Club Assets

[enotian 562]

28 minutes ago, iainb said:

"Creative" Accounting 

 you're not allowed to be that creative.

From an association perspective they may insist upon clubs having rider assets. Indeed I understand that is why Newcastle picked up Roynon this season. But from a business valuation perspective the riders are not assets and do not feature on the balance sheet.  By acquiring a licence you might obtain the riders 'registration' which entitles you to first option on that rider or a loan fee from another club but these are just rules of the association.  I think it was Matej Kus where there was a stand off where he refused to ride for Redcar and Redcar didn't want to loan him out and Newcastle didn't want to buy him. Ultimately he rode for Newcastle as a compromise was reached. Not sure if Newcastle bought him but got their fingers burnt on his baking trays if they did.

The riders are sole traders or private businesses in their own right. I don't think if I sub contracted some work to Google that I could include the value of Google on my companies balance sheet.  Might be worth a try.

If you look at Newcastle this season.  They've had to raise £8k via Just Giving.  As far as I'm aware at no point did another promoter offer to buy Archie Freeman. A young talent who could go very far in the sport and the potential to improve dramatically over the next couple of seasons and entertain supporters for hopefully many many seasons. In ever sense a potential asset to a club.  Just not from a financial perspective because once any contract he has agreed expires he is effectively free to sign a contract with anyone else despite what the association might think. Especially as he might at some stage decide to ply his trade in Poland or Sweden, without any transfer fee being applicable.

The IPL in cricket is an interesting comparison.  Ben Stokes went for £1.4m in one of their auctions.  Who received the £1.4m??  Durham CC?  the ECB? Ben Stokes? I'm not sure who can claim to 'own' him?

 

[iainb 4,962]

It's all very strange isn't it? Are loan fees still a thing then? Whereby your leasing/loaning a worthless asset. 

Just done a quick Google and it looks as though the last big transfer, or one of them, was the late Lee Richardson back in 2004 for £32,000 + VAT. If memory serves they bought him to replace Leigh Adams

[iainb 4,962]

23 minutes ago, enotian said:

From an association perspective they may insist upon clubs having rider assets. Indeed I understand that is why Newcastle picked up Roynon this season.

 

Was Roynon a free agent then? He's been around for years? Or was he "owned" by the BSPL? If so, talk about hitting a club when they're down, offloading a rider to a financially struggling club. 

[enotian 562]

1 minute ago, iainb said:

Was Roynon a free agent then? He's been around for years? Or was he "owned" by the BSPL? If so, talk about hitting a club when they're down, offloading a rider to a financially struggling club. 

Not sure to be honest.  I assume he was an asset of BSPL.  Maybe Coventry was his last "owner"? I'm not sure if Newcastle had to pay to acquire him but I was told he was retained over Mountain (at the point he was released) because Roynon would become an asset and Mountain wouldn't.  So the notion still exists even if it has zero financial status.

[iainb 4,962]

2 minutes ago, enotian said:

Not sure to be honest.  I assume he was an asset of BSPL.  Maybe Coventry was his last "owner"? I'm not sure if Newcastle had to pay to acquire him but I was told he was retained over Mountain (at the point he was released) because Roynon would become an asset and Mountain wouldn't.  So the notion still exists even if it has zero financial status.

I think you've hit the nail on the head there... it all seems to be pretty notional these days I think

[1 valve 558]

12 hours ago, enotian said:

The IPL in cricket is an interesting comparison.  Ben Stokes went for £1.4m in one of their auctions.  Who received the £1.4m??  Durham CC?  the ECB? Ben Stokes? I'm not sure who can claim to 'own' him?

 

The player receives all of the money which they pay tax on. So Stokes would have netted circa £800k. 

Edited July 3, 2021 by 1 valve

[iainb 4,962]

Didn't you used to get a percentage of a transfer fee depending on whether you asked for a transfer or not? Or have I just made that up?

[HGould 2,213]

Asked this at a fans forum a few years ago now.

Answer I was given-:

Each Club has an asset list and riders have notional values.

Each Club has to have a certain target within that asset list if above it it's fine, if below it they have to top it up each year with a cash payment to BSPL. 

That's why some Clubs sign young assets, adds value to their list and reduces cash payment to top that list up to required level.

Before Covid Clubs pay loan fees based on a % of rider average.

So if a Poole Asset (Poole have by far biggest asset base allegedly) with an average of 5 is loaned to another Club annual loan fee is about 1.5 x that...so about £750 a year the loaning club has to pay the lending club. Higher the average higher the fee.

