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

[SPIDERBOY]

Re: City & FFP (continued)

I ain't no accountant or legal eagle,and reading through this thread has been a complete head fuck for me..my head is now about as organised as a £1 DVD bin in sainsbury's....can someone just tell me if we will be ok?.....a straight yes or no will do...thanks.

No-one knows, depends what you mean by "ok". We'll still exist, so on that front we'll be ok, but as for next season's Champion's League, it's not been decided yet. We may have to pay a fine (a withholding of prize money to be more accurate), we may have to reduce our squad, we may even be banned from the Champion's League (although this is a worse case scenario that isn't hugely likely). Alternatively we may be fine and we may be able to prove, via adjudicatory panels and courts, that UEFA have got their accountancy wrong and we have, in fact, passed FFP.

There is no definitive answer at this point.

Cheers

 

[Matty]

Re: City & FFP (continued)

Having looked at it all from scratch the only thing that the CFCB can realistically challenge is the IP sale to City Football Group for £22.43m.
Trying to change the meaning of RTP simply won't fly so the Etihad deal will be OK as will the IP sale to a 3rd party - it isn't an RPT deal and it is easy to identify that the firm is not an RPT by means of a letter to PWC from a well respected law firm stating this fact without revealing who the 3rd party is (this mechanism is used all the rime for calculating tax liabilities in various jurisdictions so it is nothing new).

The question over the nature of the 3rd party deal depends on what PWC have said about it. My guess is that they will have said it is a valid deal but as no one has done it before they cannot put a value on it.

That will give the CFCB all the ammunition they need to give it a fair value of zero.

That will mean us failing FFP by between £7m and £15m. Which means we can't deduct £80m in pre June 2010 wages which means a headline failure of £87m+.

City will fight this all the way to the end of the line as the punishment certainly doesn't fit the crime.

If we can prove the 3rd party we have sold out image rights to is not an RPT then it's of no concern to PWC whether or not they deem it to be fair value. If there's no related party link between us and the 3rd party then the value of the deal is fair value, as the third party has chosen to pay it without any internal influence from City. Otherwise you'd have to assess all sponsorship deals for fair value regardless of the RPT nature of the parties involved. Imagine the scenario, City sell our image rights to Nike for £25m, UEFA say, "that's inflated value, we're going to deduct 50% of the value of that deal". What UEFA are doing there is publicly calling into question the ethics, the professionalism and the ability of the Nike marketing board. They'd be sued before the ink dried on their FFP report. A sponsorship deal/image rights purchaes/whatever else you care to think of is worth what someone is willing to pay, as long as the someone is not a related party with undue influence being applied from within.

Haven't BDO effectively confirmed that its not a RPT? Its not classed as a RPT in the audited accounts and BDO have confirmed that they have received all of the information and explanations they require for their audit.

If that's true then PWC and UEFA can do nothing whatsoever about the sale of Image Rights. They are worth whatever the independent 3rd party was willing to pay.

 

[Prestwich_Blue]

Re: City & FFP (continued)

That article shows you how much of our revenue is actually fudged.

I think we have to hold our hands up as supporters and recognise that City have been indulging in 'creative' accounting practices. However I would offset that by saying that I believe we are not the only club doing this kind of thing, and that ultimately there would be no need for these questionable revenue streams if it wasn't for FFP.

UEFA's accountants have obviously decided that they want to single us out for punishment, I believe our only course of action will be challenging FFP legally on the grounds that it is anti-competitive.

when you say that City "have been indulging in creative accounting", are you aware that City's accounts get fully audited, by PWC I believe, who are 1 of the big 4 audit firm in the world, and as much as City are an important client to them, we would not be worth them losing their reputation for and they would not therefore allow unrealistic "creative accounting" if they felt that it would not meet reasonable challenge. Did you know that 15 years or so ago there used to be a "big 5" of audit and accounting firms, the other one being Arthur Andersen, and they had a big client called Enron with whom Arthur Andersen did not exercise proper audit controls, and it completely wiped them out and they no longer exist

Our auditors are a firm called BDO. They're not one of the so-called 'Big 4' but are the next one on the list (i.e. 5th biggest).

 

[BringBackSwales]

Re: City & FFP (continued)

I think we have to hold our hands up as supporters and recognise that City have been indulging in 'creative' accounting practices. However I would offset that by saying that I believe we are not the only club doing this kind of thing, and that ultimately there would be no need for these questionable revenue streams if it wasn't for FFP.

UEFA's accountants have obviously decided that they want to single us out for punishment, I believe our only course of action will be challenging FFP legally on the grounds that it is anti-competitive.

when you say that City "have been indulging in creative accounting", are you aware that City's accounts get fully audited, by PWC I believe, who are 1 of the big 4 audit firm in the world, and as much as City are an important client to them, we would not be worth them losing their reputation for and they would not therefore allow unrealistic "creative accounting" if they felt that it would not meet reasonable challenge. Did you know that 15 years or so ago there used to be a "big 5" of audit and accounting firms, the other one being Arthur Andersen, and they had a big client called Enron with whom Arthur Andersen did not exercise proper audit controls, and it completely wiped them out and they no longer exist

Our auditors are a firm called BDO. They're not one of the so-called 'Big 4' but are the next one on the list (i.e. 5th biggest).

ok thanks PB, I know BDO I just did not realise they were City's auditors - the principle is the same, as I assume they would like to stay number 5!

