Musings on FFP position

[Chrysalis]

27 minutes ago, ttfn said:

It must count (otherwise there’s no incentive to sell in FFP) but I’d have thought that you could only take the profit into account.
 

Otherwise you could just buy a player for £50m then sell them the next day for £50m and you’d have £50m extra turnover and no accounting cost. 

Remainder of amortisation cost removed.and profit added I assume, plus wages removed.

[coolhandfox]

42 minutes ago, st albans fox said:

Can I aske what happens if we sell wes for £85m

 

obvs his 90k/week falls off the wage bill but how do we account for the fee in the t/over equation or is it irrelevant? 

The whole of the transfer a profit would show against the accounts + any amortised element of the players transfer fee. (Lets forget St E 20% sell on fee for a moment to make it simple.

 

Wez was bought for £36.5m in 2020 on a five-year contract, so the annual amortisation of the transfer fee was £7.3m. He signed a new contract in 2022, that would then mean the remaining book value of his transfer fee 22m (3 x7.3m) would be re-amortised over his new 5 year contract at 4.4m.

 

So in the account for this season he transfer fee is a -4.4m to our FFP position. 

 

Therefore if we sell him it would be show an annual profit improvement of 4.4 million lower amortisation + £50million profit on sale = 54.m + his wages in this years accounts. 

 

Just to note I'm no accounting expert, just what I've learnt. 

 

 

1 hour ago, gerrytaggart said:

This seems extremely low.  Id double that estimate.

The non-play staff value?

 

Yes you are more then likely right, Susan W is on 300k ish.  

Edited 4 August 2022 by coolhandfox

[coolhandfox]

35 minutes ago, ttfn said:

Also can expect to lose a reasonable amount of amortisation - we were charged £71m a year for 19/20 and 20/21 on transfer fees. That will fall - lots of our more expensive transfers affecting those years will have been fully amortised (or the amortisation massively reduced if they extend their contracts) by 2023:

Slimani, Perez, Tielemans, Silva, Soyuncu, Iheanacho, Maddison. That’s 7 of the top 10 most expensive signings in the club’s history and of the other 3 only one (Daka) will be a new amortisation charge in the 21/22 accounts. 
 

So even if we sign 3 or 4 pretty high value players in the next year or so it seems hard to

imagine our amortisation “spend” won’t come down.

We could  also improve our position by offering new contract to the likes of Daka and Castange new contracts at some point and re-amortising their remaining book value. 

 

 

[Guest ttfn]

22 minutes ago, coolhandfox said:

The whole of the transfer a profit would show against the accounts + any amortised element of the players transfer fee. (Lets forget St E 20% sell on fee for a moment to make it simple.

 

Wez was bought for £36.5m in 2020 on a five-year contract, so the annual amortisation of the transfer fee was £7.3m. He signed a new contract in 2022, that would then mean the remaining book value of his transfer fee 22m (3 x7.3m) would be re-amortised over his new 5 year contract at 4.4m.

 

So in the account for this season he transfer fee is a -4.4m to our FFP position. 

 

Therefore if we sell him it would be show an annual profit improvement of 4.4 million lower amortisation + £50million profit on sale = 54.m + his wages in this years accounts. 

 

Just to note I'm no accounting expert, just what I've learnt. 

 

 

The non-play staff value?

 

Yes you are more then likely right, Susan W is on 300k ish.  

That is how the accounting works, but it’s not technically turnover - that’s the oddity.

[coolhandfox]

Just now, ttfn said:

That is how the accounting works, but it’s not technically turnover - that’s the oddity.

Not sure how they view it for FFP purposes, they haven't been very open on the process.

[Guest ttfn]

33 minutes ago, st albans fox said:

but does annual t/over get affected by sales/purchases. We know that purchases are amortised over the period of the contract.  What happens with sales ? How are they amortised and of so, over what period? 

 

 

Sales aren’t amortised, but you don’t see them in turnover either, you just see it as one number outside of turnover being profit on disposal of player registrations (or something similar), being the sales value achieved less the unamortised value of the sold player’s registration.
 

Also worth clarifying that the timing of the cash payments (if staggered) will make no difference at all (or such little difference that it is not worth going into here), I.e if we sold Fofana for £100m but Chelsea agreed to pay it at £20m per year for 5 years we’d still see all of that £100m (less the accounting value of his registration) as profit in the accounts today.

Edited 4 August 2022 by ttfn

[st albans fox]

2 minutes ago, ttfn said:

Sales aren’t amortised, but you don’t see them in turnover either, you just see it as one number outside of turnover being profit on disposal of player registrations (or something similar), being the sales value achieved less the unamortised value of the sold player’s registration.

