Accounting Treatment of Football Player Contracts as Intangible Assets under IFRS: Amortization, Impairment, and Earnings Management in Football Clubs
Fay-Valentina Kounadi,
BA, MBA,
Philips University, Nicosia, Cyprus
foteini-va.1183.23@philipsuni.ac.cy
Spyros Missiakoulis,
BA, MA, Ph.D
Philips University, Nicosia, Cyprus
s.missiakoulis@philipsuni.ac.cy
Nikolaos Ireiotis,
BA, MA, Ph.D
National and Kapodistrian University of Athens,
Athens, Greece
ABSTRACT
In the modern knowledge economy, intangible assets are the main driver of value creation. In the field of professional football, football clubs operate as complex economic entities whose competitive and financial viability depends directly on human capital. Football player contracts constitute clubs' most fundamental productive asset, raising critical accounting and theoretical issues.
The present study examines the accounting treatment of player registration rights as intangible assets under International Financial Reporting Standards (IFRS), and in particular IAS 38 – Intangible Assets and IAS 36 – Impairment of Assets. In parallel, it analyzes the interaction between accounting procedures, the UEFA regulatory framework (Financial Fair Play and Financial Sustainability Regulations), and earnings management.
From a theoretical perspective, the recognition of football players as "assets" highlights the limitations of applying traditional accounting rules. According to Human Capital Theory (Schultz, 1961; Becker, 1964), the knowledge and abilities of individuals are inherent to them, making human capital non-transferable and not fully controllable. IAS 38 circumvents this limitation by refraining from treating individuals as objects and instead capitalizing exclusively the contractual exploitation rights.
Nevertheless, this practice creates a systemic accounting asymmetry: while athletes acquired through transfers are recognized as assets based on their objectively verifiable acquisition cost, academy-trained (internally generated) athletes are not recognized as assets, owing to the impossibility of reliably measuring their cost. This leads to an underestimation of the asset base of clubs with strong youth infrastructures, widening the gap between book value and actual market value.
The research follows a qualitative, conceptual approach, combining doctrinal analysis of IFRS with an examination of the UEFA regulatory framework. It begins with a thorough analysis of Initial Measurement, that is, the capitalization of transfer fees, intermediary fees, and signing bonuses, as well as player exchanges (swaps). It then proceeds to Subsequent Measurement and Amortization, applying the straight-line amortization method over the life of the contract. It is noted that contract extensions before expiry allow the remaining undepreciated value to be redistributed over a longer time horizon, functioning as an income-smoothing mechanism. Finally, Impairment (IAS 36) is examined by performing impairment tests in cases of serious injury or sporting obsolescence, where determining the recoverable amount involves high subjectivity due to the absence of an active market.
The study highlights the impact of UEFA's recent transition from Financial Fair Play (FFP) to the Financial Sustainability Regulations (FSR). Its pivotal elements include the introduction of a five-year cap on amortization for regulatory purposes (closing loopholes for circumvention through multi-year contracts) and the imposition of a Squad Cost Ratio limit of 70% of revenue.
The paper concludes that IFRS provide a functional and standardized framework which, being based on historical cost, fails to capture the dynamic and variable nature of athletes' value. The exercise of professional judgment in contract management directly affects clubs' financial picture and regulatory compliance, making the accounting of football players a central pillar of their strategic planning.
The significance of this study lies in its holistic and timely reassessment of IFRS in the field of professional football. By linking Human Capital Theory with the new UEFA FSR regulations, the paper highlights the limitations of traditional accounting, the existence of a systemic asymmetry between purchased and internally developed athletes, and the mechanisms of earnings management. Thus, it offers a solid foundation for both academic research and for policymakers and club managers in the sports industry.
Keywords: Intangible Assets, Football accounting, Player Registration Rights, Human Capital Theory, UEFA Financial Sustainability Regulations.
JEL Classification: M41, M48, J24, L83, G32