 

[andyhinch]

Re: City & FFP (continued)

I ain't no accountant or legal eagle,and reading through this thread has been a complete head fuck for me..my head is now about as organised as a £1 DVD bin in sainsbury's....can someone just tell me if we will be ok?.....a straight yes or no will do...thanks.

What DVD's you got? This could be a long summer.
Yes. And no.

 

[M18CTID]

Re: City & FFP (continued)

I think we have to hold our hands up as supporters and recognise that City have been indulging in 'creative' accounting practices. However I would offset that by saying that I believe we are not the only club doing this kind of thing, and that ultimately there would be no need for these questionable revenue streams if it wasn't for FFP.

UEFA's accountants have obviously decided that they want to single us out for punishment, I believe our only course of action will be challenging FFP legally on the grounds that it is anti-competitive.

when you say that City "have been indulging in creative accounting", are you aware that City's accounts get fully audited, by PWC I believe, who are 1 of the big 4 audit firm in the world, and as much as City are an important client to them, we would not be worth them losing their reputation for and they would not therefore allow unrealistic "creative accounting" if they felt that it would not meet reasonable challenge. Did you know that 15 years or so ago there used to be a "big 5" of audit and accounting firms, the other one being Arthur Andersen, and they had a big client called Enron with whom Arthur Andersen did not exercise proper audit controls, and it completely wiped them out and they no longer exist

Our auditors are a firm called BDO. They're not one of the so-called 'Big 4' but are the next one on the list (i.e. 5th biggest).

The BDO is pretty poor now that all the best darts players have defected to the PDC.

 

[jimbopm]

Re: City & FFP (continued)

That article shows you how much of our revenue is actually fudged.

I think we have to hold our hands up as supporters and recognise that City have been indulging in 'creative' accounting practices. However I would offset that by saying that I believe we are not the only club doing this kind of thing, and that ultimately there would be no need for these questionable revenue streams if it wasn't for FFP.

UEFA's accountants have obviously decided that they want to single us out for punishment, I believe our only course of action will be challenging FFP legally on the grounds that it is anti-competitive.

when you say that City "have been indulging in creative accounting", are you aware that City's accounts get fully audited, by PWC I believe, who are 1 of the big 4 audit firm in the world, and as much as City are an important client to them, we would not be worth them losing their reputation for and they would not therefore allow unrealistic "creative accounting" if they felt that it would not meet reasonable challenge. Did you know that 15 years or so ago there used to be a "big 5" of audit and accounting firms, the other one being Arthur Andersen, and they had a big client called Enron with whom Arthur Andersen did not exercise proper audit controls, and it completely wiped them out and they no longer exist

When I say creative, I am not implying illegal. I'm sure our accounts have passed all of the audits but I still think that UEFA have a bee in their bonnet about us setting up companies that have paid us money for 'intangible assets'.

UEFA will want to get to the bottom of what these so-called intangible assets are and why these new companies - registered outside the football clubs jurisdiction - have paid large sums to us.

 

[BlueAnorak]

Re: City & FFP (continued)

Arab Sheikh ruled countries tend to treat an attack on one as an attack on them all.
So, if PWC seriously feck up then their whole Middle East business could go down the pan and a large number of companies outside the middle east where a large chunk is owned by an Arab Sovereign Wealth fund could also stop using them.
As such it's unlikely that PWC would have said anything controversial.
If there is any controversy It will be the CFCB interpretation of what PWC have said.

 

[Prestwich_Blue]

Re: City & FFP (continued)

When I say creative, I am not implying illegal. I'm sure our accounts have passed all of the audits but I still think that UEFA have a bee in their bonnet about us setting up companies that have paid us money for 'intangible assets'.

UEFA will want to get to the bottom of what these so-called intangible assets are and why these new companies - registered outside the football clubs jurisdiction - have paid large sums to us.

In accountancy, there's rarely any black and white in the way things are recorded or reported. That's why they have Accounting Standards, in order to try to achieve an element of consistency and transparency. But if we've sold some IP to MC NYC, who aren't even in operation properly yet, and to Melbourne Heart, who we bought after the IP sale took place, then I agree there's bound to be questions asked.

 

[jimbo101]

Re: City & FFP (continued)

Not quite DD, you'd have to buy £16k worth of ladders :D

No you wouldn't.

You'd put the 2k as a one off expense and wipe out your profits.

Technically the ladder's cost should be accrued/depreciated, but it was just a simple example.

A better one is that you spend £2k on a local radio advert.

But we are deviating from the point ;-)

Hmmm, may be slightly different in the uk but a capital expense for tax purposes usually can't be written off in one year, here fixed assets have to be written off over 8 years (depreciation is totally different to capital tax allowances btw).

Shall we not get into a discussion about taxes. I'm sure that our discussions with UEFA are on a slightly higher level than ladders!!
(BTW £2k on ladders would be enough as you get £500k capital allowance to offset against Corp Tax)