The Championship FFP Thread (Merged)

[Mr Popodopolous]

Okay, done a bit more research etc.

Seems that- and maybe I misinterpreted this at the time- their 3 year cycle reset from last season. So in 2018/19 because of the sanction in 2017/18 that brought about a new 3 year cycle?

In a way I can understand it, but in a way that doesn't seem right! Means that if you breakeven or make a legit profit over the following 2 years you can basically lose £39m + allowables in 2018-19 , that can't be right- that'd be ridiculous! Sure that wasn't how the media reported it after they got docked the points?

[Mr Popodopolous]

Possibly futile, but I helped someone I know to draft an email to the EFL yesterday.

Usually they respond to people with at least "we cannot discuss any individual cases". Will post any reply that they get on here- they've (via me) asked them for something specific which likely wouldn't betray commercial confidentiality- but tbh may not exist.Typo in first bolded word may not help!

Quote

To whom it may concern,

 

Good morning. 

 

I am interested in the Birmingham Cirty case from last season.

 

Without going into anything confidential or commercially sensitive, could you please advise- I believe it was in the media at the time but not fully sure- of a link to a press release if one exists of the criteria that Birmingham City were judged on subsequent to the 3 year period that ended in 2017/18? So therefore the criteria for 2018/19, and perhaps subsequent to this.

 

Was it a new 3 year period of £39m + allowable costs, or was it £13m in 2018/19 + allowables?

 

Thank you.

 

Yours faithfully,

 

My mate (advised my me)

 

Edited October 2, 2019 by Mr Popodopolous

[Mr Popodopolous]

I remember mentioning this or getting at it in the past, but glad to see it confirmed.

Answer of course was...

Now I am pretty bloody surprised that you can just revalue or get revalued a tangible asset (ie stadium) upwards just like that and bank the profit selling it to NSWE Stadium Limited (formerly the same company known as Recon Football Limited, Aston Villa Limited and initially I believe Vilden - as far as I can see there is no Revaluation Reserve, nor is this a new company created within the group to do the transaction but an existing one renamed! (Owners changed, granted).

Is there no expectation of a regular assessment ie annual of impairment and grounds for reversal, or adjustment- or is it simply fine as and when a company sees fit? No limitations on time either?

They certainly didn't reverse the full impairment or it would have been a bigger profit- reckon Villa Park book value (not the same as market value) in 2017/18 was around £28-29m.

Hopefully the attachments work- definitively proves it is an existing company within the group. If is an existing within the group, is there no scope for it to be classified as a transfer, inter or intra company- in which no money changes hands, no profit?

Edited October 2, 2019 by Mr Popodopolous

[Mr Popodopolous]

Oooh a reply from the EFL to my mate!!  Going to read that statement now, but possibly read it before anyway.

Quote

 

Dear X,

 

Thank you for your e-mail.

 

You can find the statement released in relation to the decision on Birmingham City on our website, here.

 

We hope that this helps to answer your query.

 

Thank you for contacting the EFL.

 

Kind Regards

 

X

Supporter Services Department

EFL

 

Well, that was a waste of time :laugh:- directed me back to the statement and judgement.

Can't see anything specific in there but will re-read and see if there's anything I've missed.

Edited October 2, 2019 by Mr Popodopolous

[Davefevs]

@Mr Popodopolous so Villa reduce value whilst still with Prem money, knowing that should their gamble of getting back not work, they’ll revalue to cover the deficit.

[Mr Popodopolous]

Sounds about right @Davefevs .

Though worth pointing out that it seems to take place under Randy Lerner's ownership.

Are there not rules in place about this kind of thing (the upstairs, downstairs valuations, not the owners!) though? Don't mean FFP, talking accounting and even legal.

Sometime later, I'm going to try to get a handle on it with this.

https://www.icaew.com/-/media/corporate/files/technical/financial-reporting/financial-reporting-faculty/financial-reporting-webinar-slides/2018/2018-09-27-accounting-for-impairments-under-frs-102--final-web.ashx?la=en

Looks quite fun  but also quite long...Think under US Accounting standards, such a move wouldn't be permissible.

For FRS 102, on early reading and my general understanding it doesn't look too easy to justify- certainly the EFL seemingly waving it through seems below par about right under Harvey and co?

Edited October 2, 2019 by Mr Popodopolous

[Davefevs]

I’ll let you read fully and summarise!

[Mr Popodopolous]

3 hours ago, Davefevs said:

I’ll let you read fully and summarise!

Some lightish reading while I listen to City on the radio-!  Owers summary will get me through...

One thing I did note briefly in the FFP rules though it's unclear if it is exceptional items or not under the new or old regs.

Quote

 

2.4 The following items may be the subject of an application for treatment as a Permitted Exceptional Item under these Rules by a Championship Club:

2.4.1 The timing of transfer fund receipts and their subsequent use in financing replacement players (for example where a Championship Club recognises a transfer receipt in one Reporting Period but then utilises those funds for player purchases in a subsequent Reporting Period);

2.4.2 Post year end player sales proceeds which can be demonstrated to have been used to fund previous losses;

2.4.3 Costs (net of any insurance proceeds) associated with a career ending injury;

2.4.4 Exceptional litigation and associated professional fees;

2.4.5 Exceptional bad debts; and

2.4.6 Stadium revaluation losses or reversal of losses including depreciation adjustments to the extent that these are recognised in the profit and loss account in line with FRS 15 or equivalent International Accounting Standard.

2.5 By way of further illustration in the event a Championship Club suffers a material loss through, say, its major contracted sponsor being unable to fulfil its financial obligations under that contract or where a material bad debt arises through the liquidation of another football club both these items would be covered by 2.4.5 above.

2.6 The League may from time to time add to the list of Permitted Exceptional Items set out in paragraph 2.4 without requiring an amendment to these Rules.

2.7 The following items cannot be the subject of an application for treatment as a Permitted Exceptional Item under these Rules by a Championship Club:

2.7.1 profit / loss on the disposal of player registrations;

2.7.2 amortisation / impairment of player registrations (subject to 2.4.3 above); and

2.7.3 any costs associated with a change in team management including, by way of example and without limitation, termination payments to former managers, or compensation fees to former clubs.

 

These need to be applied for, and heavily scrutinised against the backdrop of the FFP situation of the club, not just granted- well that's my interpretation anyway!

Reversal of losses seems like the closest thing to reversal of impairment- and I'd suggest on first glance that suddenly reversing a loss, revaluing a tangible fixed asset (okay, stadium!) back up 3 years on from a major impairment of £44.8m is well outside the spirit of the regs- but not just the spirit and should've if at all possible been excluded from FFP calcs! Seems incredibly convenient...or valued by an independent valuer before the all-clear given. That latter point also would go for Derby, Reading, Sheffield Wednesday- and if they've done it, Birmingham.

That could be another element of Gibson's case perhaps, regarding the regs not being applied correctly.

Unsure of 11.3.1 still applies but if it does:

Quote

11.3.1 the overall objective of seeking to prevent any attempt to circumvent the Financial Fair Play Objectives as defined in Regulation 18.1 of the Regulations of The League;

It well and truly could be considered to cover the above!!

Under duties of disclosure- and this is most definitely under the new regs, but in part it's unclear where the old ones end and the new ones start.

Quote

4.4 Each Club shall, at all times and in all matters within the scope of these Rules, behave with the utmost good faith both towards The League and the other Clubs (provided always that only The League shall have the right to bring any action whatsoever for any alleged breach of this requirement).  Without prejudice to the generality of the foregoing, Clubs shall not manage their affairs or submit information which is intended to seek to or take any unfair advantage in relation to the assessment of fulfilment (or non-fulfilment) of the requirements of the Rules.

Okay, Middlesbrough considering suing Derby probably doesn't fall under this either! Neither for that matter arguably does Middlesbrough considering legal action vs the EFL.

Still think- though maybe clutching at straws- that the EFL not making a public statement as Purslow purportedly wanted declaring that they had passed FFP could end up making things interesting. Certainly if they make a quick return!

Edited October 2, 2019 by Mr Popodopolous

[Mr Popodopolous]

Not had a chance to look properly at accounting standards etc yet but two interesting lines on ground valuations etc.

After some digging I eventually found in plain sight that St Andrews was apparently as per Al Majir sold for £30m to owners in sale and leaseback- sounds reasonable tbh! Profit 3.5-4 x net book valuie though if that transaction true, net book value seemingly somewhere between £7.5m and £8m could make it interesting again?

The second one is the PL but I see that the company that purchased Upton Park for £40m- Boleyn Phoenix- sold it on for £60m. Profit according to WH Holding, £8.7m (or thereabouts) on sale of Upton Park to Boleyn Phoenix. Yet, it's unclear in the accounts as neither Cashflow nor Profit seem to show £40m but I could be missing something!

As per Kieran Maguire of course, the 2nd one!

Still have significant doubts over Hillsborough and Pride Park in particular though- Villa Park may pass the test, unfortunately but I wonder given a £44.8m impairment of Villa Park in 2015/16.

EDIT:

Have looked further back and yes, the £40m is somewhat explained- by Kieran Maguire, at a prior date.

http://priceoffootball.com/west-ham-united-2017-financial-results-fools-gold/

Edited October 8, 2019 by Mr Popodopolous

[Mr Popodopolous]

Shaun Harvey speaks- including on FFP!

https://www.telegraph.co.uk/football/2019/10/09/wanted-hold-carabao-cup-draw-space-ousted-efl-chief-reveals/

The relevant sections...the headline with one of his ideas is a cracker though!

Incidentally, I think he actually raises one or two good points, but overall he was useless...

Denies a 2016 rule change was an oversight? Curiouser and curiouser...raises some serious questions IMO. I struggle to see why 18/24 clubs would vote for it when the majority comply or make serious efforts to comply with FFP!

I think they already have mandatory wage cuts in the form of relegation wage clauses, but maybe not all clubs do and could they be higher? I agree though that a closure of the loophole should be tied to other reforms.

Wage cuts repaid as a bonus in the event of promotion is in fact an interesting idea.

The first bolded bit, makes me wonder further whether they appointed him as he's an idiot who won't bother much with oversight and is just somewhat of a patsy.

@Davefevs @downendcity @chinapig @BobBobSuperBob @CyderInACan @Coppello you might be interested in this. Varied others too I suspect.