So the benefit in our fight against ffp issues of selling wes is limited. Of course it provides funds for liquidity and some purchases but all we gain re ffp is the removal of a few mill per annum ref his purchase cost amortisation and around 4.5m per season in salary. 

[Guest ttfn]

3 minutes ago, st albans fox said:

So the benefit in our fight against ffp issues of selling wes is limited. Of course it provides funds for liquidity and some purchases but all we gain re ffp is the removal of a few mill per annum ref his purchase cost amortisation and around 4.5m per season in salary. 

Well, that depends on two things:

1) What the UEFA definition of turnover is. As @coolhandfoxhas said it doesn’t make any sense really to exclude sales from turnover but it also makes no sense to include the full value of the sale rather than just the profit. I think they will allow the profit to be included as part of the turnover for this purpose.

2) Whether we’re talking about UEFA or PL FFP. Under PL (traditional model and the only version we are currently exposed to) FFP the accounting profit we make on Fofana is very important, in fact it should set us up for the next 2-3 years.

 

Uefa can’t possibly set up a structure where you can’t reinvest in transfers money you make on sales. So that makes me think they’ve got their own definition of turnover which allows you to count profit on player sales in the denominator for the 70/80/90% requirement.

Edited 4 August 2022 by ttfn

[Ric Flair]

1 hour ago, st albans fox said:

half way through next year we lose a lot of wages when players fall out of contract 

 

so the 2023 season numbers will drop off markedly end June. 
 

YT.  70

Evans.   80

perez.   80

Hamza.  60

Mendy.   50

bertrand.  75

Amartey.   40

cags.     40

Vards.    140

 

I reckon that’s approx 16m that will drop off 2023 wages if we replace no one ! (22m with kasper) 

 

i wonder what we can therefore spend on incoming  players wage bill and stay within 90% ??

 

very crude scenario because some of these players will go before 2023 

 

 

 

 

 

 

We also need to rip it up and start again. It's going to very difficult to negotiate wage cuts or even the same wages for existing successful players, as well as offering new players considerably less than what the existing players are on.

 

This is a huge challenge for us but the only realistic model is to buy vastly talented but unpolished young players on progressive contracts but look to sell on for big profits relentlessly. Likewise got to have our academy operating at full tilt, investment should be as much a priority there as the 1st team, maybe even focus mainly on that if we are going to struggle with the 1st team in the next year or two.

 

I wonder if we do go back to the drawing board, ironically by doing so and unlikely finishing top 7 means it's less of a priority to adhere to the UEFA FFP rules but you cannot plan to fail.

[Ric Flair]

UEFA are making me want a Super League 😂

[Guest Chocolate Teapot]

3 hours ago, st albans fox said:

You’re confused- this isn’t about anything other than making sure the big clubs across Europe stay as the big clubs 

 

 

Chelsea spending 300m is fine but leicester a Club that have never spent more than 35m on a player are the issue.

[Chrysalis]

10 minutes ago, Ric Flair said:

UEFA are making me want a Super League 😂

I actually did want it when it was proposed.  Feel the league would have been better without the big 6.

[jayfox26]

2 minutes ago, Chocolate Teapot said:

Chelsea spending 300m is fine but leicester a Club that have never spent more than 35m on a player are the issue.

Yeh the whole thing stinks. Barcelona have well and truly made a mockery of any ffp rules but yet the smaller unimportant clubs are the problem and are the ones that should be punished. Football is corrupt from top to bottom and is only going to get worse. The likes of Bayern, PSG, Barce/Real, Man C/Liverpool will continue to dominate all the trophies and the chances of anything like our title win happening again to a non cartel club is pretty much impossible. As Ric said, think I'd prefer a esl at this point so the greedy feckers can all piss off and leave the rest of us to have a more even playing field. 

[st albans fox]

32 minutes ago, Chocolate Teapot said:

Chelsea spending 300m is fine but leicester a Club that have never spent more than 35m on a player are the issue.

We need some (more) dodgy sponsorship deals 

[coolhandfox]

Just now, st albans fox said:

We need some (more) dodgy sponsorship deals 

If we really need to, we could sell the naming rights of the stadium and  training ground.

 

Get more of a market value like we did with FBS.

 

Personal still see this as a house keep exercise, we have been a little fat and lazy over the last few years.

 

Time to get lean and hungry again. 

[st albans fox]

5 minutes ago, coolhandfox said:

If we really need to, we could sell the naming rights of the stadium and  training ground.

 

Get more of a market value like we did with FBS.

 

Personal still see this as a house keep exercise, we have been a little fat and lazy over the last few years.

 

Time to get lean and hungry again. 

The stadium has a name 

surely king power should be paying into the pot for that  - there are ways the money could be returned back which wouldn’t affect ffp??

