Documente Academic
Documente Profesional
Documente Cultură
Financial Statements
2017-2018
Management Report &
Financial Statements
2017-2018
CONTENTS
Management
Report &
Management Financial
Report
for the year
Statements
2017-2018
ended June 30, 2018
04
Financial
Statements
26
for the year
ended June 30, 2018
132
Budget
2018/2019
140
Management
Report
For the year ended June 30, 2018.
Operating income amounted to €751 million in Club membership fees and season tickets The Club enjoys a balanced revenue mix, with This diversified stream of recurring revenues
2017/18, up €76.3 million or 11.3% from the year accounted for 6.6% of total revenue, down the three largest lines (stadium, television and provides financial stability to the Club,
before, extending the growth trend that has kept from 7.4% the year before, with the share marketing) each making up around a third of cushioning the impact of potential fluctuations
the Club among the world’s leading revenue- gradually decreasing over the past years (from the total. in revenue caused by varying performance
earning sports entities in the past 13 years. 9.8% in 2009). on the sporting front or by changes in the
The Club has gradually reduced the weight of economic environment.
This item includes revenue from the various In the 2000-2018 period, revenue grew at an television revenue (La Liga and Champions
business lines (stadium, international and friendly average annual rate of 11%. League matches) and increased the weight of
matches, broadcasting, and marketing), but other revenue sources.
excludes revenue from player transfers, which is Going forward, promoting the Club’s brand
recognized in the income statement under “Gains/ through investment in top players and
(losses) on disposal of non-current assets”. international expansion are still the principle
ways in which the Club can remain competitive
All business lines, and specifically marketing and maintain its status as a global benchmark
(16%), contributed to growth in revenue. in football.
BREAKDOWN
OF OPERATING INCOME
(before disposal of non-current assets)
2017/2018
OPERATING INCOME
(before disposal of non-current assets)
700
675
26% 32%
650
600
550
578
620
€ 751 M
550
th 521
514
ual grow € 118 M
480
e ann 13%
500
g
vera 442
450
1 1% a 407
400
366
350
351 9%
292
300 276
236
33% 24%
250
193
200
152
150
138
118
100
50
0
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Stadium Stadium
Int. & Friendly Matches Int. & Friendly Matches
Broadcasting Broadcasting
Marketing Marketing
6 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 7
PERSONNEL EXPENSES/ OPERATING PROFIT BEFORE DEPRECIATION
OPERATING INCOME: AND AMORTIZATION
EFFICIENCY RATIO (EBITDA)
The efficiency ratio, calculated by dividing the and achieving the double crown (Euroleague Operating profit before depreciation and must be considered when assessing the cash
Club’s total personnel expenses by operating and Spanish Liga ACB) in basketball, a feat amortization, or EBITDA before disposal of flows from operating activities generated by
income (before disposal of non-current that has never before been accomplished. non-current assets, is the Club’s earnings from the Club. Football clubs are subject to a limit
assets), is the most widely internationally Stripping out the impact of the trophies won, operating activities after subtracting personnel on player registrations. Therefore, before they
used indicator to measure a football club’s the ratio would have been around 53%. and other operating expenses from the revenue can add new players, they must release other
operational efficiency. The lower the ratio, the obtained by the business lines. players. As a result, player transfers among
more efficient the Club is. Player salaries also increased in line with the football clubs is hardly an exception, but
overall market development and the staff EBITDA before disposal of assets amounted to rather part of the Club’s standard practice so
The Club’s efficiency ratio in 2017/18 was 57%. revaluation caused by the sports successes €93 million in 2017/18, up from €86 million the that it can renew staff, generating proceeds
This is lower than the previous year (60%) but achieved in the last few years (four Champions year before, leaving an EBITDA before disposal than can be used to self-finance part of the
higher than the prior years’ average, mainly League titles in the last five years). of assets/operating income ratio of 12%. cost of new additions. In 2017/18, gains on
due to the payment of performance bonuses player transfers amounted to €54 million (with
arising from the Club’s outstanding sports Even despite its exceptional sports achievements, Sports successes underpin revenue growth in average gains in the last five years of €43
achievements this year: including four football Real Madrid’s efficiency ratio is well below the the medium term, but result in an imbalance in million), resulting in EBITDA of €147 million,
trophies (Champions League, FIFA Club World 70% maximum level recommended by the the short term, caused by the one-off effect of the compared to €138 million the year before.
Cup, UEFA Super Cup and Spanish Supercup) European Club Association (ECA). bonuses, especially in a year like this one, with Excluding the impact of the trophies won,
the Club winning four football and two basketball EBITDA in 2017/18 would be €170 million.
trophies. Excluding this effect, EBITDA before
disposal of non-current assets would be around The EBITDA performance in recent years is the
€116 million, with an EBITDA before disposal of result of a financial management that pursues
assets/operating income ratio of 17%. profitability through by combining efforts to
boost revenue and rein in costs.
Nevertheless, EBITDA after the disposal of
assets (player registrations), or simply EBITDA,
30% 40
20
20% 5
0
-20
10%
-19
-40
0% -60 -45
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
8 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 9
TAX BALANCE:
INCOME STATEMENT CONTRIBUTION BY REAL MADRID TO TAX
KEY HIGHLIGHTS REVENUE AND SOCIAL SECURITY
Operating income in 2017/18 amounted to Depreciation and amortization expense in Real Madrid contributed €285.4 million directly At June 30, 2018, Real Madrid was current on
€751 million, up €76 million or 11.3% from the 2017/18 was €102 million, which is €8 million to state and local taxes, and social security in the payment of all its tax obligations, as always.
year before. All business lines, and specifically lower than the year before due to changes in 2017/18. The breakdown by item is as follows:
marketing (16%), contributed to growth in sports staff and the remaining terms of contracts.
revenue. • €210.1 million paid in state and local income
Net finance expense was €2 million, in line with tax and social security, representing a cost
EBITDA before disposal of non-current assets the year before. of 28% of the Club’s revenue; i.e. for every
totaled €93 million, with gains on player €100 of income, Real Madrid allocates €28
transfers of €54 million (2017: €48 million), Profit before tax in 2017/18 was €43 million to tax and social security payments.
leaving thus EBITDA of €147 million, compared (€26 million in the previous year), which, after
to €138 million in 2016/17. Excluding the applying the nominal tax rate of 25% and other • €75.3 million in VAT paid to the tax authorities
impact of the trophies won, EBITDA in 2017/18 tax legislation, stands at €31 million after tax, (difference between output VAT charged to
was €170 million. €10 million (45%) higher than the year before. customers and input VAT paid to suppliers) ,
arising from Real Madrid’s economic activity.
From the €147 million, EBITDA amortization and The large profit obtained by the Club in 2017/18
depreciation expense, and interest expenses was marked by the most outstanding sports
must be subtracted. achievements in Club history in both football
and basketball.
operating income 675 751 Personal income tax withholding and non-resident income tax (deductions from staff remuneration and image rights) 193,406
Annual Growth 8.8% 11.3% INCOME TAX 7,863
Property and other local taxes 938
OPERATING PROFIT before depreciation and amortizacion, and disposal of non-current asssets SOCIAL SECURITY CONTRIBUTIONS (company) 6,122
(EBITDA before disposal of non-current assets) 86 93
SOCIAL SECURITY CONTRIBUTIONS (employee) 1,761
% of revenue 13% 12%
TOTAL COST of taxes and social security 210,089
OPERATING PROFIT before depreciation and amortizacion (EBITDA) 138 147 % of revenue 28%
profit after tax 21 31 TOTAL CONTRIBUtIoN by REAL MADRID to tax revenue and social security 285,427
10 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 11
INVESTMENTS CASH AND CASH EQUIVALENTS
The Club invested €115 million in 2017/18, of · €231 million on the construction of Real Madrid The Club had a cash balance of €190 million at The Club enjoys a large cash position thanks to
which €25 million were spent to upgrade and City, considered the largest sports complex year-end. the high cash generated from operating activities
develop facilities; €90 million were invested on ever built by a football club, with a total and restraint over investment.
the acquisition of players. surface area of 120 hectares, 10 times bigger This was its second highest ever at the end of
than the former complex. Ideally located in a financial year, considering that it also paid The cash balance, coupled with undrawn facilities,
In 2017/18, all of the investment in players was one of the fastest growing areas of Madrid significant bonuses for sports achievements. leave Real Madrid in shape to comfortably meet
self-financed with proceeds from transfers, and with excellent public transportation, its scheduled payment obligations.
which amounted to €108 million. Net investment Real Madrid City is a strategic enclave and
in 2017/18 in sports personnel (acquisitions a first rate sports and entertainment center.
- transfers) was €-18 million (2016/17: €73.5 Noteworthy in recent years is the marked
million). Average annual net investment in the improvement made to the facilities, with CASH AND CASH EQUIVALENTS
2000-2018 period was €66.5 million. the construction of the first-team and youth
team residences -a Club goal for many € Million
In addition to investing in players, the Club years- and a basketball training arena and
allocated a significant amount to building and two new training fields. Construction of the 220
211
upgrading its facilities and for technological new office building, to which almost all of the
200
development. In the 2000-2018 period, Real Club’s operating departments have already 190
Madrid has invested: moved, was completed during the year. This 180 174
178
169
will allow greater integration between the 160 156
·
€256 million on the stadium, modernizing various departments and free up space in the 160
153
143
the facilities and enhancing their quality and stadium. 140
functionality for spectators, as well as providing
the facilities with the resources and services Overall, these investments have helped drive Real 120
112 113
109
to broaden the stadium’s commercial offering Madrid’s economic growth, social development 103
98 98
100 93
and develop the Club’s IT platform. All this and sports successes. 85
investment has generated a considerable 80
40
INVESTMENTS 19
20
€ Milion 10
340 0
320 314
300 06/30/2000 06/30/2001 06/30/2002 06/30/2003 06/30/2004 06/30/2005 06/30/2006 06/30/2007 06/30/2008 06/30/2009 06/30/2010 06/30/2011 06/30/2012 06/30/2013 06/30/2014 06/30/2015 06/30/2016 06/30/2017 06/30/2018
280
260
240
240
220 207
200
180 173
159 161 152
160 142
140 128 126 118 117 115
120 109
100 91 88 83 90
80
60
40
20
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
12 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 13
WORKING CAPITAL
Working capital (i.e. the difference between €-106 million as at June 30, 2018. The reduction Due to the large volume of transactions carried be consistent with an adequate cash flow
current assets and current liabilities) can be in the working capital/revenue ratio is greater: out by the Club at present, the only way to management and not compatible with the
broken down into operating working capital from 41% in 2010 to 14% in 2018, despite offset recurring negative working capital would not-for-profit status of the Club, which invests
(€-287 million at June 30, 2018), financial the increase in salaries and wages payable be to have a large positive financial working funds obtained in the development of its sports
working capital (€177 million) and other working caused by the performance bonuses for sports capital through a large balance of cash and and its facilities.
capital (provisions and taxes) for minor amount achievements. cash equivalents.
(€4 million).
This negative working capital is recurring; Apart from exceptional requirements at specific
The Club’s working capital is structurally i.e. rolled over each year due to the intrinsic moments, a large cash balance relative to the
negative as the nature of its operations leads nature of operations, as reflected in the trend size of the Club’s balance sheet would not
to operating working capital with large creditor in balances; figures are broadly similar from
balances (between €-120 million and €-290 year to year, with occasional variations due
million for player registrations, net trade payable to operating trends each season (e.g. sport
and upfront collection of membership fees and achievement prizes).
season tickets). WORKING CAPITAL
These balances are rolled over and, therefore,
Significant efforts have been made in recent present similar amounts at each year-end, so € MILLION 6/30/09 6/30/10 6/30/11 6/30/12 6/30/13 6/30/14 6/30/15 6/30/16 6/30/17 6/30/18
years to lower its negative working capital, they do not represent debt, or a liquidity or
which has gone from €-182 million in 2010 to business continuity problem. OPERATING WORKING CAPITAL
Trade receivables + Inventories 32 58 71 66 54 46 57 67 108 103
Receivables from public administrations 4 1 1 1 1 1 7 0 0 0
Trade payables -47 -74 -67 -75 -73 -63 -64 -66 -63 -63
Payables to public administrations -7 -11 -15 -13 -15 -15 -22 -15 -27 -23
Salaries and wages payable (50% player registration, bonuses) -50 -56 -71 -93 -82 -114 -104 -144 -197 -208
WORKING CAPITAL Accruals -48 -66 -69 -67 -60 -58 -62 -64 -85 -96
Subtotal -116 -149 -151 -181 -176 -202 -189 -222 -265 -287
€ Million
-60
-30 Subtotal -45 -37 27 59 77 103 56 133 128 177
-90
-90 -94 -86 Other
-120 -98 -100 -106
-150 -123 -123 Available-for-sale financial assets 29 0 0 0 0 0 0 0 0 0
-135 -132
-142 -141
-180 Provisions -10 -1 -1 -1 -2 -2 -3 -1 -2 -2
-210 -182 Taxes 1 4 -17 0 1 7 1 5 7 6
Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
Subtotal 20 4 -18 -1 -1 5 -2 4 5 4
CASH + CURRENTS INVESTMENTS (€ MILLION) TOTAL WORKING CAPITAL -142 -182 -141 -123 -100 -94 -135 -86 -132 -106
Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
19 153 143 169 160 103 98 85 112 93 98 154 156 174 109 211 178 190
14 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 15
LIABILITIES AND GROSS DEBT NET DEBT
The Club had total liabilities at June 30, 2018 (€189 million at June 30, 2018 and €164 million Gross debt was discussed in the previous The Club includes as debt the balance of
of €595 million (2017: €611 million) and equity at June 30, 2017). section. advances on income accruing in the future,
of €494 million (2017: €463 million), resulting which stood at €24 million at June 30, 2018
However, the Club’s key metric is its net debt; it
in a total balance sheet value of €1,089 million In accordance with Spanish GAAP, the (2017: €17 million).
does not make sense to discuss what one owes
(2017: €1,075 million). Club’s gross debt at June 30, 2018 totaled without factoring in what one owns.
Net debt at June 30, 2018 amounted to €-107
€135 million, of which €60 million are bank
Net debt is gross debt minus cash and cash million (2017: €-10 million), which is actually net
Liabilities include gross debt, trade payables borrowings and €75 million are borrowings on equivalents, (€190 million at June 30, 2018; liquidity as the sum of cash and cash equivalents
(€271 million at June 30, 2018 and €260 investments in players and facilities (2017: €187 2017: €178 million), and receivables from other and receivables from transfers, exceeds
million at June 30, 2017) and other liabilities, million, of which €82 million and €105 million, clubs from player transfers (in keeping with a the amounts payable on investments, bank
composed of provisions, accruals, and taxes respectively). core principle of consistency, since gross debt borrowings, and advances. Net debt represents
includes amounts paid to other clubs for player the external resources which, coupled with own
acquisitions and as player acquisitions/sales are funds, are used to fund the capital invested by
mirror sides of the business), of €76 million at the Club to carry out its activity. Therefore, as
June 30, 2018 (2017: €37 million), recognized in debt is negative, own funds are used to fund
real madrid liabilities at june 30, 2017 the item “Financial assets” in the balance sheet. more than all the capital invested.