Quote

 

It is not just fans of Bury but those of many other clubs to have faced – or still facing – a similar fate who have found somebody to blame in Harvey. So much so that, on his final day at the EFL, the hashtag #SHAT began trending on Twitter in the UK after someone posted the sarcastically-titled ‘Shaun Harvey Appreciation Thread’.

“I got hammered by supporters for actually doing the job I was paid to do, which was to run the league for the benefit of the clubs,” Harvey says.

Even Steve Gibson branded the Harvey regime “absolutely hopeless”, a barb the latter refuses to rise to – instead hailing the Middlesbrough chairman as one of the league’s best owners.

Which brings us to the other current crisis to have begun on Harvey’s watch: the legal action by Boro over stadium sales by Derby County and others.

 

Harvey denies a 2016 rule change opening the door to such a practice for the purposes of complying with Financial Fair Play regulations was an “oversight” and says it is for clubs to decide whether they close it again.

But he adds this should be in conjunction with other reforms to improve competitive balance across the professional game and help curb mounting losses by sides. They include slashing parachute payments to relegated clubs and introducing mandatory wage cuts for their players, cuts that could be repaid as a “bonus” to the same players in the event of promotion.

 

 

Edited October 10, 2019 by Mr Popodopolous

[chinapig]

4 hours ago, Mr Popodopolous said:

Shaun Harvey speaks- including on FFP!

https://www.telegraph.co.uk/football/2019/10/09/wanted-hold-carabao-cup-draw-space-ousted-efl-chief-reveals/

The relevant sections...the headline with one of his ideas is a cracker though!

Incidentally, I think he actually raises one or two good points, but overall he was useless...

Denies a 2016 rule change was an oversight? Curiouser and curiouser...raises some serious questions IMO. I struggle to see why 18/24 clubs would vote for it when the majority comply or make serious efforts to comply with FFP!

I think they already have mandatory wage cuts in the form of relegation wage clauses, but maybe not all clubs do and could they be higher? I agree though that a closure of the loophole should be tied to other reforms.

Wage cuts repaid as a bonus in the event of promotion is in fact an interesting idea.

The first bolded bit, makes me wonder further whether they appointed him as he's an idiot who won't bother much with oversight and is just somewhat of a patsy.

@Davefevs @downendcity @chinapig @BobBobSuperBob @CyderInACan @Coppello you might be interested in this. Varied others too I suspect.

 

Thanks for the link. The interview comes across as a journalist giving Harvey a free pass to whitewash his reputation. Why not ask him straight out why the rules were changed and who instigated the change?

Somehow I don't think Harvey will be agreeing to an interview with the likes of David Conn.

[Mr Popodopolous]

34 minutes ago, chinapig said:

Thanks for the link. The interview comes across as a journalist giving Harvey a free pass to whitewash his reputation. Why not ask him straight out why the rules were changed and who instigated the change?

Somehow I don't think Harvey will be agreeing to an interview with the likes of David Conn.

That is the million dollar question- why were they changed, who instigated it? Would also add when exactly they were changed? We believe 2016 but I still feel the when is quite important.

Yes, it seems a bit of a soft line of questioning on reflection. David Conn or Kieran Maguire for example would be a very different proposition! Potentially the two Matts who actually swapped papers, possibly even direct job roles- Lawton and Hughes- both seem pretty sharp. None will be on his interview list!

Like I said he seemed to have one or two interesting ideas but for me, the rule change- this leaves more questions than answers. I am assuming he did not instigate fair market valuations when Derby and Reading in 2017/18, possibly Sheffield Wednesday that said same season though it's not in the public domain, when the contract in place etc, Aston Villa season just gone- should he have been quizzed on this too? I know it's being done now but it's far too late in some respects, even were we to reach the final outcome with an adjustment made. Certainly in Aston Villa's case!

Additionally, in the case of Sheffield Wednesday should he not have been all over the fact there was a possible discrepancy between sale date of Hillsborough and accounting period? Again, an ideal q for him!

The interview thinking about it should also have asked him about Projected Accounts- did the EFL just ignore/forget these? Because for a long time the system was mooted as 2 years of real accounts and then third year of projected accounts as submitted by the club in order to prevent what we've seen in the past of sides who have clearly breached and by a good margin going up and flourishing as only judged retrospectively. If there were legal concerns about this fair enough but again, more questions than answers unfortunately!

Serious note, I wonder if the EFL could take legal action against Harvey if it turns out that certain rules were just blatantly overlooked, disregarded or at best, significantly misinterpreted etc when he was in charge- ie projected accounts. Let alone valuations and even possibly on one case, the correct accounting period!

Edited October 10, 2019 by Mr Popodopolous

[OwlsonlineAdmin]

The issue the EFL have is should they go at us, Derby etc they are opening a can of worms by questioning the professionalism of the accountants, who are under stringent review by their governing body and same with the valuers. 

I've 20 years of accountancy experience and know that signing accounts off is something not done lightly, so if they have then it's cos they trust their judgements. The delays and new companies did concern me but I'm absolutely certain that they took advice from people that do this time and again. 

That said if we've done wrong then we deserve any EFL sanction.

[Port Said Red]

3 hours ago, OwlsonlineAdmin said:

The issue the EFL have is should they go at us, Derby etc they are opening a can of worms by questioning the professionalism of the accountants, who are under stringent review by their governing body and same with the valuers. 

I've 20 years of accountancy experience and know that signing accounts off is something not done lightly, so if they have then it's cos they trust their judgements. The delays and new companies did concern me but I'm absolutely certain that they took advice from people that do this time and again. 

That said if we've done wrong then we deserve any EFL sanction.

Without wishing to denigrate you and your profession, when one sees that certain businesses (e.g. Thomas Cook) were not actually overnight disasters, but had been building year on year on financial incompetency, one can’t but help look at who was signing off the books and why.

[Davefevs]

6 hours ago, OwlsonlineAdmin said:

The issue the EFL have is should they go at us, Derby etc they are opening a can of worms by questioning the professionalism of the accountants, who are under stringent review by their governing body and same with the valuers. 

I've 20 years of accountancy experience and know that signing accounts off is something not done lightly, so if they have then it's cos they trust their judgements. The delays and new companies did concern me but I'm absolutely certain that they took advice from people that do this time and again. 

That said if we've done wrong then we deserve any EFL sanction.

I guess there’s two sides to this:

1. the companies house official accounts 
2. FFP submission

for 1. All the accounting principles can be followed legally.

for 2. It seems like there is quite a big grey area.

[Mr Popodopolous]

 

8 hours ago, OwlsonlineAdmin said:

The issue the EFL have is should they go at us, Derby etc they are opening a can of worms by questioning the professionalism of the accountants, who are under stringent review by their governing body and same with the valuers. 

I've 20 years of accountancy experience and know that signing accounts off is something not done lightly, so if they have then it's cos they trust their judgements. The delays and new companies did concern me but I'm absolutely certain that they took advice from people that do this time and again. 

That said if we've done wrong then we deserve any EFL sanction.

Think the valuation is the bigger issue personally.  However we can't say for certain whether the right reporting period was adhered to, not without actually seeing the documents- IF it was the incorrect reporting period and that's merely an if, then the right step is to exclude it from the 2015/16-2017/18 accounting period and impose a points penalty based on the adjusted FFP result. Then it would be needed to checked for fair market value and would be adjusted accordingly.

Of course if there has been a significant overstatement of value AND a dodgy accounting period vs transaction then that in turn should lead to further penalties.

The ones I really want to see hammered are Aston Villa- had parachute payments, yet still did it- their fanbase seems to contain a high ratio of arrogant belters too.

4 hours ago, Port Said Red said:

Without wishing to denigrate you and your profession, when one sees that certain businesses (e.g. Thomas Cook) were not actually overnight disasters, but had been building year on year on financial incompetency, one can’t but help look at who was signing off the books and why.

Yep, auditors themselves have come under scrutiny in recent times.

Conflicts of interest in these sorts of things should be very much avoided and without looking to question professionalism, certain things make me wonder a bit with 2 clubs in particular on this front.

Edited October 12, 2019 by Mr Popodopolous

[Mr Popodopolous]

Interesting- seems Leeds owner turned down the whole suing of the EFL thing, despite an offer by Gibson to join the case.

Said he agreed in principle but wanted to focus mainly on the football.

I've got a set of sanctions in mind if any valuations were significantly overstated line and tests for sanctions which I'll post later.

Another interesting story is that Derby are for sale for £60m apparently- well it's a story anyway.

I wonder if it would include the ground- because if it does...serious questions to answer there IMO.

Edited October 14, 2019 by Mr Popodopolous

[Davefevs]

10 hours ago, Mr Popodopolous said:

Interesting- seems Leeds owner turned down the whole suing of the EFL thing, despite an offer by Gibson to join the case.

Said he agreed in principle but wanted to focus mainly on the football.

I've got a set of sanctions in mind if any valuations were significantly overstated line and tests for sanctions which I'll post later.

Another interesting story is that Derby are for sale for £60m apparently- well it's a story anyway.

I wonder if it would include the ground- because if it does...serious questions to answer there IMO.

Exactly my thoughts too.

[chucky]

10 hours ago, Mr Popodopolous said:

Interesting- seems Leeds owner turned down the whole suing of the EFL thing, despite an offer by Gibson to join the case.

Said he agreed in principle but wanted to focus mainly on the football.

I've got a set of sanctions in mind if any valuations were significantly overstated line and tests for sanctions which I'll post later.

Another interesting story is that Derby are for sale for £60m apparently- well it's a story anyway.

I wonder if it would include the ground- because if it does...serious questions to answer there IMO.

Was going to post about the Derby for sale story. As the club and ground have 2 different owners, does he mean it's just the club for sale? Or "buy a stadium and I'll throw in a free club to play in it" 

[Bristol Rob]

19 hours ago, chucky said:

Was going to post about the Derby for sale story. As the club and ground have 2 different owners, does he mean it's just the club for sale? Or "buy a stadium and I'll throw in a free club to play in it" 

Didn't Ron Noades manage to sell Palace without Selhurst Park for an astonishing fee, almost to the point where it was just assumed that the stadium was included.

[Mr Popodopolous]

19 hours ago, chucky said:

Was going to post about the Derby for sale story. As the club and ground have 2 different owners, does he mean it's just the club for sale? Or "buy a stadium and I'll throw in a free club to play in it" 

The reports are unclear- whether it'd be gifted, sold separately or continue being rented from Morris- maybe it's the latter, he would still own the ground but the club and new owner still own the stadium.

