Essay Football Finance

Submitted By huangshuyang
Words: 5179
Pages: 21
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Independent study 2005/06 200123902

Abstract

In my study I set out to see whether the structure of the football club alters the way in which a club approaches its investments in new players, and also the way in which the players are valued and how they appear in the clubs financial reports. Along with this I was also given the view of Club 1’s financial director who gave me a detailed response on how a football club and its investments differs from that of a more conventional business ( Publishing House) as he had only moved to the football club 10 months earlier. I interviewed two financial directors at different football clubs the main difference being the way they were structured. Along with the interview I obtained the financial reports for the year 2002-2003 and 2003-2004. This was to allow me to compare the information within the different club’s accounts and link this back to the interview I had conducted. What I found was that the structure of the football club only really effects major decisions however the way in which the two clubs value their players and how the players increase or decrease in value are treated the same. This is due to FRS 10 and 12 which are two regulations that football clubs must adhere too.

Introduction

Does the structure of the football club effect the way the club operates with regard to investments in players, football clubs such as Tottenham Hotspur who are trading shares on the Stock Exchange and allowing people to invest rather than being run by just one person.

My research is going to look into the different ways football clubs operate depending on their ownership structure. Football transfers are widely reported in newspapers and by the clubs themselves. In particular I want to look into the investment decision; I feel that this process will differ considerably between the two. I will also look at the clubs published reports to see how a football club actually values a player as an asset. So there is a lot of data about the investments however the reliability of the data is questionable. I will produce my data in the form of a report as this will portray my findings better.

Investment decisions are an important part of any company from buying a new computer to fully furnishing an entire factory; all of these decisions require a careful thought process and justification to the board or shareholders. The same applies to that of a football club. Now that football clubs are becoming public companies so they are competing for share prices like any other company. This research I am proposing could be useful to high-light any differences if there are any. Delloite did a review in 2003 and it found that Manchester United were the richest club in the world with a number of clubs in the top 20 companies in the UK. All the existing literature tends to look at the theory behind investments and investing in stock markets. Although this will have a similar approach it is not quite the same as there is very little that actually looks into the process a football club goes through before it decides to invest in a particular item.

Theory

Football players have been classed as intangible assets by their clubs so that the value placed upon them can be included in the accounts of the club. In the world of accounting the inclusion of intangibles on the balance sheet has been a hot topic as to whether it should be allowed. In September the ACCA held a conference in Edinburgh where this idea was discussed. Revisions to the Companies act 1985 the introduction of the OFR ( Operating Financial Review) now provides an accounting underpinning for certain companies to report on their people policies. ACCA stand point on valuation of human resource is that they believe more research needs to be done before applying financial
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