City & FFP | 2020/21 Accounts released | Revenues of £569.8m, £2.4m profit (p 2395)

[Rammy Blue]

Click to enlarge.

View attachment 67772

Will all be forgotten when we ruin football again in the summer….

 

[MillionMilesAway]

They can have a ten year contract but amortisation has to be over 5 years

Yep, agreed. I think that's the suggested change.

It would even things between a country with a max 5 year contract limit and one that doesn't, as the amortisation would be the same for both.

 

[lancs blue]

They can have a ten year contract but amortisation has to be over 5 years

Yes, that's how I read it, clubs can offer a length of contract that complies with national limits but can only amortise the fee over 5 years.

 

[meltonblue]

Write off debt goes as a positive movement through p&l which increases profit. Profit means tax. Tax is a p&l hit/expense.

So in Leicester's case it will improve their reported profit (or loss) by £194m.

Whatever their final profit or loss position is in the year they do the write off they will have to pay tax on. Before 1 April 2023 its 19%/after 23%...

I could be wrong as there could be ways around it and also football sometimes seems to have its own rules. But that's the way it works for normal businesses.

It’s not a write off as such though, it’s a conversation to equity they’ve done so it’s just tidying up the balance sheet isn’t it?

 

[meltonblue]

I think the latter is likely - they can change the FFP rules without needing external agreement.

I wonder if some other countries have a limit of 5 years though, and this is more to level the playing field across UEFA rather than to stop some exploiting it.
They'll presumably have to allow Chelsea some leeway as the contracts are in place before the rule.

Not sure they can enforce an accounting change for assets that’s different to the law in that country though, if they could then I’m not sure why fifa would have the caveat in their own regulations already.

I’m not sure how they’d propose to treat renewed contracts either.

 

[WRicko]

They can have a ten year contract but amortisation has to be over 5 years

But accounting standard would be to do it over the life of the contract

 

[waspish]

But accounting standard would be to do it over the life of the contract

Yes but seems uefa will only take the five years into ffp accounting

 

[MillionMilesAway]

Yes but seems uefa will only take the five years into ffp accounting

Quite - it's not about changing accounting standards, it's saying that UEFA will set their rules that transfer fees will be assessed for amortisation based on a maximum of 5 years.

 

[MillionMilesAway]

Not sure they can enforce an accounting change for assets that’s different to the law in that country though, if they could then I’m not sure why fifa would have the caveat in their own regulations already.

I’m not sure how they’d propose to treat renewed contracts either.

The FIFA line just makes no sense, as it basically seems to say:

if it's illegal to have contracts longer than 5 years, then you can't have contracts over 5 years in length.
If it is legal to have contracts longer than 5 years, then you can have them.

I'm not sure what limitation the sentence adds!

 

[meltonblue]

The FIFA line just makes no sense, as it basically seems to say:

if it's illegal to have contracts longer than 5 years, then you can't have contracts over 5 years in length.
If it is legal to have contracts longer than 5 years, then you can have them.

I'm not sure what limitation the sentence adds!

Exactly! To me it reads like “this is what we’d like to happen, but we can’t actually make it happen”. Don’t bother writing it in the first place then!

 

[Centurions]

The FIFA line just makes no sense, as it basically seems to say:

if it's illegal to have contracts longer than 5 years, then you can't have contracts over 5 years in length.
If it is legal to have contracts longer than 5 years, then you can have them.

I'm not sure what limitation the sentence adds!

I did try and follow the thread back but it gave me a headache.

So FIFA are saying if the country allows more than a 5 year contract it's OK by them and if not, they have to stick to 5 years maximum (not that they have any choice)?

Out of interest does anyone know which rule applies to each of the top 5 leagues in Europe?

 

[pardoeofftomexico]

I presume as others have said, you can have a contract for as long as it is allowed in your country but the amortisation has to be over 5 years. They can set their own rules for these write-offs. There will be plenty of adjustments from published accounts for expenses on training academies etc.

To whoever mentioned the Leicester loan conversion to equity being taxable that is quite wrong. It does not add a penny to profit.

 

[Jack Hackett]

I assume for tax and for the filing of accounts at Companies House, contracts will be amortised over the length of the contract but for UEFA, separate accounts need to be produced amortising contracts over 5 years?

 

[MillionMilesAway]

I did try and follow the thread back but it gave me a headache.

So FIFA are saying if the country allows more than a 5 year contract it's OK by them and if not, they have to stick to 5 years maximum (not that they have any choice)?

Out of interest does anyone know which rule applies to each of the top 5 leagues in Europe?

Haven't seen anything to answer that - it would be quite useful context though.

 

[train man]

I don't know what FFP rules suggest, but recent posts seem to conflate amortisation of transfer fee and cost of annual salary (or length of contract). Would it not be just the transfer fee that is amortised (possibly at a maximum of 5 years regardless of length of contract) and the player salary cost left to simply hit p/l during each year incurred, as an expense?

 

[Kinkys Left Foot]

I assume for tax and for the filing of accounts at Companies House, contracts will be amortised over the length of the contract but for UEFA, separate accounts need to be produced amortising contracts over 5 years?

Not a separate set of accounts really, for UEFA we suspect it's purely for the FFP calculation in respect of profit/loss over the rolling 3 year periods.

Be interesting to see if the PL follow suit with regards to their version of FFP.

 

[Ederson1000YardDrive]

It’s not a write off as such though, it’s a conversation to equity they’ve done so it’s just tidying up the balance sheet isn’t it?

Oh didn't realise they did a debt for equity swap. Should be tax neutral.

Fair fucks to Leicester's owner if that's what they've done.

 

[halfcenturyup]

Not a separate set of accounts really, for UEFA we suspect it's purely for the FFP calculation in respect of profit/loss over the rolling 3 year periods.

Be interesting to see if the PL follow suit with regards to their version of FFP.

And the % of revenues allowed on wages etc.

 

[meltonblue]

Oh didn't realise they did a debt for equity swap. Should be tax neutral.

Fair fucks to Leicester's owner if that's what they've done.

Yep, said earlier in the thread it’s ideally what all owners should do to protect the clubs themselves from risk. Particularly given how much they’re benefiting from the asset growth!

 

[aguero93:20]

Quite - it's not about changing accounting standards, it's saying that UEFA will set their rules that transfer fees will be assessed for amortisation based on a maximum of 5 years.

Which leaves anyone being assessed for 5 years by UEFA on 8 and 9 year contracts well able to meet FFPR for the next few years while running at what could quite be a huge loss.