Sta£e of the Nation - County Cricket Finances

I wonder if their subscriptions are more attractively priced than those at Sussex?

Are  assets such as computer equipment, company cars, office furniture etc treated for depreciation purposes on the same basis as buildings (albeit perhaps on  a shorter time frame) ?

If so that's illogical.  Some assets become obsolete and worthless. But buildings - even if they are in need of modernisation and repair - invariably increase in value. When was the last time the property market  went down?  Take a look at any estate agents listings and even properties advertised as 'in need of improvement' are worth 100 times what they were worth 50 years ago.

Example. Our house was sold at auction in 1958 for £2,500 -I know because we  have a copy of the bill of sale. Last time we had it valued a in 2014, we were advised that it would go on the market at £1.25 million. We've spent zero money on it since we bought it 12 years ago, but if we sold it at the agent's valuation we would make a 25 per cent profit on what we paid for it.

So how has our asset 'depreciated'?

I can see how other assets have depreciated. I've had to buy two new computers and had three new cars in the time we've lived here. But in terms of the house, we are sitting on an ever-growing gold mine.  Where is the depreciation? Am I missing something?

It is £55 (20%) cheaper to watch first division cricket at Somerset than second division cricket at Sussex. Perhaps Jim can explain the logic of Sussex's pricing relative to first division counties.

www.somersetcountycc.co.uk/tickets/membership/#QFlwHfYjxiY8Q9zY.97

You cannot compare residential property with commercial buildings. To illustrate - say you start a business from scratch, you buy some land (this will probably increase in value - no need to depreciate), and then you erect a building (factory, workshop, office, whatever). The cost of the building is not written off against the year 1 profits - instead it is written off over the estimated useful life of the building, ie it is depreciated. Many commercial buildings (not all) become obsolete or redundant eventually. 50 years is the maximum assumed life of assets that need to be depreciated, and you could argue that this figure is either to small or too large - however, current accounting standards stipulate 50 years maximum. Cricket buildings are a good illustration of the difference between commercial and residential property. When you sell your house, you are selling the land and building(s) combined, and there is a ready market for this combined asset. Contrast - Sussex could never have sold the Gilligan Stand - at any time, at any price, because it was physically intrinsic to the business. The club did not depreciate the asset, but (surprise, surprise) it eventually needed replacing - not because it didn't function, but because it was obsolete in terms of the club's ongoing requirements. The same principle applied to the old SW stand. So, the Spen Cama legacy was manna from heaven; it (luckily) avoided the need to borrow money for the new buildings. Other counties did not have a fairy godmother, and have had to resort to hefty borrowings. The point of depreciation charges is to set aside a chunk of profits each year to enable the eventual replacement of assets to be more easily afforded. It is easier to accept that computers and cars need to be depreciated because they are short term assets, and we can foresee the need to replace them. Understandably, most people don't see the need to depreciate buildings, because 50 years is a long time, and anyway they won't be around to sort out the finance when they eventually need replacing. . .

Whilst I agree with a lot of what you have writen here, I have to differ with you on what you claim to be the point of depreciation. I very much doubt that many ( if any) corporations set aside a cash sum equal to the annual depreciation charge in order to fund asset replacement.

" The fundamental objective of depreciation is to reflect in operating profit the cost of use of the tangible fixed assets (ie amount of economic benefits consumed) in the period" (paragraph 78, Financial Reporting Standard 15).

and with that I'll leave it there as I'm sure a discussion regarding accounting standards is not what people log onto this forum for.

So, does this mean the sceptics on here about Somerset's financials should recant, and acknowledge what anyone who has visited their ground recently can see? Their transformation over the last ten years, under Chairman, entrepreneur Nash, is remarkable. No trophies over this period, but off field, a 90% increase in membership income (Sussex membership income down over same period). Virtuous circle as catering, commercial performance also much better. Taken on some debt to massively improve ground facilities and capacity, but debt easily covered, as seen in the accounts. Now a Category B ground, so will host international games  and, if goes ahead the City T20, previous capacity, probably less than Sussex.

And look at the details of the accounts published by Somerset on their website. Even down to telephone usage. It would be great if Sussex provided even half that detail to their members, rather than the aggregate numbers we have become accustomed to?