Untenable position?

Oldsparkey

Oldsparkey

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Jan 27, 2011
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With CAS issuing their final ruling on the Emiliano Sala dispute in February, has City shot itself in the foot by strenuously claiming Sala was not a City player at the time of his tragic death?

Look at a worst case scenario that CAS finds 100% against City and orders it to pay up. With the club continually denying Sala's status as a CCFC player, we can hardly go back on that position and ask the insurers to settle the claim.

I know that City have made a provision of £20.7M as a contingency in the recent accounts, but that's not cash, just prudent accounting requirements. If City were found liable, they would have to find the actual cash from somewhere else if not the insurers.

If I were the insurance company, I'd be inclined to tell City to naff off.
 
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Caught between the devil and deep blue sea springs to mind.

Agree he's our player then the fee (possibly plus interest) will be payable.

Hold the line and not pay anything, or maybe a smaller proportion, and the burden is not that great.

However if found against us then we cop for the lot and interest and costs. Ouch!!!

Subject to appeal of course.

Then what liability does the arranger of the flight have and does he have any assets left for him to pay? Probably not.

VT will have his best legal guys on this hence recent club silence.

My guess is there will be some sort of joint liability. How much down to us, who knows, although the lack of any spending power this summer may be indicative.
 
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Oldsparkey said:
So it makes me think why the need for a provision in the accounts?

Such specific instructions issued to the club by the insurer would be an admission that they're accepting liability.
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I’d have imagined the insurers are party to how the case is being run.
 
ninian opinion said:
I’d have imagined the insurers are party to how the case is being run.
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I'm pretty sure you're right Nin.

The point is if the insurers are leading the case, then they must see themselves as liable should it fail, viz Sala is declared a City player. The aim for them would be that CAS finds for Cardiff and then they (and City) would be off the hook.

If it is the insurers who are pushing this, it's clear they see themselves at finacial risk if it fails. The logic is that whatever the outcome, City should therefore be covered, so why the need for a hefty provision in the accounts?

It may be just prudent accounting practice, but that provision could be viewed by CAS as a tacit admission of liability.
 
Oldsparkey said:
I'm pretty sure you're right Nin.

The point is if the insurers are leading the case, then they must see themselves as liable should it fail, viz Sala is declared a City player. The aim for them would be that CAS finds for Cardiff and then they (and City) would be off the hook.

If it is the insurers who are pushing this, it's clear they see themselves at finacial risk if it fails. The logic is that whatever the outcome, City should therefore be covered, so why the need for a hefty provision in the accounts?

It may be just prudent accounting practice, but that provision could be viewed by CAS as a tacit admission of liability.
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I think it is prudent accounting. I believe the auditors have a responsibility to make provision for any potential known future liability.
 
BluefromBridgend said:
I think it is prudent accounting. I believe the auditors have a responsibility to make provision for any potential known future liability.
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I can understand that Bluey, but there are always "potential" future liabilities (losses) for which provisions are not made and for very good reasons.

For instance if a club buys a player for say £10M, he could sustain a career ending injury or die in a road accident shortly after, and that's £10M down the pan. Do you then set a provision of £10M in the accounts for that just in case? No, because he's covered by insurance in the same way that Sala would have been.

If Sala is declared to have been a City player at the time of his tragic death, then presumably our insurers are liable. If declared not, the responsibilty/obligations lie with Nantes. Either way, there should be no potential financial implications.

So why the need for an accounting provision - unless there's something else we don't know.
 
Oldsparkey said:
I can understand that Bluey, but there are always "potential" future liabilities (losses) for which provisions are not made and for very good reasons.

For instance if a club buys a player for say £10M, he could sustain a career ending injury or die in a road accident shortly after, and that's £10M down the pan. Do you then set a provision of £10M in the accounts for that just in case? No, because he's covered by insurance in the same way that Sala would have been.

If Sala is declared to have been a City player at the time of his tragic death, then presumably our insurers are liable. If declared not, the responsibilty/obligations lie with Nantes. Either way, there should be no potential financial implications.

So why the need for an accounting provision - unless there's something else we don't know.
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As I said Sparks, prudent accounting procedures. The scenario you painted is random and unknown whereas Sala's death and the circumstances of the actual death are, more or less, a matter of fact. You can't provide for an unknown event.