Read it's rent until 2038 at £1.2m or something- for an £81.1m transaction- very nice commercial terms and truly arms length I'm sure!

The other bit is that once every 5 years, rent is or would be subject to upward only free market tests. That has potential to change the equation down the track.

[Lanterne Rouge]

6 hours ago, Bristol Rob said:

Didn't Ron Noades manage to sell Palace without Selhurst Park for an astonishing fee, almost to the point where it was just assumed that the stadium was included.

I think when Barry Fry bought Posh he thought London Road was included but it wasn`t. 

Their first game afterwards was v Northampton and their fans were singing `He`s fat, he`s round, he thought he owned a ground, Barry Fry`

[Mr Popodopolous]

Story on the current investigations- wonder if PL and EFL jointly coordinating, as there seems to be nothing on Aston Villa.

https://www.telegraph.co.uk/football/2019/10/16/efl-step-investigation-derby-sheffield-wednesday-reading-stadium/

This one isn't fading away quietly.

Some interesting exerts from the article:

Quote

Derby, Sheffield Wednesday and Reading are under scrutiny from the EFL over the valuations of their stadiums, with an unscheduled board meeting held in London on Wednesday to discuss the situation.

Interesting.

Quote

An EFL Spokesman said: “Further investigation is still required on a number of issues in respect of the Profitability and Sustainability (P&S) submissions of some Championship Clubs.  The EFL, however, does not discuss or disclose any of the details regarding individual P&S cases of its members.”

Standard.

Quote

Yet the EFL are understood to be closely examining the valuations and have enlisted QC's from Blackstone Chambers - the central London firm who advised government on Brexit in the Supreme Court - to assist their independent investigation.

Some serious players then!!

Quote

The threat of possible future legal action against the three Championship clubs cannot be discounted at this stage.

This last bit, although mooted in a previous article, nonetheless is a very interesting twist!?

One more thing, I notice there are a lot less leaks than there were for the Birmingham Investigation. Better run post Harvey?

Edited October 17, 2019 by Mr Popodopolous

[Mr Popodopolous]

Punishments and criteria- a flow chart would outline it ideally but don't have time for that.

Test 1- Applicable to all.

Is the EFL valuation roughly in line with the amount it was sold for- Fair Market Value the key thing for most.

If yes, then fair enough if no, proceed to Test 2...

Test 2- Applicable to all.

If reduced and restated to the EFL figures, how does this affect the FFP submissions to May/June 2020 ie for 2017/18. If still in line then carry on, if not...proceed to Test 3.

Test 3- Applicable to all.

If the restated value pushes them into breach- and I suppose you could test the period of 2015/16-2017/18, 2016-17-2018-19 and 2019-20- essentially any season or period in which the transaction is applicable, then it's an EFL Commission as per Birmingham. Mitigating and aggravating factors etc, all legal style. 

OR 

Test 3- Applicable to all- Version B.

Simply deduct points as per the formula outlined in the Birmingham case setting the precedent.

Further points for consideration- Applicable to all:

a)

1. Should a significant overstatement of valuation be included in the EFL Commission or should this be a separate charge? You can argue this either way IMO.
2. Should there in this instance be yet further charges for inaccurate accounting and submissions? Deliberately misleading the EFL in other words!!
3. Should the methods of valuation be tested? For example I read in an early article that one had been valued as if sold for housing yet there it is, still being leased. Misleading at the very least and if the methods of valuation vs the reality are not commensurate with each other then- yes you've guessed it, even more charges?

b)

Specific to Sheffield Wednesday- IF it is proven that they have put something from 2018/19 into 2017/18, should this be yet another separate charge? Because say what you will about the other clubs, at least their transactions seem to have been clearly and definitively within the right accounting periods. To say nothing of the wildly delayed accounts- which again the other clubs have not done.

Edited October 17, 2019 by Mr Popodopolous

[Mr Popodopolous]

One thing I did notice when re-reading the article and checking the Birmingham case is that the law firm hired by the EFL were the same ones used in the Birmingham Independent Disciplinary Commission- ie Blackstone Chambers.

Charles Flint QC works for them and was the Chairman for the Disciplinary Commission, before whom it was heard.

Should anything be read into that law firm being hired for this one?

Edited October 18, 2019 by Mr Popodopolous

[Mr Popodopolous]

It's not new material as such but I'd love to know how the following teams are in compliance and their current FFP positions- accounts for varied big European clubs are out by now, why does it take 9 months in the UK?? Look how quickly Birmingham's were out at the HKSE- 3 months after the accounting period until 30th June 2019 and 3 months sharp.

Okay, mini rant over.

Reading- soft embargo in summer, we know they sold Madjeski for £26.5m so that's a profit of £6.5m or so. Took their losses down to "only" £20m or so in 2017/18. They sold some and yes some high earners go, but then again to purchase Puscas, Joao,neither of whom I suspect will be on tiny wages, then to loan in Miazga, Ejaria and Boye- the latter a fresh one, the first 2 renewals. Rafael, Morrison, Pepe on frees and Charlie Adam too- may have raised a bit in the market but I can't see how they will be compliant by the end of this season, given the 2016/17 small loss/profit drops off the books. Still some of the departures and wage savings surely cancelled out by some of the free/loan additions. They apaprtently have an option or obligation to buy Ejaria for £3m in the summer too.

QPR. I know that they have cut back certainly, and yes a fairly small loss in 2016/17, ably assisted by a frankly ludicrous 4 years of parachute payments despite yoyoing were lucky enough to catch the tailend of that, but they loaned both Wells and Hugill- surely not cheap- look at our terms for Afobe after all!

Yes I know FFP deductions and that, but QPR being able to sign two on loan in a post parachute payment season seems incongruous- but then the lack of clarity over whether projected accounts are applied means it's possibly legit.

Oh yeah, Birmingham. Their situation is clear as mud.

• Will their UK Accounts differ to their Hong Kong ones?
• Will there be e.g. a stadium sale and leaseback that was mooted in the former which didn't appear in the latter?
• Is it now 3 years of £13m which get judged next season to eliminate the 2018/19- or is it a separate one year period of £13m for last and this season? Because if it's the former they lost £31m in 2018/19 but tbh that seems not to include the Adams sale, oddly- at least according to HKSE results.

Edited October 23, 2019 by Mr Popodopolous

[Mr Popodopolous]

No update on the story as a whole but news at the other Sheffield club that makes me wonder still further on the £60m valuation.

Read an interview with Kevin McCabe yesterday. Was interesting stuff- relevant to this was the fact that he owned Brammall Lane and the training ground, Hallam FM Academy.

Prince Abdullah acquiring these for the club as parr of the takeover is far closer to, perhaps even a complete, arms length commercial transaction, though there was a court case too.

The combined total- £50m!! Training ground cost £20m to construct based on some fuerher research of mine, so a breakdown of this would be interesting to see...unsure when was constructed so I'd have to look more.

@Davefevs @BobBobSuperBob @Coppello @downendcity @chinapig

Any Sheffield Wednesday fans too, I'd be interested to see your take.

EDIT: That combined total may also include the hotel but article made no reference.

Some of these transactions go beyond FFP for me, these sale and leaseback arrangements with related parties!

Edited October 27, 2019 by Mr Popodopolous

[Mr Popodopolous]

Possibly too much to hope, but I see Keith Wyness Employment Tribunal over his Aston Villa departure is up soon.

I wonder if any FFP regulation 'flexibility'/dealings will come out from the summer of 2018- I wonder...the answer would be probably not but!

https://www.dailymail.co.uk/sport/football/article-7614755/AHEAD-GAME-Aston-Villa-braced-explosive-revelations-ex-chief-Keith-Wyness.html

Regards some of the other valuations, these should be examined in some detail- all of them actually- as to whether the correct method was used, and whether there was yet another layer of misleading to add...ie valuation as if sold for commercial, residential and other property- by sold I mean sold outright- as opposed to sold for a lease to a third party, sold for existing use to a third party- or what we saw, a third party doing sale and leaseback. I remember one article did state, or at least intimated the idea that this had been done for one of the transactions- well if this is true, then as we can see they are still playing in the ground...FALSE INFO!

Best case scenario is you deduct the difference between Existing use and sale for commercial, but it feels a lot bigger than that to me.

Quote

 

Former Aston Villa chief executive Keith Wyness has prepared an explosive statement to open his case against the club for unfair dismissal, which is due to be heard at Midlands (West) Employment Tribunal on November 4.

Wyness resigned from the club having been accused of being a whistleblower, which he denies, although that will not prevent him from lifting the lid on events at the club during his tumultuous period in charge between 2016 and 2018. 

As chief executive, Wyness was closely involved in the takeovers of both Dr Tony Xia and current owners Wes Edens and Nassef Sawiris, as well as the financial turmoil that led to Villa missing several payments due to the taxman and almost going into liquidation 18 months ago.  

 

Edited October 28, 2019 by Mr Popodopolous

[Mr Popodopolous]

Dunno the context but when searching for something else an amusing Tweet- wonder who it could be about.

They who laugh last though...because we're in safe hands and nowt to fear from any FFP regs- they OTOH, have a very interesting £60m transaction that it basically hinged upon, plus questions over whether Reporting Period matches Transaction date.

If one or both of those 2 factors are wrong, wow.

Another amusing thing was I- though far from alone- posted in some depth about Sheffield Wednesday date of transaction vs reporting period back in the summer and then again one week in September except more succinctly...then about a week later, a story arose that the EFL were investigating this very matter!

Now I take no credit in all seriousness, but the EFL were dragging it out somewhat...

Quote

 

2 Profitability and Sustainability

2.1 Rules 2.2 to 2.9 shall apply with effect from Season 2016/17.

2.2 Each Club shall by 1 March in each Season submit to the Executive:

2.2.1 copies of its Annual Accounts for T-1 (and T-2 if these have not previously been submitted to the Executive) together with copies of the directors’ report(s) and auditor’s report(s) on those accounts;

2.2.2 its estimated profit and loss account and balance sheet for T which shall:

(a) be prepared in all material respects in a format similar to the Club’s Annual Accounts; and

(b) be based on the latest information available to the Club and be, to the best of the Club’s knowledge and belief, an accurate estimate as at the time of preparation of future financial performance; and

2.2.3 if Rule 2.5 applies to the Club, the calculation of its aggregated Adjusted Earnings Before Tax for T, T-1 and T-2 in a form approved by the Executive from time to time and which as at the date of these Rules is set out in Appendix 1.

