6 - Gavi

[delancey]

You mean 10%.
Not 0.1%

Yeah exactly. I was writing out the math. Haha

 

[mc_lovin]

My point is that 4.5 seasons have already passed by (54 months). 145m *.10 % = 14.5m still to be amortized over the next 6 months. My line of thinking is that whatever amount that has already been amortized remains amortized. Therefore, amortizing the remaining 14.5m over two seasons more isn?t really that much of a change.

I guess the accounting isn't done day by day. More like once a year, meaning he's still with ~27ME in the books. I am sure a shrewd accountant can move around the numbers

 

[delancey]

I guess the accounting isn't done day by day. More like once a year, meaning he's still with ~27ME in the books. I am sure a shrewd accountant can move around the numbers

Accrued expenses need to be accounted for at the end of the fiscal year. That is, whatever expense accrues in a given period must be reported in that period, according to the matching principle. Expenses must be tied to revenues earned in a given period. That?s why I?m breaking it down in months.

 

[mc_lovin]

Accrued expenses need to be accounted for at the end of the fiscal year. That is, whatever expense accrues in a given period must be reported in that period, according to the matching principle. Expenses must be tied to revenues earned in a given period. That?s why I?m breaking it down in months.

You seem to have more of a clue than me, but is amortization really an expense and not just a book value? The actual payment for Dembele is independent of the amortization (and the payment is the actual expense)?

 

[delancey]

Typically there are four types of depreciation methods used: straight line, declining balance, sum of the years? digits and units of production depreciation. It could be that under Spanish accounting law, clubs are allowed to depreciate their assets differently.

To answer your question, assume that a business purchases a machine for 10 dollars. That machine has a useful life of 10 years. What this means is that the machine (the asset) will generate value (revenue) during those 10 years (not only in the first year). Therefore, the expense of that asset must be distributed across those 10 years (its useful life). The asset has a contra account named Accumulated depreciation. The contra account essentially adjusts the book value (book value minus accumulated depreciation). This is done to highlight the machine?s current book value on the balance sheet, while also accounting for its role in generating revenue for that given year on the income statement). So, depreciation adjusts the book value of the asset on the balance sheet, and increases the depreciation expense on the income statement every year until the asset is no longer useful. That way, investors and other stakeholders can understand the accounting of transactions that occurred in the past and how they affect the present.

Every year the following journal entry takes place:
Depreciation expense XX
Accumulated depreciation. XX

 

[khaled_a_d]

Typically there are four types of depreciation methods used: straight line, declining balance, sum of the years? digits and units of production depreciation. It could be that under Spanish accounting law, clubs are allowed to depreciate their assets differently.

To answer your question, assume that a business purchases a machine for 10 dollars. That machine has a useful life of 10 years. What this means is that the machine (the asset) will generate value (revenue) during those 10 years (not only in the first year). Therefore, the expense of that asset must be distributed across those 10 years (its useful life). The asset has a contra account named Accumulated depreciation. The contra account essentially adjusts the book value (book value minus accumulated depreciation). This is done to reflect the machine?s current book value on the balance sheet, while also accounting for its role in generating revenue for that given year on the income statement). So, depreciation adjusts the book value of the asset on the balance sheet, and increases the depreciation expense on the income statement every year until the asset is no longer useful. That way, investors and other stakeholders can understand the accounting of transactions that occurred in the past and how they affect the present.

Every year the following journal entry takes place:
Depreciation expense XX
Accumulated depreciation. XX

I think the main question is whether the adjusted amortization is done on monthly or yearly basis.
Seems to me the club count it as yearly, but you are saying monthly, right?
If it is yearly, and assuming all of Dembele add-ons are paid (doubt it) so he cost us 145M, that means he counts for 29M a year. 4 years has already been accounted for.
The question is about last one, the remaining 29M. Is it 29M or 14.5M since half of the season is over?

If it is 29M, and we renew for 2 years, while lowering his salary (somehow) then instead of having 29M this year, it will be 29M on 3 years, so it is around 19.33M we save on books this year in addition to whatever we lower from his salary?
If it is 14.5M, then we are spreading that amount on 2-5 years, making it 5.8M per year and thus will be saving 11.6M this year, in addition to whatever amount of salary we save.

If it is the later situation, which you suggest, then 11.6 is indeed not much.
That being said, I think the club needs to avoid losses this year, so every million counts for them.
So, it makes sense they can be a little bit desperate to renew him, unfortunately.

Edit:
Assuming we paid no add-ons (unlikely, but just to get the range we are saving) then he counts for 105M, that is 21M per year.
That is 14M saving if it is counted annually, 8.4M if it is counted monthly.

