Bruce
Well-known member
A concrete example is Matt Crooks. We bought him in July 2021 for somewhere around £1m with what was presumably a 4 year contract so his "amortisation" amount each year is (approx) £250K.This is a pretty good description of how it works:
21-22 -250K = "book value" £750K
22-23 -250K = book value £500K
23-24 this season. We sold him for some amount with what sounds like a 20% sell-on fee from Rotherham. His current book value is £500K. If we sold him for the top-end of the rumours at £4m then that's £3.2m after 20% sell-on fee, £500k (book value) = profit of £2.7m.
Presumably we sold him for somewhere closer to £3m which would be a profit of around £1.9m minus agent fees, legal fees and so on. Call it £1.5m when all is said and done.
In PSR terms that 1.5m profit stays on the books for 3 years (this year and the next two). That means that we could buy someone next year for £6m, give them a 4 year contract and the amortisation fee of £1.5m per year is balanced out by the Tree fund for the first two years. We're probably looking at paying north of £8m for a top Championship striker this summer so the Tree fund balances most of that in terms of PSR for the next two seasons.
It feels a bit like magic beans but that's just how accounting works. The bad side is what happens when the profit from the sale runs out but you're still paying* amortisation costs. That's what happened to us with Assombalonga and Fletcher; we had 7 years of having to account for their amortisation fees and never got a penny back.
On the plus side, say we made £5m net profit from Rogers and £1.5m from Crooks that's £7.5m which is enough to spend £30m on players with 4 year contracts (£7.5m/year) and be ok for the next two years in PSR terms. It will bite badly from year 3 onwards if we are still in the Championship.
*You don't really pay. Think of it like buying a new car with actual cash. You buy it for £20K. You now have £20K less cash but now have a nice, shiny car worth £20K. End of the year, your car is probably worth £15k tops if you try and sell it so you have "lost" £5k. In PSR terms, you have "lost" £5K towards your PSR limit.