Guidance

The Executive will in due course consider the Annual Accounts for the Accounting Reference Period in respect of which information pursuant to Rule 2.2.2 is submitted and in particular examine whether any material variances indicate that the estimated financial information was not prepared in accordance with Rule 2.2.2(b).

2.3 The Executive shall determine whether consideration included in the Club’s Earnings Before Tax arising from a Related Party Transaction is recorded in the Club’s Annual Accounts at a Fair Market Value. If it is not, the Executive shall restate it to Fair Market Value.

2.4 The Executive shall not exercise its power set out in Rule 2.3 without first having given the Club  reasonable opportunity to make submissions as to:

2.4.1 whether the said consideration should be restated; and/or

2.4.2 what constitutes its Fair Market Value.

2.5 If the aggregation of a Club’s Earnings Before Tax for T-1 and T-2 results in a loss, any consideration from Related Party Transactions having been adjusted (if appropriate) pursuant to Rule 2.3, then the Club must submit to the Secretary the calculation of its Adjusted Earnings Before Tax for each of T, T-1 and T-2.

2.6 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss of up to the Lower Loss Threshold (calculated in accordance with Rule 3), then the Executive shall determine whether the Club will, until the end of T+1, be able to fulfil its obligations as set out in Regulations 16.19.8(a), (b) or (c).

2.7 Where the Executive determines, in its reasonable opinion and having considered any information provided to it by the Club, that the Club may not be able to fulfil its obligations as set out in Regulations 16.19.8(a), (b) or (c), the Executive shall have the powers set out in Regulation 16.20.

2.8 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss that exceeds the Lower Loss Threshold, then the following shall apply:

2.8.1 the Club shall provide, by 31 March in the relevant Season, Future Financial Information to cover the period commencing from its last accounting reference date (as defined in section 391 of the 2006 Act) until the end of T+2 and a calculation of estimated aggregated Adjusted Earnings Before Tax until the end of T+2 based on that Future Financial Information;

2.8.2 the Club shall provide such evidence of Secure Funding as the Executive considers sufficient; and

2.8.3 if the Club is unable to provide evidence of Secure Funding as set out in Rule 2.8.2, the Executive shall have the powers set out in Regulation 16.20.

2.9 If the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2 results in a loss that exceeds the Upper Loss Threshold (calculated in accordance with Rule 3) then:

2.9.1 the Executive may exercise its powers set out in Regulation 16.20;

2.9.2 the Club shall be treated as being in breach of these Rules and accordingly The League shall refer the breach to the Disciplinary Commission in accordance with section 8 of the Regulations.

 

Serious note, for those who are interested- will be interesting to see how these Investigations into stadia valuations are doing.

Edited October 29, 2019 by Mr Popodopolous

[Mr Popodopolous]

Had a look back at Derby and their takeovers, both by Mel Morris and in the late 2000's.

Mel Morris 2015/16 season- Sevco 5112 Limited- NO Fair Value Adjustments made, ergo the Net Book Value may not have differed all that much from the Fair Market Value.

in 2008 or 2009, Global Derby UK Ltd- the club possibly at or preceding their takeover got it revalued in December 2007 yes, at £55m- guess how many Fair Value Adjustments made? Zero!

Other notably- or possibly not- aspects include a Revaluation Reserve on the Derby accounts but not the parent company at time of takeover- in both cases.

I wonder then, given that it was Revalued to £55m in 2007, why then was there still a Revaluation Reserve thereafter- Pride Park truly worth nearly £95m in 2007?? How was that Revaluation Reserve accounted for in 2008 and subsequent years? Is there some formula of Net Book (Carrying) Value + Revaluation Reserve?

In 2007/08, the Unrealised surplus on revaluation of Stadium was equal to, the Revaluation Reserve- certainly the numbers were the same. Yet I struggle to believe that as of December 2007, Pride Park was worth £55m + £39,554,000=so about £94,554,000. Unrealised in terms of profit maybe?

Will post a few screenshots later- still inclined to think Pride Park in the range of £50-55m, £60m at a push at time of sale. Yes there was work done, yes that enhances value- but remember the Depreciation.

The expert who suggested it was worth <£41m though is most intriguing!

Sheffield Wednesday? Well there's been nothing of note Infrastructure wise at Hillsborough for a while. Valued at DRC in 2014 at £22.25m- there was a Revaluation Reserve- unrealised- of £6-7m- can only assume ground worth not much more and quite possibly less than £30m surely? That Revaluation Reserve did of course decline between 2014 and whenever the ground was sold!

Aston Villa intrigues me owing to their Impairment of Villa Park in 2015/16- yes it's an accounting trick but interested in how it works, add back on Impairment or a chunk of it.

Surely there would be strict Tests, criteria, formula- etc.

The Cost of Impairment was £44.8m in 2015/16, yet they sold it for £56.7m in 2019- or roughly double Net Book Value- which makes me think that £28m or thereabouts was added back on at time of sale.

Quote

 

FRS 102 Impairment of Assets

10.16 Impairment of assets (FRS 102 Section 27) An impairment loss occurs when the carrying amount of an asset exceeds its recoverable amount. ... A company should also disclose a description of the events and circumstances that led to the recognition or reversal of the impairment loss.

 

 

 

 

 

Very interesting to read what this is- how they shall justify it in their accounts! The PL, EFL and yes other clubs should be looking very closely at this.

 

Mind you, what exemptions applied to lack of disclosure of 2018 independent valuation for Derby, 2018- we assume- one for Sheffield Wednesday, likewise for Reading. Wonder if Aston Villa will disclose theirs too.

 

Oh yeah, Hillsborough- probably £30m or so at Depreciated Replacement Cost.

Edited October 30, 2019 by Mr Popodopolous

[Mr Popodopolous]

Hi @Coppello

Apologies if I've already asked, or referred to this one- I've asked about similar before but this is quite specific.

Quote

 

5 Clubs Ceasing to be Members of the Championship

5.1 If a Club is promoted or relegated out of the Championship Division that Club shall, notwithstanding promotion or relegation, remain bound by these as if it were still a Championship Club, until such time as it has complied with all of its obligations relating to its last Season as a Championship Club.

 

Thinking specifically about Aston Villa if they have significantly overstated the value of Villa Park for example.

In short, to your knowledge is this just an EFL declared thing or a fairly watertight agreement?

Certainly, I'd interpret that as leaving the door open to future action on return, or the possibility of parking a punishment if PL wouldn't enforce, or holding a possible EFL Hearing in reserve etc.

While I'm at it too, is it at the discretion of a club as to when to review/amend impairment of assets? Can't see how Villa Park down by £44.8m in 2015/16 then up again by £28m or so 3 years later.

Is regular testing, and equally regular disclosure of such not required then? 

Plus reasons being stated- I haven't found these anywhere to date. Seems quite a shift up and down in value for an asset- Villa Park- that has remained largely the same between 2015/16 and 2019.

Edited November 1, 2019 by Mr Popodopolous

[Coppello]

On ‎01‎/‎11‎/‎2019 at 12:22, Mr Popodopolous said:

Hi @Coppello

Apologies if I've already asked, or referred to this one- I've asked about similar before but this is quite specific.

Thinking specifically about Aston Villa if they have significantly overstated the value of Villa Park for example.

In short, to your knowledge is this just an EFL declared thing or a fairly watertight agreement?

I think that's why the clause is in there to deter clubs from loose financial management knowing it will get them in the Premier League. It's deliberately vague so it can be applied in a number of situations. Has this rule changed since the days of QPR and Bournemouth FFP settlements? There's definitely a focus from the EFL on combating FFP failures before the club has benefited from exuberant spending. I know this hasn't happened this year to Villa given they saved themselves by selling Villa Park but there is a noticeable shift in thinking. The revaluation of the stadium point is just a major balls up by the EFL and sadly they can't claw back the provision that they removed. 

On ‎01‎/‎11‎/‎2019 at 12:22, Mr Popodopolous said:

While I'm at it too, is it at the discretion of a club as to when to review/amend impairment of assets? Can't see how Villa Park down by £44.8m in 2015/16 then up again by £28m or so 3 years later.

Is regular testing, and equally regular disclosure of such not required then? 

Plus reasons being stated- I haven't found these anywhere to date. Seems quite a shift up and down in value for an asset- Villa Park- that has remained largely the same between 2015/16 and 2019.

You should assess for an impairment trigger annually for each Cash Generating Unit (ie a stadium or each factory if you are a manufacturing company). An impairment trigger is something that will result in a significant decrease in value to the CGU or the amount of cash it will generate over its life. In reality, there are very few triggers that could arise for a stadium. If you think about it logically, this can only really occur with things such as a sudden unexpected decline in the condition of the stadium or the capacity or ticket price is suddenly reduced.

Again, this appears to be a little suspect to me and I would really struggle to justify an impairment reversal. I've worked in the oil and gas industry where impairment reversals are more common given that the amount of future cash an oil asset can generate fluctuates hugely with the oil price. Reversing an impairment of a football stadium doesn't really sit right with me and I would question the reasoning behind the initial write down. 

 

Sorry @Mr Popodopolous, I started writing this on my work laptop on Friday and thought I'd revisit it when I got home. I didn't realise that OTIB messages you've drafted weren't carried across different computers so I've had to open up my work laptop to find it! 

[Mr Popodopolous]

 

Quote

 

Now, back to the breaking news.

Wednesday were informed by the English Football League in April that they were under a transfer embargo for breaking profitability and sustainability regulations.

 

An embargo of some sort seems to be, if we follow the Birmingham pattern a holding pattern- notice that there is a problem, a first stage? Perhaps was even a full embargo!

Quote

 

Since, they have cut their cloth, with Jack Hunt and Jordan Rhodes leaving the club. There is also speculation that third-choice ‘keeper Keiren Westwood could depart S6 this summer.

As a result, Wednesday are now in negotiations with the EFL to have the embargo lifted.

 

He did not! Along with a number, I believe he was sidelined to try to help ease him out to show willing in terms of compliance. Birmingham did similar last season with a number of players.

