|Staff & Payroll|
Coventry - Amortisation
If a club sign a player we generally know how much has been paid in transfer fees, the figures from www.soccerbase.com are a good source.
The club has to pay the transfer fee to the selling club. In the club accounts it then has to report how much it views each player's worth has declined each year. So for example Coventry signing Freddie Eastwood for £1,200,000 on a four year contract costs the club £300,000 per year. This is what is reported as 'amortisation' in the club accounts. At the end of the contract the player can just leave on a 'free' so he is viewed as potentially no worth to the business after that.
This 'amortisation' only covers the costs for players bought in. So Kevin Thornton, for example, did not have any effect on the amortisation costs of the club, as he was never bought from another club. Also once a player has finished his initial contract he stops being counted. The other way to look at amortisation is that it is the average amount being spent per year on bringing new players in.
Again the graph below shows the changes that have had to happen since the club left the Premier League. What is not so obvious on the surface is the amount the club were overspending when they were in the top division. The £7m+ in the 2000-2002 seasons was way beyond what the club could afford. The club seemed to have recognised this and sold players as fast as they could as soon as they went down.