Create a 6 pages page paper that discusses financial statements in arsenal plc. As the annual report states that the company does not include any value for their acquired or “homegrown (internally developed)” players. Since the purpose of financial reporting is to provide a fair view of the organization, therefore we will analyze how much extent this statement accurately depicts the true picture of the organization. Before making an analysis, we will have a historical review of how these accounting policies have emerged over a period of time.
The clubs have historically been an integral element of the business of football. The regulations introduced by the English Football Association in 1885 required that all players be registered annually with a club (Morrow 1997). While on the other hand, accounting of professional sports clubs has been a very complex topic and especially in the area of human resource accounting due to the striking differences between professional sportspeople and other employees.
In the field of Accounting, the traditional practice for football players was to exclude the valuation of players whether they were developed internally or bought through the transfer system (Morrow, 1995). However, this trend has changed during recent years where a growing number of clubs have noticed that such a practice did not provide a true picture of the financial affairs of the organization therefore now they are incorporating football players as assets. A publication authorized by Wagner (2007) suggested that human resources are one of the most .vital capitals (people and teams) and investors often look for these factors in the valuation of the company along with the structural capital which consists of processes, information systems and relational capital which is associated with customers, suppliers, and other stakeholders. Accounting policies with respect to sports players significantly changed during the mid of ’90s. The mechanism of the transfer system of football players brought a significant influence on the valuation of the companies. The transfer system which pertains to player trading is done by clubs to recoup their investment in training and development of a player’s skill during the contract period. Generally, there are two kinds of transfer mechanisms that take place between the clubs: Transfer of players under contract and transfer of players who are outside the scope of a contract who are also called free agents. Until 1995, if the club aimed to extend the contract of the players and if the player didn’t want to extend the contract and wanted to join another club after the contract period. then the holding club was entitled to receive a transfer fee from the new club to whom the player was joining. In a litigation case of ‘Bosman’, the court ruled that players outside contracts are given the freedom to move freely from one team to another and it was declared void to charge any transfer fees among the clubs after the contract has expired.