The mechanism
A transfer fee buys an asset — the player's registration — so it is capitalised and written down across the length of his contract. A £100m signing on a five-year deal costs £20m a year for five years, not £100m once. That figure is the amortisation charge, and it is what appears in the accounts and in the squad cost ratio.
Book value, and why it decides who gets sold
Book value is what remains unamortised. After two years of a five-year, £100m deal, £40m has been written off and £60m remains on the books. Sell him for £70m and the profit is £10m, not £70m. Sell an academy graduate for £30m and the profit is close to the full £30m, because he cost nothing to acquire. This is the single most important fact in modern squad building: two players of identical market value can have wildly different value to a club's compliance position.
Why contracts got longer
A longer contract spreads the same fee more thinly. An eight-year deal on £100m costs £12.5m a year rather than £20m. Chelsea's long contracts under Boehly were an explicit exploitation of this, which is why UEFA capped amortisation at five years for its own calculation regardless of the contract length. The Premier League followed.
Why a club can spend big and still comply
Because only one fifth of a fee lands in year one, a club with a large revenue base can absorb a marquee signing more easily than the headline suggests. Conversely a club whose squad was assembled over several expensive windows carries the accumulated charges of all of them at once — the reason some clubs look constrained despite not having spent recently.
Where it goes wrong
Amortisation does not stop when a player stops playing. An injured, unwanted or out-of-favour signing keeps costing his annual charge until the contract ends or he is sold, and selling below book value books a loss. That is what a mistake in the transfer market actually costs — not the fee, but years of charges with no way out.
See it applied
Every club page works these numbers through for a real squad, with the sources and the caveats attached.
Questions
What is transfer amortisation?
Spreading a transfer fee as an annual cost across the length of the player's contract. A £100m fee on a five-year deal is £20m of cost each year for five years.
What is a player's book value?
The part of his fee not yet written off. Profit on a sale is the fee received minus that remaining book value, which is why academy players — who have almost no book value — generate near-total profit.
Why do clubs give players very long contracts?
To spread the fee more thinly each year. UEFA now caps amortisation at five years for its calculations, closing most of that loophole.
Does amortisation stop if a player is injured?
No. The annual charge continues until the contract ends or he is sold, which is why an unsuccessful signing is expensive long after he stops featuring.