TOTAL LIABILITIES 449 162 611 NET DEBT AT JUNE 30, 2018
€ MILLION CURRENT NON-CURRENT total
Payables for player transfers, works and repurchase of rights -56 -20 -75
REAL MADRID LIABILITIES AT JUNE 30, 2018 Player transfer receivables 52 24 76
Net investments/transfers -3 4 1
€ MILLION current Non-current total Bank borrowings -10 -50 -60
Cash 190 0 190
Borrowings 66 69 135 Cash advance -24 -24
Subtotal other net debt 180 -74 106
Trade and other payables 271 271
TOTAL NET DEBT 177 -70 107
Financial liabilities 337 69 406
16 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 17
NET DEBT EQUITY
The Club’s net debt at June 30, 2018 was €-107 Since June 2009, it has made ongoing and Equity represents the Club’s own funds; i.e. the The greater the amount of equity relative to debt,
million. Rather than a debt, this negative amount considerable efforts to reduce debt. funds which, with borrowings, fund the Club’s the higher the Club’s value, solvency and financial
actually represents net liquidity as the sum of cash needs to carry out its activities. autonomy, as capital invested is financed more by
Comparing debt with the Club’s payment capacity
and cash equivalents and receivables from transfers, equity than debt. The debt/equity ratio is used as
represented by ordinary cash flow (measured Equity is the accounting measure of enterprise
exceeds the amounts payable on investments, an indicator of solvency and financial autonomy:
using EBITDA: €147 million), yields a debt/ value. For an entity like Real Madrid, which does
bank borrowings, and advances. The Club has had the lower this ratio, the higher the Club’s solvency
EBITDA ratio—one of the most commonly used not distribute dividends, the annual change in
negative net debt for the third year in a row, i.e. it and financial autonomy is.
solvency indicators—at June 30, 2018 of 0.0, equity relates to annual profit after tax (and any
enjoys a net liquidity position. The improvement in
which corresponds to the best possible credit balance sheet revaluation). Real Madrid’s debt/equity ratio has decreased in
net liquidity at June 30, 2018 compared to June 30,
rating in front of the financial institutions. recent years, to -0.0 at June 30, 2018; the value
2017 was €97 million, the largest debt reduction Through the profits it obtains, the Club has
achieved by the Club in the last 15 years. of net debt represented 0% of the value of equity,
increased equity each year to €495 million at June
indicating maximum solvency and financial
30, 2018, up €31 million from the year before (net
autonomy.
NET DEBT profit for the year).
€ MILLION
400
350
327
300
250 245
200
198
150
162 170 EQUITY
115 130 125
91 96 € MILLION
100 84 72 500 495
50
442 463
450
0 412
400
-4 370
-50 -13 -10 350
-38 312
-100 300
275
-94 -107 251
-150 250
-141 220
-200 200 196
176
Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 150 141
106
100
68 74 80 86
Net debt: Bank borrowings + Payables/Receivables on acquisition/transfer of assets – Cash 62
50 30
A negative sign means a net liquidity position. Debt also includes the balance of non-current advances
0
Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
Net debt/EBITDA ratio
3,5 Net debt/equity ratio
3.1 Net debt : Bank borrowings + Payables/Receivables on acquisition/transfer of assets – Cash
3,0 A negative sign means a net liquidity position. Debt also includes the balance of non-current advances
6,0
2,5 5.4
5,0
2,0
4,0
1.7 1.7
3.2
3,0
1,5 1.4 1.4
1.1 2,0 1.7
1,0
0.8 1.1
1,0 0.8 0.8 0.7 0.7
0.6 0.5 0.3 0.2 0.2
0,5 0.5
0.4 0
-0.1 -0.0 -0.0 -0.0
0 n/a n/a n/a n/a n/a n/a 0.0 0.0 0.0 -1,0 -0.5
Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 -2,0 -1.4
-1.9
-3,0
EBITDA: Operating profit before depreciation and amortization. As of 2008/09, with new Spanish GAAP, it includes gains/(losses) on
Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
disposals and impairment of non-current assets.
18 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 19
BALANCE SHEET
assets EQUITY AND LIABILITIES Assets/liabilities at June 30, 2018 amounted high cash generated from operating activities
to €1,089 million, an increase of €14 million and restraint over investment, bearing in mind
€ THOUSAND 06/30/2018 06/30/2017 € THOUSAND 06/30/2018 06/30/2017 from the year before. that the Club also paid significant bonuses for
sports achievements.
Sports intangible assets 316,787 366,246 Social Fund and Reserves 458,912 437,540 Highlights on the assets side: Decrease
Other intangible assets 7,479 8,788 Profit (loss) for the year 31,174 21,372 of €49 million in the carrying amount of Highlights on the liability side: Bank borrowings
Property, plant and equipment 341,215 332,700 CAPITAL AND RESERVES 490,086 458,912 sports intangible assets as the amount of decreased by €22 million. Outstanding
Investment properties 11,920 10,654 Grants received 4,420 4,564 investment was lower than amortization payables on investments were €30 million
Non-current player transfers 23,812 16,893 EQUITY 494,506 463,476 and disposals. The value of property, plant lower thanks to measures to avoid imprudent
receivable
and equipment increased by €9 million due investments. Salaries and wages payable,
Deferred tax assets 13,043 12,407
mainly to investment in the construction of the based on the related contracts, rose by €11
Other financial assets 20,301 9,784
office building and preliminary investments million due to the increase in salaries and
TOTAL NON-CURRENT ASSETS 734,557 757,472 Provisions for liabilities and charges 23,906 13,699
for the stadium remodeling project. Other the amount payable in bonuses for sports
Bank borrowings 49,793 81,791
investments increased by €11 million due to achievements. The provision charge increased
Non-current payables for player acquisitions 17,444 34,528
payments of wages, which are accrued as by €10 million due to allowances made in the
Non-current payables for stadium and Real Madrid
Sport City works 1,229 320 expenses over the long term. Receivables from period for risks and contingencies. Equity
Payables for repurchase of rights/other 902 946 player transfers increased by €40 million due at the end of the reporting period amounted
Deferred tax liabilities 16,230 13,891 to transfers carried out in the year. The cash to €495 million, up €31 million from the year
Accruals 24,227 16,952 balance increased by €12 million due to the before (net profit for the year).
TOTAL NON-CURRENT LIABILITIES 133,731 162,127
TOTAL ASSETS 1,089,025 1,074,662 TOTAL EQUITY AND LIABILITIES 1,089,025 1,074,662
20 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 21
OTHER MANAGEMENT
INFORMATION
22 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 23
OTHER MANAGEMENT
INFORMATION
24 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 MANAGEMENT REPORT 25
FINANCIAL
STATEMENTS
For the year ended June 30, 2018.
TOTAL ASSETS 1,089,025 1,074,662 TOTAL EQUITY AND LIABILITIES 1,089,025 1,074,662
28 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 29
INCOME STATEMENT FOR THE YEAR ENDED JUNE 30, 2018 INCOME STATEMENT FOR THE YEAR ENDED JUNE 30, 2018
Player and other personnel expenses 17,3 (430,751) (406,109) Total recognized income and expense 31,030 21,228
Impairment, gains/(losses) on disposal of non-current assets Balance at June 30, 2016 378,435 8,548 20,277 - 30,280 437,540 4,708 442,248
and other exceptional gains/(losses)
Impairment and losses 17,5 626 22 Total recognized income and expense
for the year ended June 30, 2017 - - - - 21,372 21,372 (144) 21,228
Gains/(losses) on disposal and other 17,5 53,583 51,667
54,209 51,689 Distribution of prior year profit 26,078 - - 4,202 (30,280) - - -
Balance at June 30, 2017 404,513 8,548 20,277 4,202 21,372 458,912 4,564 463,476
RESULTS FROM OPERATING ACTIVITIES 44,798 27,619
Total recognized income and expense
for the year ended June 30, 2018 - - - - 31,174 31,174 (144) 31,030
Finance income
Marketable securities and other financial instruments 17,6 1,004 1,657 Distribution of prior year profit 18,946 - - 2,426 (21,372) - - -
Balance at June 30, 2018 423,459 8,548 20,277 6,628 31,174 490,086 4,420 494,506
Finance expenses 17,6 (2,819) (3,011)
30 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 31
INCOME STATEMENT FOR NOTES TO THE FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 2018 FOR THE YEAR ENDED JUNE 30, 2018
32 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 33
2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS 2.3 Critical issues regarding the measurement and estimation of
uncertainties
The accompanying financial statements have been prepared in
accordance with new Spanish GAAP (Plan General Contable) The Club’s Board of Directors prepared the financial statements
approved by Royal Decree 1514/2007, of November 16, as using estimates based on historical experience and other factors
amended, upholding the specifics contained in Spanish GAAP considered reasonable under the circumstances. The carrying
applicable to sporting public limited companies (sociedades amounts of assets and liabilities, which were not readily apparent
anónimas deportivas) and sports entities insofar as they do not from other sources, were established on the basis of these estimates.
contradict the accounting standards. The accompanying financial Although the Club reviews these estimates on an ongoing basis,
statements are for the year ended June 30, 2018. there is a series of risks and uncertainties that depend on the future
outcome of certain assumptions and considerations described
The figures shown herein are in thousands of euros (€ Thousand), herein that could result in the need to revise the carrying amounts
unless stated otherwise. of assets and liabilities in future periods or other disclosures
contained in these notes.
2.1 Fair presentation
Key assumptions concerning the future and other key sources of
The accompanying financial statements have been prepared estimation uncertainty of estimates at the reporting date, that have
from the auxiliary accounting records of the Club in accordance significant risk of causing a material adjustment to the carrying
with Spanish GAAP and other prevailing accounting legislation amounts of assets and liabilities within the next financial year, are
to present fairly the Club’s equity, financial position and results of described below.
operation. The statement of cash flows was prepared to present
fairly the source and use of the Club’s cash flows represented • Impairment of non-current assets
by cash and cash equivalents. The accompanying financial
statements have been authorized for issue by the Club’s Board The measurement of non-current assets requires estimates to
of Directors. determine their recoverable amount (Notes 3.6) for assessing
whether there is any impairment. To determine recoverable
2.2 Comparative information amount, where it is not possible to use a market value, the Club’s
directors estimate, as at the date of authorization for issue of the
In accordance with company law, for comparative purposes the financial statements and whenever feasible, the present value of
Club has included, for each item of the balance sheet, the income the estimated and probable future cash flows to be generated by
statement, the statement of changes in equity and the statement the assets discounted using an appropriate discount rate.
of cash flows, in addition to figures for the year ended June 30,
2018, those for the year ended June 30, 2017. • Deferred tax assets
Quantitative information for the previous year is also included Deferred tax assets are recognized for the carry forward of
in the notes to the financial statements unless an accounting unused tax credits and any unused tax losses to the extent that
standard specifically states that this is not required. it is probable that future taxable profit will be available against
which they can be utilized and, accordingly, the assets recovered.
To determine the amount of deferred tax assets that can be
recognized, the Club’s directors estimate the amounts and dates
on which future taxable profits will be obtained, and the period of
reversal of taxable temporary differences.
34 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 35
• Provisions 2.4 Distribution of profit
The Club has made judgments and estimates regarding the Until the year ended June 30, 2015, the Club allocated all profit
probability of occurrence of risks that could require the recognition for the year to increase the balance of “Reserves”.
of a provision and, where appropriate, the related amounts. A
provision is recognized only when the risk is considered probable, In the wake of changes to tax legislation effective from the year
in which case the cost that would be arising from the obligating ended June 30, 2016, specifically in compliance with article 25
event is estimated. On other occasions, the cost is determined of the Corporate Income Tax Law 27/2014, the Club set aside a
after the reporting date and prior to the authorization for issue reserve, called the “Capitalization reserve,” earmarking 10% of
of the financial statements, once additional information and the increase in equity of the previous year, up to a limit of 10% of
documentation has been obtained that confirms the assessment taxable income for the year (Note 16.3).
or estimate of the risk materializing at the close.
2.5 Balance sheet revaluation
• Calculation of fair value, value in use and present value
In the 1996/1997 financial year, the Club availed of the balance
Calculating fair value, value in use and present value entails, sheet revaluation provided for in RD Law 7/1996, of June 7,
in certain cases, calculating future cash flows and making increasing the net value of its property, plant, and equipment
assumptions on the future amounts of the cash flows, as well by €8,548 thousand. The impact on the depreciation charge for
as the applicable discount rates. The estimates and related the year ended June 30, 2018 was €160 thousand (2017: €160
assumptions are based on historical experience and various other thousand).
factors considered reasonable under the circumstances.
Similarly, in the 2013/2014 financial year, the Club decided to
• Operating lease commitments — The Club as lessor avail of the revaluation provided for in Law 16/2012, of December
27, resulting in a net increase in its property, plant and equipment
The Club has entered into leases to carry out its business. Based of €21,344 thousand. At the Extraordinary General Assembly held
on an evaluation of the terms and conditions of the arrangements, on September 22, 2013, the revaluations were approved, along
it has determined that the lessor retains all the risks and rewards with the ad hoc balance sheet issued by the Board of Directors.
of ownership of the assets. Therefore, it accounts for these The ad hoc balance sheet and the breakdown of the revaluations
arrangements as operating leases. Operating lease payments are of the various items of property, plant, and equipment were
recognized as expenses in the income statement on a straight- provided in the 2013/14 financial statements.
line basis over the lease term.
The impact on the depreciation charge for the year ended June
30, 2018 was €589 thousand (2017: €618 thousand).
36 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 37
3. RECOGNITION AND MEASUREMENT STANDARDS contract expires, since up to that moment there is no real transfer
of rights and risks incidental to ownership of the contractual
The main recognition and measurement standards applied by the rights over the Club’s players. At the reporting date, none of the
Club in the preparation of the accompanying financial statements above circumstances necessary for derecognition of any players
for the year ended June 30, 2018, are as follows: had arisen.
Sports intangible assets includes mainly player transfer rights Other intangible assets are initially recognized at acquisition
(“transfers”) and the costs incurred to acquire such rights. cost. The cost of intangible assets acquired in a business
These rights are measured at acquisition cost and amortized combination is their fair value at the date of acquisition.
from the moment they are acquired on a straight-line basis over Following initial recognition, intangible assets are carried
the term of each player’s contract. These intangible assets are at cost less accumulated amortization and accumulated
initially recognized on the date the related acquisition agreement impairment losses.
becomes effective.
This type of intangible asset is recognized if, and only if, it is
probable that it will generate future benefits for the Club, its
After initial recognition, these assets are carried at cost less
cost can be measured reliably and it is identifiable.
accumulated amortization and any accumulated impairment.
Intangible assets are amortized on a systematic basis in
The cost of the intermediation services in player acquisitions accordance with their estimated useful life and residual value.
or renewals is recognized as an increase in the acquisition cost Amortization methods and periods are reviewed at the end
and amortized on a straight line basis over the life of the player’s of each reporting period, and adjusted prospectively where
contract. applicable. Intangible assets are tested for impairment at least
at each financial period end. If any such indication exists, the
At the end of each reporting period, these intangible assets company estimates the recoverable amount and recognizes
are assessed for indications of impairment. If there is objective the related impairment.
and clear evidence that the Club’s sports intangible assets are
impaired before the date of authorization for issue of the financial
statements, the related impairment loss is recognized. • Concessions
This item includes expenditure made to obtain the concession for
Unexercised purchase options on players at the end of the
certain of the Club’s activities. These arrangements are amortized
reporting period are measured at acquisition cost, given the
on a straight-line basis over a period of seven years. The Club’s
difficulties inherent in estimating the options’ fair value, as there
concession assets are fully amortized.
are no active market or comparable transactions for these assets.
