PSR Loopholes

[Big Ben Foster]

The profit from selling a player is equal to the sale price no matter what. It's just that with academy players, or players signed on a free, you get it all over one season, while with others a portion is distributed over the duration of their contract.

Not quite. You get the benefit of the sale all at once, but have to write down the remaining book value of the player, and that asset writedown essentially functions as a cost. For academy players and free transfers, that book value is zero, so you're not subtracting anything from the revenue.

 

[NotThatSoph]

Not quite. You get the benefit of the sale all at once, but have to write down the remaining book value of the player, which essentially functions as a cost. For academy players and free transfers, that book value is zero, so you're not subtracting anything from the revenue.

Yes, and that remaining book value is a future loss that gets removed. If you sell an academy player for 50m, that is an immediate 50m accounting profit. If you sell a player with a 30m book value for 50m, that is an immediate 20m accounting profit and removal of 30m future losses over the rest of the contract. Still 50m.

 

[Cassidy]

The profit from selling a player is equal to the sale price no matter what. It's just that with academy players, or players signed on a free, you get it all over one season, while with others a portion is distributed over the duration of their contract.

The only clubs incentivized to sell like this are those in immediate need of PSR wiggle room. Other clubs are incentivized to keep them over other players.

I know that, with regards to PSR its the PL
that decides the rule around how the cap is calculated.

Your last paragraph is also incorrect. Every club has an incentive to sell academy players over others unless the player in questions purchase value has already largely be amortised.

 

[Berbaclass]

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[Big Ben Foster]

Yes, and that remaining book value is a future loss that gets removed. If you sell an academy player for 50m, that is an immediate 50m accounting profit. If you sell a player with a 30m book value for 50m, that is an immediate 20m accounting profit and removal of 30m future losses over the rest of the contract. Still 50m.

Yes I agree with that - I was thrown off a bit by the wording of your original post

 

[NotThatSoph]

I know that, with regards to PSR its the PL
that decides the rule around how the cap is calculated.

Your last paragraph is also incorrect. Every club has an incentive to sell academy players over others unless the player in questions purchase value has already largely be amortised.

No, they don't. Lets compare two players, both with a market value of 50m. One is an academy player, one has a remaining book value of 30m and 4 years left on the contract.

Academy player	Year 1	Year 2	Year 3	Year 4
Sale:	50m	0	0	0
No sale:	0	0	0	0

Total difference: 50m, all in year 1.

	Year 1	Year 2	Year 3	Year 4
Sale:	50m - 30m (remaining book value) = 20m	0	0	0
No sale:	-7.5m	-7.5m	-7.5m	-7.5m

Total difference: 50m. 27.5m in year 1, the remaining 22.5m over 3 years.

Clubs in immediate need of PSR wiggle room are incentivized to sell the academy player, because they are allowed to spend more right now. They get no future benefit from the sale when Year 1 is no longer included in the 3 year rolling period. Clubs that don't need to sell to buy are incentivized to keep the academy player over the other one, because they don't need the bigger influx right now and can benefit from better numbers in Year 2, 3 and 4 in the future.

 

[Cassidy]

No, they don't. Lets compare two players, both with a market value of 50m. One is an academy player, one has a remaining book value of 30m and 4 years left on the contract.

Academy player	Year 1	Year 2	Year 3	Year 4
Sale:	50m	0	0	0
No sale:	0	0	0	0

Total difference: 50m, all in year 1.

	Year 1	Year 2	Year 3	Year 4
Sale:	50m - 30m (remaining book value) = 20m	0	0	0
No sale:	-7.5m	-7.5m	-7.5m	-7.5m

Total difference: 50m. 27.5m in year 1, the remaining 22.5m over 3 years.

Clubs in immediate need of PSR wiggle room are incentivized to sell the academy player, because they are allowed to spend more right now. They get no future benefit from the sale when Year 1 is no longer included in the 3 year rolling period. Clubs that don't need to sell to buy are incentivized to keep the academy player over the other one, because they don't need the bigger influx right now and can benefit from better numbers in Year 2, 3 and 4 in the future.

Its not just about immediate wiggle room, its also about wiggle room for future windows/cycles over a 2/3 year period which is an odd incentive for any club.

 

[NotThatSoph]

Its not just about immediate wiggle room, its also about wiggle room for future windows/cycles over a 2/3 year period which is an odd incentive for any club.

I mentioned the three year rolling periods, so I'm obviously aware.

Accounting impact from sale:	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
Academy player:	50m	50m	50m	0	0	0	0
Non-academy:	27.5m	35m	42.5m	22.5m	15m	7.5m	0

Both sum to 150m. The sum is just meant to illustrate that income from one year is used in three periods, and 50m x 3 = 150m. So an accounting profit of 50m in year 1 will be useful for PSR purposes in Year 1, 2 and 3. Actual profit is 50m, not 150m, of course.

