Rumors of an exchange between FC Barcelona and Juventus that would send Arthur one way with Miralem Pjanić and around 10 million euros going back the other way prompt the question: is this all a creative accounting exercise?
It’s unclear why Juve would pay 80 million for Arthur. He’s a good player and quite young, but is he really worth 80 million, even in today’s market?
Even less clear is why the 30-year-old Pjanić is worth 70 million. Again, good player, but it seems inflated for a player his age.
A lot of people have speculated that this swap is just a way for both clubs to balance the books. There is precedent here, with Barcelona having previously swapped backup keeper Jasper Cillessen for Valencia’s Neto, in a move rumored to be fueled in large part as a way to help the bottom line.
But what does that mean, exactly, and how does it work? The author of The Swiss Ramble blog explains in a Twitter thread.
From a financial perspective, it would appear that #Juventus are effectively paying #FCBarcelona €10m to exchange Pjanic for the younger Arthur, but the accounting treatment means that both clubs will report around €60m profit from this transaction. Let’s explain how.— Swiss Ramble (@SwissRamble) June 25, 2020
“The accounting treatment means that both clubs will report around €60m profit from this transaction,” he says.
But how is that possible, if Juventus are spending 10 million extra and Barcelona are only receiving 10 million?
Well, it has to do with how teams report incoming transfer fees versus outgoing fees paid.
“Football clubs consider players to be assets, so they do not fully expense transfer fees in the year a player is purchased, but instead write-off the cost evenly over the length of the player’s contract via player amortisation,” he writes.
Arthur was signed for 30 million on a six year contract, meaning his yearly value is 5 million, or 30 divided by six. After two years of his contract have gone by, his value decreases by 5 million each year, meaning he is now worth, ostensibly, 20 million. If you sell him for 80 million, you are, in a way, gaining 60 million.
It’s a similar story with Pjanić. His value on the books is 13 million. Selling him for 70 million would net Juve, by this calculation, a net profit of 57 million.
You can then amortize the player you bought over a long enough contract. That cuts into your profit, but only by so much, because once again, the incoming fee is divided for accounting purposes over the length of the contract.
The Swiss Ramble also considers the fact that Barcelona are only profiting 10 million from this operation, while swapping a much younger player for an older one, a sign that perhaps the Catalans are somewhat desperate financially.