This line item also includes the grant of an operator’s license
Players are derecognized at the date of disposal, transfer, for free-to-air broadcasting via TDT through a HD TV channel.
cancellation of the contract, or expiry of the contractual rights The license was granted to the Club by the Ministry for
over the players. Even though contact may have been initiated Industry via Ministerial Order of November 19, 2015, following
with other clubs, agents, or the players themselves, for the a public tender held in accordance with the tender terms
purpose of negotiating their departure from the Club, and approved by the Council of Ministers on April 17, 2015. The
given the difficulties and uncertainties that arise before signing amount recognized is the present value of the fees payable for
agreements, the related gain or cost is not recognized until either use of the concession over its 15-year term, which is also its
the sale or transfer contract has been signed, or until the player’s amortization period.
38 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 39
• Patents, licenses, trademarks, and similar rights operated a number of boxes in the Santiago Bernabeu
stadium that were acquired by the Club that year for €955
This items reflects the amounts paid to register the Club’s
thousand and €4,029 thousand, respectively. These rights
trademark. This asset is amortized on a straight-line basis over
were fully amortized at June 30, 2018 and 2017.
a period of 10 years.
40 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 41
The Club reviews the assets’ residual value, useful lives and Non-current assets held for sale are measured at the lower
depreciation methods at the end of each reporting year or of its carrying amount and fair value less costs to sell. These
period and adjusts them prospectively where applicable. measurement provisions do not apply to deferred tax assets,
assets arising from employee benefits and financial assets
Items of property, plant and equipment are derecognized on not related to equity investments in group companies, jointly
disposal or when no future economic benefits are expected controlled companies and associates included in the category
from them. The gain or loss on derecognition of an item of of assets non-current assets held for sale, which are covered
property, plant or equipment (calculated as the difference by specific standards. These assets are not depreciated and,
between the net disposal proceeds and the carrying amount of where necessary, the corresponding impairment is recognized
the asset) is recognized in the income statement for the year or so that the carrying amount does not exceed the fair value less
period when the asset is derecognized. costs to sell.
42 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 43
next as a function of player performance and/or injuries, • Club as lessee
the differing economic circumstances of the selling and Operating lease payments are recognized as expenses in the
buying clubs, and the stance of players/agents, among income statement when accrued.
others, it is not possible to determine the fair value of each
of these assets objectively and reasonably until their sale. • Club as lessor
Nevertheless, the Club performs a detailed (individual and Rental income from operating leases is recognized in the income
collective) analysis of the value of players’ potential based statement when accrued.
on certain sports and financial parameters to identify
whether there are any indications that a sports intangible
asset may be impaired. If any clear indication or object 3.8 Financial assets
evidence of impairment exists, the Club’s management
estimates the asset’s recoverable amount based on the • Classification and measurement
best information available at the date of authorization
for issue of the financial statements and recognizes an Financial assets are classified for measurement purposes
impairment loss. Sports property, plant, and equipment into one of the following categories: loans and receivables,
(e.g. sports stadiums and pavilions) present the same available-for-sale financial assets, and equity investments
challenges to determine the market value, as there is in group companies. The Club determines the classification
no active and transparent market in which comparable of its financial assets at initial recognition and reviews the
transactions can be identified. To assess whether these classification at the end of each financial year or reporting
assets may be impaired, the Club analyzes whether the period.
income from these assets is sufficient to cover the related
depreciation charges and other operating expenses. a) Loans and receivables
b)
Other intangible assets, other property, plant and The Club recognizes in this category trade and non-trade
equipment and investment property receivables, which include financial assets with fixed or
determinable payments not traded in an active market
The recoverable amount is the higher of the fair value less for which the Company expects to recover all of its initial
costs to sell and value in use. The asset is considered investment, for reasons other than credit deterioration.
impaired when its carrying amount exceeds its recoverable
amount. The value in use is the present value of the Loans and receivables are initially measured at fair
expected future cash flows, discounted using a market value. In the absence of evidence to the contrary, this
risk-free rate and adjusted for any risks specific to the is the transaction price, which is equivalent to the fair
asset. For those assets that do not generate cash inflows value of the consideration given plus directly attributable
that are largely independent of those from other assets or transaction costs.
groups of assets, the recoverable amount is determined
for the cash-generating unit to which the asset belongs. The financial assets included in this category are
subsequently measured at amortized cost. Nonetheless,
trade receivables falling due within one year for which there
3.7 Leases is no contractual interest rate, and loans and advances
to personnel, expected to be collected in the short term
Arrangements are classified as finance leases when the economic are measured initially and subsequently at their nominal
conditions of the lease indicate that substantially all the risks and amount, provided that the effect of not discounting the
rewards incidental to ownership of the asset are transferred. All other cash flows is not material.
lease arrangements are classified as operating leases.
44 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 45
Security deposits provided on operating leases are retains control over the asset, it continues to recognize the
measured at the amount given, which does not differ asset at the amount of the exposure to variability in the value
significantly from fair value. of the transferred asset; that is, to the extent of its continuing
involvement in the financial asset. The associated liability is
Amounts received or past-due amounts receivable related also recognized.
to multi-year contracts for the transfer of certain rights
or the rendering of services that are deferred over time The gain or loss on derecognition of the financial asset is
are recognized in the balance sheet on the liabilities side determined as the difference between the consideration
under “Non-current accruals” or “Current accruals” and, received net of attributable transaction costs, including any
for the most part, taken to profit or loss on a straight-line new asset obtained less any liability assumed, and the carrying
basis over the life of the related contracts. amount of the financial asset, plus any accumulated amount
recognized directly in equity. The gain or loss is recognized in
These amounts are classified as current (less than a year) profit or loss for the reporting period in which it arises.
or non-current (more than a year) depending on the period
of settlement.
3.9 Impairment of financial assets
b) Available-for-sale financial assets
The Club adjusts the carrying amount of financial assets with
This category includes equity instruments not classified in a charge to the income statement when there is objective
any other financial asset category. evidence that the asset is impaired.
These assets are initially measured at fair value. In the To determine impairment losses on financial assets, the Club
absence of evidence to the contrary, this is the transaction assesses the potential loss of individual as well as groups of
price, which is equivalent to the fair value of the consideration assets with similar risk exposure.
given plus directly attributable transaction costs.
• Debt instruments and other receivables
Available-for-sale assets are subsequently measured There is objective evidence that a debt instrument is impaired
at fair value, without deducting any transaction costs as a result of an event occurring after initial recognition and
incurred on disposal. Changes in fair value are accounted leading to a reduction or delay in estimated future cash
for directly in equity until the financial asset is derecognized flows.
or impaired, and subsequently in the income statement.
Investments in equity instruments for which the fair value The Club classifies debt instruments as impaired assets
cannot be estimated reliably are measured at cost less (doubtful exposures) when there is objective evidence of
any accumulated impairment. impairment and when circumstances make it reasonable
to classify collection of these assets as doubtful; these
• Derecognition circumstances refers basically to the existence of unpaid
balances, non-compliance issues, refinancing and data
Financial assets are derecognized when the contractual rights which evidence the possible irrecoverability of total agreed-
to the cash flows from the financial asset expire or have been upon future cash flows or a delay in their collection.
transferred, provided that substantially all the risks and rewards
of ownership have been transferred. For financial assets measured at amortized cost, the amount
of the impairment loss is measured as the difference between
If the Club has neither transferred nor retained substantially the carrying amount and the present value of estimated
all the risks and rewards, it derecognizes the financial asset future cash flows, discounted at the effective interest rate
when it has not retained control over that asset. If the Club calculated upon initial recognition.
46 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 47
• Equity instruments contrary, this is the transaction price, which is equivalent
There is objective evidence that equity instruments are to the fair value of the consideration, adjusted for directly
impaired as a result of one or more events that occurred attributable transaction costs.
after initial recognition giving rise to a failure to recover the
carrying amount due to a significant or prolonged decline in The financial liabilities included in this category are
the fair value. subsequently measured at amortized cost. Accrued
interest is recognized in the income statement using the
The impairment loss is measured as the difference between effective interest rate method.
the carrying amount and the recoverable amount. The
recoverable amount is the higher of the fair value less Nonetheless, trade payables falling due within one year
costs of disposal and the present value of future cash flows for which there is no contractual interest rate expected to
from the investment. When estimating impairment, the be paid in the short term are measured at their nominal
investee’s equity is taken into consideration, corrected for amount, provided that the effect of not discounting the
any unrealized gains existing at the measurement date. The cash flows is immaterial.
losses are recognized in the consolidated income statement
through a direct reduction in equity. b) Liabilities at fair value through profit or loss
The reversal of an impairment loss is recognized in the income This category includes financial derivatives not designated
statement. The loss can only be reversed up to the limit of as hedging instruments.
the carrying amount of the investment that would have been
disclosed at the reversal date had the impairment loss not These liabilities are measured initially at fair value, with
been recognized. any changes in fair value recognized in profit or loss for
the financial year or reporting period.
• Classification and measurement The Club derecognizes a financial liability when the obligation
is extinguished.
The Club determines the classification of its financial liabilities at
initial recognition and reviews the classification at the end of each
financial year or reporting period. 3.11 Inventories
Financial liabilities are classified for measurement purposes into Inventories are measured at purchase price. The purchase price
one of the following categories: comprises the amount invoiced by the seller, after deducting
any discounts, rebates or other similar items, plus any additional
a) Debts and payables costs incurred to bring the goods to a saleable condition.
This category includes financial liabilities arising on the As the Club’s inventories do not require a period of more
purchase of goods and services in the course of the than one year to be in a saleable condition, purchase price or
Club’s trade operations, and non-trade payables that are production cost does not include borrowing costs.
not derivatives.
The Club uses the weighted average cost method to allocate
Financial liabilities included in this category are initially value to inventories.
measured at fair value. In the absence of evidence to the
48 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 49
When the net realizable value of inventories is lower than cost, 3.14 Provisions
the Club recognizes an impairment loss with an expense in the
income statement. The Club recognizes provisions when it has a present obligation
(legal, contractual, constructive or tacit) arising from past events
that is known before the end of the financial year or reporting
3.12 Cash and cash equivalents period, it is probable that an outflow of resources will be required
to settle the obligation and a reliable estimate can be made of
Cash and cash equivalents include cash, current accounts, the amount of the obligation.
short-term deposits and purchases of assets under resale
agreements which meet the following criteria: In other situations where no present obligation exists yet or there
is clear uncertainty with respect to the outcome of an event (e.g.
• They are convertible to cash. claims, appeals), the Club and its legal or tax advisors assess
the prospects of a future event that could result in a gain or
• They have a maturity of three months or less from the date loss for the Club. If the future occurrence of a particular event
of acquisition. is highly probably, the resulting contingent asset or liability is
estimated.
• There is no significant risk of changes in value.
Provisions are measured at the present value of the best estimate
• They form part of the Club’s usual cash management of the amount required to settle the obligation or transfer it to
strategy. a third party. Adjustments arising from the discounting of the
provision are recognized as a finance expense when accrued.
For the purposes of the statement of cash flows, cash may Provisions expiring within one year are not discounted where
also include occasional overdrafts when these form an integral the financial effect is not material. Provisions are reviewed at the
part of the Club’s cash management. end of each reporting period and adjusted to reflect the current
best estimate of the obligation at the date of authorization for
issue of the financial statements.
3.13 Government grants
Monetary grants are measured at the fair value of the 3.15 Liabilities arising from long-term employee benefits
consideration awarded.
Neither the Club employees to which its collective labor
Grants are classified as non-refundable when the conditions agreement is applicable nor management are entitled to any
attaching to them are met, at which time they are recognized supplementary pension benefits.
directly in equity, net of the related tax effect.
Repayable grants are recognized as liabilities until they meet 3.16 Income tax
the criteria for classification as non-repayable. Until then, no
income is recorded. Income tax expense for the year is calculated as the sum of
current tax resulting from applying the corresponding tax rate
Grants awarded to finance specific expenses are recognized as to taxable profit for the year, less deductions and other tax
income in the reporting period in which the financed expenses relief, and changes during the period in recognized deferred
are incurred. Grants awarded to acquire assets or settle tax assets and liabilities. The tax expense is recognized in
liabilities are recognized as income for the reporting period in the income statement, except when it relates to transactions
proportion with the amortization or depreciation charges for recognized directly in equity, in which case the related tax is
those assets. likewise recognized in equity.
50 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 51
Deferred taxes are recognized for temporary differences at the 3.17 Classification of current and non-current assets and
reporting date between the tax bases of assets and liabilities liabilities
and their carrying amounts. The tax base of an asset or liability
is the amount attributed to it for tax purposes. Assets and liabilities are classified in the balance sheet as current
or non-current. Accordingly, assets and liabilities are classified as
The tax effect of temporary differences is included in “Deferred current when they are associated with the Club’s normal operating
tax assets” or “Deferred tax liabilities” on the balance sheet, cycle and it is expected that they will be sold, consumed, realized
as applicable. or settled within that cycle; they are expected to mature, or to
be sold or realized within one year; they are held for trading; or
Current tax assets and liabilities are measured at the amount are cash and cash equivalents whose use is not restricted for a
expected to be recovered from or paid to the taxation authorities period of over one year.
using the tax rates prevailing at the reporting date, including
any other adjustments for taxes from prior years.
3.18 Revenue and expenses
The Club recognizes deferred tax liabilities for all temporary
differences, except where disallowed under prevailing tax In accordance with the accruals principle, revenue and expenses
legislation. are recognized when the goods or services represented by them
take place, regardless of when actual payment or collection occurs.
The Club recognizes deferred tax assets for all deductible Amounts received in a period related to income of the subsequent
temporary differences, the carry forward of unused tax credits period are recognized under liabilities in the balance sheet as
and any unused tax losses. Deferred assets are recognized to current or non-current accruals, as appropriate.
the extent that it is probable that taxable profit will be available
against which the deferred tax assets can be utilized, except Revenue is recognized when it is probable that the profit or
where disallowed by prevailing tax legislation. economic benefits associated with the transaction will flow to the
Club and the amount of revenue and costs incurred or to be incurred
At the end of each reporting period, the Club reassesses can be measured reliably. Revenue is measured at the fair value of
recognized and previously unrecognized deferred tax assets. the consideration received or receivable, less any trade discounts,
Based on this analysis, the Club then derecognizes previously rebates or similar items granted by the Club. The following specific
recorded deferred tax assets when recovery is no longer recognition criteria must also be met before revenue is recognized:
probable, or recognizes a previously unrecorded deferred tax
asset to the extent that it is probable that future taxable profit • Membership fees, ticket sales and stadium revenue: recognized in
will be available against which it can be utilized. the season in which they are accrued.
Deferred tax assets and liabilities are measured using the tax • Revenue from international and friendly matches, broadcasting and
rates expected to prevail upon their reversal, based on tax marketing: recognized in the season in which they are accrued.
legislation approved, and in accordance with the manner in
which the assets are reasonably expected to be recovered and • Interest income: recognized as the interest accrues.
liabilities settled.
