Accounting by Maltese football clubs for goodwill and other intangible assets

Abstract

Purpose: The main purpose of this study was to identify the financial reporting practices by the selected local football clubs, with respect to goodwill and other intangible assets. Furthermore, it intended to find solutions for issues encountered by club practitioners with regards to valuation processes and qualitative characteristics within the local scenario. Design: The study adopted a qualitative approach. Semi-structured interviews were held with three representatives from three major Maltese football clubs in the Premier League, of which two were accountants and the other a treasurer. Findings: The findings indicate that goodwill does not exist in the financial statements of Maltese football clubs. However, it emanated from the data analysis that intangible assets are highly significant, with footballers proving to be a vital KPI. The special cases of transfers under the current cost model in determining players’ registration rights constitute issues to Maltese football clubs because a transfer fee is non-existent and are therefore not subject to a valuation exercise. These are cases involving free agents, players promoted from the youth academy, and exchanges of players. There are three alternative methods identified for such a valuation process, these being the income approach, the director’s valuation method and the independent multiple evaluation model. Moreover, the current cost model is found to provide an underestimation of a club’s intangible assets. The broadcasting rights are owned by the local league and fixed payments are given equally to the clubs. It was noted that there is a general lack of understandability, expertise, transparency, and benchmarking in the local football industry. Conclusion: This dissertation sheds light on the current methods as mentioned above and issues resulting therefrom, given the limited size of the local scenario. The data suggests that in order to improve the local football scenario, participants need to take into consideration the alternative methods suggested by this research for a more true and fair representation of the identified intangible assets. Value: This dissertation was carried out with the intention to increase awareness and recommend better ways of accounting by Maltese football clubs for goodwill and other intangible assets. Through an increase in understandability, expertise, transparency and benchmarking, members within the local football industry would be in a better position to select between alternative methods for accounting for intangible assets, while increasing the standards to a more professional level.