The Business of Transfers

We’re in the heat of the summer mercato, and with that comes a lot of player transfers. In order to sort through the financial minutia of the transfer market, I break down a few accounting aspects that affect a club’s business.

Accounting treatment of transfer fees

We’ll start with defining a few terms and concepts. For accounting purposes, the transfer of a player is considered acquiring their registration rights. This constitutes an intangible asset, as the club reaps all the economic benefits of controlling said rights. As such, if there is a transfer fee associated with acquiring the player it is considered a capital cost, and can be expensed over the term of the contract.

Let’s say the club acquired a player for $25 million and agreed to a five year contract. The following schedule outlines the net book value (NBV) of the player rights over the life of the contract:

Year Opening NBV Amortization Expense Accumulated Amortization Closing NBV
1 25 million 5 million 5 million 20 million
2 20 million 5 million 10 million 15 million
3 15 million 5 million 15 million 10 million
4 10 million 5 million 20 million 5 million
6 5 million 5 million 25 million ——


Player costs per year

When planning player acquisitions, management has to think of the player’s salary but also the affect of the transfer fee each year, as outlined above.

Using the same example above, with an annual salary of $2.5 million, the annual cost of the player to the club would be:

Salary 2,500,000
Amortization 5,000,000
Annual cost of player 7,500,000


Another aspect of transfers that is rarely talked about is agent fees. Any agent fees associated with a transfer also get added to the capital cost of the transfer. So, if we re-evaluate the example above, with $3 million in agent fees, we get the following annual cost per player:

Salary 2,500,000
Amortization 5,000,000
Agent fees 600,000
Annual cost of player 8,100,000

It’s clear to see that out of contract acquisitions are hardly free transfers.

Player sales

A common myth is that the profit to be derived from a player sale is the “net spend” or the proceeds of the sale less the original cost. That is not how it works for accounting. Let’s revisit our original example with a $25 million transfer fee and a $3 million agent fee:

Year Opening NBV Amortization Expense Accumulated Amortization Closing NBV
1 28 million 5.6 million 5.6 million 22.4 million
2 22.4 million 5.6 million 11.2 million 16.8 million
3 16.8 million 5.6 million 16.8 million 11.2 million
4 11.2 million 5.6 million 22.4 million 5.6 million
5 5.6 million 5.6 million 28 million ——


If the player was sold after year 3 for $15 million, those who believe in net spend would say that the club lost $10 million since the transfer fee was $25 million and the sale was for $15 million, however that is not the case. By accounting standards, the club actually had a capital gain of $3.8 million, shown below:

Original Cost 28,000,000
Less: Accumulated Amortization 16,800,000
Net book value 11,200,000
Less: proceeds of disposition 15,000,000
(Gain)/Loss on sale 3,800,000

Repeating the same exercise but with a home-grown player, or a player with a fully amortized transfer fee, we can see that the selling price is 100% profit:

Original Cost 28,000,000
Less: Accumulated Amortization – 28,000,000
Net book value
Less: proceeds of disposition -15,000,000
(Gain)/Loss on sale -15,000,000


Understanding the accounting principles behind transfers is becoming increasingly important in modern football since the introduction of UEFA Financial Fair Play regulations. As a fan, it might be frustrating to see your club make moves that don’t appear to make the most sporting sense, but never forget, there is always a business aspect to transfers.

Source: PWC


This blog post originally appeared on Calcio Crazy.

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