NDL Clubs get a "training fee" again based on NDL average if a rider they have signed is given contract by a CL/PL Club (at time i was told that NDL Clubs could not sign assets, I think that changed though in 2018 or 2019) 

(this was correct as I understand it in 2017 not sure if still the case)

 

[Gordon Pairman 457]

23 minutes ago, HGould said:

Asked this at a fans forum a few years ago now.

Answer I was given-:

Each Club has an asset list and riders have notional values.

Each Club has to have a certain target within that asset list if above it it's fine, if below it they have to top it up each year with a cash payment to BSPL. 

That's why some Clubs sign young assets, adds value to their list and reduces cash payment to top that list up to required level.

Before Covid Clubs pay loan fees based on a % of rider average.

So if a Poole Asset (Poole have by far biggest asset base allegedly) with an average of 5 is loaned to another Club annual loan fee is about 1.5 x that...so about £750 a year the loaning club has to pay the lending club. Higher the average higher the fee.

NDL Clubs get a "training fee" again based on NDL average if a rider they have signed is given contract by a CL/PL Club (at time i was told that NDL Clubs could not sign assets, I think that changed though in 2018 or 2019) 

(this was correct as I understand it in 2017 not sure if still the case)

 

To pick up on this topic, clubs were required to have a retained list - I have always disliked the term “asset” - with a minimum value plus a cash or bank secured bond. BSP valued the list and, if it fell below the minimum, a club had to lodge additional cash to make up the minimum. An example of this was in 2013 when Glasgow changed ownership, BSPA advised that the rider value was insufficient. We challenged this and asked for the Management Committee’s valuation but they wouldn’t tell us. Instead we had to find the extra cash. 
A rider on a club’s retained list can be loaned out for a fee which was calculated as a rate per point multiplied by their average. There was a sliding scale so the higher the average, the greater the rate. I don’t remember the numbers, but my recollection is that a reserve or second string in the lower league would be a few hundred whereas a heat leader in the top league would be many thousands. 
Purchasing a rider would then either save you a loan fee or allow you to lend him out. The “value” of a rider could therefore be assessed as what you might save or earn from the rider over how many years you might expect him to ride for you. That’s it at its most simplistic, of course - having first call on a rider might be beneficial in team building, but how do you value that?

One of the benefits of the system was that being able to sell riders helped to balance the books and some teams, like Scunthorpe and Edinburgh have been particularly good at unearthing riders with potential that they could nurture for future sale. 
For rider values to keep increasing, then so do loan fees but they have remained static for many years and, in hopefully a one-off for this year, have been reduced to very little. This then means that the transfer market has been largely inactive for some time - why pay thousands for a rider when you can loan him for a few hundred?

The reason behind clubs having to have a minimum value in their retained list was, in the case of a financial default, the riders could be sold to cover some or all of the deficit. The flaw in that is that, as only clubs can buy the riders, then the deficit is covered within the system - no new money comes in  

A solution would be to wind down loan fees and wind up bond amounts. That way, cash would be available instantly rather than there having to be an auction of riders.

Now to the accounting procedures: firstly, the answer to whether you buy the riders registrations when you buy the licence is yes. You are purchasing something that will either earn you or save you money, so why should you get it for nothing?

And now to assets. The best definition I can find is:

As holding a rider’s registration does provide a future benefit, then, if you believe that benefit will last more than one year, it is reasonable to capitalise the purchase cost and write the value off over a period  The question then is what period? My guess is that the maximum should be four years but, as accounting rules mean that you have to consider values annually, then the period chosen could be shortened or increased.

My final point - the above is based on how things were when I was a promoter. I handed my licence back in 2018 and many things have changed since then. Whether the rules on retained lists are part of the changes, I know not

 

 

 

[iainb 4,962]

4 minutes ago, Gordon Pairman said:

To pick up on this topic, clubs were required to have a retained list - I have always disliked the term “asset” - with a minimum value plus a cash or bank secured bond. BSP valued the list and, if it fell below the minimum, a club had to lodge additional cash to make up the minimum. An example of this was in 2013 when Glasgow changed ownership, BSPA advised that the rider value was insufficient. We challenged this and asked for the Management Committee’s valuation but they wouldn’t tell us. Instead we had to find the extra cash. 
A rider on a club’s retained list can be loaned out for a fee which was calculated as a rate per point multiplied by their average. There was a sliding scale so the higher the average, the greater the rate. I don’t remember the numbers, but my recollection is that a reserve or second string in the lower league would be a few hundred whereas a heat leader in the top league would be many thousands. 
Purchasing a rider would then either save you a loan fee or allow you to lend him out. The “value” of a rider could therefore be assessed as what you might save or earn from the rider over how many years you might expect him to ride for you. That’s it at its most simplistic, of course - having first call on a rider might be beneficial in team building, but how do you value that?