Deferred tax assets and deferred tax liabilities are not 3.19 Foreign currency transactions
discounted and are classified as non-current assets or non-
current liabilities. The Club’s functional and presentation currency is the euro.
52 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 53
Monetary assets and liabilities denominated in foreign currency 4. SPORTS INTANGIBLE ASSETS
are translated at the spot rate prevailing at the reporting date.
The breakdown and movement in this item are as follows:
Exchange gains or losses arising on this process and on
settlement of these assets and liabilities are recognized in the
income statement for the financial year or reporting period in
which they occur.
2017/2018
Opening Additions and Closing
€ thousand balance allowances Disposals Transfers balance
3.20 Joint operations
Football
In the year ended June 30, 2018, the Club signed a participation Cost 862,090 89,220 (103,581) - 847,729
account agreement, as regulated by articles 239 to 243 of the Accumulated amortization (497,309) (83,365) 49,012 - (531,662)
Spanish Commercial Code. The Club, acting as “manager Impairment - (300) - - (300)
participant,” recognizes any surplus or shortfall of the “non- Net carrying amount football 364,781 5,555 (54,569) - 315,767
manager participant” in the latter’s annual contribution as an
operating expense or income related to management of its Basketball
sponsorship income (Note 17.1.4). Cost 10,318 1,153 (726) - 10,745
Accumulated amortization (8,853) (1,557) 685 - (9,725)
Impairment - - - - -
3.21 Environmental assets and liabilities Net carrying amount basketball 1,465 (404) (41) - 1,020
Basketball
3.22 Related party transactions
Cost 12,850 358 (2,890) - 10,318
Accumulated amortization (8,840) (1,165) 1,152 - (8,853)
Related party transactions are measured using the same criteria
Impairment - - - - -
described above.
Net carrying amount basketball 4,010 (807) (1,738) - 1,465
54 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 55
4.1 Description of the main movements in the period 5. OTHER INTANGIBLE ASSETS
Additions of sports intangible assets relate to investments in The breakdown and movement in this item are as follows:
new players for the professional football and basketball teams
and include the amount of transfers and other acquisition costs 2017/2018
incurred in the related transactions.
Opening Additions and Closing
€ Thousand balance allowances Disposals Transfers balance
The acquisition costs in the year related to intermediation services
was €41,532 thousand (2016: €39,488 thousand). Cost:
Concessions 3,159 - - - 3,159
Patents, licenses, trademarks, and similar rights 1,526 140 - - 1,666
As indicated in Note 3.6 above, the Club recognizes impairment
Computer software 14,400 518 - 413 15,331
when there are clear indications and evidence of impairment of Other intangible assets 125,047 - - - 125,047
its sports intangible assets up to the date of authorization of the Advances 1,461 658 - (413) 1,706
financial statements. Total cost 145,593 1,316 - - 146,909
During the year ended June 30, 2018, the Club obtained revenue Accumulated amortization:
Concessions (2,208) (70) - - (2,278)
of €107,991 thousand (2017: €53,899 thousand) from the transfer
Patents, licenses, trademarks, and similar rights (1,019) (75) - - (1,094)
of rights over several players to other clubs. The net gain from
Computer software (8,948) (2,250) - - (11,198)
all disposals after deducting the carrying amount amounted to Other intangible assets (124,585) (230) - - (124,815)
€53,381 thousand (2017: €51,667 thousand) (Note 17.5). Total accumulated amortization (136,760) (2,625) - - (139,385)
Impairment:
Computer software (45) - - - (45)
4.2 Other information
NET CARRYING AMOUNT 8,788 (1,309) - - 7,479
Impairment:
Computer software (45) - - - (45)
56 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 57
Note 3.2 “Other intangible assets” describes the most significant 6. PROPERTY, PLANT AND EQUIPMENT
operating rights held by the Club at June 30, 2018.
The breakdown and movement in this item are as follows:
Transfers to “Computer software” in the year ended June 30,
2017 related to the start-up of a video platform integrated in 2017/2018
the IT platform set up by the Club to help develop its digital
Opening Additions and Closing
activity. € Thousand balance allowances Disposals Transfers balance
Cost:
5.1 Other information Sports stadiums and pavilions 347,935 358 (1,039) (24,951) 322,303
Other land and buildings 22,215 3 - 39,404 61,622
Technical installations and other items 96,138 4,487 (916) 8,900 108,609
The following table presents a summary of the cost of fully-
Under construction and advances 37,227 18,175 (471) (23,353) 31,578
amortized other intangible assets:
Total cost 503,515 23,023 (2,426) - 524,112
Accumulated depreciation:
Sports stadiums and pavilions (90,062) (6,878) 393 1,838 (94,709)
€ thousand 06/30/18 06/30/17
Other buildings (4,863) (1,040) - (1,838) (7,741)
Technical installations and other items (64,386) (6,512) 862 - (70,036)
Concessions 2,103 2,103
Total accumulated depreciation (159,311) (14,430) 1,255 - (172,486)
Patents, licenses, trademarks, and similar rights 806 805
Computer software 7,228 6,531 Impairment
Other intangible assets 120,209 120,209 Buildings and other property, plant, and equipment (11,504) - 1,093 - (10,411)
130,346 129,648
NET CARRYING AMOUNT 332,700 8,593 (78) - 341,215
2016/2017
Opening Additions and Closing
€ Thousand balance allowances Disposals Transfers balance
Cost:
Sports stadiums and pavilions 345,676 397 (255) 2,117 347,935
Other land and buildings 22,168 - - 47 22,215
Technical installations and other items 89,169 2,194 (67) 4,842 96,138
Under construction and advances 22,494 21,739 - (7,006) 37,227
Total cost 479,507 24,330 (322) - 503,515
Accumulated depreciation:
Sports stadiums and pavilions (82,809) (7,331) 78 - (90,062)
Other buildings (4,419) (444) - - (4,863)
Technical installations and other items (57,356) (7,097) 67 - (64,386)
Total accumulated depreciation (144,584) (14,872) 145 - (159,311)
Impairment
Buildings and other property, plant, and equipment (11,321) (360) 177 - (11,504)
58 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 59
6.1 Description of the main movements in the period 6.3 Operating leases
Additions in the year relate mainly to investment in the Sports • Club as lessee
City for construction of the Club’s new corporate offices and to
urban development and access work, as well as a number of At June 30, 2018 and 2017, the Club had entered into operating
investments made in the Santiago Bernabéu stadium, including leases on certain items of property, plant, and equipment,
those related to the stadium renovation project. primarily buildings, technical installations and computer
hardware. The lease terms range from one to five years,
depending on the leased asset. In most cases, the leases are
6.2 Urban development units updated in accordance with the annual CPI. The Club is in no
way encumbered by virtue of these leases.
The Club acquired urban development units to existing plots
in the Valdebebas area. These units were registered with the Payments in the year ended June 30, 2018 on these leases
respective property registers (as an annotation in the original amounted to €1,808 thousand (Note 17.4) (2017: €1,654
property inscription). thousand).
These development units have, for all intents and purposes, the Future minimal rentals payable under operating leases are as
same consideration as the land contributed, since the units are follows:
ultimately what generate the right to obtain a plot adjudication
once the Reparcelling Project is prepared. In fact, both the
purchase deeds and the registry inscriptions establish that these € thousand 06/30/2018 06/30/2017
60 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 61
The Club’s policy is to arrange the insurance policies necessary 7. INVESTMENT PROPERTIES
to cover the risks to which its property, plant and equipment are
exposed. The breakdown and movement in this item are as follows:
2016/2017 2016/2017
Amortización Valor neto Opening Additions and Closing
€ thousand Cost acumulada contable € thousand balance allowances Disposals Transfers balance
Cost
Buildings 9,607 (3,521) 6,086 Land 13,620 - - - 13,620
Buildings 15,024 - - - 15,024
Installations 170 1 - - 171
At June 30, 2018, this grant was recognized in equity for an Construction in progress 548 100 - - 648
Total cost 29,362 101 - - 29,463
amount of €4,420 thousand (Note 12) (2017: €4,564 thousand)
and in deferred tax liabilities for €1,474 thousand (2017: €1,522 Accumulated depreciation
thousand) (Notes 3.13 and 16.2). Buildings (10,263) (424) - - (10,687)
Installations (48) (14) - - (62)
Total accumulated depreciation (10,311) (438) - - (10,749)
Impairment
Buildings - - - - -
Land (3,091) - 382 - (2,709)
Construction in progress (5,351) - - - (5,351)
Total impairment (8,442) - 382 - (8,060)
62 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 63
“Land” includes mainly the plots related to the agreement 8. FINANCIAL ASSETS
signed with the Madrid City Council, and correspond to the
sale of plots 1, zones 1 and 3, 4 and 5 zone 2 of the API 11.12 The breakdown and movement in this item are as follows:
“Mercedes Arteaga, Jacinto Verdaguer” and the TER. 02. 189-
A1 tertiary plot of the 4.01 UPN “Ciudad Aeroportuaria parque 2017/2018
de Valdebebas” obtained through the segregation of the TER.
02 189-A plot. Loans and other
€ Thousand Equity instrument financial assets Total
“Buildings” includes mainly the following installations attaching NON-CURRENT FINANCIAL ASSETS
to the Santiago Bernabeu stadium: Non-current financial assets
Loans and receivables:
• Investments totaling €14,673 thousand in connection with Non-current investments - 43,768 43,768
the “La Esquina del Bernabeu” shopping center. This Available-for-sale financial assets
property comprises a series of premises and a car park. It Non-current investments 345 - 345
is leased out to a third party under an operating concession 345 43,768 44,113
arrangement executed in 1992, originally for a period
of 20 years and renewed successively. The maximum CURRENT FINANCIAL ASSETS
date at present is June 30, 2019, with possibility of early Current financial assets
cancellation. This assignment and operation arrangement Loans and receivables
generated revenue totaling approximately €467 thousand in Trade and other receivables (*) - 151,269 151,269
the year ended June 30, 2018 (2017: €499 thousand). Cash and cash equivalents (Note 10) - 190,109 190,109
- 341,378 341,378
• Investments amounting to €327 thousand related to
restaurants, including capital expenditure by the Club TOTAL FINANCIAL ASSETS 345 385,146 385,491
to equip these facilities for hospitality and catering
(*) Does not include public administrations
usage. There are four premises located within the Club’s
installations that are operated by a third party which pays 2016/2017
Real Madrid a royalty. The direct royalty revenue generated
by this activity in the year ended June 30, 2018 amounted Loans and other
€ Thousand Equity instrument financial assets Total
to €1,751 thousand (2017: €1,765 thousand).
NON-CURRENT FINANCIAL ASSETS
Impairment was recognized on the real estate assets, based Non-current financial assets
on market value for land and expectations regarding use for Loans and receivables:
buildings. Non-current investments - 26,332 26,332
Available-for-sale financial assets
Future minimal rentals receivable under operating leases are as Non-current investments 345 - 345
follows: 345 26,332 26,677
64 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 65
8.1 Non-current investments The aforementioned amounts are recognized using the
amortized cost method, which includes the financial effect of
The breakdown and movement in this item are as follows: discounting. Accrued finance income in the year ended June 30,
2018 amounted to €320 thousand (2017: €157 thousand) (Note
2017/2018 17.6).
Trade receivables
Stadium revenues 11,587 5,947
• “Equity instruments” includes the Club’s ownership interests in Broadcasting rights 1,512 643
several unlisted entities that organize competitions in which the Marketing revenues 67,504 89,578
Club’s professional basketball team participates and over which 80,603 96,168
the Club exercises neither control nor significant influence. The
Club has measured these investments at cost rather than at fair Receivables from sports entities
value, as it does not have sufficient information to determine their Player transfers 52,305 19,754
fair value reliably. Other 11,081 5,777
63,386 25,531
• “Non-current receivables from sports entities for player transfers”
Other financial assets
includes the amounts receivable from a number of sports entities
Personnel 7,280 3,093
primarily relating to the sale of rights over professional players.
7,280 3,093
These amount do not accrue explicit interest. The detail by
maturity is as follows: Total financial assets 151,269 124,792
Year 2 23,807 16,876 Total receivables from public administrations 5,755 6,735
Year 3 3 16
Year 4 and beyond 2 2 TOTAL TRADE AND OTHER RECEIVABLES 157,024 131,527
23,812 16,894
66 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 67
• Trade receivables “Other receivables from sports entities” at June 30, 2017 includes
a balance with the Professional Football League of €3,642
The balance of “Trade receivables” is presented net of impairment. thousand confirmed with the latter (2017: €3,994 thousand).
The movement in impairment losses is as follows:
There were no significant foreign currency balances at June 30,
€ Thousand 06/30/2018 06/30/2017 2018 and 2017.
Initial impairment 15,711 18,689
Charge for the year (Note 17.4) 410 2,554
Utilized (Note 17.4) (28) (3,175)
Unused amounts reversed (Note 17.4) (760) (520) 9. INVENTORIES
Transfer in the year (9) (1,837)
thousands
Foreign
currency amount Euro amount
10. CURRENT INVESTMENTS, CASH AND CASH EQUIVALENTS
US dollars 977 838
The breakdown of these items is as follows:
Australian dollars 25 16
Total 513
• Current receivables from sports entities 11. EQUITY - CAPITAL AND RESERVES
The balance of “Current receivables from sports entities” is presented The breakdown and movement in “Capital and reserves” are
net of impairment. The movement in impairment losses is as follows: shown in the statement of changes in equity.
• Entity’s Fund
€ THOUSAND 06/30/2018 06/30/2017
Initial impairment 277 283
“Entity’s Fund” consists mainly of the initial endowment and
Charge for the year (Note 17.4) - -
Utilized - -
subsequent contributions arising from the distribution of profits.
Unused amounts reversed (Note 17.4) (277) (170) In addition, the impact of the transition to the new General
Transfer in the year 28 164 Accounting Plan in Spain were recognized under this item
which, as required therein, must be recorded in unrestricted
Final impairment 28 277 reserve accounts.
68 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 69
• Revaluation reserve RD 7/96 12. EQUITY - GRANTS, DONATIONS, AND BEQUESTS RECEIVED
The revaluation reserve allocated by the Club in the 1996/1997 The movements in non-refundable capital grants included the
financial year may be used to offset tax losses or to increase the consolidated statement of changes in equity are as follows:
“Reserves” account or unrestricted reserves, once the revalued
assets have been fully depreciated or derecognized from
inventories. 2017/2018
Amounts
• Revaluation reserve law 16/2012 transferred
Opening Additions Tax effect to profit or loss Tax effect Closing
€ THOUSAND balance of additions (Note 17.1) of transfers balance
In the 2013/2014 financial year the Club availed of the balance
sheet revaluation provided in Law 16/2012 of December 27 Non-refundable grants 4,564 - - (192) 48 4,420
(Note 2.5). Amounts arising from the accounting revaluations
were recognized under “Revaluation Reserve Law 16/2012 of Total non-refundable grants 4,564 - - (192) 48 4,420
December 27”. Since the period for verifying the revaluation by
the Taxation Authorities has expired, the balance of this account
may be used to offset losses and increase share capital, or after 10
years have transpired from the date of the balance sheet in which
the revaluations were made, allocated to unrestricted reserves.