Rhodes returned as well, presumably on full wages- was only a loan (with wages covered) and a loan fee- helps yes but nothing permanent or taking into 2019/20 to improve things.

Quote

 

When asked by a supporter, Chansiri admitted that it would be “difficult” for the club to make any new additions before Thursday’s deadline. He did, however, allude that they may be able to strengthen before the month is out, through the loan window.

This is clearly a live situation between the EFL and Wednesday – it is still an on-going process. It’s evident Chansiri doesn’t know exactly what the club can, or can’t do in the transfer market yet.

“If we have a good positive answer, maybe I can bring players. If we don’t have a good positive (answer), maybe I need to do something,” he said.

 

Makes me continue to, and indeed increasingly strongly suspect that Hillsborough transaction appearing in 2017/18 accounts is very interesting!!

Quote

 

Whilst the picture remains unclear, Chansiri was hopeful it would be resolved “soon”.

However, whilst the Owls may be able to stave off FFP for this season if they don’t get promoted this year they will be big trouble. That’s not my take on events, but the chairman’s.

Chansiri made it abundantly clear that, whilst he might be able to get the club out of the embargo this year, there is no chance of repeating that feat next season.

He stated that he is not concerned by a potential fine, but by the possibility of a points deduction, next year.

 

Line 1 here- and arguably lines 2 and 3, make me seriously question whether the Transaction of Hillsborough, combined with the reporting date, corresponded!

https://derbyunifootyjournos.wordpress.com/2018/08/07/owls-chairman-dejphon-chansiri-confirms-clubs-transfer-embargo/

The article has done nothing to assuage my suspicions and doubts- that I first voiced in July and elaborated on in September.

A full week before the Times reported on the EFL raising questions.

Saw this article earlier.

@Coppello Thank you for the response- will do so in depth later, but that is interesting stuff- the major shift in thinking.

You clearly are a lot better qualified than me, but I wonder...if Villa Park proven overvalued then it could become a live issue again. The impairment issue looks pretty interesting- my view is that these assets were impaired in order to reduce price of purchase for Xia maybe? Or in advance of a prospective sale- and Intangible ones obviously due to relegation, to maybe try to make a better profit on players sold?

I still seriously wonder about this though- clearly the EFL couldn't catch Aston Villa but it is worth noting that Purslow back in the summer was purportedly pushing for a public statement from the EFL which would confirm the passing of FFP...in the absence of one, we certainly don't know. Definitely it's deliberately vague though, to leave many options open- or the threat of many options open I reckon.

From what I've seen when looking at Aston Villa's accounts in recent times, I can't see reference so far- but will look again in more depth- to impairment testing, or anything like this. My point I'm trying to make I guess, is questioning whether the Impairment fits the relevant Accounting rules and criteria- and therefore should be looked at afresh in terms of FFP calcs. Clearly a Revaluation Reserve is if value goes upwards but can a Revaluation Reserve be applied in the same financial year as a Revaluation and subsequent sale?

It basically doubled Villa Park, on promotion- the Impairment % from the original Impairment about 62.5%, without factoring in Deprecation in the following 3-4 years, was added back on to value. £28m or thereabouts of £44.8m, possibly actually with Depreciation factored in.

Edited November 5, 2019 by Mr Popodopolous

[Mr Popodopolous]

What truly baffles me on a general note though, is how Hillsborough- valued on a DRC basis in 2014 at £22.25m and a Revaluation Reserve of £6.778m, becomes £60m in 2018 (if it was even sold that year).

Magic!! Chansiri is a magician- was there oil, gold or similar found under the site or something? Seemingly built in and around a flood plain/flood zone too, if that makes any difference. Also read that its designated use is leisure only- again, don't know if that's so relevant.

I note that in 2013, there was a Revaluation Reserve of £3,615,000- that is the accounts for 2012/13 season.

This became £6,778,000 in 2017/18. A gross uptick of £3,163,000. The total unrealised gain in the P&L was £3,276,000- Revaluation upwards in Tangible Fixed Assets for that year was £1,518,000...

£60m though?? 

Oh yeah, the reason I state 2014 is because the last time that a valuation was disclosed on the balance sheet. The Revaluation Reserve naturally decreased in the subsequent 3 seasons- there was some work done perhaps but both this and the existing Net Book Value would still have been subject to depreciation too.

Hence how I come to my valuation of around £30m or so.

Edit, just looked- in the 3 years post 2014 Revaluation in accounts, they added £1,211,000 in terms of "Additions" under Tangible Fixed Assets- but this is gross of Depreciation, which came to £1,547,000 in those 3 seasons.

If it's much above £30m I'd be interested indeed!

Edited November 5, 2019 by Mr Popodopolous

[Mr Popodopolous]

Another Aston Villa point.

Article from last year...

Quote

The billionaire businessmen have paid Tony Xia £30 million for a 55 per cent stake in Villa and are promising further investment, which will be required imminently as much of their existing revenue has already been accounted for.

 

Back to the time of the Aston Villa takeover last summer.

 

That is £54.54m or thereabouts.

 

Villa Park alone? £56.7m.

 

Granted, Xia was looking to get any investment as he couldn't get cash out of China, distressed asset etc etc but when you factor in the 2015-16 Impairment too, you really do wonder...Aston Villa really were close to administration at best!

 

Xia purchased them for £60m, though that did not include £30m payable to Lerner on promotion...still I find it tenuous with these factors or at least open to question how Villa Park in isolation was worth £56.7m.

 

Recon Sports Limited (back then under Lerner, known as Reform Acquisitions Limited)- Accounts to May 2016.

 

Go to the following:

 

Quote

 

"Loss on ordinary activities to May 2016"

Exceptional Items:

Impairment of intangible assets (included in 'administrative expenses') £34,482,000

Impairment of tangible assets (included in 'administrative expenses') £44,802,000

 

The impairment of tangible and intangible assets has been recognised to write down the assets to their recoverable amount.

 

Now we all know what player Valuations are like and anyway the write down of player value doesn't count so much anyway so don't worry on that score! The second one though, is what I was driving at before.

Recoverable amount? Well, it's the greater of an assets fair value less costs of disposal or value in use. To me, "disposal" is actually doing just that- selling for real. Perhaps Accounting rules say different though!

In fact, the exact Impairment for the Freehold Land and Buildings- which is surely Villa Park- is £44,593,000.

I suppose the Freehold land which has not been depreciated maybe included which could bump it up a bit? No real indication as to what that is. Then though, that would surely have a drag on the Profit on Disposal if so.

Edited November 5, 2019 by Mr Popodopolous

[Mr Popodopolous]

Part 2.

2016/17, no Additions but a further Depreciation of £1,454,000.

Interestingly in 2017/18, there were:

• "Additions"- £2,553,000.
• Disposals"- £1,505,000

A Depreciation Charge of £1,446,000- BUT also elimination of £174,000 in Depreciation on Disposals- this couild have been the Carpark sale I read about somewhere- they clearly sold a fixed asset in 2017/18 but it's not altogether clear what...

Interestingly, the Freehold Land which does not Depreciate was added to to the tune of £1,028,0000. Now £8,959,526.

Well aware that Net Book Value and Market Value not the same, but feeling that Impairment of Villa Park in 2016 leaves some quite notable unanswered questions.

Interesting thing potentially applicable to FFP too, in the wake of the Rugby story!

https://www.efl.com/-more/governance/efl-rules--regulations/section-9--arbitration/

Some interesting points in there.

Quote

95.1 Membership of The League shall constitute an agreement in writing between The League and Clubs and between each Club for the purposes of section 5 of the Arbitration Act:

May well be that League membership is contingent on not going outside the system- possibly save for CAS?

Quote

95.1.1 to submit those disputes described out in Regulation 95.2 to final and binding arbitration in accordance with the provisions of the Arbitration Act and this Section of these Regulations;

Looks like it could well be the case.

Quote

 

95.1.2 that the seat of each such arbitration shall be in England and Wales;

95.1.3 that the issues in each such arbitration shall be decided in accordance with English law;

95.1.4 that no other system or mode of arbitration (including arbitration under Football Association Rules) will be invoked to resolve any such dispute.

95.2 The following disputes fall to be resolved under this Section of the Regulations:

95.2.1 disputes arising from a decision of The League or the Board (‘Board Disputes’);

95.2.2 Disciplinary Appeals;

95.2.3 ‘Force Majeure’ appeals pursuant to Regulation 12.3 (Sporting Sanction Appeal);

 

Key bits to FFP in bold.

Quote

 

95.3 In the case of a Board Dispute, the League Arbitration Panel sits as a review body exercising a supervisory jurisdiction and this section of the Regulations shall not operate to provide an appeal against the decision and shall operate only as a forum and procedure for a challenge to the validity of such decision under English law on the grounds of:

95.3.1 ultra vires (including error of law); or

95.3.2 irrationality; or

95.3.3 procedural unfairness,

and where the decision directly and foreseeably prejudices the interests of a person or persons who were in the contemplation of The League or Board.

95.4 In the case of a Disciplinary Appeal, the League Arbitration Panel sits as an appeal body and the standard of review is:

95.4.1 where required in order to do justice (for example to cure procedural errors in the proceedings before the Disciplinary Commission), the Disciplinary Appeal shall take the form of a re-hearing de novo of the issues raised in the proceedings i.e. the League Arbitration Panel shall hear the matter over again, from the beginning, without being bound in any way by the decision being appealed;

95.4.2 in all other cases, the Appeal shall not take the form of a de novo hearing but instead shall be limited to a consideration of whether the decision being appealed was in error and the burden of establishing the decision was in error shall rest with the appellant; and

95.4.3 in the case of appeal against sanction, the grounds are that the original sanction was too severe or too lenient having regard to all the circumstances.

95.5 The grounds for appeal / review applicable:

95.5.1 to a Sporting Sanction Appeal, are as set out in Regulation 12.3; and

95.5.2 to an Appeal Application and/or Review Application, are as set out in Rule 5 of Appendix 3.

95.6 Other Disputes are dealt with by the League Arbitration Panel as a first instance body.

 

 

Edited November 5, 2019 by Mr Popodopolous

[Mr Popodopolous]

Properly surprised that Harvey and co understood all this legal and financial stuff- especially Harvey- but there we go! 

Will look in depth later or tomorrow but Norwich- the Cost of Promotion.

