English talent as surely that’s where they’d make the money?
Archie Grey is a prime example, instead they are hoovering up lads who won’t be classed as home grown which will then effect what they can get for them.
I expect they'll be looking to flip them in 1 to 2 years. I am however confused as to how they'll do this if they aren't playing. I'm starting to wonder if they aren't planning to have 2 completely separate squads. One for the league, and one for Europe. I don't see how else they are going to give even half the squad any playing time at all.
 

Westmorlandspur

Well-Known Member
Feb 1, 2013
3,987
6,552
I find it amusing listening to all these “football people” moaning about having to sell HG . The rules have to be changed they say. They think these are football rules when anybody with half a brain knows they are business rules. Home grown players are sold all the time or released, that applies to all clubs.
If you are thick enough to pay 80m, 107m and 115m for Mudryk, Enzo and Caicedo, you will need to make savings elsewhere .
I see Chalobah is now banished to the under 21s.
Eventually their academy will stop producing so many good players and that’s when it will go bang.
Nice trick selling Gallagher to Athletico and buying one of their youngster for the same money. No doubt will be loaned out. Observers in Spain cannot quite understand why they have bought him. He’s done nowt.
 

Westmorlandspur

Well-Known Member
Feb 1, 2013
3,987
6,552
I expect they'll be looking to flip them in 1 to 2 years. I am however confused as to how they'll do this if they aren't playing. I'm starting to wonder if they aren't planning to have 2 completely separate squads. One for the league, and one for Europe. I don't see how else they are going to give even half the squad any playing time at all.
Mudryk will take some flipping. Cole Palmer probably the best bet.
 

nailsy

SC Supporter
Jul 24, 2005
30,605
46,856
I expect they'll be looking to flip them in 1 to 2 years. I am however confused as to how they'll do this if they aren't playing. I'm starting to wonder if they aren't planning to have 2 completely separate squads. One for the league, and one for Europe. I don't see how else they are going to give even half the squad any playing time at all.

This is what I don't get either. They need to keep selling their academy players to generate profit which means they need to play them or loan them out, but surely their path to the first team is blocked and there are limits on how many players you can loan now.
 

Monkey boy

Well-Known Member
Jun 18, 2011
7,021
18,823
I think it’s fairly obvious that the Saudis are involved and Boehly is just a front. Quite what the end game is I don’t know but no doubt it will be a way of cheating the system / sport washing to levels we’ve not previously seen.
 

Pellshek

Well-Known Member
Dec 30, 2015
2,743
8,063
It kinda feels like the WeWork business model: Buy loads of assets at top dollar with no demonstrable plan for how to add value to those assets, save for some marginal gains derived solely from tying up cash over the longer term.

WeWork filed for bankruptcy in 2023.
 

UncleBuck

Well-Known Member
Aug 20, 2003
10,347
13,419
The arrogance of that lot. We only want a one year deal so can negotiate for a better deal when we’re in the champions league
It’s just one big ponzi.
A 30 second google search showed me the ‘sponsor’ they had last season is an amalgamation with another company called tempura ex machina who were being taken to court.
IA are owned by a USInvestment firm called Silver Lake (🤣) who also list city football group as one of its investments in 2019.
If I can dig this up in 30 seconds why didn’t the PL do this last season and veto whatever deal they struck amongst themselves?
 

ItsBoris

Well-Known Member
Jan 18, 2011
9,460
12,820
This is accounting book values though, not company / asset values.

Firstly you buy a £100 asset in your example using only £20 cash. So you’ve spent £20 but in year 1 increased your asset worth by £100. That means that 3 players who you bought last year for £100 each and who have £60 of cash payments due this year are paid for and you have £20 left over to buy another £100 player, so in this process you’ve paid off last year’s player purchases and increased the asset value by £200 by only spending £100 cash.

On top of this you hope that the £300 worth of players you purchased last year are now worth more than they were before and are valued at £500.

Now this process has nothing to do with PPR and football accounting, but it does allow you to continually increase the asset value of your business (football club).

I don't think so. The effect on the balance sheet in either paying cash fully up front or in financing the player purchase is immediate. So either you have no change in total assets, or liabilities increase as much as assets do (which is the fundamental principle of accounting).

There is no way to continually increase the book value of a business except through profitability and good business practices. Which is certainly not what Chelsea is doing.
 

RuskyM

Well-Known Member
Jul 9, 2011
8,806
31,441
I'm no economist, but surely if you're planning on flipping these players you buy them for less than the huge prices they're currently at? Even if a player like Lavia or Mudryk develops like you want, there's only a certain amount of clubs that can afford to help you break even.
 

bubble07

Well-Known Member
Dec 27, 2004
24,540
33,517
I'm no economist, but surely if you're planning on flipping these players you buy them for less than the huge prices they're currently at? Even if a player like Lavia or Mudryk develops like you want, there's only a certain amount of clubs that can afford to help you break even.

Plus if they don't want to go chelsea will have to probably pay the remainder of they're 27 year contract
 
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