Should European football clubs use fair values to account for player contracts?

Abstract

The purpose of this study is to explore the use of non-active market fair values as defined in IFRS 13 to account for football player contracts as a means of questioning the restriction under IAS 38 that the revaluation method can only be applied where there is an active market.

Three football clubs namely Manchester United, Arsenal and Everton were selected for this study and their financial statements were reconstructed using non-level 1 fair values for football player contracts. The use of only three clubs from England and the lack of engagement with users of football club financial statements have been noted as delimitations. The values obtained from Transfermarkt are the product of transfer fee information reported by media and other sources. Completeness and accuracy of these values are considered limitations of the study.

The results indicated that the resultant financial statements enhance comparability, recognise material hidden values, provide important incremental information and facilitate a more accurate depiction of the solvency and liquidity position of entities. The study recommends that the restriction of IAS 38 should be removed.