Over the last few days, speculation has increased that Lionel Messi may be thinking of leaving Barcelona. Whether he does or does not, this brief blog sets out the financial implications for any buying club.
For any club thinking of buying Messi, there would be some eye-watering numbers to consider. A no-doubt world record transfer fee would be required; even as high as £200m+ and a hugely lucrative long term contract of perhaps £3m-4m per month. All of this adds up to a possible total outlay of close to £500m.
How Purchasing Clubs Account for their Spending
In sexy accounting speak "when a player is purchased, his cost is capitalised on the balance sheet and is written-down (amortised) over the length of his contract." In laymen's terms, transfer fees for accounting purposes are spread over the length of a players' contract. If for example Messi was sold for £200m and he signed a 5 year contract, £200m over a 5 year contract is amortised by a club in its accounts to the value of £40m per season.
A transfer occurring in the 20014-15 season will have an impact on a club trying to break-even in subsequent seasons for FFP purposes too. A buying club will amortise Messi's transfer fee over the length any potential contract. If we assume a 5 year contract, any buying club will have four further 40m amortisation charges in their 15-16, 16-17, 17-18 and 18-19 accounts. All of those amortisation costs will have FFP significance in addition to his annual wages.
Who Could Afford Messi?
Practically, the yearly accounting 'cost' to purchase Messi for FFP compliance purposes would include his annual amortised transfer fee ( e.g. £40m) plus his wages, bonuses and loyalty payments of, for example, another £50m. As such, a club would have to possibly find...