One of the benefits of the system was that being able to sell riders helped to balance the books and some teams, like Scunthorpe and Edinburgh have been particularly good at unearthing riders with potential that they could nurture for future sale. 
For rider values to keep increasing, then so do loan fees but they have remained static for many years and, in hopefully a one-off for this year, have been reduced to very little. This then means that the transfer market has been largely inactive for some time - why pay thousands for a rider when you can loan him for a few hundred?

The reason behind clubs having to have a minimum value in their retained list was, in the case of a financial default, the riders could be sold to cover some or all of the deficit. The flaw in that is that, as only clubs can buy the riders, then the deficit is covered within the system - no new money comes in  

A solution would be to wind down loan fees and wind up bond amounts. That way, cash would be available instantly rather than there having to be an auction of riders.

Now to the accounting procedures: firstly, the answer to whether you buy the riders registrations when you buy the licence is yes. You are purchasing something that will either earn you or save you money, so why should you get it for nothing?

And now to assets. The best definition I can find is:

As holding a rider’s registration does provide a future benefit, then, if you believe that benefit will last more than one year, it is reasonable to capitalise the purchase cost and write the value off over a period  The question then is what period? My guess is that the maximum should be four years but, as accounting rules mean that you have to consider values annually, then the period chosen could be shortened or increased.

My final point - the above is based on how things were when I was a promoter. I handed my licence back in 2018 and many things have changed since then. Whether the rules on retained lists are part of the changes, I know not

 

 

 

Brilliantly explained, Thanks!

All sounds a bit "Fantasy Speedway League" like to me, but if it works, which it seems to do then great. Looks like the day of the "big" transfer fee are over, for a while at least.

[Gordon Pairman 457]

1 minute ago, iainb said:

Brilliantly explained, Thanks!

All sounds a bit "Fantasy Speedway League" like to me, but if it works, which it seems to do then great. Looks like the day of the "big" transfer fee are over, for a while at least.

To be honest, I hope they are gone for good. They worked when overseas leagues were small or blocked to foreigners so UK riders mainly rode in UK.

Now, when they can ride all over Europe and, in some instances, in more than one league in the same country, then being “retained” for greater than the length of your contract makes no sense. 
This is an instance where “we’ve always done it like that” does not justify its continuing existence. 

[steve roberts 9,242]

John Berry wrote an excellent article in his book "More Confessions" (far too comprehensive to quote here) but essentially he was against the 'asset' business and felt that the whole structure regarding rider's commitments to any one club should be re-examined.

"Don't you think that there is something wrong with a system where a promoter can go and sign a foreign rider with the express intention, not of using him, but of renting him out until his value rises?"

Of course the book was published in 2006 but has anything changed since then regarding the composition of team make ups and rider availability?

[ch958 2,393]

if you haven't offered a contract to work, ie ride, I don't see how its lawful to have any hold at all over a person. I've decided to work for Tesco this year, not Morrisons but Tesco have to pay Morrisons all the time I'm there and if they don't I can't work at Tesco

[iainb 4,962]

6 minutes ago, steve roberts said:

Of course the book was published in 2006 but has anything changed since then regarding the composition of team make ups and rider availability?

I suppose the only thing that has changed is that the "big" transfer seems to be a thing of the past with the Lee Richardson one being the last one I can find.

I wonder if there is anything to stop a promoter going on a road trip of Europe and mopping up any unsigned rider on the off chance they may ride in Britain and can then charge loan fees... I presume Birmingham have the World Champion on their "retained list"

[steve roberts 9,242]

6 minutes ago, iainb said:

I suppose the only thing that has changed is that the "big" transfer seems to be a thing of the past with the Lee Richardson one being the last one I can find.

I wonder if there is anything to stop a promoter going on a road trip of Europe and mopping up any unsigned rider on the off chance they may ride in Britain and can then charge loan fees... I presume Birmingham have the World Champion on their "retained list"

If I remember the sum paid for Lee Richardson was decided on the toss of a coin as Swindon and Coventry couldn't agree on a fee?