Rangers FC - Our Flexible Friend

[Frankie 8,552]

City Slicker explores Rangers' innovation in its financial activities...

 

http://www.gersnetonline.co.uk/2010/index.php?option=com_content&view=article&id=475:rangers-fc-our-flexible-friend&catid=1:articles&Itemid=67

 

Double entry book-keeping was invented by Florentine merchants in the Renaissance period to keep accurate track of assets and liabilities ,resulting in a formulation of the worth of a business at any point in time. Effectively it balanced the assets and liabilities , the pluses and negatives ,the who owed what to whom.

 

A business that owed more than it was entitled to collect and was not funded by its owners was insolvent. One that was in profit or could raise investment was solvent.

 

Obviously the technical aspects of this form of accounting have been improved upon over the years and innovators have developed mechanisms to keep liabilities off the balance sheet or create value within existing assets.

 

Over the years RFC have been at the forefront of innovation looking at such concepts as negative depreciation and selling merchandising rights. The use of highly innovative techniques to pay employees in a tax effective manner also offered subtle nuance to the theory of corporate finance.

 

Having inherited such a pedigree of innovation the recent owner of RFC obviously felt a compunction to develop innovations of his own. These were based principally on cash flow.

 

The sale of catering income is but a normal aspect of business. As is back to back financing where assets not yet controlled are sold off in advance of the conclusion of the deal which will render ownership (albeit very ephemeral ownership ) to the vendor. Delaying or deferring fiscal payments can also be used but it is normally done with the consent of the fiscal authorities

 

In the case of RFC it appears that the business was purchased from a very willing vendor by a purchaser who structured the payment through a sale of potential assets he could own in the future. Cash generating activities were effectively franchised out in return for immediate payments. A considerable amount of funding was gathered in based on potential future revenues. Cash was retained within the business through the unilateral deferral of tax payments and perhaps less recognized but of very high importance, assets were recorded at significant values based upon recognized but little used accounting rules.

 

At the time of the actual sale of RFC the vendor apparently adopted the well recognised Scottish approach to the purchase and sale of assets. This is called â??diligence lightâ? and was pioneered by Fred (formerly Sir ) Fred Goodwin to such great effect that it achieved what successive Labour governments could never do in the UK; a nationalized banking industry. The communality of the raising of individuals to the status of Knight of the Realm and the use of â?diligence lightâ? could offer the potential for future sociological investigation ( perhaps that should be psychological ).

 

What this all boils down to is that RFC have over the years pioneered financial treatments and innovated account presentation. They have shown considerable financial and fiscal flexibility.

 

To take this review to an easily understood conclusion:

 

The club effectively developed an accounting and trading strategy based on unrealistic valuations and mortgaged cash flows to such a level that the flexibility was sufficient to allow it to disappear up its own financial arse.

 

In summary:

 

The club is what is termed FUBAR a well known acronym for F**ked Up Beyond All Recognition.

 

This report was prepared by Whyte and Associates - care of the plastic surgery clinic next to the bodego, downtown Costs Rico.

[GovanAllan 0]

I like it Frankie brutally honest.

[Frankie 8,552]

I like it Frankie brutally honest.

 

Was something a bit different in style but I enjoyed it too.

 

If you can't laugh, you'd cry.