What distribution is preferred depends on when accounting profit is more useful. One is not necessarely better than the others, so it's not true that all clubs are incentivized to sell the academy player over the player with a remaining book value of 30m.

 

[Cassidy]

I mentioned the three year rolling periods, so I'm obviously aware.

Accounting impact from sale:	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
Academy player:	50m	50m	50m	0	0	0	0
Non-academy:	27.5m	35m	42.5m	22.5m	15m	7.5m	0

Both sum to 150m. The sum is just meant to illustrate that income from one year is used in three periods, and 50m x 3 = 150m. So an accounting profit of 50m in year 1 will be useful for PSR purposes in Year 1, 2 and 3. Actual profit is 50m, not 150m, of course.

What distribution is preferred depends on when accounting profit is more useful. One is not necessarely better than the others, so it's not true that all clubs are incentivized to sell the academy player over the player with a remaining book value of 30m.

One is quite obviously better than the other if you need to reinvest in a new player whether its this summer or next or the one after

 

[NotThatSoph]

One is quite obviously better than the other if you need to reinvest in a new player whether its this summer or next or the one after

Only if you're not allowed to without the difference. And then the other is quite obviously better the year after that, and the year after that, or the year after that. I don't know what there is to discuss, obviously some clubs fall into one camp and other clubs into the other.

 

[caid]

Only if you're not allowed to without the difference. And then the other is quite obviously better the year after that, and the year after that, or the year after that. I don't know what there is to discuss, obviously some clubs fall into one camp and other clubs into the other.

Is there any benefit to going all in this year with the rules changing next year?

 

[SilentWitness]

The problem with the rules is that because of the revenue of clubs outside of the top 6, they will find it incredibly hard to be competitive or maintain a competitive streak without financial wangling.

I think it's a bit of both - i.e financial mismanagement of clubs but also restrictions of the rules that means clubs need to be clever to try and work around the rule and after all, it is legal.

I don't like it, and I don't like multiownerhsip, but, most clubs are following this model now and if you don't join it in this current football world, you'll be left behind.

 

[KeanoMagicHat]

The problem with the rules is that because of the revenue of clubs outside of the top 6, they will find it incredibly hard to be competitive or maintain a competitive streak without financial wangling.

I think it's a bit of both - i.e financial mismanagement of clubs but also restrictions of the rules that means clubs need to be clever to try and work around the rule and after all, it is legal.

I don't like it, and I don't like multiownerhsip, but, most clubs are following this model now and if you don't join it in this current football world, you'll be left behind.

In Chelsea's case though, they could also not buy 10 players a year and actually use the ones they've bought. Like they're getting around the rules so they can get the next big talent from Brazil in Estevao for £50m, it's like someone that can't pay their mortgage getting a new Audi because they need to keep up with their neighbours.

 

[NotThatSoph]

Is there any benefit to going all in this year with the rules changing next year?

I haven't looked properly into it, so I can't really say. I know the new rules is a cost to revenue ratio thing, but I don't know if it's rolling periods or anything like that. Transfer fee amortization will work the same way.

 

[WeePat]

I wondered when Forest would join the party. I guess we’ll soon see reports of Villa signing a player from Forest’s academy.

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[SilentWitness]

In Chelsea's case though, they could also not buy 10 players a year and actually use the ones they've bought. Like they're getting around the rules so they can get the next big talent from Brazil in Estevao for £50m, it's like someone that can't pay their mortgage getting a new Audi because they need to keep up with their neighbours.

That's why I sometimes feel sympathy and sometimes don't. Chelsea have definitely manufactured themselves into this situation and aren't blameless but I do think that it's a bit shitty that there is a bigger onus to sell academy talent rather than other purchases. Ideally you'd surely want a club to grow with academy prospects but it's more beneficial for clubs to sell that prospect to get more profit. I don't think the balance is right yet in the rules for the 'smaller' clubs looking to push on and try to be a bigger club or daring to dream, the limits for them are clear.

 

[duffer]

I wondered when Forest would join the party. I guess we’ll soon see reports of Villa signing a player from Forest’s academy.

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He is the Chelsea legend's nephew.

 

[Adisa]

Chelsea are running rings round the league.

 

[Big Ben Foster]

I wondered when Forest would join the party. I guess we’ll soon see reports of Villa signing a player from Forest’s academy.

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He'll sign for Forest and then refuse to leave when they eventually transfer list him

 

[beergod]

My immediate thought on PSR for academy kids is they're going to have to change the revenue recognition if they want to ever curb the practice. Revenue recognized over the transfer payment schedule would make it less enticing than the current method.

 

[Oranges038]

Premier league is going to end up like Serie A at some point in the future all the debt will catch up.

 

[Big Ben Foster]

My immediate thought on PSR for academy kids is they're going to have to change the revenue recognition if they want to ever curb the practice. Revenue recognized over the transfer payment schedule would make it less enticing than the current method.

