9 thoughts on “A Treatise on FFP and Football Finance

  1. I think you forgot to say that transfer expenditure is spread over the the term of the contract, so Nasri bought for £25m on a five year deal equates to only a £5m expenditure per year.

    By the same terms City’s £400m 10 yr deal, is calculated by UEFA as only being worth £40m per year over the term of the sponsorship, and that is how they have got round the “fair value” rule

    Any player bought under the age of 21 is also not calculated according to UEFA, as they are classed as investment in youth.

  2. Regarding Nasri, that’s exactly what I said. “For example, say City bought Nasri for £25m on a 5-year contract. They’ll have had £25m go out of their bank account, and on their balance sheet will be a player worth £25m; no expense has gone through their P&L. But each year a £5m expense does go to the profit and loss account, and the value of the player on the balance sheet decreases by the same amount. So for example, in four years time, Nasri would be a £5m asset on City’s balance sheet.”

    Regarding City’s £400m deal, I’m aware it was over 10 years, hence £40m a year. Doesn’t mean they got past FV because of that, they got past FV because it’s a unique deal.

    Wasn’t aware of your last point, cheers for that, is that on the UEFA FFP documentation?

  3. Sapper – any player bought under the age of 21 most certainly WILL be included in the calculation. UEFA allowing investment in youth means investment in infrastructure, academies, training, competitions. It doesn’t mean that a club can go out and buy Barcelona’s under 16 team and have the cost excluded from their books.

    Also although investment in infrastructure such as a training ground can be exluded, the running costs are not. So City have also got another new fairly large chunk that will come straight off their bottom line, to pay for all staff and expenses including rates, utilities etc, for an 80 acre, close to city centre, training ground.

  4. Cheers for your comment M16 0RA, good point. I’m not 100% sure that the running costs of the youth development centre will be included, but based on the following explanation of relevant expenses from the Deloitte report:

    “Relevant expenses include the cost of player transfer acquisitions, finance costs and all types of expenditure by a football club except depreciation of tangible fixed assets (e.g. the cost of the stadium and training facilities), expenditure on youth and community development activities, and tax on profits.”

    I imagine that they will be included, as they’re basically general operating costs rather than exceptional costs on community development activities.

  5. Many thanks Tom. Football finances usually leave me cold but this was in simple language and easy to understand. Well done

  6. Glad I could help, mate. I’m not going to make out that I know everything on the matter, but I hope that helps.

  7. On the youth question, any player bought under the age of 21 is classed as youth, if they are with the club for five years prior to age 21 they are classed as “home grown”, and as I understood it do not come under the FFP rules.

    If someone knows better please correct me

  8. Excellent article. But I am still unconvinced about this FFP stuff. The proposal to (eventually) tolerate no losses seems impractical given the fluctuating fortunes of football clubs. In particular it is often reckoned that qualification for the Champions League is worth £40m. So how can a club like United budget for the possibility of failing to qualify for the CL and other variations in income? Do they have to normally run a suplus of £50m just in case things go wrong? Otherwise, failure to qualify would lead to a loss which would result in their banning from the following years CL competition, which would result in a further loss, and so on. The only way out would be a sale of players to make the books balance and allow them to be considered for European competitions in the future. But, of course, such a weakened team might not be capable of qualification.

    This is all very artificial. The sensible way to run a club like United is to only run a modest surplus but to bank profits from the good years to pay for occasional losses if things go wrong. But FFP doesn’t have any provision for this, each season (or group of two or three seasons at the start of the scheme) is considered in isolation and must not be loss making.

  9. I think I to read this when ma brain is no satuartated wif bordo wine.its bound to be more sensible.
    once you kill a cow, you gotta make a burger!.
    jokin aside if its written bye the fabulous Tom Addison, i will read thouroughly, word bye word! As for that waste of space ‘boss’ Frank’ he is gonna getit, I am a fair weather supporter, been reading about Citeh.

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