Derby County deduction? (6 Viewers)

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Liquid Gold

Liquid Gold

Well-Known Member
Deduct them 12 next year, promote Oxford or Lincoln and we’re half way safe already.
 
MusicDating

MusicDating

Euro 2016 Prediction League Champion!!
www.dcfc.co.uk

Club Statement: EFL v Derby County

The League Arbitration Panel (‘LAP’) has granted a limited aspect of the EFL’s appeal against the Decision of the Disciplinary Commission (‘DC’) in August 2020 in relation the EFL’s Second Charge against the Club relating to the Club’s amortisation policy. No appeal was brought against the DC’s...
www.dcfc.co.uk www.dcfc.co.uk
 
oldskyblue58

oldskyblue58

CCFC Finance Director
Apparently it isnt that the contracts are not amortised, they are, but Derby have been including a residual value in the calculation which other clubs do not.

Normally 200k contract purchase over 2 years would mean amortisation of 100k per year

It seems Derby did a calculation something like this
Same contract but say Derby estimate player worth 100k at end of 2 years. Amortisation would be (200k less 100k) ÷ 2= 50k each year.

A significant difference that understated losses and therefore at first glance evaded EFL scrutiny. As I understand it Keiran Maguire first raised the question which got the EFL to look at it.

If the contract ends how could there be a known residual value? Their calculation is novel and doesn't it seems to me to agree with the company financial statements accounting rules. In this case a thing called FRS102

The financial statements will need to be restated, losses increased, etc. I would think that the Auditors can expect a regulatory visit it being a so high profile manipulation. The directors are at face value signing off accounts that are misleading in significant amounts

The disposal of the stadium seems to have passed inspection

Kind of makes you wonder about FFP regulations, their inspection, and enforcement- not up to it despite the win on this issue. The Derby issue goes back to financial statements for 2015 in the meantime Derby has benefitted every year since
 
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Ccfcisparks

Ccfcisparks

Well-Known Member
oldskyblue58 said:
Apparently it isnt that the contracts are not amortised, they are, but Derby have been including a residual value in the calculation which other clubs do not.

Normally 200k contract purchase over 2 years would mean amortisation of 100k per year

It seems Derby did a calculation something like this
Same contract but say Derby estimate player worth 100k at end of 2 years. Amortisation would be (200k less 100k) ÷ 2= 50k each year.

If the contract ends how could there be a known residual value? Their calculation is novel and doesn't it seems to me to agree with the company financial statements accounting rules. In this case a thing called FRS102

The financial statements will need to be restated, losses increased, etc. I would think that the Auditors can expect a regulatory visit it being a so high profile manipulation. The directors are at face value signing off accounts that are misleading in significant amounts

The disposal of the stadium seems to have passed inspection
Click to expand...
Who were their auditors, do you know? I'm guessing one of the big 4.
 
oldskyblue58

oldskyblue58

CCFC Finance Director
No it wasn't actually was a Derby based firm called Smith Cooper audit ltd
 
Frostie

Frostie

Well-Known Member
Understated their losses by £30m over the 3 year FFP reporting period thanks to their 'creative' accounting.
Punishment must surely be severe.
 
Liquid Gold

Liquid Gold

Well-Known Member
They’re definitely going to get a points deduction and it’s a win for us if it comes this season or next. We either start the season with Derby down loads of points or Wycombe still in the league.
 
Gynnsthetonic

Gynnsthetonic

Well-Known Member
Liquid Gold said:
They’re definitely going to get a points deduction and it’s a win for us if it comes this season or next. We either start the season with Derby down loads of points or Wycombe still in the league.
Click to expand...
We won't need to worry about the bottom the league next season, i have a feeling we're gonna be play off contenders!
 
Sky_Blue_Dreamer

Sky_Blue_Dreamer

Well-Known Member
oldskyblue58 said:
Apparently it isnt that the contracts are not amortised, they are, but Derby have been including a residual value in the calculation which other clubs do not.

Normally 200k contract purchase over 2 years would mean amortisation of 100k per year

It seems Derby did a calculation something like this
Same contract but say Derby estimate player worth 100k at end of 2 years. Amortisation would be (200k less 100k) ÷ 2= 50k each year.