£9.4m in promotion bonuses apparently. They don't count towards FFP but at the same time...shows just how expensive it is to go up and how important the headroom we now have could be. No suggestion that Norwich broke FFP incidentally, that's even before we consider allowable costs etc.

Edited November 5, 2019 by Mr Popodopolous

[Mr Popodopolous]

That's courtesy of Kieran Maguire of course.

[Mr Popodopolous]

http://democracy.plymouth.gov.uk/documents/s31655/Plymouth Argyle Market Value Report.pdf

I found this.

Now the only problem is that it was from 8 years ago and there are many variables of couirse. Not even read it myself yet but @Davefevs @Coppello @CyderInACan @downendcity to name a few might be interested!

Seems to be about market valuation of Home Park- wonder what lessons there are for the EFL when assessing the deals over the last 2 seasons. Good template potentially!

EDIT: Report was written/dated October 2011 but the actual transaction may have gone back further.

Further digging suggests that £10.4m as of October 2008 was what it was valued at.

Edited November 6, 2019 by Mr Popodopolous

[Mr Popodopolous]

More corroborating evidence, were it needed- in so far as you can trust a forum anyway, which raises questions over the Hillsborough transaction and the Reporting Period.

https://www.owlstalk.co.uk/forums/topic/279512-ground-being-sold-in-february/

Not read that Market Value Report yet, hopefully it'll give some pointers for grounds sold and their worth.

Been looking at Sheffield Wednesday accounts going back to 1990, with relevant valuations, checking against revaluation reserves etc and I can't fathom how it was valued at £60m- £30m or low £30 million's tops!

Notably, the valuations when carried out, seemed within a fairly consistent band, when done at Depreciated Replacement Cost.

Once Revaluation Reserve factored in, over these periods and in any given year, it's been in the £25-35m bracket.

Yet, suddenly...Bang- £60m!

Edited November 6, 2019 by Mr Popodopolous

[Mr Popodopolous]

Pride Park.

Re-acquired or reintergrated onto the Books in 2007/08. Revalued and £55m.

Fair enough perhaps.

What I don't get though, is why when it was Revalued on 11 December 2007 on a depreciated replacement cost basis- and the workings are shown somewhat- Revaluation Adjustment takes it up by £34,147,000, but the Revaluation Adjustment eliminating £5,047,000 of Depreciation, is why is there still a Revaluation Reserve in those 2007 08 accounts of £39,554,000.

Is there no risk of Double Counting having taken place here- or at least the case for a large portion of it here?

Because on Disposal, when unrealised or accounted for in Accounts the Revaluation Reserve forms part of that value-how on earth though can it be upgraded in value- possibly rightly- and yet, still have a Revaluation Reserve at that time of £39,554,000?

Because in 2006-07, it was unclear who owned it.

Incidentally, it was- give or take a few hundred quid and rounding, and it probably wasn't factored in, the exact difference between Historical Cost and Revaluation adjustment.

£55,000,000

-£34,147,000

=£20,853,000.

Construction Cost?

Stated at £20,852,867

Where the hell does a Revaluation Reserve of £39,554,000 come from then? Can it be counted twice- because the Adjusted Depreciation Plus the Upward Revaluation Adjustment comes to the Revaluation Reserve exactly at that time..that comes to £39,254,000- yet how come it's upgraded in the Tangible Fixed Assets if there's still a huge Revaluation Reserve in there?

Also on acquisition by both Mel Morris, and indeed in 2008 by Global Sports Derby or whatever they were called, there was no fair value adjustment to the assets...none!

Which makes me wonder if Net Book Value and Depreciated Replacement Cost/Sale Price did not overlap somewhat in terms of Pride Park- consistently. 

£50-55m my guess, £60m at a push- said it consistently.

Appears after some admittedly early inspectiom that they got the Revaluation gain pretty much on the balance sheet ..yet had pretty much the same again (gross of subsequent depreciation) to bank in profit!

Edited November 6, 2019 by Mr Popodopolous

[martnewts]

I haven’t looked at the accounts in question but is there a deferred tax provision in them? If so a proportion of the revaluation could/should be part of the deferred tax balance

[Mr Popodopolous]

11 hours ago, martnewts said:

I haven’t looked at the accounts in question but is there a deferred tax provision in them? If so a proportion of the revaluation could/should be part of the deferred tax balance

Thanks, that's interesting stuff- still learning on this one.

Had a look or a quick look at Deferred Tax for 2016/17 so the most recent before the sale and leaseback and it gave a net total of £27,188,837.

Would we be going back to their 2007/08 results for a better guide- if I'm reading this right (probably not), deferred Tax Value increases sale price?

Tax doesn't count in FFP though, because tax on profit that's deducted from calcs, whereas if say an FFP loss ie after deductions, of £10m and a tax credit of £2m, then I believe that the loss would still be £10m after FFP deductions for FFP purposes.

Edited November 7, 2019 by Mr Popodopolous

[Mr Popodopolous]

To add @martnewts, they didn't pay any taxation on it, at least so far as I can see.

Because their Accounts showed profit of £14,571,628 before tax and it was still the case after tax.

However, strip out the Transaction, or should I say the Profit on the Transaction of £39,940,387 and that's a pre tax loss of £25,386,759!

Further, their holding company/parent company Sevco 5112 Limited even with the transaction showed a small loss so that may also have accounted for a lack of tax paid that year?

Like I say though, FFP is generally Profit Before Tax or Loss excluding any Tax credit. Another hole in the regs?

Edited November 7, 2019 by Mr Popodopolous

[martnewts]

@Mr Popodopolous A deferred tax charge would be calculated on the potential taxable chargeable gain arising if the property was sold at the revalued amount and would only become payable in the event of a disposal.

It would be (broadly) calculated on the difference between the historic cost and the revalued amount (less indexation if applicable) at current corporation tax rates.

 

 

[Mr Popodopolous]

Thanks for the explanation, been trying to piece it together somewhat- like I say though seemed to be no evidence of tax paid by Derby in 2017/18.

Which is neutral because under FFP, tax isn't factored into the P&L anyway.

Does it add to the value though, or is this something different? I'm still trying to work out given the historic revaluation, how there was both a revaluation reserve and an upwards revaluation of around £39m back in 2007!

This £55m valuation was at depreciated replacement cost. This was reflected, save for a few hundred pounds almost exactly in the books in terms of the change from cost to Depreciated Replacement Cost.

On the face of it, there would appear to be both an upward revaluation and a Revaluation Reserve in addition, as of 2007/08!

Edited November 7, 2019 by Mr Popodopolous

[martnewts]

On 30/10/2019 at 14:55, Mr Popodopolous said:

I wonder then, given that it was Revalued to £55m in 2007, why then was there still a Revaluation Reserve thereafter- Pride Park truly worth nearly £95m in 2007?? How was that Revaluation Reserve accounted for in 2008 and subsequent years? Is there some formula of Net Book (Carrying) Value + Revaluation Reserve?

In 2007/08, the Unrealised surplus on revaluation of Stadium was equal to, the Revaluation Reserve- certainly the numbers were the same. Yet I struggle to believe that as of December 2007, Pride Park was worth £55m + £39,554,000=so about £94,554,000. Unrealised in terms of profit maybe?

@Mr Popodopolous you have made me interested and I have now looked at the accounts for 2007/8.

 

The revaluation reserve at 30/6/08 of £39,554,000 is the difference between the valuation of £55,000,000 and historic cost of £20,852,867 = £34,147,133 plus writing back of depreciation previously charged on land and buildings of £5,407,000

This results in Pride Park being stated in those accounts in fixed assets at £55,000,000

The £39,554,000 revaluation reserve in the balance sheet is not an additional asset it is actually a credit on the balance sheet so more similar to a liability than an asset.

The unrealised surplus reported is effectively disclosing the amount of the revaluation "profit" in the statement of total recognised gains and losses. ie a "profit" which has been recognised but that is not reported in the profit and loss account.

The 2008 accounts do not include a provision for deferred tax, possibly because the requirements for measuring and disclosing deferred tax were different than they are currently.

 

 

[martnewts]

On 30/10/2019 at 14:55, Mr Popodopolous said:

Aston Villa intrigues me owing to their Impairment of Villa Park in 2015/16- yes it's an accounting trick but interested in how it works, add back on Impairment or a chunk of it.

Surely there would be strict Tests, criteria, formula- etc.

@Mr Popodopolous I suspect the rational for the impairment was that up to 2015/16 Villa were a Premier League Club and therefore the "asset" Villa Park was generating premier league levels of income, following relegation the asset is no longer generating Premier league levels of income and consequently arguably its value has been impaired. Not sure of the date of the subsequent Villa park sale but if after they achieved promotion then I guess Villa Park is again an asset that will generate Premier League levels of income and therefore the impairment would be reversed.

[Mr Popodopolous]

41 minutes ago, martnewts said:

@Mr Popodopolous you have made me interested and I have now looked at the accounts for 2007/8.

 

The revaluation reserve at 30/6/08 of £39,554,000 is the difference between the valuation of £55,000,000 and historic cost of £20,852,867 = £34,147,133 plus writing back of depreciation previously charged on land and buildings of £5,407,000

This results in Pride Park being stated in those accounts in fixed assets at £55,000,000

The £39,554,000 revaluation reserve in the balance sheet is not an additional asset it is actually a credit on the balance sheet so more similar to a liability than an asset.

The unrealised surplus reported is effectively disclosing the amount of the revaluation "profit" in the statement of total recognised gains and losses. ie a "profit" which has been recognised but that is not reported in the profit and loss account.

The 2008 accounts do not include a provision for deferred tax, possibly because the requirements for measuring and disclosing deferred tax were different than they are currently.

 

 

Thanks for the explanation @martnewts am slowly getting the hang of it a bit I think.

Yep, that's what I thought- in my initial workings- revaluation upwards plus the write back (I called it deletion or removal or something) of the past Depreciation.

Yep, they were similar to my sums too.

Not an asset then? Well all I do know is that neither Mel Morris in 2015 nor Global Derby in 2007/08 decided to upgrade Pride Park based on fair value- so the Revaluation Reserve stayed put, save for depreciation over the years.

So unrealised surplus in this instance would be the Revaluation Reserve? To be realised on sale of Pride Park?

Thanks, was looking for one of those but couldn't find.

