The podcast I listen to that I believe you where on you said you disagreed with some other expert in regards to Etihad I think you said it doesn’t matter if it game from ADUG this other expert disagreed can you explain more please thanks
I'll try. Under FFP, an owner can put in funds to cover a small amount of losses or they can put in funds via sponsorships.
Sheikh Mansour could put a billion pounds in our bank account but we can only spend that money in line with our revenue, and that billion pounds isn't classed as revenue as it goes on our balance sheet. However ADUG could sponsor us for a billion pounds, and that would be revenue, as it would appear on the Profit and Loss account.
FFP seeks to stop this and says that any entity defined as a related party (which is an established accounting concept) can only introduce sponsorship revenue if that contract represents fair market value. That means if it's what an unrelated third party would pay. The going rate for shirt sponsorships is now probably around £40-45m for clubs in our position so if ADUG sponsored us for £100m, that wouldn't be regarded as fair market value. Or if it paid us that for a full page advert in the programme.
To be precise, they
could do that (sponsor our shirt for £100m a year) but we'd have to disregard a lot of that for FFP purposes. UEFA might only allow us to recognise £45m of that £100m as revenue, although it'd still be sat in our bank account. That happened with PSG and Qatar, where they had to disregard most of the €200m that Qatar put in as sponsorship.
If, however, the entity sponsoring us isn't classed as a related party, there is no concept of fair market value and they can pay us whatever they like. City (and our auditors) do not regard Etihad as a related party and, even if it was, the sponsorship was generally regarded (by UEFA and CAS) as representing fair value. But there's more.
The whole point of UEFA's charges, and the CAS case, was that Etihad was only paying a small part of their sponsorship and that the bulk of the money was coming from someone else. UEFA (or the CFCB to be precise) felt it was ADUG, whereas the CAS hearing showed it came from central funds supplied by the Executive Affairs Authority to Etihad (which I'd discovered some years ago). EAA isn't a related party to City so in that case, it didn't matter where Etihad got their money from. They paid us a certain amount and they got commercial exposure commensurate with what they paid.
If, on the other hand, CAS had found that ADUG had routed money into City via Etihad, it's 99% certain we would have been found to have contravened FFP and the ban would almost certainly have been upheld. Stefan, for all the brilliant work he's done on the legal side of this, is wrong to say that it didn't matter where those additional funds came from. It was quite simply the core issue at the heart of the CFCB's charges and the CAS hearing.
It mattered very much in fact. ADUG = ban, not ADUG = no ban.
