City Losses

Without question they'd have to sell for far less than the contract values of those players just to attract a sale, unless they can find an uber rich Mike Ashley who'll forget to do his homework. They'll take a big loss when they eventually sell, but as OT says they won't mind that.

And yes, they will end up selling players, that's not opinion its more or less fact.

 

All they will do is pay off the debt and maybe sell some of the higher earners for probably more than they bought them for before selling the club. It would be the only viable way

 

There is no debt. They have bought the club for other reasons and do not expect it back. They can afford these kinds of write offs.

 

You really need to start reading whole threads!

 

Hahaha. Sorry what have I missed this time. I just read that first post and thought "what debt?" It all just gets balanced out nicely by their above board sponsorship deal...........

 

Man Citeh will not become financially sustainable without their owners backing because of their stupidly high wages. I hope that they do look into how much sponsorship deal are likely to be worth and limit Man City to it (I can't see it happening), as they would not be able to pay the wages out of the income which they get.

 

That's just it, they're quoted saying they won't be spending so much on transfers going forward, and then operating costs will be in line. Except most clubs can't even break even with average salaries, let alone ones quadruple that...I don't know how they'll be able to hide the inevitable future losses?

 

Maybe they have paid the contracts upfront to the players (that's why Tevez doesn't care) before next year, therefore they won't have any outgoings and anything they bring in will go on signings...

...I think thats the only way around it. It's a bit backwards like.

 

I.e. pay three years pay in the month before the rule comes in? Would be hilarious to see what Super Mario would do with it...

 

They can't do that. Even if they pay the player his contract upfront, they have to bookkeep it as a prepayment on the balance sheet and then accrue an equal share during each year that the payment is relevant for, thereby returning the salary expense to the profit and loss for each of the following years (and therefore the break even calculation).

Tevez is a major asset for them in their attempts to break even though, hence why they haven't fired his ass. They paid nothing for him so he is a zero asset on their balance sheet. But they could effectively sell him for upwards of £40m meaning they could show a profit of that much in the year of sale. That will pay a heck of alot of wages and probably balance the books in one of the years.

As for the rest, it isn't as rosy as you might think for them. Income from connected parties such as Etihad has to tested against fair market value and any excess removed from the profit and loss for the break even calculation. They will also have to build in an interest charge (at market value) on the debts owed to the owner.

Many have pointed out that the debts will be written off. This is all well and good and I agree that ultimately they will be. However, when a company writes off a creditor you have to show the balance written off as income. But the fair play regs do not allow such income to be included in the break even calculation meaning that they will not be able to use this technique to cancel out either the added in loan interest expense or to cancel out the expenses the funds loaned originally paid for (i.e. the purchase of the players or payment of their wages).

Citeh are going to have to try and be very creative in cooking the books if they want to get into europe. Saying that if the fair plays regs fail to prevent them from doing so I think it will be fair to say that the Fair Play Regulations will not be worth the paper they are written on because Citeh's flouting of the intent behind the rules has been incredibly blatant. We can only hope that they do their job ...!

 

As someone who's spent all day revising financial strategy for an exam next week, you're not helping me relax in my off time...

 

Sorry about that

What qualification are you studying for?

 

CIMA strategic level. It's a nightmare because its been 3 years since I either sat an exam or worked in a finance department. Reckon I can blag the two wordy ones, but Thursdays the numbers bit and I reckon my lack of practice will let me down. Plus I'm horrendously ill disciplined and home learning...

 

Can't be worse at home learning than me, I'm the world's worst Glad my studying years are well behind me.

Good luck with the exam next week. Wish I could give you some kind of magic wand method to get around the hard work but i'm afraid there is no short cut. Gonna have to practice, practice and practice somemore

Have you got some good practical study material to work with?