Question

Question 1(a) The success of accountancy firms and professional football clubs may largely be attributed to the skills of their employees. However, accountancy firms do not reflect these skills as assets on their statement of financial position whereas some football clubs do. Required: Are these football clubs violating accounting principles with regard to the reporting of assets? Explain.

Answer 1

Football club Players are recruited , the same as company employees are recruited . They contribute as revenue generation assets . In any company, employees salaries are charged are expenses to match against revenue in the Income Statement . However the value of employees is not seen as “ Assets” in the Balance Sheet . BUT Slightly differ in case of footballer are recruited for certain fee.

Certain cost is applied if the players are recruited from other club. Such cost may include transfer fees, intermediation fees and other related cost . Club buying players would ear “ right to use” the players to generate revenues.

In the accounting world, Rights are considered as Intangible Asset

Football players is contracted for a period of Time .The benefits enjoyed by the club are limited to the period of contract . Football players have limited useful life.

Intangible assets includes players transfer rights and cost incurred to acquire such rights .

This rights are measured at acquisition cost and amortized on a straight Line basis over the term of each players contract .

The asset is initially recognised at the date teh acquisition contract enters into force

So Football team should disclose as “ Intangible Asset “ into their Financial Statement as per Accounting Standard