Football faces £500m blow

British football clubs may be forced to write off over £500m worth of "intangible assets" from their balance sheets as a result of the proposed change in the rules on player transfers.

British football clubs may be forced to write off over £500m worth of "intangible assets" from their balance sheets as a result of the proposed change in the rules on player transfers.

Under a deal proposed by the sport's ruling bodies in an attempt to prevent an investigation by the European Commission, players aged 24 or over could leave a club without a fee being paid if they asked to be released.

If the plans are adopted, it would mean that players like the Portuguese star Luis Figo, who cost Real Madrid £37m in the summer, or Sylvain Wiltord, the French striker who has just been signed by Arsenal for £13m, could actually have been signed for free.

The move has sent shivers through the world of football finance. Leading accountants will be meeting with the Accounting Standards Board over the next few weeks to see how it will affect the way players are valued on club balance sheets.

Currently, under a rule called FRS 10, the cost of acquiring a player is placed on the balance sheet as an "intangible asset" and then written off over the life of his contract. For example, if Wiltord signed a five-year contract, Arsenal would be expected to write off £2.6m a year so that by 2005 he would be valued at nothing.

However, there is speculation that this application could be scrapped and the balance sheet values written off imme-diately to reflect that fall in the potential sale price of a player.

Such a move would hit leading British clubs in the wallet. According to the annual review of football finance, published last month by accountants Deloitte & Touche, the total value of players on clubs' balance sheets in England is £506m.

Newcastle United has most to fear. It has £53.2m of player assets on its balance sheet. The next highest is Blackburn Rovers with £39.1m, followed by Liverpool with £35.4m.

Manchester United shares fell nearly 3 per cent on Friday over fears about the loss of potential revenue from selling its players. Though the book value of its team is only £30.1m, this does not include stars such as David Beckham, Paul Scholes and Ryan Giggs who came from the club's youth development programme. Before the new transfer rules, those three could have been worth as much as £100m.

Though the leading clubs could probably ride out a large-scale write-off, smaller clubs whose finances are already rocky may face difficulties as banks see potential pay days of selling star players disappear.