Liverpool - Amortisation
When Liverpool signs 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 Aqualini for a reputed £20m on a five year contract costs the club £4m 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 only covers the costs for players bought in. So Steven Gerrard, for example, does 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. So if Pepe Reina was on a four year contract for example then he now has no effect on this.
The graph shows the way the player transfer costs have zoomed since 2004. This reflects the vast transfer fees being paid by the club. If better and better players are being brought in then this is not a big problem, if they players being brought in are not then the policy may well cause financial difficulties down the line.