2016/2017
This balance may only be distributed, indirectly or directly, when Amounts
the revalued assets have either been fully depreciated, disposed transferred
Opening Additions Tax effect to profit or loss Tax effect Closing
of or derecognized. € THOUSAND balance of additions (Note 17.1) of transfers balance
70 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 71
13. PROVISIONS AND CONTINGENCIES 13.2 Current provisions
13.1 Non-current provisions The breakdown and the movement in this item are as follows:
Other provisions 13,699 13,364 (3,012) (145) 23,906 Total current provisions 1,745 30 - 145 1,920
Other provisions 36,939 - (22,867) (373) 13,699 Total current provisions 1,350 420 (1,025) 1,000 1,745
72 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 73
The bulk of the amount drawn down on guarantees with indefinite year, notification was received from the bankruptcy trustee
maturity relate to claims arising from settlement of tax on the indicating that another 15% was to be liquidated. Finally, on
increase in the value of urban land in Valdebebas (Note 6.2), October 19, 2016, the bankruptcy trustee presented its findings
and to a guarantee provided to comply with the commitments report to the court, raising the final amount of collection to over
of the grant of a license to broadcast an HD channel through 97% which, in principle, should be settled by the end of 2018.
TDT. No liabilities are expected to arise from these guarantees.
3. Variable collection rights from different clubs and image/
Elsewhere, in guarantee of compliance with its payment sponsorship contracts were also recognized in the year ended
obligations with a number of financial institutions and other June 30, 2018 amounting to €6,754 thousand (2017: €8,103
creditors, the Club pledged the sports sponsorship contract thousand), while no payment obligations related to these
until the 2018/2019 season and collection of membership fees variable rights were recorded (2017: €4,533 thousand).
until the 2020/2021 season.
In addition, although no payment obligations had accrued as
at June 30, 2018, there are potential liabilities arising from
13.4 Commitments, contingent assets, and liabilities agreements with sports entities that would be triggered if certain
objectives are achieved in future seasons. In the unlikely event
For some of the following agreements, information is provided that all the objectives were to be met, the maximum amount
regarding different issues without any indication of financial to be paid over the term of all the agreements up until their
amounts, as this is confidential commercial information and its expiration would amount to €18,000 thousand (2017: €18,000
disclosure could be damaging for the Club. thousand). If payment were made, these amounts would be more
than offset by the increased revenue from sports competitions,
1. On June 6, 2016, the Spanish High Court (Audiencia Nacional) especially the Champions League.
issued an order notifying the State Council’s response based on
indications from the Spanish competition authorities (CNMC) There are also potential assets related to sponsorship
to the Club’s appeal for annulment of a penalty imposed by agreements that are contingent upon fulfillment of established
the CNMC against the Club in the proceeding initiated over sports objectives in future seasons. In the unlikely event that all
an agreement for the assignment of audiovisual rights signed the objectives were met, the maximum amount to be paid over
between the Club and Mediaproducción S.L. Subsequently, in the term of all the agreements up until their expiration would
November 2016, the CNMC annulled the fine and reimbursed amount to €42,848 thousand (2017: €40,823 thousand).
the Club for the €3,900 thousand it had already paid, in the
2013/2014 financial year, plus late payment interest. The 4. On February 17, 2012, the Club, its subsidiary at the time
amount reimbursed (€3,900 thousand) did not have any Real Madrid Gestión de Derechos S.L., and Rak Marjan Island
impact on profit for the year ended June 30, 2017, since it was Football (a company incorporated in Luxembourg) entered into
recognized in the previous period, when the favorable ruling an agreement to develop a resort on an artificial island of the Ras
to the Club’s appeal was issued. This marked the end of this Al-Khaimah Emirate, licensing use of the Club’s name and logo
proceeding. user rights for a period of 22 years (up to 2034) in exchange for a
substantial amount of revenue for the Club and subsidiary. Rak
2. In 2005/2006 a contract was signed with Siemens AG, Marjan Island Football assumed all the risks related to financing
which was then assumed by BenQ Mobile GmbH & Co. This and constructing of the complex. The agreement established
company declared bankruptcy in the 2006/2007 financial year different levels of fixed and variable income based on the
and, consequently, the Club set aside a provision for the full project’s two phases. The Group considered this agreement
amount of the debt that period. as a licensing agreement for use of the commercial operating
rights to its name and logo.
As a result of the liquidation process, until June 30, 2015, 80% of
the total debt filed for creditor protection was collected (2008/09: Under the contract, an amount was to be received during the
35%; 2011/12: 30%; 2013/14: 15%). In the 2015/2016 financial project development phase that began accruing in the 2011/12
74 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 75
financial year. However, for reasons of prudence, an impairment year, with the impairment charge adjusted in accordance with
loss was recognized in prior years for the total amount accrued, the new valuation. Impairment at June 30, 2018 amounted to
since Rak Marjan required more time to raise the necessary €2,529 thousand (2017: €2,709 thousand), as recognized in the
funds to undertake the project. On December 19, 2012, the Club related balance sheet item (Note 7).
terminated the contract as this company defaulted on payments
or did not provide guarantees. It initiated legal proceedings in On March 21, 2012, Madrid Federal Court of Appeals 14 upheld
2013/14 claiming these amounts. The proceedings were ruled the request for an injunction filed regarding the agreement
on favorably for the Club on June 10, 2015, with subsequent between the Club and the Madrid City Council on July 21, 2011,
claims made for the aforementioned amounts, despite the fact entailing suspension of enforcement of the agreement. Both
that Rak Marjan was being liquidated. the Club and the City Council appealed the injunction, and on
July 12, 2012, the Administrative Appeals section of the Madrid
Under the framework of the company’s liquidation, on February Supreme Court handed down a sentence revoking the injunction
23, 2017, the Club was summoned to a hearing in the Luxembourg issued by the Judge from the Madrid Court of Administrative
court for March 10, 2017, to clarify the proposed liquidation being Appeals 14, considering that there were no grounds for the
presented. This procedure was resolved with the company’s final injunction.
liquidation, without the Club collecting on the debt claimed.
Regarding the main legal proceeding, on April 25, 2012, a claim
5. On July 29, 2011, an agreement was signed and ratified by was filed before the Court against the agreement signed on July
public deed on December 21, 2011 with the Madrid City Council 29, 2011, seeking its annulment and restitution of the assets to
legalizing the earlier agreements entered into between the two their situation prior to the signing of the agreement, along with the
parties on May 29, 1998 and December 20, 2001. related cancellation of any files on register, and requiring a new
appraisal of the obligations arising from the agreements signed
This agreement included compensation from the Madrid City in 1991 and 1998. The Administrative Appeals court handed
Council due to the legal impossibility of transferring the entire down a ruling on October 10, 2013, notified on October 15, 2013,
“Las Tablas” plot as stipulated in the agreement signed on May rejecting the appeal and upholding the sentence, which was ruled
29, 1998, as well as Real Madrid’s compensation for breach of as final through an organization procedure dated November 20,
the main obligation of the underground parking lot on the Paseo 2013.
de la Castellana’s lateral section established in the Agreement
dated December 20, 2001. For its part, the European Commission notified Spain of its
decision to initiate proceedings regarding alleged state aid
The Madrid City Council paid the compensation by transferring arising from the appraisal of a plot of land located in Las Tablas
a plot of land located between Rafael Salgado, Paseo de la (Madrid), which the Madrid City Council was forced to turn over
Castellana, and Concha Espina on API 05.12 “Santiago Bernabéu”, to Real Madrid, in compliance with a land-swap agreement
Plots 1, zone 1 and 3, 4 and 5 Zone 2 of API 11.12 “Mercedes signed by the parties in 1998. Due to the legal impossibility of
Arteaga, Jacinto Verdaguer” and the tertiary plot TER. 02 189- handing the plot over, it was appraised by the City Council at its
A1 of UNP 4.01 “Ciudad Aeroportuaria parque de Valdebebas” value for tax purposes, and replaced by other land of equivalent
obtained by segregating plot TER.02 189-A. value.
All the property, plant, and equipment included in the scope On July 4, 2016, the European Commission issued a decision
of the agreement were appraised by the Technical Services concluding that the Club obtained an advantage of €18.4 million
Department of the Sub-Directorate General of Urban Adaptation from the over-evaluation of a plot of land. The Club, considering
under the General Directorate for Town Planning Management of that this did not constitute state aid since the Club received, via
the Government, Development and Housing Area. The appraisal the delivery of other land, an amount equivalent to that which it
was carried out by an external appraiser. Where the appraised was entitled to receive, appealed this decision before the General
amount was lower than net carrying amount, the related Court of the European Union, confident that the decision would
impairment loss was recognized. A new appraisal is made each be repealed.
76 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 77
In November 2016, the Club rejected the resolution, seeking that Real Madrid filed an appeal against this agreement with the LFP
it be overturned before the General Court of the European Union. in its Assembly held during the 2015/2016 season regarding the
This is still being processed. distribution of the year’s TV broadcast rights, as it considered
that since the Royal Decree had not yet entered into force during
Nevertheless, the Club made the required payment, but this did the season, the distribution of the capital gains generated by the
not have any impact on profit or loss for the 2016/2017 financial overall management of the individual contracts made by the LFP
year since, in keeping with criteria of prudence, the Club had was not yet applicable. It considered that, in accordance with
already recognized a provision for all amounts that it could the LFP bylaws for the distribution of the remaining joint LFP
ultimately be forced to pay. income (e.g. sponsorships, advertising, football pool revenue),
the distribution should be made by attributing 60% of income to
6. In December 2013, the European Commission notified Spain the 20 first division clubs (an even 3% each), and 40% for the 22
of its decision to commence proceedings regarding alleged state second division clubs (an even 1.82% each). Failing this, Real
aid to different Spanish football clubs, including Real Madrid Club Madrid proposed an even distribution between the 42 LFP clubs.
de Fútbol, for applying legislation to this type of entity that, for tax
purposes, included a lower tax rate. At the date of authorization for issue of the financial statements, the
appeal filed by the Club was still being heard by the Federal Court
On July 4, 2016, the European Commission issued a decision of Appeals, subsequent to the dismissal of the Club’s injunction
in which it considered that by being taxed at a lower rate, the proceedings proposed regarding the LFP assembly agreement
clubs benefited by an estimated €0 to €5,000 thousand per club, and after the High Sports Council ratified the agreement. Should
the precise amount of which the Spanish authorities needed to the appeal be accepted, for its rights related to the 2015/2016
determine on a case-by-case basis. The Club considers that the season, the Club would collect an amount in addition to that
application of this legislation did not constitute state aid, since the already collected under the terms of its individual contract.
tax benefits come in addition to other prejudices; an analysis of
the years contemplated by the European Commission regarding 8. In July 2015, the FIFA notified the Club that it was levying
the Club’s tax returns showed that the Club would have suffered a fine related to open proceedings initiated for signing up
economic damage had it been taxed as a limited liability company underage players. The penalty included an economic sanction
(sociedad anónima). This favorable economic assessment for the of approximately €330 thousand, in addition to a ban on signing
Club was also included in the European Commission’s decision up any players for a specified period of time. The Club filed an
of July 4, 2016. In addition, last year the Club was subject to appeal with the FIFA, which on December 20, 2016, issued its
a tax audit regarding the EU case by the Spanish taxation final ruling. It reduced both the play signing ban, affecting only
authorities. This procedure was resolved without requiring any the January 2017 window, and the amount of the penalty, to 240
material adjustment to the economic loss estimated by the Club. thousand Swiss francs (approximately €229 thousand).
In light of this situation, in the 2016/2017 reporting period, the
Club commenced a procedure to claim reimbursement of the
amount of economic loss caused by the discriminatory treatment
of the legislation, plus late payment interest. During the year, the
Club filed an appeal with the Supreme Court, which is currently
pending a ruling.
78 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 79
14. FINANCIAL LIABILITIES 14.1 Non-current payables
The breakdown of “Financial liabilities” is as follows: The breakdown of “Trade and other payables” is as follows:
TOTAL FINANCIAL LIABILITIES 59,944 345,941 405,885 In addition, the Club has several undrawn long-term credit facilities
amounting to €150,000 thousand (2017: a nominal amount of
€82,000 thousand of which €72,000 had been drawn up).
(*) Does not include payables to public administrations
80 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 81
• Other financial liabilities 14.2 Current payables
The breakdown of this item by year of maturity is as follows: The breakdown of “Current payables” is as follows:
At June 30, 2018, the Club had one short-term loan of €10,000
thousand of principal outstanding (2017: €0).
June 30, 2017
Subsequent It also had a short-term credit facility with an undrawn amount of
€ Thousand 2018/2019 2019/2020 2020/2021 2021/2022 years Total
€32,000 thousand (2017: €51,157 thousand arranged and undrawn).
Suppliers of fixed assets 11,331 4,380 2,274 59 789 18,833
Sports entities for player transfers 15,096 1,865 - - - 16,961 The borrowings in both cases bear floating interest at the Euribor rate
Other financial liabilities - - - - - - plus a market spread.
Total 26,427 6,245 2,274 59 789 35,794 The breakdown of foreign currency balances is as follows:
There were no non-current payable balances in foreign currency June 30, 2017
at June 30, 2018 and 2017.
Foreign
€ Thousand currency amount Euro amount
US dollars 324 285
Pound sterling 13 15
Japanese yen - -
Total 300
82 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 83
14.3 Trade and other payables 14.4 Working capital
The breakdown of “Trade and other payables” is as follows: Working capital is the difference current assets and current
liabilities on the balance sheet.
€ Thousand 06/30/2018 06/30/2017
Working capital at June 30, 2018 was a negative 106 million
Trade payables 61,805 62,168 euros. It remained negative, as in previous years, but improved
Sports entities for services rendered 1,296 783
compared to the year before by €26 thousand (June 30, 2017:
Sports personnel 200,818 189,939
Other personnel 6,942 7,134 €-132 thousand).
Total financial liabilities 270,861 260,024
Negative working capital is the result, partly, of investment in
Other payables to public administrations (Note 16) 23,136 26,988 property, plant, and equipment, intangible assets and in sports
Current tax liabilities - -
intangible assets, in both the current and previous years.
Total payables to public administrations 23,136 26,988
TOTAL TRADE AND OTHER PAYABLES 293,997 287,012 The effect of these investments is in addition to the Club’s
inherently negative working capital. The principal factor driving
negative working capital is, in line with the intrinsic workings
of the Club, the large operations-driven accounts payable
The amount of “Sports personnel” relates primarily to remuneration (purchases and services, player signings, upfront collection
payable to players and coaches of the first football team in of membership dues/season tickets), which are recurring; i.e.
accordance with their contracts, the terms of which stipulate renewed annually.
that these payments are made generally in July and January.
Also included are performance bonuses for sports achievements Current recurring payables at June 30, 2018 amounted to €393
which, under the terms of the contracts, are paid the following thousand (purchases and services: €86 million; signings/other
season. personnel: €208 million; accruals of membership dues/season
tickets and other: €99 million euros), up from €377 million at
The breakdown of “Sports personnel” is as follows: June 30, 2017 (purchases and services: €90 million: signings/
other personnel: €197 million; accruals of membership dues/
season tickets and other: €90 million). These current recurring
€ Thousand 06/30/2018 06/30/2017
payables are responsible for large part of the negative goodwill
First football team players and coaching staff 194,312 187,816 at the end of the reporting period.
