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News and Commentary On Newcastle United Football Club By Ed Harrison, A Proud Exiled Geordie And Lifelong Fan

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Why Ashley Doesn’t Have To Spend Money Before July 1st

6:43 pm, Thursday, June 12th, 2014 by Dr. Ed Harrison · 12 Comments

There is a report in the Mirror today that Newcastle are on track to make a record profit of around £60M, when this financial year closes on June 30th – but of course we will not know the official results for several months.

mike ashley glum

Mike Ashley – Newcastle owner

And the report says Newcastle are rushing to spend some transfer money before July 1st, and that’s  so that the profits are not too huge, otherwise the report suggests Mike Ashley will face the Newcastle fans’ fury.

But any money spent on transfers now is only valid on July 1st – which is the start of the next financial year – and that’s because the contracts are valid from that date – so we assume the money paid for players goes into the next financial year too.

As an example the two players we have already signed – Ayoze Perez and Jack Colback are paid by their former clubs – Tenerife and Sunderland respectively – through June 30th, because officially the transfer window opens on July 1st – which happens to be the start of the next financial year, and that’s officially when any transfer fees are paid for deals already agreed between clubs.

We could be wrong on that as we said – but we don’t think so –  and there’s a reason why the financial year in football runs from July 1st through June 30th and  the transfers that count in any one financial year are those that are done from July 1st through August 31st and in January – and that’s basically two months in the summer and the month of January.

Since the transfer window doesn’t open until July 1st the only transfers that count for this financial year are those done last July and August and in January – so the transfer windows for this financial year are already over.

So saying Mike has to spend the money this month otherwise Newcastle will make huge profits doesn’t seem accurate.

That’s one reason Newcastle should have brought in replacement(s) for Yohan Cabaye in January, and that would have counted in this financial year, but we have had only two loan signings this financial year – Loic Remy and Luuk de Jong – as far as bringing players in is concerned.

And of course with an increase of over £35M from the Premier League in May compared to last year, our profits are going to be huge – assuming our costs have remained steady.

The Mirror report states that Newcastle will have one of the best financial results of clubs in all of Europe – and that could be accurate.

Now if we can only get the owner to spend some of the money that we have available on some really good players before September rolls around – then we’ll really be flying

Comments welcome.



Tags: Financial Fair Play · Financials · Newcastle News · Recruitment · Transfer News and Rumours · Transfer Target



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12 responses so far ↓

  • 1 Shaker // Jun 12, 2014 at 6:52 PM

    I’ve said 1 week ago that around £70M will
    enter Ashleys pocket !!
    i don’t think even with this HUGE money somthing
    will change about Newcastle
    too bad :(

  • 2 nimo // Jun 12, 2014 at 6:58 PM

    Think a lot of people forget about the day to day running of the club and expenditure.. Ashley will continue to rape the club and doesn’t care about it but just cos TV rights and table position along with ticket sales give us around 70mill profit (or whatever it is) doesn’t mean that’s what’s free .. If we just spent 25-30 million if be happy..
    Shame I won’t be happy with this regime

  • 3 Charlietoon // Jun 12, 2014 at 6:59 PM

    He does not want to win games he wants to make a buck so I’d predict business as usual. Keep us in the league but not in the cups or near the top.

  • 4 Shaker // Jun 12, 2014 at 7:11 PM

    # Charlietoon

    I also add to what you said
    MA don’t want the players to get tired in the Cup matches
    he want to make as best position in the league as possible
    so he can earn more Money !!

    remember all what he said many years ago :
    ” it’s just a business to me ”
    :( :(

  • 5 Sliema // Jun 12, 2014 at 8:08 PM

    This is a bit silly.

    He won’t be rushing to spend to “avoid the fury” from us fans, since when had that made a blind bit of difference to him?

    The date has nothing to do with anything financially.

    He ain’t spending the money, cause he ain’t spending the money!

  • 6 NEWEXPATMAGPIE // Jun 12, 2014 at 8:15 PM

    I believe this is the main reason he will never sell the Club? He gets all the Free? Advertising for his Sports Direct Empire, and he will stay until another Multi-Billlionaire makes him an offer he can,t refuse?

    It has always,always been just about the Money with this guy, so unfortunately we are stuck with him!

