Hibs - Amortisation
When the club signs a player we generally know how much has been paid in transfer fees, the figures from www.soccerbase.com are generally used.
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 De La Cruz signing for £700,000 on say a four year contract costs the club 700/4 = £175,000 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 Steven Whitaker, 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.
The 2006 costs show that the club has costs of £83,000, after £60,000 the previous year. This matches up with the club policy of developing young players and rarely bringing in new players for a fee.
The line on the graph below shows the value of the players on the books. Again kids do not count, so it is the value of the players brought in. The big leap in 2002 came from the De La Cruz and Orman transfers. The dip in 2003 came from selling De La Cruz on.
In 2007 there was the biggest investment in new players for 5 years with Makabu, O'Brien, Morias, Gathoussi, Kerr and Donaldson joining for a combined outlay of nearly £1m.
If the club sell a player for more than the worth they have in their books then it is seen as profit.
2008 - the leap in costs here comes down to the spending of some of the Brown, Whitaker, Murphy money. That this cost went up while the team results worsened was unfortunate.