 

[delancey]

I think the main question is whether the adjusted amortization is done on monthly or yearly basis.
Seems to me the club count it as yearly, but you are saying monthly, right?
If it is yearly, and assuming all of Dembele add-ons are paid (doubt it) so he cost us 145M, that means he counts for 29M a year. 4 years has already been accounted for.
The question is about last one, the remaining 29M. Is it 29M or 14.5M since half of the season is over?

If it is 29M, and we renew for 2 years, while lowering his salary (somehow) then instead of having 29M this year, it will be 29M on 3 years, so it is around 19.33M we save on books this year in addition to whatever we lower from his salary?
If it is 14.5M, then we are spreading that amount on 2-5 years, making it 5.8M per year and thus will be saving 11.6M this year, in addition to whatever amount of salary we save.

If it is the later situation, which you suggest, then 11.6 is indeed not much.
That being said, I think the club needs to avoid losses this year, so every million counts for them.
So, it makes sense they can be a little bit desperate to renew him, unfortunately.

Edit:
Assuming we paid no add-ons (unlikely, but just to get the range we are saving) then he counts for 105M, that is 21M per year.
That is 14M saving if it is counted annually, 8.4M if it is counted monthly.

I merely broke it down monthly to account for the previous 6 months of his contract. That amount of depreciation will be accounted for in full (within this fiscal year), regardless of when a business chooses to record it (monthly, semi-annually, annually, etc). Depreciation expense accrues throughout the year, but must be recorded at the end of the year to reflect the financial impact of said asset on a company?s business. The end result is the same.

Ex. If you buy an asset with a useful life of 12 months, but then sell it after 6 months, the impact on the business must still be recognized for the 6 months the asset was on the books.

It could be that the club isn?t merely using straight line depreciation, in which case the math above is totally off. The Unusual nature of running a football club may have given accountants more freedom to account for depreciation. I don?t know the answer here.nothing is usually as easy as it seems. I?m sure some ?legal? cooking of the books has occurred. Haha

Edit. And I agree that a few million more here and there could make all the difference for a club in our situation. Man, how we have sunk!

 

[Windhook]

The indications on the pitch are that he will renew, like kissing the badge after scoring. Right now he is the centrepiece of Xavi's team and he's performing well. The future is problematic, though, in few seasons he might want to move away if the club stays mediocre as this season.

 

[khaled_a_d]

The indications on the pitch are that he will renew, like kissing the badge after scoring. Right now he is the centrepiece of Xavi's team and he's performing well. The future is problematic, though, in few seasons he might want to move away if the club stays mediocre as this season.

Moriba was same on the pitch, fighter and all

 

[jairzinho]

.......But he never kissed the badge.

 

[Windhook]

Moriba was same on the pitch, fighter and all

Yeah. But Moriba demanded too much money for a few okayish displays on the pitch in La Liga, meanwhile I think Gavi deserves a better salary given his great talent.

 

[behindbrowneyes]

Moriba was same on the pitch, fighter and all

Ilaix always had a bit pogbaish lazy attitude on the pitch. Gavi has the fight of Puyol in him. Always full force, no matter what.

No doubt about this kid loving Barca.

Ilaix had a toxic, money-hungry environment and Barca had already to go over their internal salary limit for B players which they only did twice, the other one being Ansu. No signs yet that Gavi's environment is that way.

The fact that his extension takes time mighz also have something to do with club wanting him to register as first team player. Aguero is gone, but club wants a replacement and needs to get rid off other players in order to have first team spots.

 

[delancey]

Ilaix always had a bit pogbaish lazy attitude on the pitch. Gavi has the fight of Puyol in him. Always full force, no matter what.

No doubt about this kid loving Barca.

Ilaix had a toxic, money-hungry environment and Barca had already to go over their internal salary limit for B players which they only did twice, the other one being Ansu. No signs yet that Gavi's environment is that way.

The fact that his extension takes time mighz also have something to do with club wanting him to register as first team player. Aguero is gone, but club wants a replacement and needs to get rid off other players in order to have first team spots.

Yeah I think the delay is related to us being at the limit of the salary cap.

 

[Porque]

I think also Gavi has shown absolutely no doubt that he is at a first team level- inspite of his age. Ilaix showed some great actions but his overall game had alot of holes to develop.

Gavi, like Pedri who got a big renewal, is already a key player.

When players show the consistent level like Pedri and Gavi, then you really have to renew based on that and totally ignore the age. Of course both sides will want to have some sort of feeling process to make it a long term relationship as obviously subsequent renewals will only go up, and you don't want to create any tensions or dramas.

 

[Andresito]

Boy's brutality is absolutely beautiful. Will easily become a Camp Nou favourite with mentality like this.