Still struggling to see how £81.1m however! Not when valued at depreciated replacement cost, and given how buildings do depreciate.

34 minutes ago, martnewts said:

@Mr Popodopolous I suspect the rational for the impairment was that up to 2015/16 Villa were a Premier League Club and therefore the "asset" Villa Park was generating premier league levels of income, following relegation the asset is no longer generating Premier league levels of income and consequently arguably its value has been impaired. Not sure of the date of the subsequent Villa park sale but if after they achieved promotion then I guess Villa Park is again an asset that will generate Premier League levels of income and therefore the impairment would be reversed.

Yeah, that makes sense I guess. Also wouldn't have hurt with the purchase price either for Tony Xia of course...

Villa Park sale according to Land Registry went through on May 23rd 2019- when they were still technically a Championship club. Impairment wasn't fully reversed though, seemed to be down £44,593,000 in 2015/16 but the add back in 2018/19 was about £28-28.5m. I'd have to pull up the exact figures later but it feels in that ballpark. Gross or net of depreciation and subsequent deprecation I'm unsure.

Edited November 7, 2019 by Mr Popodopolous

[martnewts]

2 minutes ago, Mr Popodopolous said:

So unrealised surplus in this instanced would be the Revaluation Reserve? To be realised on sale of Pride Park?

Exactly that.

Pride Park in the 2008 accounts was included at £55M See note 9 in the accounts tangible fixed assets, Land and Buildings which show a total net book value of £60.1M for Land and Buildings. So there must be some other land and buildings included in the accounts in addition to Pride park

[Mr Popodopolous]

15 minutes ago, martnewts said:

Exactly that.

Pride Park in the 2008 accounts was included at £55M See note 9 in the accounts tangible fixed assets, Land and Buildings which show a total net book value of £60.1M for Land and Buildings. So there must be some other land and buildings included in the accounts in addition to Pride park

Thought it was the case, read a lot on it and it seemed to be the only explanation that made most sense.

Training ground etc maybe.

Still really struggling with a rise to £81.1m though! That was the price paid for sale. Showed in hose accounts as £

My personal guess given relative consistency of valuations, depreciation was £50-55m, maybe £60m at a push.

I've looked through about 11 years worth and there certainly doesn't appear to be a further £39m or whatever it is of other Tangible Fixed Assets in there...surely with the Revaluation in 2007/08, this Revaluation Reserve assuming it's all for Pride Park or mostly for Pride Park should have become much smaller or cancelled out entirely?

I may post my workings later, print screens etc- it's a very interesting situation though IMO.

Edited November 7, 2019 by Mr Popodopolous

[martnewts]

8 minutes ago, Mr Popodopolous said:

I've looked through about 11 years worth and there certainly doesn't appear to be a further £39m or whatever it is of other Tangible Fixed Assets in there...surely with the Revaluation in 2007/08, this Revaluation Reserve assuming it's all for Pride Park or mostly for Pride Park should have become much smaller or cancelled out entirely?

In the 2018 accounts the revaluation reserve has been eliminated. It is no longer shown on the balance sheet on page 12. The movement in the reserve is not shown in Note 19 as you might expect it to be.

From Note 11 of the accounts the Cost or revaluation eliminated on disposal is £56,502,091 I presume this to be the original cost of £20,852,867 plus the revaluation of £34,147,133 plus I presume costs added to freehold property since the revaluation of £5,056,695

 

 

[Mr Popodopolous]

17 minutes ago, martnewts said:

In the 2018 accounts the revaluation reserve has been eliminated. It is no longer shown on the balance sheet on page 12. The movement in the reserve is not shown in Note 19 as you might expect it to be.

From Note 11 of the accounts the Cost or revaluation eliminated on disposal is £56,502,091 I presume this to be the original cost of £20,852,867 plus the revaluation of £34,147,133 plus I presume costs added to freehold property since the revaluation of £5,056,695

 

 

Except they received £81.1m for it.

The cost or revaluation eliminated on disposal was indeed £56,502,901, the depreciation eliminated on disposal for it was £14,523,854. The remaining balance there is £41,618,237.

That's why the valuation, the 2007/08 Revaluation Reserve and upward Revaluation appearing for accounts is a puzzle, for me anyway.

Additions will of course enhance value, but there will be depreciation too- in that 10 years from the 2007 one.

Fortunately, the EFL FFP regs stipulate that such transactions must be at fair market value- and if incorrect, they will be adjusted accordingly- hence the current investigation into Derby, Reading and Sheffield Wednesday.

Hillsborough at £60m? That's a good laugh! Was last valued at DRC at £22.25m in 2014 accounts and there was a Revaluation Reserve of abo0ut £6.7-6.8m at that time post readjustment. 4 years on and both the value there and the RR will have depreciated.

Some alright but not earth shattering additions yes, but we're expected to believe that it rose £30m+ in 4 seasons!

Not much more than £30m IMO- that's in total not in addition! Looked at their accounts going back to 1990 too and nothing but nothing indicates a sale price of £60m in 2018!

Edited November 7, 2019 by Mr Popodopolous

[martnewts]

34 minutes ago, Mr Popodopolous said:

Except they received £81.1m for it.

£81.1M is broadly Net book value eliminated £41.6 plus profit on disposal £39.9

 

[Mr Popodopolous]

35 minutes ago, martnewts said:

£81.1M is broadly Net book value eliminated £41.6 plus profit on disposal £39.9

 

Yeah I know that...just puzzled as to how it reached that point in first place- given Depreciated Replacement Cost was nowhere near that and subsequent Depreciation and additions...that valuation is "interesting".

Also know that NBV doesn't represent Fair Value, or Depreciated Replacement Cost necessarily.

That's why the EFL have hired independent valuers etc I guess for the Pride Park, Hillsborough and the Madejski Stadium transactions.

I'm arguing that it is quite a bit less than £81.1m. Maybe I'm wrong but something doesn't stack up- however its weighted and balanced, it doesn't all neatly fit together.

Of course, this is all the EFL's fault largely. Because, had they kept in place the regulation that says profit on disposal of fixed tangible asset isn't considered as part of FFP calcs then this would all be a moot discussion- for some weird reason that clause was deleted, or they should have kept it but with an amended, or deleted it but with caveats.

Or even allowed it but passed FFP submissions provisionally while they investigated, or perhaps more realistically insisted that they as an honest broker commissioned the valuation not the club and the EFL commissioned valuation would be the one used for FFP purposes. Now they are re-assessing the valuations but the problem is that Aston Villa are now in the PL- but still being checked themselves apparently.

A million ways in which they- the EFL- could have worked this better!

Still- from an organisation that appointed then kept on for 6 seasons Shaun Harvey as the CEO- can we expect anything more??

Edited November 7, 2019 by Mr Popodopolous

[elhombrecito]

This thread makes my head hurt 

[Mr Popodopolous]

To simplify my argument.

IF a revaluation plus write back of depreciation occurs in 2008, there shouldn't be a new Revaluation Reserve or certainly not much of one.

Either there should be the Upward Revaluation Plus write back in the Accounts in 2008 and next to nothing, in the Revaluation Reserve.

Or the Book Value should have remained similar but with a whacking great Revaluation Reserve added in 2007/08.

To have both seems incongruous to me!

For arguments sake had it been Option A, assume Depreciation at about 2% year but yes some additions...Pride Park sells at maybe £45-50m.

Had it been Option B, what with Depreciation and yes some additions, Pride Park sells at £45-50m.

I'd have to do the full workings later but it seems to me that both were benefited from. There was no Revaluation Reserve in 2006/07 Accounts for example- this is purely IMO about Pride Park.

Edited November 7, 2019 by Mr Popodopolous

[martnewts]

9 minutes ago, Mr Popodopolous said:

To simplify my argument.

IF a revaluation plus write back of depreciation occurs in 2008, there shouldn't be a new Revaluation Reserve or certainly not much of one.

Either there should be the Upward Revaluation Plus write back in the Accounts in 2008 and next to nothing, in the Revaluation Reserve.

Or the Book Value should have remained similar but with a whacking great Revaluation Reserve added in 2007/08.

To have both seems incongruous to me!

For arguments sake had it been Option A, assume Depreciation at about 2% year but yes some additions...Pride Park sells at maybe £45-50m.

Had it been Option B, what with Depreciation and yes some additions, Pride Park sells at £45-50m.

I'd have to do the full workings later but it seems to me that both were benefited from. There was no Revaluation Reserve in 2006/07 Accounts for example- this is purely IMO about Pride Park.

I agree with your argument completely.

The revaluation reserve was established in the 2008 accounts which was the first year of revaluations it is the "other side" of the accounting entry which increases the fixed asset valuation, the revaluation reserve then sits in the balance sheet until either disposal or subsequent revaluation (up or down) subject to annual depreciation amounts. The Total annual depreciation charge on the property is then split between the amount which relates to the original cost which is deducted from the net book value and the amount which relates to the revalued amount which is deducted from the revaluation reserve

The write back of depreciation in 2008 is to restart the clock so to speak on that asset so that the full £55M is included in fixed assets. 

Effectively in the 2007 accounts pride park was included at cost £20.8M less accumulated depreciation of £5,4M ie  £15.4M

if in 2008 it is revalued up to £55M but the accumulated depreciation of £5.4M remains in the accounts then in the 2008 accounts Pride Park is then only shown at £49.6M when the valuation shows it to be "worth" £55M

In subsequent years the £55M is then subject to annual depreciation charges.

 

 

 

[Mr Popodopolous]

Interesting to see that Stoke actually show their ground at market value and book value.

Interesting because the current market value based on the most recent valuation is about £41.6m or £42.1m if we include Plant and Machinery.

£27,290,896 at Cost. This valuation carried out in March 2018.

It's particularly interesting as both Pride Park and the Bet365 are in and around the Midlands, and the best bit is that, both grounds were opened in 1997! Similar capacity too.

One small note but not really looked in much depth is that their Revaluation Reserve seems not to depreciate unlike many. Only appears to change on revaluation or re-assessment. Now it could be about something other than the ground as their accounts once you find the right part seem fairly transparent, Book Value of buildings seems to be individually listed but that small bit is a little confusing.

Also interesting to see that save for player registrations, there was no writedown of asset value on relegation- actually that Aston Villa one on early inspection seems fairly unusual!

