Pratically if you buy a player for 20 mil and give him a 5 year contract , in theory with every passing year his value drops by 20/5=4 mil . So in the second year his value drops to 16 , third year 12 , foruth year 8 , fifth year 4 and after the fifth his value goes to 0 (contract expires)
It is a very important data to take in account when selling players because it decides the value with which you need to sell a player to be equal in the account books . For example if we sold the 20 mil player after a year for 16 mil , that would be a 0 difference , if we sold him for 20 that would be a plus of 4 mil , everything lower than 16 mil would be a minus .For more info ask Marotta , he is a master in these things