Accounting, Valuation and Duration of Football Player Contracts

:  FRS 10 requires investments in player contracts by football companies to be capitalized and amortized. Given the high degree of uncertainty associated with such contracts, it is not clear that this treatment is consistent with asset capitalization criteria. The evidence provided in this paper doe...

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Bibliographic Details
Published in:Journal of business finance & accounting 2005-04, Vol.32 (3-4), p.549-586
Main Authors: Amir, Eli, Livne, Gilad
Format: Article
Language:English
Subjects:
Assets
Business accounting
Business studies
capitalization versus expensing
Contracts
Economic analysis
Economics of sport
Empirical research
England
Financial accounting standards
Football
football industry
FRS 10
Intangible assets
Investment
Legal aspects
Mathematical models
player contracts
Professional soccer
Studies
Uncertainty
United Kingdom
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Summary::  FRS 10 requires investments in player contracts by football companies to be capitalized and amortized. Given the high degree of uncertainty associated with such contracts, it is not clear that this treatment is consistent with asset capitalization criteria. The evidence provided in this paper does not support inconclusively this capitalization requirement in that it indicates weak association of investment in player contracts with three measures of future benefits. In particular, the duration of this association is at most two years, which is shorter than the duration implied by the amortization period reported by sample companies. Nonetheless, other findings suggest that market participants seem to agree with the treatment prescribed by FRS 10. These results should be of interest to practitioner and standard setters who (axiomatically) regard intangibles acquired in an arm's length transaction as assets.
ISSN:0306-686X
1468-5957
DOI:10.1111/j.0306-686X.2005.00604.x