The end of financial 'fair' play?

[Shaelumstash]

However, as UEFA have many times talked about "Fair Value" and "Benchmarking" deals against the market I think there is a strong possibility they will look in to the Etihad deal more closely, as outlined by the head of the FFP board below.

It's actually quite frightening to think that even UEFA don't understand their own processes. Just to explain a little more on this. FFP sets out the financial rules to be followed, many of which are simply to do with enforcing accounting standards so that everyone is, as far as possible, either reporting on the same basis or making it clear where they haven't.

But there's a second part to FFP and that's how the process of reporting and licensing is managed. It's not well known that it's the various national associations which will be carrying out the FFP assessments, which in our case is the FA. There are too many for UEFA to do in the time available so they've effectively sub-contracted it.

As I understand it, we submit an FFP 'return' to the FA and they, acting on UEFA's behalf, check it and either grant the licence or tell UEFA to grant the licence. UEFA can audit the national association's process and individual submissions and I'd bet a pound to a penny that we're one of the first audited. So they may be able to ask us "Is this a related party transaction?" but if we say "Our advisers have told us it isn't and our auditors agree with that assessment" then I believe there is nothing they can do.

Their officials were making these idiotic comments even before the actual process had been sorted out & agreed. My suspicion is they were politically motivated to make it look like they planned to do something when in fact they knew they had no power to. It's interesting that it's all gone very quiet in the last two or three months.

Fantastic post Preswich Blue, many thanks for this. I agree the new regulations were politically motivated without question. It is absurd that UEFA claim FFP was brought in to tackle debt and yet as far as I am aware there are no restrictions on debt whatsoever.

You are far more qualified than I am to determine whether UEFA have the power to do something to penalise us now or in the future. It seems given the current regulations they are not, but it does not necessarily mean they will not move the goal posts in the future.

And to the poster above, I appreciate the rules on related party transactions are a standard accounting practice. However, I am not aware of any other industry where companies are only allowed to include their core business (football in this case) income to gain a licence to operate in their respective field, and capital investment is outlawed (Or considerably restricted).

 

[Asa's left peg]

There are a number of holes in which mean it doesn't really hold water anyway. If ultimately, it's about stopping clubs from borrowing beyond their means to repay, (with the penalty being unable to be part of their little club), then this will mean nothing to a club outside the top four or without ambitions to be. Also, if one of the teams in the top 4 borrows too much to build a new stadium because it doesn't count towards FFP (say Spurs for example) and they loose an income stream,( like a drop in gate reciepts) they may not be able to repay those loans and effectively go bust but qualify for the CL !
Bizzare.

Also the politically motivated statememts from UEFA officials before they saw seen anything, gives it away.

 

[onceabluealways]

The new TV deal will help all premier clubs but FFP will still stand and will still impact PSG etc.

In light of the new deal and the additional revenue this brings to English clubs wouldn't surprise me if platini scrapped FFP as he's fighting a losing battle against the clubs he wanted to hit.

It will hit PSG though because their income is nothing like the prem clubs but they are offering the wages and paying the transfer fees etc.

 

[jrb]

Sorry, I'm a layman in this and I don't understand much about FFP, but are wages not taken into account?

I can see figures like 270 million profit being bandied about and it all sounds great, but Yaya's wages alone cost us over 9 million a year. The wage bill appears to put a massive dent in any profit, far more than tickets bring in.

It's not 270m profit, that £270m is income (earnings/revenue whatever you want to call it). Out of that comes wages, player transfers, stadium upkeep etc to reach a final profit figure.

Our 'profit' last year was -£194m (loss) but this year we don't have to account for a £34m write-off so before any extra money comes in we are looking at a £160m loss. You can then remove some stuff that doesn count towards FFPR like EDS costs, City in the community, maybe £10m so for FFPR we made a £150m loss (even though in 'real money terms' it was still £160m).

Then you start adding all the "extra money" we will get from this season which we didn't have last season.

Etihad deal - £40m?
CL earnings - £30m?
Extra prize money - £5m?
Extra TV revenue - £5m?
More sponsorships - £10m?

I'm sure there's more but just those above take our losses from £150m to £60m. There's some special rule that player wages signed before a certain date can be excluded (again, in real money they count on our books but for FFPR they won't) so take out the wages of Adebayor, Bridge, RSC, Tevez, NDJ and some others. We then get down to, guess of £30m, which is in the allowed loss range for FFPR.

On the books we will still be showing a loss which includes a lot of those costs so we could, for example, still show an overall loss of £100m - but for FFPR (with all the exclusions) we will be in the safe area of £30m loss.

Finally, the new PL deal would mean teams in the Top 4 getting around £30m-£40m extra/year which will be a huge bonus but will only kick into the books after 2014.

Hope this helps explain it.