Other football team players and coaching staff 37 1,098
Basketball players and coaching staff 6,469 1,025
These balances will be rolled over, and therefore will reflect
Total payables to sports personnel 200,818 189,939 similar amounts at each year-end. Payment for player signings
is made in two half-yearly installments: in January and July.
Membership fees are collected on June 30 of the following year.
This generates a recurring negative balance, which is canceled
over the entire year. However, cancellation does not represent
any payment since it is covered by income the following year.
Box seating and VIP area season tickets, as well as amounts
from certain sponsors, were collected prior to the end of the
season, whereas the recognition in revenue and, accordingly,
the reduction in the creditor balance is carried out over the entire
season, implying no payment whatsoever.
84 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 85
The remaining current payables at June 30, 2018 related to • Non-current advances
amounts owed for investments, which will be paid comfortably
with the cash flows generated by the Club each month from This item relates to discounted amounts received in advanced
operating activities, plus available cash and financial investments and pending accrual arising on various sponsorship agreements.
in highly liquid assets.
Finance expenses recognized in the income statement for the year
In sum, what is important is that the Club expects to generate ended June 30, 2018 related to the discounting of the advance
significant operating profit, i.e., operating income higher than payments received and amounted to €365 thousand (2017: €478
operating expenses, both this year and next. As a result, after thousand).
meeting the payment commitments arising from its operations,
the Club generates significant surplus cash to cover its investment • Deferred income
commitments.
a) Broadcasting revenue
Considering the above and taking into account the forecast cash This item includes amounts collected or invoiced by the
balances based on conservative assumptions for the coming Club under agreements on audiovisual rights entered into
seasons, and the undrawn available credit lines at June 30, 2018 before June 30, 2018, which accrue in the 2018/19 season.
of €182 million (2017: €61 million), the uncertainties that may arise
in terms of potential liquidity risk and the Club’s financial position b) Stadium revenue
due to negative working capital are mitigated. Stadium revenue comprises mainly membership fees and
season tickets and, to a lesser extent, income from stadium
boxes received or invoiced before June 30, 2018, which
15. CURRENT AND NON-CURRENT ACCRUALS accrue in the 2018/19 season.
86 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 87
16. TAXATION The Club is current with all its tax obligations and has no past-
due amounts with the taxation authorities, or agreements with the
The breakdown of tax assets is as follows: taxation authorities for deferring any payments.
Deferred tax assets for deductible temporary differences 13,043 12,407 • Personal income tax payable: balance payable for
Unused tax credits and other tax relief - - transactions in the month of June, with settlement on July
Deferred tax assets (non-current assets) 13,043 12,407
20.
88 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 89
16.1 Calculation of income tax expense Reconciliation of income tax expense/(income) recognized and
the result of multiplying total recognized income and expenses by
In accordance with prevailing tax legislation, the Club’s profits are the applicable tax rate, differentiating the amount reported in the
subject to a 25% tax rate. However, certain deductions may be income statement, is as follows:
made to the resulting tax liability.
The reconciliation of net income and expense with taxable income 2017/2018
(tax loss) in the provision for income tax recognized at the end of
Income and expense
each period is as follows: Profit/(loss) recognized directly
€ THOUSAND for the year in equity
2017/2018 Income and expense for the year before tax 42,983 -
Income and expense Permanent differences 10,433 -
Profit/(loss) recognized directly 53,416 -
€ thousand for the year in equity
Income and expense for the year Effective tax rate 25% -
Continuing operations 31,174 -
Theoretical tax charge 13,354 -
Income tax
Continuing operations 11,809 -
Income and expense for the year before tax 42,983 - Deductions (868) -
Adjusted of prior year provision for income tax 19 -
Permanent differences 10,433 -
Capitalization reserve (685) -
Temporary differences Adjustment of prior year capitalization reserve (11)
Originating in the current year (12,274) -
-
Originating in prior years 4,913 -
(7,361) - EFFECTIVE INCOME TAX EXPENSE 11,809
Income and expense Income and expense for the year before tax 26,265 -
Profit/(loss) recognized directly Permanent differences 7,226 -
€ thousand for the year in equity
33,491 -
Income and expense for the year
Continuing operations 21,372 - Effective tax rate 25% -
Income tax
Theoretical tax charge 8,373 -
Continuing operations 4,893 -
Income and expense for the year before tax 26,265 -
Deductions (2,971) -
Permanent differences 7,226 -
Adjusted of prior year provision for income tax 87 -
Temporary differences Capitalization reserve (596) -
Originating in the current year (31,107) -
Originating in prior years 21,444 -
EFFECTIVE INCOME TAX EXPENSE 4,893 -
(9,663) -
90 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 91
The breakdown of income tax expense/(income) is as follows: 16.2 Deferred tax assets and liabilities
92 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 93
• Deferred tax assets - Unused tax credits and other tax relief In 2002/03, applicable tax legislation on capital gains obtained
from the sale of certain assets was amended, as per article
The accounting movement in “Unused tax credits and other tax 36.ter of the Corporate Income Tax (CIT) Law, establishing a
relief” is as follows deduction from tax payable on such capital gains in the year
in which the credit is utilized, up to a limit of 10 years from
when it is generated. This deduction was 10% for capital
2017/2018 gains generated through financial year 2006/07, falling to
7% thereafter. As a consequence of this regulation, the Club
€ THOUSAND Opening balance Increases Decreases Closing balance recognizes the tax asset corresponding to gains that have been
Investment tax credits - 1,122 (1,122) -
included in the tax base, provided the pertinent requirements
Other deductions - 857 (857) - are met, such as reinvestments within the legally stipulated
time frames.
Total unused tax credits and other tax relief - 1,979 (1,979) -
Law 27/2014, of November 27, effective for tax periods
beginning on or after January 1, 2015, eliminated this deduction
on new gains generated as of that date. However, it kept the
2016/2017 deduction for gains generated in prior years and not applied to
taxable income.
€ THOUSAND Opening balance Increases Decreases Closing balance
• Deferred tax liabilities – deferral for reinvestment
Investment tax credits - 2,286 (2,286) -
Other deductions - 685 (685) - These liabilities result from the tax treatment applicable to
capital gains on certain transfers of players’ federative rights,
Total unused tax credits and other tax relief - 2,971 (2,971) - as well as on merchandising, internet, image and distribution
rights transferred and on a portion of the land at the Club’s
former sporting complex, whose recognition in taxable income
has been deferred.
The breakdown of investment tax credits by year in which they
arose is as follows: The aforementioned tax treatment consisted of applying the
tax credit for reinvestment of extraordinary gains provided
for in article 21 of the CIT Law (Law 43/1995, of December
€ THOUSAND
Unused deduction 27) to the gains generated in financial years from 1996/97 to
Eligible Tax credit generated in prior Deduction generated Unused
Arising in gains generated year applied in the year applied tax credit 2001/02 on the disposal of certain assets, thereby acquiring a
commitment to reinvest the full sale proceeds at some point
2017/2018 164 11 (1,111) (11) - within the period elapsing between the year prior to the sale
2016/2017 32,652 2,286 - (1,175) 1,111 and the three years following it. These gains were reinvested
in player federative rights, other intangible assets and items
of property, plant, and equipment, as well as financial assets.
At the end of each reporting period, the Club recognizes tax
credits and relief to the extent that it is probable that sufficient
taxable profit will be available against which they can be utilized.
94 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 95
The total amount of deferred income in accordance with article These gains have been included in taxable income as a general
21 of the CIT Law, the recognition method and the amounts rule in seven equal parts from year three, except where the
already reinvested and pending reinvestment are set out in the proceeds were reinvested in fixed assets, in which case the
following table (thousands of euros): income is included in taxable income in the tax periods in
which the related assets are depreciated.
June 30, 2018
• Deferred tax liabilities – Deferral of capital gains due to
€ THOUSAND deferred payment
Gain included Gain Last Method
Assets Deferred Amount to be Amount in taxable pending FY for for including In the 2009/10 financial year, and in accordance with article 19.4
Financial year sold gain reinvested reinvested income inclusion including gains gain
of Legislative Royal Decree 4/2004 of the Consolidated Text of
1996/1997
Player federative
8,084 11,239 11,239 8,084 - 2006/2007 Sevenths the Spanish Corporate Income Tax Law (TRLIS in Spanish), the
rights
Club decided to recognize, for tax purposes, the capital gains
Player federative
1997/1998
rights
3,865 5,421 5,421 3,865 - 2007/2008 Sevenths on asset transfers in transactions involving deferred payment
Player federative based on the collections carried out.
1998/1999 14,135 17,159 17,159 14,135 - 2008/2009 Sevenths
rights
1999/2000
Player federative
20,358 25,142 25,142 20,358 - 2009/2010 Sevenths This gave rise to a deferred tax liability amounting to €6,475
rights
thousand in the year ended June 30, 2018 (2017: €7,901
2000/2001 Other rights 115,995 117,197 117,197 115,995 - 2010/2011 Sevenths
thousand) related to the deferred capital gains during the year,
Player federative
2000/2001
rights
24,523 25,243 25,243 24,523 - 2010/2011 Sevenths and the cancellation of €3,930 thousand from collection of
2001/2002 Land 203,443 204,142 204,142 203,443 - 2011/2012 Sevenths deferred capital gains from the previous year (2017: €8,206
% of depreciation of thousand).
2001/2002 Land 15,714 15,768 15,768 4,463 11,251 2011/2051
reinvested assets
Total 406,117 421,311 421,311 394,866 11,251 • Deferred tax liabilities - free depreciation
Deferred tax (25%) 2,813
Pursuant to Royal Decree Law 13/2010, of December 3, on
measures designed to boost competitiveness, effective from
June 30, 2017 January 1, 2011, the Club availed for the first time for the
2011/23 financial year the free depreciation of its investments
€ THOUSAND
in the new property, plant and equipment and investment
Gain included Gain Last Method
Assets Deferred Amount to be Amount in taxable pending FY for for including properties covered under this law, and is not required to maintain
Financial year sold gain reinvested reinvested income inclusion including gains gain employment, which was a condition in the previous regulation.
Player federative
Free depreciation generated a deferred tax amounting to
1996/1997 8,084 11,239 11,239 8,084 - 2006/2007 Sevenths €1,533 thousand in the 2011/12 financial year.
rights
Player federative
1997/1998 3,865 5,421 5,421 3,865 - 2007/2008 Sevenths
rights In the year ended June 30, 2018, a total of €76 thousand euros
1998/1999
Player federative
14,135 17,159 17,159 14,135 - 2008/2009 Sevenths was canceled (2017: €70 thousand) related to the accounting
rights
depreciation of the assets to which free depreciation was applied.
Player federative
1999/2000 20,358 25,142 25,142 20,358 - 2009/2010 Sevenths
rights
2000/2001 Other rights 115,995 117,197 117,197 115,995 - 2010/2011 Sevenths
Player federative
2000/2001 24,523 25,243 25,243 24,523 - 2010/2011 Sevenths
rights
2001/2002 Land 203,443 204,142 204,142 203,443 - 2011/2012 Sevenths
% of depreciation of
2001/2002 Land 15,714 15,768 15,768 4,133 11,581 2011/2051
reinvested assets
Total 406,117 421,311 421,311 394,536 11,581
Deferred tax (25%) 2,895
96 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 97
16.3 Capitalization reserve 16.4 Other information
In accordance with Article 25 of Corporate Income Tax (CIT) Law • Tax assessments 2010-2014
27/2014, of November 27, taxpayers that pay tax at the rate
provided in sections 1 to 6 of Article 29 of the CIT will be eligible In January 2016, tax assessments were signed under protest
for a reduction in taxable income of 10% of the increase in capital relating to personal income tax, non-resident income tax, value
and reserves provided the following conditions are met: added tax and corporate income tax for 2010 to 2014. The Club was
notified in May 2014 of the resolutions regarding final settlement.
a) The increase in capital and reserves must be maintained for a The assessments arose due to discrepancies regarding the tax
period of five years from the end of the tax period to which the treatment of payments made by the Club for services rendered
reduction relates, except in the event of tax losses. and invoiced to the Club by agents. The Spanish tax authorities
considered that these payments were made on behalf of players
b) The amount of the reduction must be appropriated to a reserve, where a relationship was deemed to exist between the agent and
which must appear on the face of the balance sheet as a separate player.
heading, which will be non-distributable for the aforementioned
time period. The Club expressed its disagreement and filed appeals with the
Central Economic Administrative Tribunal (TEAC). However, in
In no circumstance may the reduction in taxable income exceed keeping with criteria of maximum prudence, the Club recognized
10% of taxable income for the tax period prior to the reduction the entire expense and paid the amount of the assessments in the
and the integration referred to in section 12 of article 11 of the CIT year ended June 30, 2016.
and prior to the offset of tax losses.
In January 2017, the Club was notified of the commencement
In this regard, the Club included in the calculation of its taxes of penalty proceedings regarding the 2010-2014 assessments,
for the year ended June 30, 2018, a reduction in taxable income even those the inspections did not uncover any indications that
for the year of €2,739 thousand (2017: €2,383 thousand) related the Club had committed an offense. The proceedings concluded
to 10% of the increase in equity in the year plus the unused with a €6.5 million settlement agreement. The Club expressed
reduction from the prior year when the 10% limit provided for in its disagreement and filed appeals with the Central Economic
this legislation was applied. This reduction in taxable income led Administrative Tribunal (TEAC). However, in keeping with criteria
to a reduction in income tax expense of €685 thousand (2017: of maximum prudence, the Club paid the full amount of the
€596 thousand). assessments in the preceding year. This payment did not have
any impact on 2016/2017 accounting profit, since it was charged
To comply with its requirements, the Club set aside the related to provisions already set aside at the end of the 2015/2016
reserve within the term provided for in company law for the financial year.
approval of the financial statements (see Note 2.4).
98 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 99
• Tax assessments 2014-January 2016 Under prevailing tax regulations, tax returns may not be considered
final until they have either been inspected by the tax authorities
On July 22, 2016, the Club was notified of the commencement of or until the four-year inspection period has expired. Therefore, at
a tax audit of corporate income tax for the tax period from July 1, June 30, 2018, the Club was open to inspection of income tax
2014 to June 30, 2016 on the enforcement procedure for state aid (personal income tax withholding and non-resident income tax)
in relation to the European Commission’s decision of July 4, 2016 from 2016, VAT from July 2015 and corporate income tax for the
regarding alleged state aid granted to four Spanish football clubs, 2015/2016 and 2016/2017 financial years.
including Real Madrid Club de Fútbol, for applying legislation to
this type of entity that, for tax purposes, includes a lower tax rate Regarding these years open to inspection, the Club considers that
(see Note 13.4.6). there are no material contingencies that could arising from future tax
audits, even those that could arise from discrepancies regarding the
The tax audit began on October 25, 2016, and subsequently tax treatment of payments to agents. This is because even though
expanded to include the following taxes: the Club completely disagreed with the criteria used by the tax
authorities, to prevent new assessments or possible penalties, it
ITEM Period has decided to settle the taxes and appeal the settlements. In any
Income tax 7/2014 to 6/2015 event, the Club’s actions will be based, as usual, on the principle
Value added tax 7/2014 to 6/2015 of tax legality, irrespective of the amounts required for the Club’s
Withholding/payments on account of personal income tax 2015 and January 2016 disagreement with the settlement agreements.
