Pitch Dish

How does PSG Keep Spending Money Under the Spending Restrictions?

In layman’s speak, if a player is purchased for £50 million and his contract is 5 years, that money is amortized over the life of the contract – or £10 million per year. So a transfer this year, can affect many years to come.

But this is also the reason why a team may appear to sell a player at a loss, but actually is a profit.

Here is how, taking ex-Manchester City player, Robinho for example:

“[H]e was bought for £32.5 million in September 2008 on a four-year contract, so annual amortisation was £8.1 million. He was sold after two years, so cumulative amortisation was £16.2 million, leaving a value of £16.3m in the books. Sale price to Milan is reported as £18 million, so City will report a profit on sale of £1.7 million in the 2010/11 accounts. Therefore, City will show an annual profit improvement of £18.1 million after this deal: £8.3 million lower wages + £8.1 million lower amortisation + £1.7 million profit on sale.”

This demonstrates how clubs write-off the transfer value of a player over the life-time of their contract and also illuminates that because Robinho was worth £16.3m two years into his four year deal, Manchester City actually made an accounting profit on his transfer of £1.7m. Fans would see the sale of a player for £18m bought two years previously for £32.5m as bad business. The club in their accounts will class it as a £18.1m profit improvement.

Read More: danielgeey.com

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