A significant difference that understated losses and therefore at first glance evaded EFL scrutiny. As I understand it Keiran Maguire first raised the question which got the EFL to look at it.

If the contract ends how could there be a known residual value? Their calculation is novel and doesn't it seems to me to agree with the company financial statements accounting rules. In this case a thing called FRS102

The financial statements will need to be restated, losses increased, etc. I would think that the Auditors can expect a regulatory visit it being a so high profile manipulation. The directors are at face value signing off accounts that are misleading in significant amounts

The disposal of the stadium seems to have passed inspection

Kind of makes you wonder about FFP regulations, their inspection, and enforcement- not up to it despite the win on this issue. The Derby issue goes back to financial statements for 2015 in the meantime Derby has benefitted every year since
Click to expand...

That surely can't be allowed can it? If the player leaves at the end of the contract that has to be classed as an asset disposal and so the calculations on the disposal would negate the residual value? Esp given the millions of pounds we're looking at. Such significant purchases surely wouldn't be just lumped into one class and then amortisation worked out as a percentage of the whole? Unless the entire purpose is to mislead by reducing amortisation values in the P&L account and/or to artifically raise asset values?

This is the kind of reason why I think profit is such a rubbish metric for working out tax - far too easily manipulated within the laws
 
S

skybluesam66

Well-Known Member
Sky_Blue_Dreamer said:
That surely can't be allowed can it? If the player leaves at the end of the contract that has to be classed as an asset disposal and so the calculations on the disposal would negate the residual value? Esp given the millions of pounds we're looking at. Such significant purchases surely wouldn't be just lumped into one class and then amortisation worked out as a percentage of the whole? Unless the entire purpose is to mislead by reducing amortisation values in the P&L account and/or to artifically raise asset values?

This is the kind of reason why I think profit is such a rubbish metric for working out tax - far too easily manipulated within the laws
Click to expand...
if you were buying something that had a market value at the end of your useful life with it, then you could do this
The trouble is, once a contract runs down it has zero residual value
There is an argument for contract extensions, to extend the useful life, and then take the cost over the extended contract period, but not without that in place
 
Sky_Blue_Dreamer

Sky_Blue_Dreamer

Well-Known Member
skybluesam66 said:
if you were buying something that had a market value at the end of your useful life with it, then you could do this
The trouble is, once a contract runs down it has zero residual value
There is an argument for contract extensions, to extend the useful life, and then take the cost over the extended contract period, but not without that in place
Click to expand...

That is exactly my point. Whereas most things could have some small residual value even as scrap this is one where you know without question it has a value of zero. One they are out of contract you no longer have any commercial rights over them.

EDIT: Apart from those that you may be due a development fee for if you offered them a new contract on at least existing terms.
 
Frostie

Frostie

Well-Known Member
Excellent article in The Athletic today which summarises the situation well.

Derby literally just making up their own player values or using Transfermarkt(!) is particularly hilarious!

 
oldskyblue58

oldskyblue58

CCFC Finance Director
Sky_Blue_Dreamer said:
That surely can't be allowed can it? If the player leaves at the end of the contract that has to be classed as an asset disposal and so the calculations on the disposal would negate the residual value? Esp given the millions of pounds we're looking at. Such significant purchases surely wouldn't be just lumped into one class and then amortisation worked out as a percentage of the whole? Unless the entire purpose is to mislead by reducing amortisation values in the P&L account and/or to artifically raise asset values?

This is the kind of reason why I think profit is such a rubbish metric for working out tax - far too easily manipulated within the laws
Click to expand...


Clearly it isn't right that is why the EFL challenged it and in the end won their case. With the exception of sums available for development perhaps, i do not see how you can include a residual value for something that simply finishes and no longer exists at the end of its term. In fact there is an argument perhaps for saying that because contracts appear to be worth less in say the last six months that amortisation is not spread evenly but more front loaded to reflect that. Some clubs usually lower league simply do not carry the players value as an asset and write off in the year of purchase.

You have to do the calculation for each individual contract and then include the sum of all contracts in the financial statements.

As i explained the whole purpose must have been to understate amortisation and to reduce the losses declared.