Withholdings on account of non-resident tax 2015 and January 2016
Therefore, the aforementioned tax audits of income tax for the 17. REVENUE AND EXPENSES
7/1/2014 to 6/30/2015 period regarding the enforcement of state
aid were replaced by the new tax audits. 17.1 Operating income
In January 2017, the Club signed assessments under protest The accompanying income statement includes the following
for the taxes and periods indicated for a total amount of items:
approximately €1 million. As with the previous tax audits for
the 2010-2014 period, this amount was due to discrepancies in € THOUSAND 06/30/2018 06/30/2017
the tax treatment of payments made by the Group for services Revenue 748,042 671,864
rendered and invoiced to the Club by agents. After the end of Other operating income 1,704 1,030
the 2016/2017 financial year, the final settlement agreements in Grants (Note 12) 192 192
Provision surpluses (Note 13.1) 1,000 1,539
relation to these assessments were received. They did not differ
Total operating income before disposals 750,938 674,625
significantly from the provisional assessments and had no impact
on accounting profit for the 2016/2017 financial year as they Gains/(losses) on disposal and other (Note 17.5) 53,583 51,667
were recognized with a charge to provisions already set aside at
the end of the 2015/2016 financial year. The Club filed appeals TOTAL OPERATING INCOME 804,521 726,292
with the TEAC. As at the date of authorization for issue of the
accompanying financial statements, no ruling had been issued.
100 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 101
• Revenue • Agreements in force
The breakdown of the Club’s revenue from continuing operations 1. In the year ended June 30, 2004, an agreement was signed with
by business category and geographic market is as follows: Adidas to expand and improve the sportswear sponsorship rights.
A new agreement was signed with Adidas in the 2011/12 season
extending the sponsorship rights to the 2019/20 season and raising
€ THOUSAND 06/30/2018 06/30/2017
the minimum amounts guaranteed, as well as royalty percentages.
La Liga revenue 52,222 51,055 An advance payment was received during that season which will
King’s Cup (Copa de S.M. el Rey) revenue 5,374 5,609
be discounted on a straight-line basis from the amounts receivable
Spanish Supercup revenue 4,810 -
Champions League revenue 85,458 86,213
from the 2012/13 season to the 2019/20 season. This advance
European Supercup revenue 4,000 4,000 was recognized at its present value under “Non-current accruals”
FIFA Club World Cup revenue 4,425 4,922 in liabilities and will be gradually canceled as the corresponding
Revenue from friendly matches 18,543 9,875 contract revenue is recognized.
Basketball competitions revenue 6,841 5,954
Other revenue 13,957 9,542
Also in the 2011/12 season, a number of contracts were signed with
Total box office and competition revenue 195,630 177,170
Total revenue from membership fees and season tickets 49,865 49,772 Adidas to assign, for the 2012/23 season, the exploitation rights for
Total stadium revenue 28,931 25,486 products licensed by the Club and certain retail rights in exchange
Total broadcasting revenue 178,413 165,299 for a minimum guaranteed royalty.
102 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 103
4. An agreement became effect in the year (see Note 3.20) The breakdown of purchases by geographic area is as follows:
subject to the growth and development of sponsorship revenue
for an initial period of four years, with possibility of extension € THOUSAND 06/30/2018 06/30/2017
by one or two year in accordance with the level of achievement
Spain 27,924 26,066
of certain economic terms. The agreement covers all territories Intra-EU 284 253
and sponsorship categories, except sports and commercial
sponsorships of jerseys and Stadium and training fields naming Total 28,208 26,319
rights.
5. In the 2015/2016 season, once the individual contracts entered 17.3 Personnel expenses
into by the clubs concluded, Royal Decree Law 5/2015, of April 30,
governing joint exploitation of audiovisual rights of professional The breakdown of “Personnel expenses” is as follows:
football competitions (first and second Spanish football divisions,
the King’s Cub and the Spanish Supercup) became effective.
2017/2018
The legislation establishes a joint revenue-sharing scheme based
Other
on category (first or second division), performance and social Termination employee Total
acceptance, measured by membership fees and average box Salaries Image benefits/ Group Social benefits personnel
€ THOUSAND and wages rights departures bonuses security expense expenses
office revenue, and the share of the contribution to the generation
of income from the marketing of TV broadcasts. Players and coaching staff of first football team 280,795 2,786 - 54,858 486 1,010 339,935
Players and coaching staff of second football team 6,425 54 19 - 348 - 6,846
It also establishes a mandatory contribution system (expenditure Players and coaching staff of lower division
football team 5,218 22 - - 896 1,800 7,936
in accordance with income obtained) to sustain other football
Non-sports personnel 34,035 - 113 1,150 4,273 722 40,293
categories and associations, and to promote sports in general.
Total football 326,473 2,862 132 56,008 6,003 3,532 395,010
Players and coaching staff Basketball 23,257 2,760 - 6,306 403 877 33,603
17.2 Raw materials and other consumables used
Non-sports personnel Basketball 1,686 - - 300 124 28 2,138
Total basketball 24,943 2,760 - 6,606 527 905 35,741
The detail of consumption of raw materials and other consumables
during the year is as follows: TOTAL PERSONNEL EXPENSES 351,416 5,622 132 62,614 6,530 4,437 430,751
Staff who can be registered in the LNFP 280,795 2,786 - 54,858 486 1,010 339,935
Staff who cannot be registered in the LNFP 34,900 2,836 19 6,306 1,647 2,677 48,385
Total sports personnel expenses 315,695 5,622 19 61,164 2,133 3,687 388,320
104 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 105
2016/2017 The following table presents the total sports personnel expenses
based on the budget preparation guidelines of the clubs, as
Other well as the LPF’s public limited sports companies (Sociedades
Termination employee Total anónimas deportivas or “SADS”).
Salaries and Image benefits/ Group Social benefits personnel
€ THOUSAND wages rights departures bonuses security expense expenses
Players and coaching staff of first football team 247,148 6,242 - 65,044 436 1,255 320,125 2017/2018
Players and coaching staff of second football team 10,834 188 96 - 375 - 11,493
Players and coaching staff of lower division football teams 4,189 54 337 143 892 1,689 7,304 Personnel Depreciation and Impairment (Income)/expense
Non-sports personnel 30,742 - 1,573 1,375 3,998 728 38,416 € THOUSAND expenses amortization and losses from transfers Total
Total football 292,913 6,484 2,006 66,562 5,701 3,672 377,338
Staff who can be registered in the LNFP 339,935 80,258 331 (7,205) 413,319
Staff who cannot be registered in the LNFP 48,385 4,664 112 435 53,596
Players and coaching staff Basketball 21,041 3,382 - 1,295 433 851 27,002
Non-sports personnel Basketball 1,666 - - - 103 - 1,769
Total sports personnel expenses 388,320 84,922 443 (6,770) 466,915
Total basketball 22,707 3,382 - 1,295 536 851 28,771
TOTAL PERSONNEL EXPENSES 315,620 9,866 2,006 67,857 6,237 4,523 406,109 2016/2017
Depreciation
Personnel and Impairment (Income)/expense
The breakdown of personnel expenses in the preceding table € THOUSAND expenses amortization and losses from transfers Total
below sports staff who can be registered in the LNFP (1st and
Staff who can be registered in the LNFP 320,125 86,795 - - 406,920
2nd division A players and coaches) and those who cannot (other
Staff who cannot be registered in the LNFP 45,799 5,469 42 (1,762) 49,548
football and basketball divisions) is as follows:
Total sports personnel expenses 365,924 92,264 42 (1,762) 456,468
106 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 107
• Other operating expenses Fees paid for audit and other services rendered to the Club by the
auditor and other members of the audit firm are as follows:
The breakdown of “Other operating expenses” is as follows:
€ THOUSAND 06/30/2018 06/30/2017
Total other operating expenses 200,469 154,241 17.5 Impairment and gains/(losses) on disposal of non-current assets
Total external services 136,760 123,724 17.6 Finance income and expenses
“Other leases, royalties and other services” includes, inter alia, € THOUSAND 06/30/2018 06/30/2017
operating fees, TV production expenses, catering, hostess and Finance income
event expenses, and costs of editing and mailing publications. Interest on term and other deposits - 25
Exchange gains 111 498
Unrealized exchange gains 5 106
Other finance income 568 871
Finance income on remeasurement of financial assets ( Note 8.1 ) 320 157
1,004 1,657
Finance expenses
Bank service fees 627 598
Exchange losses 571 376
Unrealized exchange losses 1 76
Loan interest costs 1,033 1,003
Finance expenses on remeasurement of financial assets ( Note 15 ) 587 958
2,819 3,011
108 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 109
17.7 Foreign currency transactions 18. RELATED PARTY TRANSACTIONS
Transactions carried out in currencies other than the euro are as Related parties with which the Club carried out transactions in
follows: the year ended June 30, 2018, and the nature of the relationship,
are as follows:
2017/2018
Nature of the relationship
€ THOUSAND
Board of Directors Directors
Short-term purchases of fixed assets Sales Services received Senior management Directors
Currency Notional Currency Notional Currency Notional Fundación Real Madrid Shared directors between the Foundation and the Club
Real Madrid Consulting (Beijing) Co Ltd Subsidiary
USD 44 USD 27,526 USD 5,318
GBP 36 GBP 28 GBP 227
BRL - BRL - BRL 2
CNY - CNY - CNY 137 18.1 Balances and transactions with Real Madrid Consulting (Beijing) Co Ltd
AED - AED - AED 157
RUB - RUB - RUB 5 Balances with subsidiary Real Madrid Consulting (Beijing) Co Ltd
80 27,554 5,846 are as follows:
110 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 111
1. Director compensation 18.3 Real Madrid Foundation
The members of the Board of Directors did not accrue any The Real Madrid Foundation’s governing body is its Board of
compensation for serving as directors. Trustees. According to the Foundation’s bylaws, the Foundation’s
At June 30, 2018 and 2017, the Club had no obligations with former trustees include, among others, the members of the Board of
or current members of the Board of Directors in respect of pensions Directors of Real Madrid Club de Fútbol.
or life insurance, nor had it extended any guarantees on their behalf.
The members of the Board of Trustees do not earn any compensation
2. Identification of and total compensation paid to senior for their seats on this board.
management
There are commitments with the Foundation regarding contributions
In the year ended June 30, 2018, there were 37 senior executives
to fund the sustainability of the Foundation and the pursuit of its
(2017: 33), of which 37 continued to hold their directorships at
activities. Contributions between July 1, 2017 and June 30, 2018
June 30, 2018 (2017: 32).
amounted to €2,021 thousand (2017: €1,958 thousand).
Total compensation paid to executives in the year ended June 30,
2018 was €18,093 thousand (2017: €15,222 thousand).
19. NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS
The members of the Board of Directors at June 30, 2018 were as
follows: Real Madrid has established a series of procedures and controls
Chairman: that make it possible to identify, measure, and manage the risks
Florentino Pérez Rodríguez arising from financial instrument activity.
1st Vice-Chairman: Financial instrument activity exposes the Club to credit, market,
Fernando Fernández Tapias
and liquidity risk.
2nd Vice-Chairman:
Eduardo Fernández de Blas 19.1 Credit risk
3rd Vice-Chairman:
Pedro López Jiménez Credit risk is the risk that a Club counterparty will not meet its
contractual obligations, i.e. the possibility that financial assets will
Secretary: not be recovered at their carrying amount within the established time
Enrique Sánchez González
frame.
Board members:
Santiago Aguado García The maximum exposure to credit risk is as follows:
Manuel Cerezo Velázquez
Jerónimo Farré Muncharaz € THOUSAND 06/30/2018 06/30/2017
Ángel Luis Heras Aguado
Non-current investments
Nicolás Martín-Sanz García
Non-current receivables from sports entities (Note 8.1) 23,812 16,894
Catalina Miñarro Brugarolas Other financial assets (Note 8.1) 20,301 9,783
José Manuel Otero Lastres Trade and other receivables
Enrique Pérez Rodríguez Trade receivables (Note 8.2) 80,603 96,168
Raúl Ronda Ortiz Current receivables from sports entities (Note 8.2) 63,386 25,531
José Sánchez Bernal Other financial assets (Note 8.2) 7,280 3,093
Receivables from public administrations (Note 8.2) 5,755 6,735
Gumersindo Santamaría Gil
Cash and cash equivalents (Note 10) 190,109 177,988
José Luis del Valle Pérez
391,246 336,192
112 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 113
For the purposes of credit risk management, the Club differentiates The breakdown of these balances by age is as follows:
between financial assets arising from operating activities and
those arising from investing activities. € THOUSAND 06/30/2018 06/30/2017
With a balance of more than €1,000 thousand 14 131,139 • Acceptable investment products include bank deposits,
With a balance between €1,000 thousand and €500 thousand 10 7,471 repos, commercial paper issued by highly solvent financial
With a balance between €500 thousand and €200 thousand 23 7,215 institutions, interest-bearing accounts and other similar
With a balance between €200 thousand and €100 thousand 30 4,301 financial products. Specifically, investment in speculative
With a balance of less than €100 thousand 190 4,455 financial products or those in which the counterparty is not
Impairment (15,988) clearly and explicitly identified are expressly prohibited.
267 138,593
114 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 115
• Investments should be diversified to ensure that the risk is 19.3 Liquidity risk
not significantly concentrated in any one institution.
Liquidity risk is the risk that the Club will have a shortage of funds
• Investments in current financial assets must be liquid assets or lack access to sufficient funds at an acceptable cost to meet
with a maturity of three months or less, with a repurchase its payment obligations at all times. The Club’s objective is to
commitment or a secondary market that guarantees their maintain sufficient available funds. Club policies establish the
immediate liquidity if required. minimum liquidity levels required at all times.
• The Club’s power of attorney policy dictates the parameters The undiscounted contractual maturity schedule of financial
for the use of joint and several signatures based on amount. liabilities is as follows:
2017/2018
19.2 Market risk
Less than 3 3 to 12 Between
Interest rate risk is the potential loss arising from fluctuations in € THOUSAND months months 1 and 5 years > 5 years Total
the fair value or future cash flows from assets or liabilities and Bank borrowings 10,151 - 49,793 - 59,944
to changes in the discount rates used to determine the carrying Other financial liabilities
amounts of assets, especially player values. Payables to suppliers of fixed assets 29,291 9,367 16,029 653 55,340
Payables to sports entities for player transfers 16,847 - 1,893 - 18,740
Regarding players and estimates of their value in use, the Club Other financial liabilities - - 1,000 - 1,000
performs the analysis and considers the circumstances set out in Trade and other payables 227,626 66,371 - - 293,997
Note 3.6 when assessing potential impairment losses.
283,915 75,738 68,715 653 429,021
As explained in Note 14, at June 30, 2018 the Club had two loans
and several credit facilities with financial institutions with short-
and long-term maturities. The nominal amounts drawn down
and repayable total €60,000 thousand (2017: €82,000 thousand). 2016/2017
Interest on these borrowings is at a variable rate.