I don't think there's any accounting rule that would allow that, though.

 

[beergod]

I don't think there's any accounting rule that would allow that, though.

There was no accounting rule capping transfers expense recognition at 5 years instead of the 8 years Chelsea was doing, but that got changed fast.

 

[Big Ben Foster]

Premier league is going to end up like Serie A at some point in the future all the debt will catch up.

I remember hearing the exact same thing 15+ years ago. There will always be clubs that spend beyond their means and clubs that don't.

 

[Oranges038]

I remember hearing the exact same thing 15+ years ago. There will always be clubs that spend beyond their means and clubs that don't.

The bubble will burst eventually.

 

[duffer]

The bubble will burst eventually.

I've genuinely been hearing that since the 92-93 season.

 

[Big Ben Foster]

The bubble will burst eventually.

What makes you think the growth in the money flowing into the sport is a bubble?

 

[Physiocrat]

Any financial restrictions will be gamed which is why they are a bad idea? We need genuine footballing restrictions like smaller benches, smaller squads and/or foreigner rules to level the playing field. These are much harder to game than financial rules. If the only goal was to level the playing field, it seems to me a foreigner rule would make the biggest difference and stop the big sides hoovering up all the world’s best players. This would need to be introduced UEFA or FIFA wide to work properly and be fair.

 

[Oranges038]

I've genuinely been hearing that since the 92-93 season.

I'm not that old.

So, perhaps it has been said since then.

What makes you think the growth in the money flowing into the sport is a bubble?

The price of everything involved in following football is going up and up every year, match tickets, jerseys, merchandise, TV subs etc. If it continues eventually fans will stop putting money into the game, because they can't afford it or they'd rather spend their money elsewhere.

 

[Big Ben Foster]

The price of everything involved in following football is going up and up every year, match tickets, jerseys, merchandise, TV subs etc. If it continues eventually fans will stop putting money into the game, because they can't afford it or they'd rather spend their money elsewhere.

And at that point the growth plateaus and it becomes a mature market. That doesn't make it a bubble.

 

[BeforeKeanetherewasRobson]

Couldn’t be more obvious if they tried. Basically saying “what you going to do about it? Nothing” to the PL

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[tomaldinho1]

I'd like them to change the rules.

Selling academy kids should not be the best way to meet the requirements.

I totally understand why clubs are using these rules to their advantage.

This is all ok if the PL then start reacting to these loopholes, it’s kind of the natural evolution of a newer rule, where you get all sorts of clubs probing how to gain advantage and over time the rules will get more concrete/effective.

 

[RedRocket9908]

Villa have qualified for the UCL through good recruitment and coaching yet instead of being able to build on that properly are having to sell top players and top youngsters (that could have helped them consolidate their position) because of "FFP", possibly to some of the status quo clubs they're trying to gazump.

Can't argue these rules are doing what they were designed for I guess.

Aston Villa qualified for the UCL by spending more than they should have, they knew the rules but still overspent and are now in trouble as a result.

No one is forcing anyone to sell their best players or top youth players either.

 

[Sandikan]

Imagine how much more opportunities they'd have if City, Chelsea and Newcastle weren't able to outspend them.

Stupidest line of argument ever this. FFP is needed otherwise literally two or three clubs will dominate everything. It helps out smaller clubs MASSIVELY.

This is it, City fans amongst others have started using this "red cartel" line, suggesting the system is there to help us, Liverpool and Arsenal dominate.

That's an Arsenal team without a title in 20 years and a Liverpool side with 1 in 30.

The mind boggles at how horrible football would truly become if you could spend unlimited amounts without even pretending to hide what you're doing.

 

[bosnian_red]

Couldn’t be more obvious if they tried. Basically saying “what you going to do about it? Nothing” to the PL

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I'm fine with this. It's just kicking the can down the road in terms of budget impact, and you are transferring players around so it's not like you are selling a hotel to count it towards ffp.

 

[RedRocket9908]

This probably started with City selling academy goalkeepers with zero top flight appearances for 19m each.

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[duffer]

This probably started with City selling academy goalkeepers with zero top flight appearances for 19m each.

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"Chelsea buys Kellyman off Villa for £20m, despite his valuation being £1m"

What on earth is she rambling about? An 18 year old English forward who has started in the Prem is valued at £1m? By who? Someone who just woke up from a 20 year coma?

 

[LawCharltonBest]

What’s the difference between PSR and FFP?

 

[NotThatSoph]

"Chelsea buys Kellyman off Villa for £20m, despite his valuation being £1m"

What on earth is she rambling about? An 18 year old English forward who has started in the Prem is valued at £1m? By who? Someone who just woke up from a 20 year coma?

Transfermarkt, it looks like. Pretty silly.

 

[duffer]

What’s the difference between PSR and FFP?

PSR is the Premier League's version of UEFA's FFP.