What does amortisation mean in economics? Why do sports clubs say, for example, that they cannot sell a player because they paid 100M for him and he is not yet amortised?
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In accounting, assets are amortised (for intangible assets like intellectual property, branding, reputation) or depreciated (tangible assets like machinery and buildings) over their useful life until they reach 0 or are disposed of.
Players are treated as intangible assets in a company’s balance sheet and are amortised over the course of the contract. I can’t speak to what the person meant in your example, but if the player’s market value is below the value in the club’s books (this is the original cost minus amortisation to date) and the player is sold at market value this would decrease the value of the club itself, which would be a problem for the owners/shareholders if they wanted to sell. It also reduces profit and the amount that can be paid as a dividend to those shareholders.
For example, club buys player for 1m on a 10 year contract, 1 year passes and the player is amortised 1/10 and is now worth 900k on the books. However the player is not performing well and the club wants to sell. Another club offers 500k because of the poor performance. The club doesn’t want to sell because it would make a 400k loss on the sale.
In the above example the player would realistically be impaired rather than amortised, but that’s a discussion for another day.
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