Kieran Maguire shares 'huge' financial insight as two new deals announced at Liverpool
Liverpool are shoring up their long-term sustainability by tying valuable players down to new contracts.
Liverpool announced that the two Brazilians had signed long-term contracts on 3rd and 4th August respectively.
This site first revealed on 31st July that Liverpool had opened talks with Fabinho and that super agent Jorge Mendes was negotiating on his behalf.
Maguire claims that amortisation, an accounting practice used to spread the cost of a player over his contract length, makes the new deals cost-effective.
“It protects the value of the player, which in this case is huge,” he told Football Insider correspondent Adam Williams.
Subscribe to Football Insider TV now
“As we know, when you enter the last year of your contract, the value tends to diminish rapidly.
“But also, from the club’s point of view, it reduces costs because of amortisation.
“The way amortisation works is that if you have a contract extension, you now spread the present value of the player in the books over the remaining length of the contract.
“Effectively, everybody’s happy. The player gets a pay rise and a degree of certainty. The club gets that value locked in through the contract extension.
“But also, while they are paying them more wages, from an accounting point of view, the increase in wages is counterbalanced by a reduction in amortisation costs. So for FFP purposes, it ends up as cost-neutral.