Per UOL Esporte, Bruno Guimarães’ £100m release clause is valid until June 24. The Newcastle United midfielder has been heavily linked to Arsenal ahead of the summer transfer window and although it’s an expensive deal to complete, the release clause can be paid in three installments. Here’s a post on the possible financials:
Arsenal’s financial year runs from June 1 to May 31. The £100 million release clause for Bruno Guimarães is valid until June 24, 2024. The timing of when Arsenal triggers the release clause is crucial because it determines which financial year the transaction affects and possibly FFP. (although I don’t think this is a concern and overdone by the media)
Triggering the Clause Before May 31, 2024 (HIGHLY UNLIKELY – also I think it’s only active in June anyway)
If Arsenal triggers the release clause before May 31, 2024, the transaction falls into the 2023/24 financial year. This means that the financial impact, including the first installment of the payment, is recorded in the 2023/24 accounts. (This is very unlikely to happen as the financial year closes in a couple of days)
Triggering the Clause Between June 1, 2024, and June 24, 2024:
If Arsenal triggers the release clause after June 1st 2024, and makes the first payment on June 10th 2024 for example, the transaction falls into the 2024/25 financial year. This will affect the 2024/25 financial year accounts.
Amortization of the Transfer Fee
When a club signs a player, the transfer fee is not expensed immediately. Instead, it is amortized over the length of the player’s contract. Amortization spreads the cost of the player over the duration of the contract, reflecting the player’s value and contribution each year.
Example Calculation:
* Transfer Fee: £100 million
* Contract Length: 5 years
The annual amortization expense is calculated by dividing the total transfer fee by the number of years in the contract.
5 years / £100 million = £20 million per year
This means that Arsenal will record an expense of £20 million each year for five years in their profit and loss account, representing the cost of the player.
Cash Flow Implications
The payment of the release clause in three installments impacts the club’s cash flow. These payments will be recorded under the “Cash Flow from Investing Activities” section of the cash flow statement, which tracks the cash spent on acquiring players and other investments.
Installment Payments:
* First Installment: £33.33 million
* Second Installment: £33.33 million
* Third Installment: £33.33 million
As mentioned if it falls into 24/25 which is likely, there is no concern for FFP. We can definitely afford him. So if there is anything in the media to say otherwise please ignore it. It is ultimately a new financial year without any player trading so far that financial year.
If we do the release clause route, I think we will do it before the Copa America as it starts on the 21st June and the clause ends on the 24th June. Otherwise, we will let the clause run and instead negotiate with Newcastle on fresh terms after the tournament.
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