The acquisition of a player’s registration must be recognised in the financial statements when all significant conditions for the transfer to take place have been satisfied, i.e. it is effectively unconditional, which means that there must be a legally binding agreement between the two clubs and between the acquiring club and the player.
The disposal of a player’s registration must be recognised in the licence applicant’s financial statements when all significant conditions for the transfer to take place have been satisfied, i.e. it is effectively unconditional and the risks and rewards have been transferred to the new club.
Licence applicants that capitalise the costs of a player’s registration as an intangible asset must apply certain minimum accounting requirements as described in Annex G.3. A licence applicant can expense the costs of a player’s registration rather than capitalise them as an intangible asset if this is permitted under national accounting practice.
The minimum accounting requirements for licence applicants that capitalise the costs of a player’s registration as an intangible asset are as follows:
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Only the directly attributable costs of a player’s registration can be capitalised as an intangible asset. For accounting purposes, the carrying value of an individual player must not be revalued upwards, even though a licence applicant’s management may believe market value is higher than carrying value. In addition, whilst it is acknowledged that a licence applicant may be able to generate some value from the use and/or transfer of locally trained players, for accounting purposes costs relating to a licence applicant’s own youth sector must not be included in the balance sheet – as only the costs of a player’s registration are to be capitalised. All forms of consideration to and/or benefit of players (such as sign-on fees) must be treated as employee benefit expenses and not costs of a player’s registration. Finance costs arising in respect of borrowings are treated as finance costs and are not costs of a player’s registration even if the borrowings were obtained to help finance the acquisition of player registrations.
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Amortisation of costs of a player’s registration must begin when the player’s registration is acquired. Amortisation ceases when the asset is fully amortised or derecognised (i.e. the registration is considered as being permanently transferred to another club), whichever comes first.
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For each individual player’s registration, the depreciable amount must be allocated on a systematic basis over the duration of the player’s original contract, up to a maximum of 5 years. This is achieved by the systematic allocation of the cost of the asset as an expense from the date the player’s registration is acquired and over the period of the player’s contract, up to a maximum of 5 years. If the period of a player’s contract with the club is extended, then the intangible asset carrying value of the player’s registration plus any additional directly attributable contract negotiation costs (e.g. agent/intermediary fees) can either be amortised over the remaining period of the original contract, or be amortised over the extended period of the player’s contract, up to a maximum of 5 years from the date of the contract extension.
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All capitalised player values must be reviewed for impairment each year by the licence applicant’s management. If the recoverable amount for an individual player is lower than the carrying amount on the balance sheet, the carrying amount must be adjusted to the recoverable amount and the adjustment charged to the profit and loss account as an impairment cost. It is recommended that each licensor requires each of its licence applicants to apply consistent accounting policies in respect of player registration costs.
The net book value of a player’s registration should be reviewed for impairment in the reporting period, in the following circumstances:
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when it becomes clear by the annual accounting reference date that a player will not be able to play again with the club, for example if he suffers a career-threatening injury or is permanently unable to play professional football. In this case, the net book value of the player's registration on the balance sheet must be fully impaired in that reporting period. The following events do not represent a cause for recognising impairment loss:
- A player suffers an injury in a reporting period and is temporarily unable to play professional football with the club, or
- A player suffers a decline in fitness or ability and is not selected for participation in first team matches.
In this regard, the future wages of a player suffering from a career-threatening injury or permanently unable to play professional football must continue to be recognised as employee benefit expenses throughout the duration of the player’s contract.
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if the management of the club is committed to permanently transfer a player's registration and the transfer occurs just after the annual accounting reference date. In this case, the net book value of the player's registration on the balance sheet should be reviewed for impairment if the disposal proceeds for the permanent transfer of the player’s registration to the new club is lower than his net book value. The accounting principle must be disclosed in the financial statements and applied consistently from one reporting period to another.
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if the management of the club has temporarily transferred a player's registration for an amount lower than the amortisation cost.
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If two or more players are transferred in opposite directions between clubs, the licence applicant must assess whether these transfers are to be considered as player exchange transactions under the terms of these regulations. If so, the international accounting requirements for the exchange of assets (i.e., currently International Accounting Standard 38, paragraphs 45-47) are to be applied when calculating the profit from the disposal of the outgoing player(s) and the registration costs for the incoming player(s).
In principle, when calculating the profit from the disposal of the outgoing player’s registration, the proceeds cannot exceed the net book value of the cost of the player’s registration in the licence applicant’s financial statements, adjusted to take account of any net cash paid in the context of the exchange transaction and the registration costs for the incoming player must be capitalised at the maximum at the carrying amount of the outgoing player, adjusted to take account of any net cash paid by the club in the context of the exchange transaction.
A player exchange transaction is when two or more players are transferred in opposite directions between clubs, and which typically includes one or more of the following conditions in respect of the players transferred in and out (not exhaustive list). Transfers, incoming and outgoing:
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are included in the same transfer contract;
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are included in different transfer contracts that are linked to each other;
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are concluded in the same registration period;
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do not involve any or only limited monetary disbursements;
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do involve the same or similar payment obligations or payment deadlines for both the players transferred in and the players transferred out that are likely to offset each other.
Profit/loss on disposal of a player’s registration must be calculated net of any amounts paid and/or payable that are directly attributable to the disposal of the player’s registration, comprising:
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realised conditional transfer compensation for amounts which have become payable on the disposal of the player’s registration (e.g. sell-on fee payable to another club);
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any other directly attributable amounts paid and/or payable to another party such as another football club, agent/intermediary, or national football association/league.
The licence applicant must apply the following adjustments in respect of the permanent transfer of a player’s registration between clubs that are related parties:
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The club that has transferred in the player’s registration must calculate the cost of acquiring the player’s registration – for the calculation of an amortisation charge for the reporting period (for clubs using the capitalisation and amortisation method of accounting for player registrations) or for the costs of the player’s registration (for clubs using the income and expense method of accounting for player registrations) – using the greater of the following amounts:
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The actual transaction cost of acquiring the player’s registration;
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The historical costs of the player’s registration in the financial statements of the club that has transferred out the player.
If the calculated amortisation charge is greater than the recorded amortisation charge or the calculated costs of the player’s registration are greater than the recorded costs of the player’s registration, then an appropriate adjustment must be made so that the difference is recognised in the restated financial statements.
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The club that has transferred out the player’s registration must calculate the disposal proceeds of the player’s registration – for the calculation of the profit on disposal of the player’s registration (for clubs using the capitalisation and amortisation method of accounting for player registrations) or for the income from the player’s registration (for clubs using the income and expense method of accounting for player registrations) – using the lower of the following amounts:
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The actual transaction proceeds on disposal;
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The net book value in respect of the costs of the player’s registration in its financial statements.
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If the calculated profit on disposal is lower than the recorded profit on disposal or the calculated income from the player’s registration is lower than the recorded income from the player’s registration, then an appropriate adjustment must be made so that the difference is recognised in the restated financial statements.
The above accounting requirements apply by analogy to any other personnel, e.g. head coach, and release income/costs or similar paid to another club.