[coolhandfox]

23 minutes ago, st albans fox said:

The stadium has a name 

surely king power should be paying into the pot for that  - there are ways the money could be returned back which wouldn’t affect ffp??

Yes, but like the shirts are they paying the going rate?

 

Looks less dodgy get some else to pay more for it then just increasing it themselves.

 

But like they did with FBS

[st albans fox]

1 minute ago, coolhandfox said:

Yes, but like the shirts are they paying the going rate?

 

Looks less dodgy get some else to pay more for it then just increasing it themselves.

 

But like they did with FBS

I assume the family don’t want to lose the stadium name - but the club is missing income because of that. I’m sure there are ways and means of getting £15m per season in and getting the money back to KP whilst keeping the income on the books ……

 

we were shockingly naive in not having the shirts paying big through the 2017-2020 seasons.  

[Grebfromgrebland]

1 hour ago, Chocolate Teapot said:

Chelsea spending 300m is fine but leicester a Club that have never spent more than 35m on a player are the issue.

You've hit the nail in the head. 

[Guest Kopfkino]

3 hours ago, st albans fox said:

but does annual t/over get affected by sales/purchases. We know that purchases are amortised over the period of the contract.  What happens with sales ? How are they amortised and of so, over what period? 

 

 

 

2 hours ago, ttfn said:

Well, that depends on two things:

1) What the UEFA definition of turnover is. As @coolhandfoxhas said it doesn’t make any sense really to exclude sales from turnover but it also makes no sense to include the full value of the sale rather than just the profit. I think they will allow the profit to be included as part of the turnover for this purpose.

2) Whether we’re talking about UEFA or PL FFP. Under PL (traditional model and the only version we are currently exposed to) FFP the accounting profit we make on Fofana is very important, in fact it should set us up for the next 2-3 years.

 

Uefa can’t possibly set up a structure where you can’t reinvest in transfers money you make on sales. So that makes me think they’ve got their own definition of turnover which allows you to count profit on player sales in the denominator for the 70/80/90% requirement.

Uefa states that clubs must use IFRS or local accounting standards (so basically IFRS). A player is an intangible asset. When you dispose of, or derecognise, an intangible asset the ‘profit’, proceeds - carrying value, goes onto your income statement. The definition of turnover being limited to the value of good and services delivered from football operations.

 

Uefa’s new rules are quite simple

 

Employee benefit expenses for players and head coach

+

amortisation or impairment costs

+

cost of agents or intermediaries 

/

Operating revenue 

+
profit/loss on disposal of players and other transfer expenses

 

 

So in terms of cost control, player sales have a benefit only in the year generated. But in terms of financial stability, it’s useful for 3 years. So for cost control, even more focus on being a conveyor belt of talent and selling someone each year.

[Terraloon]

15 hours ago, coolhandfox said:

I was wondering what our position against the new European FFP would look like if it was applied to our 20/21 accounts.

 

We need to be at 90% by 23/24, 80% by 24/25 and 70% by 25/26 of money spent on players and coaches, transfers fees and agents fees. (Other staff at the club outside of players and coaching don't count neither do stuff stadium improvements etc) 

 

So for us in 20/21 that would look like this: 

 

Overall Total Wages

192m

Keep in mind this includes around 300 staff, non players or coaches whose wages aren't included in FFP, for calculation purposes I'm going to knock off 6m (300 x £20000) which seems a reasonable average wage for non-playing our coaching staff

Also, the 20/21 accounts had deferred wages from 19/20 due to COVID

 

Overall Total wages minus players and coaching

186m

 

Player Fees (Keep in mind this is the amortised amount of transfer fees in the accounts for the season, not the amount we spent that season)

78m

 

Agents Fee

12.5m 

 

Total expenditure with regards to FFP rules 276M 

 

Which comes to 122.5% of income for that year. 

 

So for the 20/21 accounting period, we would have busted the 23/24 limit by 32%, give an idea way we are being a little careful.

 

This is my interpretation of the 20/21 accounts and FFP rules so it isn't perfect.

I posted much the same the other day and like you came to the conclusion that it was the soon to be implemented rules that would be  a major issue but those were the 20/21 figures and whilst we won’t know what they look like to much later the 21/2 year end is going to look at lot worse. If for no other reason bar circa £3 million player trading profit will be down  by in excess of £55 million

 

The fact is that as a minimum the amortisation won’t have decreased and yes there may have been a lift from a season with fans returning and EL and EL conference income those numbers to a degree will be offset by reduced FACup and PL prize money, and the fact that a chunk of TV money due for the 2019/20 season didn’t feature in that years accounts it was carried forward to the 20/21 season will see that income stream drop significantly 

 

I started to work the numbers out and by my very very rough calculations for the 21/22 the income v player cost numbers could be anything up to 150% and without significant player sale the 22/23 season ( the FFP calculation runs 1/1/23-31/12/23) .