There will be something in SAP (standards/statements of accounting practices) which says the eventuality must be provided for, especially with the amount involved.

Any accountants/auditors on here who can put this better than me?
 
BluefromBridgend said:
As I said Sparks, prudent accounting procedures. The scenario you painted is random and unknown whereas Sala's death and the circumstances of the actual death are, more or less, a matter of fact. You can't provide for an unknown event.

There will be something in SAP (standards/statements of accounting practices) which says the eventuality must be provided for, especially with the amount involved.

Any accountants/auditors on here who can put this better than me?
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We'll have to ask Nin - I think he's in that field.
 
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You are right Bluey, just found this...................

"There remains a provision in the club`s accounts (as there was in the previous year) in respect of the ongoing legal dispute over the Emiliano Sala transfer. The figure is £20.7m but, as the accounts clearly note, no such sum is considered payable and will be extinguished after a subsequent hearing of the case by the Court of Arbitration for Sport. However, to comply with prudent accounting requirements, full provision continues to be made in the accounts."
 
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Sorry Nin - my error. <doh> In that case, can you help me with my drink driving charge instead?.......<laugh>

Still don't get it though. The club's balance sheet value is reduced by the inclusion of a "prudent" £20.7M accounting provision for which it wouldn't be liable because......

A) CAS would find for City and therefore deem them not to be liable for the payment, or.......

B) CAS would find against City but it wouldn't have to be paid by the club anyway because it would be covered by insurers, right?

So either way, the club is worth £20.7M more than the balance sheet states? Prudent or not, where's the sense in that?

In the absence of any meaningful club football or news about it, this is the best fun we can get at the moment.......<doh> <laugh>
 
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As an accountant and former auditor, I can confirm that provision should be made for possible extraordinary events. However, the existence of insurance should mitigate the cost....unless there are issues over the insurance policy ......or maybe if there was no policy in force???? After all, company policy on flights was not followed and company policy on organising insurance may not have ben followed or someone cocked up!!!!
 
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FrankfurterBlue said:
As an accountant and former auditor, I can confirm that provision should be made for possible extraordinary events. However, the existence of insurance should mitigate the cost....unless there are issues over the insurance policy ......or maybe if there was no policy in force???? After all, company policy on flights was not followed and company policy on organising insurance may not have ben followed or someone cocked up!!!!
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Furter - those were my thoughts, but no accountancy qualifications at all for me pal, just a graduate of the University of Life having been in business for 35 years of it. I worry about the insurance (or lack of) implications. We all know the lengths, rightly or wrongly insurance companies will go to avoid paying out.

If there was cast iron insurance cover in place, then that would mitigate the need for a balance sheet provision of such enormity to cover the transfer fee, agent's fees, costs and accrued interest on the potential debt - so why is it there?

I understand single event cover is limited to £16M under City's policy. That would certainly cover the Nantes transfer fee leaving the other issues to be resolved meaning a much lower provision needed to be made as a contingency.

I think there's a lot about the insurance implications surrounding this tragic incident that cost Sala his life yet to be played out. Particularly those surrounding the authorisation/permission given to McKay to arrange a flight for the player - a flight that has been found to be illegally operated using an aircraft and pilot not fit for purpose.
 
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ccfcremotesupport said:
The owner of the plane is absolving herself.
Can see the insurers wanting to sue if its ruled he was our player.
A long way yet to go.

https://www.bbc.co.uk/news/uk-wales-58980475
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Christ, putting the clubs potential financial culpability to one side, it really is starting to sound like a very murky, unpleasant chain of events both up to and after the tragic event.

It looks very much as if Mr Henderson has an awful lot to answer for.

It doesn't make any of the senselessness of it all any easier.
 
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It's awful. Such a terrible chain of events that could and should have been halted a number of times. Everyone now diving for cover leaving Henderson very exposed.

For the club's sake, I hope their statement is true in every aspect. It doesn't absolve them from the fact that they could have insisted he took commercial flights and arrived a day later but I just hope they did not have a legal responsibility to do so.

As an aside, Mrs. Bfb has been selected for jury duty in Cardiff next week. Aunty, bollocks, uncle I know but if it had been this week she could have been on the case.
 
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