Just to tie in with the above. I came up with these figures. Guesstimated of course. I think City are looking at a figure between £175mill-£200mill(best case scenario) I didn't include transfers on purpose. Either a profit or loss.(obviously) Hard to judge though.

Premier League Title Winners. £60mill
Etihad deal. £35-£40mill
Champions League. £20-£25mill
Season tickets £20mill
New TV rights. £15mill(additionall)
Nike kit deal. £10mill-£15mill
Additional income after winning the Premier League Title in the last minute/worldwide exposure. Sponsorship, Merchandise, corporate hospitailty, etc, etc. £Johnny Ball, think of a number.

 

[droylsdenblue]

I'm positive that our owners employ some of the best legal brains in the world so I would be amazed if the Etihad deal or any other falls foul of any FFP rules.

 

[jrb]

Don't worry Brothers.

Richard Scudamore will be at the Etihad Stadium on Sunday afternoon, a decision he attributes to geographical convenience, although no one would blame the Premier League chief executive for taking the view that, on the balance of probability, the trophy presentation come 5pm will be in east Manchester.


The league's chairman, Sir Dave Richards, will travel from his Sheffield home to the Stadium of Light just in case Manchester United find themselves crowned champions for the 13th time. Scudamore protests that the choice was made weeks ago, with Manchester being closer than Sunderland to his home in the Cotswolds. It is part of his job to be diplomatic but the truth is that if this is to be Manchester City's first Premier League title it is right that he should be there.

The role of chief executive requires Scudamore to walk a difficult line: managing 20 disputatious clubs with competing interests and also negotiating the most lucrative television contracts in world sport every three years. Tenders have now gone out for the next three-year deal, which will start with the 2013-2014 season.

Yesterday, Scudamore was at the Emirates to present the trophy for the Premier League schools tournament, in which each club nominates a local school to compete, complete with full kit and officiated by Premier League referees. It was good practice in the event of Scudamore handing the trophy to Vincent Kompany on Sunday, a moment that would undoubtedly mark a key moment in English football.

The big questions are: If City do become only the fifth club to win the Premier League in its 20 seasons, will the new Uefa rules on financial fair play mean that they are the last club to benefit from the transformative effect of a billionaire investor? And does Scudamore believe Sheikh Mansour's project, £800m and counting, has been good for English football?

Scudamore says: "It might be the last time it [changing a club] can be done this quickly but it doesn't mean it will be the last time it can be done. We know exactly what FFP [the first monitoring period of which ends next summer] is; what none of us know is what impact it will have. You need one heck of a crystal ball and I can't begin to speculate.

"It might have the impact we hope, which is wage inflation and transfer inflation is capped and limited. We hope it doesn't have a negative impact in terms of willingness of people to invest. It might encourage people to invest; it might lock in the natural order, where the big clubs remain the big clubs and no one can break in.

"[An investor] can still come in and make investments in infrastructure. You could come in and build a fantastic stadium, capitalise on a big fan base and grow your natural revenues. You could make a huge development in youth and get a lot of good young players in, therefore achieving playing success by other means, still using your resources that the rules allow. But it would take longer to actually build that club into a title-winning club. It might take a bit longer but it won't stop people. It might even encourage people to invest, knowing that everyone is similarly restrained.

"What you won't be able to do is come in and bring in more talent than you need. You can't be as profligate as some have been, warehouse talent that you don't require and have huge squads. It [investing in a club] will be done in a more controlled way."

Scudamore is one of the few in English football to have met Sheikh Mansour, the fortysomething owner of the club who has only attended one City game since he acquired them in 2008. "What I can say is that Sheikh Mansour and the chairman, Khaldoon al-Mubarak, when you look at all their other business interests, are committed to excellence," he says. "That's what comes through.

"Of course, they can afford excellence. Look at what else they do in their sporting world, in Formula One, and look at the investment into Abu Dhabi.

"What they do generally are things that are excellent. We are glad to have them in that sense because they bring quality and that is the impression you get whenever you meet them. They want to do what is right and what is good and what improves things. They don't leave a stone unturned and that has improved everybody; it means everyone ups their game.

"You look at what they have done for the infrastructure of the club, what they are doing with the academy, around the stadium with the fan zone, and the site itself, the [Etihad Campus] plans they have are fantastic. So the investments they have made aren't just in the playing squad."

 

[Rammyblues]

We are in safe hands, and I love all the bitterness from other fans who think FFPR is going to somehow derail or stop our spending on quality players and the like.

 

[Dribble]

Question:

In terms of advertising exposure, what advertising/sponsorship value can be placed on having a sponsors logo displayed on the shirt of the winner of the derby match which attracted the biggest domestic sporting audience in the history of TV sport and which was played at the stadium that the said sponsor also had the naming rights to?

Also, In terms of advertising exposure, what advertising/sponsorship value can be placed on having a sponsors logo displayed on the shirt of the winner of the worlds most successful and watched football league in such dramatic final day circumstances as globally witnessed on May 13th 2012, which was played at the stadium that the said sponsor also had the naming rights to?