 

The thing that I haven’t quite bottomed is will the income period run for the same period ? On face value it shouldn’t  make a difference but something in the back of my mind keeps thinking it will.

 

 

I see people talking about Chelsea and yes they do seem to be pushing the boat out. In structure terms nothing really has changed. Shares changed hands but the entity that is the FC hasn’t changed save I suspect the club probably have increased its asset base in that all the land etc around the ground that was previously on the books of another of RAs companies will now be an asset of the club

Abromavich had a very complex company structure the  debt people talk actually didn’t sit on the football clubs books it was higher up the ownership structure  much of it was pre FFP and included both the original purchase of shares and subsequent increases in equity in the Football Club issued.

 

One thing I do wonder about is if say Chelsea have seen a window of opportunity to cleanse their accounts in terms of failed players book values.

 

In 20/21 for the first time in many a year they impaired players values I suspect that they may well do likewise in their 21/22 accounts and when the process starts to run from 1/1 23 will UEFA initially use a hybrid model or will it in effect be a clean slate. If it isn’t you will see a massive number in terms of impairment number. Players like Kepa, Lukaku, Werner with something like £140 million amortisation or £40 + million a year  still to be accounted for could easily and probably with all justification be impaired down  particularly if they are no longer at the club particularly as the new owners will have almost certainly taken a pragmatic view when they quantified the value of intangibles during their DD

 

 

 

 

 

 

15 hours ago, coolhandfox said:

 

 

 

 

 

 

 

Edited 5 August 2022 by Terraloon

[Jobyfox]

11 hours ago, Chrysalis said:

I actually did want it when it was proposed.  Feel the league would have been better without the big 6.

I keep seeing people saying this, but the problem with the Super League was that they wanted to stay in the domestic leagues and also have their own, ring fenced, European competition. Basically making it impossible for every other club to compete in either. 

 

If they were going to just set up their own league and just play each other it would have been a lot more palatable. People will say: "yeah... but the league would have kicked them out..." forget that they would have been stopping their own gravy train. I have absolutely no confidence they would have acted to safeguard the integrity of the game or the other clubs. 

[Terraloon]

16 minutes ago, Jobyfox said:

I keep seeing people saying this, but the problem with the Super League was that they wanted to stay in the domestic leagues and also have their own, ring fenced, European competition. Basically making it impossible for every other club to compete in either. 

 

If they were going to just set up their own league and just play each other it would have been a lot more palatable. People will say: "yeah... but the league would have kicked them out..." forget that they would have been stopping their own gravy train. I have absolutely no confidence they would have acted to safeguard the integrity of the game or the other clubs. 

In effect We are already save exceptional seasons already there.

 

Just 10 PL clubs have ever qualified for the CL. The current 6 plus Leeds when Ramsdale bankrupt them, Blackburn one season ,  Newcastle and of course Leicester. 
 

Save the odd exceptions that same group always qualifying is mirrored in the major footballing nations.

 

There has long been an argument that Celtic and Rangers could be stripped away from the SPL and the league would thrive I think that’s folly. If the big 6 joined a pan European league be it in the super league format or some even worse having them outside of there domestic leagues it would strip hundreds of millions away from the other clubs. 
 

There is however great danger in the expanding numbers of American owners because at some point they will be able to sway arguments that will fundamentally change the financial structure and that will only lead to the super big clubs getting bigger. 

[Terraloon]

13 hours ago, Ric Flair said:

We also need to rip it up and start again. It's going to very difficult to negotiate wage cuts or even the same wages for existing successful players, as well as offering new players considerably less than what the existing players are on.

 

This is a huge challenge for us but the only realistic model is to buy vastly talented but unpolished young players on progressive contracts but look to sell on for big profits relentlessly. Likewise got to have our academy operating at full tilt, investment should be as much a priority there as the 1st team, maybe even focus mainly on that if we are going to struggle with the 1st team in the next year or two.

 

I wonder if we do go back to the drawing board, ironically by doing so and unlikely finishing top 7 means it's less of a priority to adhere to the UEFA FFP rules but you cannot plan to fail.

I sure that the top 6 are looking at their own models and will be making plans to bring down their transfer spends. Although decent money. Last season 4 players went to PL clubs for over £70 million this season to date the fees aren’t anywhere close to those levels.

 

[Les-TA-Jon]

People need to stop using "Financial Fair Play" - that gives the false impression it's about creating a level playing field. It isn't. It's about enforcing clubs to be fiscally responsible and sustainable. 

 

UEFA themselves have dropped the phrase too because of this.