This could be instructive...another thing for me to add to the Plymouth one to have a look at!

http://info.valuation-tribunals.gov.uk/Decision_Documents/documents/NDR/425026586935134N10.pdf

In short, if it's classed as a material change of circumstances then it feels more understandable.

If not however...

All I do know though, is that the timing was very helpful, as it meant that Lerner could get rid of the club quicker and more easily- with £30m to be paid as a bonus or part of the deal on promotion.

Also worth noting that Xia first season did not seem to have Book Vale vs Fair Value required as other clubs such as Derby did on takeover and indeed Lerner himself in 2007- possible that it isn't mandatory in accounts or that regs changed with shift to FRS 102 of course.

Edited November 8, 2019 by Mr Popodopolous

[Port Said Red]

@Mr Popodopolous, I greatly admire your determination to get to the bottom of these rules and regulations, especially as you have often pointed out, it's not within the scope of your normal interests. I do feel that what your most recent posts show is, just how technical and complex the rules are. In my experience, anywhere in life where the rules are made so complex, it has two results: -

1. It's much easier to fall foul of the rules unless someone is very well versed in them 

(But conversely) 

2. It's often easier to get around the rules because they are made so complex, good accountants and lawyers can keep cases tied up in knots for years for something as simple as the wording of a paragraph. 

I think that what you have proved I believe is that the EFL are not sure whether they have the competence to take these clubs to court,  they could spend years in cases against clubs who could move in and out of their jurisdiction at any point in the process. 
As interesting as I find your posts, I am coming to the conclusion that only Bolton or Bury type scenarios have any significant effect on how clubs do business.  

[Mr Popodopolous]

Thanks @Port Said Red I do try- they are very complex indeed, agreed!

Agree with much of this, though the Fair Value rule is fairly clear, the EFL appointed valuers will as a starting point if they haven't already, decide whether these stadia were sold and leased back on proper commercial terms- an FFP regulation allows for adjustment to such transactions if required. You're right though, the wording must be spot on.

I'm not so bothered personally at this stage about court cases or legal action or anything like that, the main thing is to get those values, adjust if necessary and Test afresh for FFP over given periods- I think the EFL should have done this at the time and had they done so, then this could have helped to prevent a lot of problems. The other thing the EFL need to do is to make sure that the clubs are paying rent at a commercial rate- that Plymouth Market Value Report is quite interesting and Derby's rent payment and that of others is certainly well out of line with this! I'd suggest 5% seems fair, this report though had Plymouth paying £135,000 per year on a transaction of £1.6m!! Or 8.4375%. Apply that to some of these and said clubs will have quite a bill...like I say I see 4-5% as about in line but that report was instructive. Court cases or legal action bu the EFL are probably something that should come into action later down the track if applicable IMO- the urgent priorities are Fair value, adjustment to said fair value then reassessment of FFP but certainly for the most recent periods.

Quite possibly, though if these ones are pulled up, then the regulation needs to be changed quick sharp and a stipulation inserted that:

1. Clubs can do this but it won't count towards FFP calculations in any respect, regardless of purchaser.
2. Any actual disposal- by which I mean a bona fide sale to a third party and the ground no longer used by the club in any form- that is an actual disposal so I'm not sure if I have a problem with it counting towards FFP there.
3. Allow this in terms of FFP, but only when a bona fide third party is involved, such as a Bank, a Finance company, a Professional landlord etc- presumptuously the third party won't significantly overpay or undercharge on rent. Any Related Party deals in this respect simply don't count as FFP- they still appear at CH and in the accounts but nothing relevant for FFP.

Mind you, in general terms- football finance was not Shaun Harvey's strong point seemingly!

Only clubs who publicly took the piss, acted like idiots or fought it- see QPR and the protracted legal issues- or see Birmingham signing Pedersen under a soft embargo, were the ones to really get it- well in his world anyway.

In partial defence of Harvey, his pushing on safe standing and alcohol for fans in view of the pitch is something to praise him for - shame he was so useless in many other aspects!!

I also have the belief that the EFL and other football Governing bodies think the fans are idiots- "Sale and leaseback with a profit- paper profit or real profit from a related party to bring into compliance and provide some headroom? Ah, they'll never know!"

Part of the equation?

The comments by Tad Detko cited earlier in this thread were pretty damning in terms of the EFL's approach at that time to this sort of thing.

Edited November 8, 2019 by Mr Popodopolous

[chucky]

 

Me on this thread,

[Bristol Rob]

 

 

[Mr Popodopolous]

Equally interestingly, an old ground like Hillsborough and more importantly in a city such as Sheffield- well that's about 50% higher than London.

An old ground which has flooded in the recent past- that may have an impact on commercial valuation?

An old ground- and trust me I've looked through accounts going back to 1990- that has been within a fairly consistent range of valuation when this was done at DRC, in a city that is cheaper than Derby- but not all that far away geographically. I also note they didn't seem to depreciate it through a lot of the 1990s but am guessing that was alright for football because of the obligatory upgrades to stadia post 1989. Maybe it was just the accounting policy for Freehold land and buildings for a while.

Valuations in the range of £20-25m and maybe a bit more, plus periodic adjustments to the Revaluation Reserve which you will gain on disposal...suddenly sells for £60m! How does that work then?

Cheaper per acre in Sheffield than Derby, albeit perhaps not a huge amount in it...the gap to London that is!

Actually, scratch that- slightly cheaper in Derby than Sheffield.

June 2007 the flooding I think.

Edited November 8, 2019 by Mr Popodopolous

[OwlsonlineAdmin]

Do you understand how depreciation works Mr P,  often it is a paper number used to revalue assets yearly, it isn't allowed to be used to work out PCTCT as it becomes an add back. 

An example would be cars, you get a brand new 30k car, the second it leaves the forecourt the value reduces massive, would you say that the 30k car you bought at 11am is suddenly worth 25k at 11.01 cos it shifted a couple of feet? You wouldn't but financially it has. 

As I've said previously, if we are guilty of breaking the rules we deserve all we get but I suspect we sought both legal advice and financial advice before making any, ultimately, paper transaction. Derby's ground, as was ours, was valued by professional, "independent" valuers so they should have a report to explain their uplift from NBV. 

[Mr Popodopolous]

To a point I agree @OwlsonlineAdmin to a point.

I think differences may depend on methodology being used? For example, the valuation I am basing the £30m or so on is that of Depreciated Replacement Cost. To me, that seems to be fairly appropriate for this kind of transaction- read MK owl on Owlstalk every so often and he's alluded to this being the case before!

Value in use? That could change the equation, not an approach I'm altogether familiar with- but if it was under Depreciated Replacement Cost then £60m seems waaay out of kilter- for completeness, it was £22.25m in 2014 under Depreciated Replacement Cost- for that again according to MKOwl a while ago, you would pick a number and work back?

Fair value and market value, both require an active market.

Comparative value can be useful, I note that Brammall Lane and the training ground went for a combined or are due to be sold back to Sheffield United for a combined £50m- perhaps there is some sort of major discount or special deal? McCabe back to Abdullah/Sheff Utd feels more like an open market or fair value or whatever transaction than Chansiri to one of his own companies- benchmarking in short is something that can be used here, but it has limited use for this sort of specialised propety I'd have thought.

Valuation method could be quite important here IMO.

 Now the rent, this is another debate.

I note that when Home Park was sold to Plymouth Council in 2010/2011 and leased back it went for £1.6m! Hillsborough clearly worth quite a bit more, but what's the rent?? That was quitre onerous this transaction because Plymouth as part of the terms were due to play the Council £135,000 per season- or that's a yield of 8.4375%! Ouch, but that was clearly done on commercial terms and Plymouth were over a barrel a bit.

Applied to Hillsborough, if £60m is right, you should be paying £5,062,500 per year if that is a benchmark- and it is a benchmark as there is/was a market report on it.

Personally I'd say 4-5% makes good commercial sense, but would have to be worked out dependent on commercial yields in Sheffield probably.

See, the reason I strongly suspect these transactions need real scrutiny is because if a bank or a Commercial Property company or another Commercial entity and not a related one but an actual arms length entity brought Hillsborough etc, and leased it back- don't worry security of tenancy would be guaranteed- then the terms would be nothing like as generous- nothing like, especially the rent!

For completeness, Andrea Radrizzani purchased back Elland Road- Leeds sold it and leased it back and it changed hands a couple of times during their financial troubles for actual bona fide arms length transactions- he purchased it for £20m! £20M!! In a more expensive city for what that is worth- he rents it back to Leeds now, would have to research the rent.

I wouldn't be posting a single word- not a word- of criticism of any of these deals if they were sold at genuine arms length, with proper commercial rent arrangements to boot- if you could still get £60m or Derby £81.1m or even Aston Villa £56.7m I'd be hailing from the rooftops the business acumen of the owners!

Bit on Leeds- just look at a snapshot of some of their terms when it was sold to, subsequently leased back from, an actual commercially based 3rd party!

The only caveat here is I'm unsure what Radrizzani is charging- saw some stories of a 33 month rent free grace period, after that? Unsure! Whether the stories are accurate, I'd have to delve deeper and see.

Here's a good Twitter thread you might like too- about to read it myself, with an open mind!

I've looked at the acreage though, granted in Derby vs Sheffield as it wouldn't go deep into the postcode- and the £250,000 v £110,000 for house prices- well I question whether price per acre or house price is a better comparative factor here.

They said about £32m- a little above but nothing vastly so, above my guesses and estimation based on precedent- possibly using a slightly different methodology too!

Edited November 9, 2019 by Mr Popodopolous

[OwlsonlineAdmin]

I worked with Mkowl for several years. 

[Mr Popodopolous]

From what I've read of his posting on it, seems very on the ball with it.

Different valuation methods could change things- I should have stated at the start that I was basing my workings on a Depreciated Replacement Cost basis as a starting point. Which I still think is a good method for transactions such as this.

It's good to have these discussions- dunno where @DerbyFan went but they were good discussions too. Echo chambers are crap!

Edited November 9, 2019 by Mr Popodopolous

[Mr Popodopolous]

Dunno if this is behind a paywall but we'll soon see I guess.

These transactions certainly seem to have raised eyebrows over time in the various sectors.

[Mr Popodopolous]

Okay, on closer inspection seemed to be the same article. 

Still think these transactions would have raised interest in the various industries, sectors however!

Edited November 11, 2019 by Mr Popodopolous