Must admit i am very surprised by the revelation that there were was no documentation to back up their calculations. These are significant amounts and you have to wonder what the auditors were doing since 2015 in not checking the values of material items in the financial statements, then not applying best practice. You should check the contracts, the legality, the value, length etc, to simply accept the calculation in a rubber stamp exercise is not acceptable. If the directors/owners refuse to comply then auditors qualify the report and/or resign. Would have brought things to a head much sooner by alerting EFL to potential problems (auditors have to disclose why they resigned) and not allowed 5 or 6 years where Derby simply flouted the rules and got away with it

You then have to wonder if there is a case of financial fraud that the directors have to answer for. People will have relied upon the financials when checking them in support of say bank loans or supply contracts. Other clubs & EFL will also have relied upon the contents in their football dealings of course too. Potentially Derby are at a higher risk of insolvency and anyone who relied on the figures for 2015 to 2018 could lose money they cannot recover. Going forward the 2019 figures will have to include the adjustments for previous years and change the accounting policy, then 2020 onwards should be in line with everyone else. Also any accounts will need to disclose the financial penalty imposed and probably the effect on going concern of being relegated.

as 2019 & 2020 accounts are yet to be filed i assume Derby are under transfer embargo and could get further penalty because of that

It is a big mess that isnt going to end with just a points deduction imo.

The key to all clubs survival has never been the profit or loss - it has always been the cash that the club has available to it. Which leads us back to the old argument that all clubs should be self sustaining and what that actually means.
 
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Sky Blue Harry H

Sky Blue Harry H

Well-Known Member
If we can sign Messi, but only get 12 pts deduction for paying him over the odds, I think it will be worth the gamble.

#greatideasthatmightnothappen
 
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fernandopartridge

fernandopartridge

Well-Known Member
Aside from any potential punishment, Derby must be in some serious financial trouble now. Accounts a year overdue, charges on all of their property. Nobody with any sense will want to take over either.
 
Frostie

Frostie

Well-Known Member
Sky Blue Pete said:
And a relegation about to be confirmed
Click to expand...

Probably next season rather than this as fast running out of time.
Punishment has to be decided, Derby will inevitably appeal that & then there's a possibility EFL will appeal again too. Fixtures decided in 6 weeks & not sure all that will be resolved before then.

Will give them a mountain to climb next season though.
 
MusicDating

MusicDating

Euro 2016 Prediction League Champion!!
fernandopartridge said:
Aside from any potential punishment, Derby must be in some serious financial trouble now. Accounts a year overdue, charges on all of their property. Nobody with any sense will want to take over either.
Click to expand...
I wonder if the EFL can explain how Derby managed to sign 5 players in the Dec transfer window despite being a year late submitting their accounts? No transfer embargo?...

www.bbc.co.uk

Derby County sign Teden Mengi, Lee Gregory, George Edmundson, Beni Baningime & Patrick Roberts

Derby County sign Teden Mengi, Lee Gregory, George Edmundson, Beni Baningime and Patrick Roberts on loan.
www.bbc.co.uk
 
chiefdave

chiefdave

Well-Known Member
MusicDating said:
I wonder if the EFL can explain how Derby managed to sign 5 players in the Dec transfer window despite being a year late submitting their accounts? No transfer embargo?...

www.bbc.co.uk

Derby County sign Teden Mengi, Lee Gregory, George Edmundson, Beni Baningime & Patrick Roberts

Derby County sign Teden Mengi, Lee Gregory, George Edmundson, Beni Baningime and Patrick Roberts on loan.
www.bbc.co.uk
Click to expand...
Even if you ignore the accounts submission something was off about the way they went from not being able to pay wages to signing more players than anyone else without a takeover going through was a bit suspect to say the least.
 
Liquid Gold

Liquid Gold

Well-Known Member
Paul Anthony said:
www.bbc.co.uk

Erik Alonso: Derby County's proposed takeover by Spanish businessman called off

Derby County's takeover by Spanish businessman Erik Alonso is called off.
www.bbc.co.uk

Derby take over fallen through.
Click to expand...

giphy.gif
 
S

skybluesam66

Well-Known Member
now there's a surprise
Admin approaching possibly, which could be another 12 points on top of a points deduction for false accounting
 
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