Less than 3 3 to 12 Between
€ THOUSAND months months 1 and 5 years > 5 years Total
116 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 117
The table below summarizes the maturity profile of the Club’s in relation to the average supplier payment period in commercial
financial assets: transactions:
06/30/2018 06/30/2017
2017/2018
Days
Average supplier payment period 59 59
Between Ratio of transactions paid 59 59
Less than 3 3 to 12 1 and
€ THOUSAND months months 5 years Total Ratio of transactions outstanding 58 57
118 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 119
20.2 Environmental disclosures € THOUSAND 06/30/2018 06/30/2017 06/30/2016
Regulations
Difference (17,601) (16,141) (3,254)
120 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 121
The calculation of relevant expenses and the reconciliation of • First football team personnel expenses indicator
relevant expenses with the accompanying financial statements is
provided below: When the total annual amount of personnel expenses associated
with Clubs’ and SADS’ first football team staff, players and
€ THOUSAND T T-1 T-2 coaches exceeds 70% of relevant income for the season, as
06/30/2018 06/30/2017 06/30/2016 defined in the LFP’s Economic Control Regulations, this is
considered to be an indication of a possible future economic-
Relevant expenses
Cost of sales/materials 27,008 26,347 22,252
financial imbalance.
Employee benefits expense 430,751 406,109 306,877
Other operating expenses 200,175 156,082 127,841 € THOUSAND 06/30/2018 06/30/2017
Depreciation and amortization 102,415 110,157 123,574
First football team personnel expenses 342,658 323,054
Write-down and losses on disposal of player registrations 114 43 7,693
Relevant income 787,924 711,808
Impairment losses and derecognitions of other intangible assets, property, plant and
equipment, and investment property (626) (22) 1,913
Finance and dividend costs 2,819 3,011 5,123 First football team personnel expenses indicator 43% 45%
Non-identifiable youth activity expenses (5,763) (8,368) (9,107) Required first football team personnel expenses indicator <70% <70%
Expenses from community development activities (2,346) (1,951) (2,311) COMPLIES COMPLIES
Depreciation/write-down of other intangible assets, property, plant and equipment,
and investment property (16,567) (17,871) (26,631)
Cost directly attributable to the construction of property, plant, and equipment - - -
The calculation and reconciliation of relevant income is the same
Other basketball expenses (46,265) (37,908) (35,328) as the calculation of the breakeven point above:
Total relevant expenses 691,715 635,629 521,896
The reconciliation of first football team personnel expenses and
Expenses per the financial statements total personnel expenses is provided below:
Supplies 27,088 26,347 22,252
Player and other personnel expenses 430,751 406,109 306,877
€ THOUSAND 06/30/2018 06/30/2017
Other operating expenses 200,095 156,082 127,841
Depreciation and amortization 102,415 110,157 123,574 First football team sports personnel expenses 339,935 320,125
Impairment and losses (626) (22) 1,913 First football team non-sports personnel expenses 2,723 2,929
Finance expenses 2,819 3,011 5,123 Total first football team personnel expenses 342,658 323,054
Total expenses per financial statements 762,542 701,684 587,580
Youth football team personnel expenses 14,782 18,797
Difference (70,827) (66,055) (65,684) Basketball personnel expenses 35,741 28,771
Non-sports football personnel expenses and overheads not related to the first football team 37,570 35,487
Reconciling items: Total personnel expenses per financial statements 430,751 406,109
Non-identifiable youth activity expenses (5,763) (8,368) (9,107)
Expenses from community development activities (2,346) (1,951) (2,311)
Depreciation/write-down of other intangible assets, property, plant and equipment, and
investment property (16,567) (17,871) (26,631)
Basketball expenses (46,265) (37,908) (35,328)
Net losses on disposals of player registrations 114 43 7,693
Total reconciling items: (70,827) (66,055) (65,684)
122 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 123
• Net debt/relevant income ratio 2. Ratios necessary to join the LFP as an affiliate
When net debt at June 30 of each sports season exceeds 100% The LFP’s bylaws state that the following ratios must be met in
of the entity’s relevant income for that season, this is considered order to join as an affiliate. The amounts required for the Club’s
be indicative of a possible future economic-financial imbalance, registration for season T relate to:
as defined in Regulations.
Balance sheet figures: data at December T-1
According to regulation definitions, the amount of net debt Revenue: data at June T-2
corresponds to the sum of net debt for club transfers (i.e. net
of receivables and payables for player transfers), net debt from • Ratio 1
loans (i.e. bank overdrafts and borrowings, loans from owners € THOUSAND Season of registration (T)
and related parties, advanced payments to be accrued in a period 2018/2019 2017/2018
of more than year, and finance leases less cash, cash equivalents Non-current liabilities 153,496 162,127
and non-current investments) plus payables to suppliers of fixed Current liabilities 409,164 449,059
assets. Net debt does not include trade or other payables. Less: Deferred tax liabilities (16,744) (13,891)
Less: Cash and cash equivalents (133,076) (177,988)
Less: Receivables from sports entities (84,762) (42,425)
Total adjusted liabilities T-1 328,078 376,882
Revenue T-2 671,864 619,710
€ THOUSAND 06/30/2018 06/30/2017
Ratio 1 0,49 0,61
Net debt (106,974) (10,289) Required ratio 1 <3,75 <4,0
Relevant income 787,924 711,808 COMPLIES COMPLIES
Cash and cash equivalents 190,109 177,988 The most significant events that occurred between the end of the
Current receivables from transfers 52,305 19,754 reporting period and the date of authorization for issue of these
Non-current receivables from transfers 23,812 16,894 financial statements were as follows:
Total reconciling asset items: 266,226 214,636
• Acquisition of player transfer rights for approximately €30,000
TOTAL NET DEBT (106,974) (10,289)
thousand.
• Sales, assignments or share in third-party transactions involving
player transfer rights for approximately €109,300 thousand.
124 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 125
22. INCOME STATEMENT BY ANALYTICAL SEGMENT 23. BUDGET OUT-TURN FOR 2017/2018 SEASON
Membership fees, ticket sales and other stadium revenue 169,631 4,787 174,418 Membership fees, ticket sales and other stadium revenue 162,644 174,418 11,774
Revenue from international and friendly matches 98,256 1,944 100,200 Revenue from international and friendly matches 68,735 100,200 31,465
Broadcasting revenue 176,564 1,849 178,413 Broadcasting revenue 176,691 178,413 1,722
Marketing revenue 291,017 6,891 297,908 Marketing revenue 282,244 297,908 15,664
Total operating income (before disposal of non-current assets) 735,468 15,471 750,939 Total operating income (before disposal of non-current assets) 690,314 750,939 60,625
Operating profit/(loss) before depreciation and amortization, Total operating expenses before depreciation and amortization (585,450) (657,934) (72,484)
and disposal of non-current assets 121,805 (28,800) 93,005
Operating profit/(loss) before depreciation and amortization, and disposal
Gains/(losses) on disposal of non-current assets 51,623 1,959 53,582 of non-current assets 104,864 93,005 (11,859)
Impairment/derecognition of non-current assets 626 - 626
Gains/(losses) on disposals of non-current assets 48,361 53,582 5,221
Operating profit/(loss) before depreciation and amortization (EBITDA) 174,054 (26,841) 147,213 Impairment/derecognition of non-current assets - 626 626
Depreciation and amortization (100,357) (2,058) (102,415) Gains/(losses) on disposals of non-current assets 48,361 54,208 5,847
Operating profit/(loss) 73,697 (28,899) 44,798 Operating profit/(loss) before depreciation and amortization (EBITDA) 153,224 147,213 (6,011)
Variance:
Positive: higher revenue, lower expense
Negative: lower revenue, higher expense
126 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 127
Operating income amounted to €750,938 thousand, €60,625
thousand over budget. All revenue items were higher than
budgeted, by a total of €19.5 million. In addition, sports
achievements in the season resulted in higher income of €41.1
million. The Club won four football (Champions League, FIFA
Club World Cup, UEFA Super Cup and Spanish Supercup) and
two basketball (Euroleague and Spanish Liga ACB) trophies.
128 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 FINANCIAL STATEMENTS 129
Authorization for issue of the financial statements and
management report for the year ended June 30, 2018
In a meeting held on July 16, 2018, the members of the Board of
Directors of Real Madrid Club de Fútbol authorized for issue the
financial statements and management report for the financial
year ended June 30, 2018, which consist of the documents
preceding this certification.
Chairman
Florentino Pérez
130 Vice-Chairmans
INFORME ECONÓMICO REAL MADRID 2016-2017
Secretary
Enrique Sánchez González
Board members
Santiago Aguado García
Manuel Cerezo Velázquez
Jerónimo Farré Muncharaz
Ángel Luis Heras Aguado
Nicolás Martín-Sanz García
Catalina Miñarro Brugarolas
José Manuel Otero Lastres
Enrique Pérez Rodríguez
Raúl Ronda Ortiz
José Sánchez Bernal
Gumersindo Santamaría Gil
José Luis del Valle Pérez
On a recurring basis, the Club receives considerable amounts in the year in broadcasting revenue, membership
Basis for opinion fees and season tickets, marketing and sponsorship contracts, and friendly matches, considered prepaid income
as they are accrued in subsequent reporting periods (the following year in most cases), as described in Notes 3.18
We carried out our audit in accordance with Spanish standards on auditing. Our responsibilities under those and 15 to the financial statements. The Club recognizes the amounts related to this prepaid income under “Non-
standards are further described in the ”Auditor’s responsibilities for the audit of the financial statements” section. current accruals” and “Current accruals,” as appropriate, on the liability side of the balance sheet at June 30,
2018.
We are independent from the Club in conformity of ethical requirements, including independence, which are
applicable to an audit of financial statements in Spain according to what is required by Spanish standards on
auditing. In these regards, we have neither provided services different to audit of financial statements nor any
situation or circumstance has concurred that, according to the aforementioned standards, had affected the
necessary independence in a way it had been jeopardized.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
134 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 AUDIT REPORT 135
The appropriate accounting recognition of these accruals was a key matter for our audit given the variety of items In preparing the financial statements, members of Board of Directors are responsible for assessing the Company’s
and terms in the underlying agreements, requiring a detailed and case-by-case analysis of each. As part of our ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
audit engagement, we reviewed the procedures followed by the Club and analyzed the main agreements in order to going concern basis of accounting unless management either intends to liquidate the Company or to cease
determine whether the approach was applied on a consistent basis and to determine the reasonableness of the operations, or has no realistic alternative but to do so.
calculations made.
Auditor’s responsibilities for the audit of the financial statements
Other information: Management report
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
The other information involves exclusively the management report for the year ended June 30, 2018. The material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
management report is the responsibility of the members of Board of Directors of REAL MADRID CLUB DE FÚTBOL Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
and is not an integral part of the financial statements. with Spanish standards on auditing will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
Our opinion on the financial statements does not cover the management report. In connection with the expected to influence the economic decisions of users taken on the basis of these financial statements.
management report, our responsibility, as required by auditing standards, is to evaluate and report on whether the
management report is consistent with the financial statements based on the knowledge obtained from the Club in As part of an audit in accordance with Spanish standards on auditing, we exercise professional judgment and
the course of our audit of the financial statements, and not include other information obtained as evidence during maintain professional skepticism throughout the audit. We also:
the audit. It is also our responsibility to evaluate and report on whether the content and presentation of the
management report comply with applicable regulations. If, based on the work we have performed, we conclude that • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
there are material misstatements, we are required to report that fact. error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
Based on the work performed, in accordance with the preceding paragraph, the information contained in the misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
management report is consistent with the financial statements for the year ended June 30, 2018, and its content collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
and presentation comply with applicable regulations.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
Responsibilities of members of Board of Directors for the financial statements effectiveness of the Club’s internal control.
Members of Board of Directors are responsible for the preparation and fair presentation of the financial • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
statements in accordance with the applicable financial reporting framework (see Note 2), and for such internal estimates and related disclosures made by members of Board of Directors.
control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
136 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 AUDIT REPORT 137
• Conclude on the appropriateness of members of Board of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Club’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Club to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
From the significant matters communicated to the members of the Board of Directors of the Club, we determine
those of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters.
We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
matter.
______________
July 17, 2018 José Luis Ruiz
138 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 AUDIT REPORT 139
BUDGET
2018-2019
REAL MADRID CLUB DE FÚTBOL
2018/2019 BUDGET
€ THOUSAND 2017/2018 BUDGET 2018/2019 Operating income (before disposal of non-current assets) in 2018/2019
is budgeted at €752.0 million, up €1.1 million from the €750.9 million
Membership fees, ticket sales and other stadium revenue 174,418 172,316 the year before. This increase is budgeted in spite of the high income
Revenue from international and friendly matches 100,200 116,259 achieved of 4 football trophies (in special Champions League) and 2
Broadcasting revenue 178,413 158,234 basketball trophies obtained, contrary to the assumptions of reaching
Marketing revenue 297,908 305,240 quarter final in Champions League budgeted. To equalise the sports
assumptions, the income budgeted would be €53 million higher than
Total operating income (before disposal of non-current assets) 750,939 752,049 the previous year.
Total operating expenses before depreciation and amortization (657,934) (643,136) Supplies, operating expenses and provisions are expected to move in
line with the developments in the Club’s activities and allowances for
Operating profit/(loss) before depreciation and amortization, and disposal of non-current assets 93,005 108,913
potential contingencies, resulting in a decrease of €5.9 million over the
year before.
Gains/(losses) on disposals of non-current assets 53,582 102,210
Operating profit before depreciation and amortization and disposal of
Impairment/derecognition of non-current assets 626 (45,000)
non-current assets is budgeted at €108.9 million, €15.9 higher than the
year before.
Gains/(losses) on disposals of non-current assets 54,208 57,210
€102.2 million worth of player transfers is budgeted (2018: €53.6 million),
Profit/(loss) from operating activities before amortization and depreciation (EBITDA) 147,213 166,123 based on transfers already carried out of first division and youth football
team players.
Depreciation and amortization (102,415) (121,879)
€45.0 million impairment of property, plant and equipment provision is
budgeted equivalent to the net carrying amount of several assets of the
Operating profit/(loss) 44,798 44,244
Stadium that will cause fall along the next exercises once the project of
remodeling of the stadium begins.
Finance income 1,004 698
Finance expenses arising on implied cost of deferred payment on player acquisitions (588) (676) Based on the above, operating profit before depreciation and amortization
Finance expenses arising on interest on loans, guarantee expenses and other financial expenses (2,231) (1,077) EBITDA is budgeted at €166.1 million, €18.9 higher than the year before.
Net finance income/(expense) (1,815) (1,055) The budgeted depreciation and amortization charge is €19.5 million
higher than the year before due to changes in sports staff.
Profit/(loss) before tax 42,983 43,189
Net finance expense is budgeted to decrease by €0.8 million from the
year before.
As a result, the budget shows profit before tax of €43.2 million, €0.2
million higher than the year before.
142 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 BUDGET 2017-2018 143
REAL MADRID CLUB DE FÚTBOL BUDGET BY SPORTS
SEGMENTS FOR THE 2018/19 SEASON
Membership fees, ticket sales and other stadium revenue 167,788 4,528 172,316
Revenue from international and friendly matches 115,033 1,226 116,259
Broadcasting revenue 156,555 1,679 158,234
Marketing revenue 299,913 5,327 305,240
Total operating income (before disposal of non-current assets) 739,289 12,760 752,049
Total operating expenses before depreciation and amortization (602,766) (40,370) (643,136)
144 MANAGEMENT REPORT & FINANCIAL STATEMENTS REAL MADRID 2017-2018 BUDGET 2017-2018 145
Printed in November 2018, in Madrid
Published by: Real Madrid C.F.