Value of Footballers Questioned - 5/09/2005

Football clubs should write down the value of players on their balance sheets according to new research from accounting academics at Cass Business School. New accounting rules which make it mandatory to record all purchases of intangible assets (which is a new way of talking about Wayne Rooney) are argued to have removed club managers' discretion over whether to record transfer fees on the balance sheet or to expense them. An analysis of the relationship between transfer fees, financial performance and stock market perception at 58 cubs, of which 24 were listed at some point since 1990, suggested that large transfer fees might not enhance profitability or cash flow. It also called into question whether players should be recorded as assets, given the risk associated with their contracts (such as injury or under performance). The researchers suspect that players are being over valued. What this means is that intangible assets on clubs' balance sheets should be written down. This would reduce profitability even further and means that clubs would be even less profitable than they already appear. The risks associated with players are not being acknowledged in the high prices paid for transfer fees with many players being sold on at a high discount.