Where FFP is concerned, all we have to do is to 'demonstrate' that financially we are moving in the right direction toward break-even. Our deal with Etihad isn't locked to £35m-£40m per season irrespective of how we perform, because as I understand it, the deal can be massively increased depending on our success, increased sponsor exposure and the identification of additional sponsorship opportunities ie: sponsoring our training kit ala the ManUre/DHL deal as just one example.

I honestly believe that when FFP properly kicks in that Uefa will be forced to be more concerned with their European footballing aristocracy than they will with Manchester City Football Club......... Sheikh Mansour has got it boxed boys and girls.

 

[CBlue]

However, as UEFA have many times talked about "Fair Value" and "Benchmarking" deals against the market I think there is a strong possibility they will look in to the Etihad deal more closely, as outlined by the head of the FFP board below.

It's actually quite frightening to think that even UEFA don't understand their own processes. Just to explain a little more on this. FFP sets out the financial rules to be followed, many of which are simply to do with enforcing accounting standards so that everyone is, as far as possible, either reporting on the same basis or making it clear where they haven't.

But there's a second part to FFP and that's how the process of reporting and licensing is managed. It's not well known that it's the various national associations which will be carrying out the FFP assessments, which in our case is the FA. There are too many for UEFA to do in the time available so they've effectively sub-contracted it.

As I understand it, we submit an FFP 'return' to the FA and they, acting on UEFA's behalf, check it and either grant the licence or tell UEFA to grant the licence. UEFA can audit the national association's process and individual submissions and I'd bet a pound to a penny that we're one of the first audited. So they may be able to ask us "Is this a related party transaction?" but if we say "Our advisers have told us it isn't and our auditors agree with that assessment" then I believe there is nothing they can do.

Their officials were making these idiotic comments even before the actual process had been sorted out & agreed. My suspicion is they were politically motivated to make it look like they planned to do something when in fact they knew they had no power to. It's interesting that it's all gone very quiet in the last two or three months.

Fantastic post Preswich Blue, many thanks for this. I agree the new regulations were politically motivated without question. It is absurd that UEFA claim FFP was brought in to tackle debt and yet as far as I am aware there are no restrictions on debt whatsoever.

You are far more qualified than I am to determine whether UEFA have the power to do something to penalise us now or in the future. It seems given the current regulations they are not, but it does not necessarily mean they will not move the goal posts in the future.

And to the poster above, I appreciate the rules on related party transactions are a standard accounting practice. However, I am not aware of any other industry where companies are only allowed to include their core business (football in this case) income to gain a licence to operate in their respective field, and capital investment is outlawed (Or considerably restricted).

I'm no expert but wouldn't the Banking Industry fall under similar rules?

 

[Shaelumstash]

It's actually quite frightening to think that even UEFA don't understand their own processes. Just to explain a little more on this. FFP sets out the financial rules to be followed, many of which are simply to do with enforcing accounting standards so that everyone is, as far as possible, either reporting on the same basis or making it clear where they haven't.

But there's a second part to FFP and that's how the process of reporting and licensing is managed. It's not well known that it's the various national associations which will be carrying out the FFP assessments, which in our case is the FA. There are too many for UEFA to do in the time available so they've effectively sub-contracted it.

As I understand it, we submit an FFP 'return' to the FA and they, acting on UEFA's behalf, check it and either grant the licence or tell UEFA to grant the licence. UEFA can audit the national association's process and individual submissions and I'd bet a pound to a penny that we're one of the first audited. So they may be able to ask us "Is this a related party transaction?" but if we say "Our advisers have told us it isn't and our auditors agree with that assessment" then I believe there is nothing they can do.

Their officials were making these idiotic comments even before the actual process had been sorted out & agreed. My suspicion is they were politically motivated to make it look like they planned to do something when in fact they knew they had no power to. It's interesting that it's all gone very quiet in the last two or three months.

Fantastic post Preswich Blue, many thanks for this. I agree the new regulations were politically motivated without question. It is absurd that UEFA claim FFP was brought in to tackle debt and yet as far as I am aware there are no restrictions on debt whatsoever.

You are far more qualified than I am to determine whether UEFA have the power to do something to penalise us now or in the future. It seems given the current regulations they are not, but it does not necessarily mean they will not move the goal posts in the future.

And to the poster above, I appreciate the rules on related party transactions are a standard accounting practice. However, I am not aware of any other industry where companies are only allowed to include their core business (football in this case) income to gain a licence to operate in their respective field, and capital investment is outlawed (Or considerably restricted).

I'm no expert but wouldn't the Banking Industry fall under similar rules?

I'm not an expert either, but as far as I'm aware there is no restrictions on banks raising capital from non banking related business, such as new share issues.