Bernard Woolley I think that is perhaps too complicated because, if one were to amortize this over the contract length, what if the player were to renew the contract? Does the amortization period extend to the end of the new contract?
I'm gonna lay out my (not an accountant) understanding and perhaps someone who is can correct me.
Let's say you sign a player for £80m on a five year contract. My understanding is the spend is amortised over 5 years, at a rate of £16m per annual reporting period.
If they're on £5m a season in wages, that's then £16+1m = £21m impact to the club's "football bottom line" annually.
The logic of amortisation is that when paying a fixed, one-off fee to acquire the player as a kind of asset (which also has separate operating costs—that is, their wages), the signing club's liability can be spread out over the asset lifetime—the length of the contract.
If, after 3 years of the original 5 year deal, the club and player decide to extend their arrangement, and the player's offered a raise to £10m a season over a 4 year period, together with a £4m sign-on fee for kicks, then the original fee continues its amortisation at £16m for the first 2 of the 4 years of the new deal (which are the last 2 of the original 5).
However, as a fixed one off expense to retain the player as an asset, the £4m sign-on fee would also be amortised on the books at £1m per season over the 4 years.
(This may be incorrect, or depend on how the renewal is structured, for all I know. Maybe the remaining amortised £32m of the original fee is now spread out at £8m per year over the 4 years of the new deal, or something?)
For years 4–5 after the player's new deal, the club's "football bottom line" receives a £16+10+1m = £27m hit.
For years 6–7, the impact reduces to £10+1m = 11m, as the original fee has finally been dealt with.
I have no idea what applies to players sold on ... for example I don't know if the £16m per season continues to be applied to the books even if the player has moved on, or if any outstanding amortised liability has to be finalised at the time the player (the asset) departs.
Anyway, the above was pretty much an exercise in proving to myself how little I understand ... as mentioned I'd be curious if anyone can shed light on the normal (or legally required) methods of player accounting, or correct what I've written.
