Have you ever wondered why big clubs like Real Madrid, and Barcelona can spend millions of euros, but can post a big profits in their balance sheets. Well its a very simple trick, and its all about accounting.
|AMORTIZATION ON CRISTIANO RONALDO|
Example would be, when Real Madrid bought Cristiano Ronaldo for €100 million, and the player himself signed a 5-year contract at the club. This meant that Real Madrid paid for Cristiano Ronaldo only €20 million (100/5 = 20) in the first year of his signing in the balance sheet. Real Madrid than reported this €20 million in balance sheet every year during that 5 year contract, except if there was extension (and there was an extension). With extension of the contract, that 100 million gets to even smaller parts.
|WRONG SPENDING AND SELLING|
With this kind of amortization, clubs can show much better financial results. In other words, when Real Madrid bought Cristiano Ronaldo for €100 million, and let say, they sold one random player for €20 million, their balance sheet would indicate that their spending was equal to their selling, which doesn’t really make sense, now does it.
This is why the clubs, that are selling and buying players the most, are showing totally unrealistic picture in their balance sheets. Manchester United spent around £150 million on players last summer, but sold players for around £30 million. That means, if every player Manchester United bought signed a 5-year contract (a big possibility), than Manchester United spent exactly £30 million, or in other words, the same amount they sold that summer. That would also mean that Manchester United profit was actually £120 million worse (120 – 30 = 120), than they showed.