  • 7 tynesidetommo // Jun 12, 2014 at 8:25 PM

    Big Mike and spending spree? Someone’s having a chuckle and it sure ain’t the fans

  • 8 lesh // Jun 12, 2014 at 10:55 PM

    Ed’s summed up the financing of transfers perfectly – even I can understand and thus so should all of the where’s the money going brigade.

    Of course Ashley could decide to take money forward to the 2014-15 financial year as a provision, thus reducing any profit for the 2013-14 year – if the accountants could find a way of doing so in accordance with accounting rules. But then we’d hear cries of ‘where’s the money gone?’! Can’t win though a slice of any surplus could be used to reduce the Club’s debt to Ashley. Now that’d make sense.

    Spending in January would have been an option but it looks as though Kinnear made a dogs breakfast of his tenure with us.

    Repost from previous (just to help you get to sleep)

    Jesper. A man of many talents: a linguist, a font of musical knowledge, a wit, a sage – I could go on but unless you have double doors in your house, you’ll never get out of it!

    MadisonToon

    Your assessment of why the Pardew bashers have emerged from their albeit bride siesta, is fair.

    But, however much they want Pardew out, they’ll never get their wish until Ashley decides to make the change.

    Even I’ve worked out that the more his detractors bay for Pardew’s head, the less chance there is that Ashley’ll sack him. We saw that at the end of last season.

    It’s clear that Ashley alone’ll make any staffing decisions no matter how many fans protest so they should just get used to the fact that Pardew’s gonna be with us for the foreseeable future and so should either like it, or lump it.

    Tough I know but trying to force Ashley into making changes is like swimming against a strong tide or pi$$Ing against the wind.

    It’s time wasting, energy sapping and frustrating

  • 9 james589 // Jun 13, 2014 at 12:37 AM

    I should qualify this immediately by saying I have no direct knowledge of accounting treatments specific to football, but I work as an accountant and my understanding was that expenditure on players isn’t recognised all up front in the accounts in the year a player is first purchased.

    The club are acquiring an asset which they intend to generate value from and therefore amortise the cost of that purchase over the period which they intend to derive benefit from that asset (presumably the initial contract period). For example, if we were to buy a player for £12m and he signed a 2 year contract, a depreciation cost of £6m a year would be recognised in each of the 2 years (or £500k a month). So if we bought a player at that price now the effect would be to reduce our profits in the year to June by £500k – which if our profits are going to be as big as the Mirror are claiming – isn’t going to reduce it by much.

    There are ways of profit smoothing people try to employ, through timing on revenue recognition, the treatment of expenditure and as others have mentioned provisions etc. What none of this will do however is affect our cash balance. Unless we spend lots on players before the year end the accounts will show a very healthy cash balance. The club can hide its profits somewhat but can’t hide its cash so the question will not be so much where’s all the money gone as why aren’t we making the best use of the money we have?

    To summarise, even if we go on a big spending spree in the next 2 weeks it will hardly touch current year profits but it would reduce our available cash balance at the financial year end.

  • 10 james589 // Jun 13, 2014 at 12:46 AM

    And Ed has it spot on- costs would only start to be recognised when the contractual right exists and the asset (player) is first available for use i.e. 1 July onwards so there would be nil impact on current year profits, but cash balance could be reduced if payment for players was made prior to June 30.

  • 11 lesh // Jun 13, 2014 at 1:37 AM

    james589 you’re correct in saying that were we to lay oh a fee in full now, that it wouldn’t affect profit.

    But the point Ed’s made is that a payment would probably fall due on July 1 – the new financial year.

    In any event, amortisation would mean and as you said, that the full cost wouldn’t be taken from one year. But the cash position would be affected in one hit.

    Now as you’re an accountant, you should agree, I’m sure that the measure of the health of a business is its cash position.

    Even if a business is carrying debt,, a profit along with a good asset position and income streams and lots of cash is a business that would influence potential purchasers.

    Maybe Ahley’s not daft after all?

  • 12 Sav // Jun 13, 2014 at 4:05 AM

    …otherwise he’ll face fans’ fury?
    That’s never caused him a sleepless night before now. Monster Mash is looking at club ownership as a project to make profit and benefit free advertising. No-one has ever looked at running a club in this way before, ie with profit the sole focus, and with the new TV revenues and merchandising, he may well be blazing a atrail others follow. God help us.




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