The end of financial 'fair' play?

[Prestwich_Blue]

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).

There's nothing in FFP that stops us (or any other club) including non-core income. From a financial reporting point of view, we'd have to show any income derived from companies which were owned, either wholly or in part, by ADUG. So if Etihad were to set up their call centre on the campus site and paid us rent, then that would be part of our commercial income. Arsenal included the income generated from the sale & development of the Highbury site and Bolton include the revenue from the hotel at the Reebok.

FFP allows any revenue generated from commercial activities that take place at or in close proximity to the ground or training complex to be included or any income derived from commercial activities that use the club brand. So if ADUG built the Manchester City hotel in Abu Dhabi then we could probably report the income from that.

One thing that isn't quite clear in FFP is at what level you report. So Manchester City Football Club Limited is wholly owned by Manchester City FC Ltd, which is wholly owned by ADUG. I think we currently report at the level of Manchester City FC Ltd, the holding company, so any income belonging to that entity that meets UEFA's regulations can be included.

 

[Marvin]

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).

There's nothing in FFP that stops us (or any other club) including non-core income. From a financial reporting point of view, we'd have to show any income derived from companies which were owned, either wholly or in part, by ADUG. So if Etihad were to set up their call centre on the campus site and paid us rent, then that would be part of our commercial income. Arsenal included the income generated from the sale & development of the Highbury site and Bolton include the revenue from the hotel at the Reebok.

FFP allows any revenue generated from commercial activities that take place at or in close proximity to the ground or training complex to be included or any income derived from commercial activities that use the club brand. So if ADUG built the Manchester City hotel in Abu Dhabi then we could probably report the income from that.

One thing that isn't quite clear in FFP is at what level you report. So Manchester City Football Club Limited is wholly owned by Manchester City FC Ltd, which is wholly owned by ADUG. I think we currently report at the level of Manchester City FC Ltd, the holding company, so any income belonging to that entity that meets UEFA's regulations can be included.

Are these Hotels profitable? I look around, and nearly every new development in Manchester includes a Hotel. I've noticed the MEN trumpeting how the success of the Manchester football clubs has boosted hotel occupancy levels. I don't think a SportCity hotel is viable until the much talked about Leisure destination is built. The Metrolink and City Training Complex make the area much more attractive - it just needs a compelling all round reason to attract visitors. There's a hotel going up at the junction of Pollard St and Gr Ancoats St

 

[Shaelumstash]

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).

There's nothing in FFP that stops us (or any other club) including non-core income. From a financial reporting point of view, we'd have to show any income derived from companies which were owned, either wholly or in part, by ADUG. So if Etihad were to set up their call centre on the campus site and paid us rent, then that would be part of our commercial income. Arsenal included the income generated from the sale & development of the Highbury site and Bolton include the revenue from the hotel at the Reebok.

FFP allows any revenue generated from commercial activities that take place at or in close proximity to the ground or training complex to be included or any income derived from commercial activities that use the club brand. So if ADUG built the Manchester City hotel in Abu Dhabi then we could probably report the income from that.

One thing that isn't quite clear in FFP is at what level you report. So Manchester City Football Club Limited is wholly owned by Manchester City FC Ltd, which is wholly owned by ADUG. I think we currently report at the level of Manchester City FC Ltd, the holding company, so any income belonging to that entity that meets UEFA's regulations can be included.

You are quite right with what you are saying Preswich Blue. The point I was trying to make (not very well) is that I am not aware of any other industry where you are only allowed to spend relative to income, and a capital injection is not allowed (or restricted).

For example, as I understand it, we can use capital investment for youth and infrastructure projects, but not the core business - i.e the first team squad. As I understand it, other than a deviation of 30-40m over the first 3 years, all spending on the first team squad must be balanced by the revenue of the club (or associated companies).

If our owner wanted to invest new capital of say 200 million in the first team squad, unless revenue increased in the following years to allow for this, we would not receive the European licence. Is there any other industry you know of where capital investment is outlawed / penalised?

 

[Prestwich_Blue]

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).

There's nothing in FFP that stops us (or any other club) including non-core income. From a financial reporting point of view, we'd have to show any income derived from companies which were owned, either wholly or in part, by ADUG. So if Etihad were to set up their call centre on the campus site and paid us rent, then that would be part of our commercial income. Arsenal included the income generated from the sale & development of the Highbury site and Bolton include the revenue from the hotel at the Reebok.

FFP allows any revenue generated from commercial activities that take place at or in close proximity to the ground or training complex to be included or any income derived from commercial activities that use the club brand. So if ADUG built the Manchester City hotel in Abu Dhabi then we could probably report the income from that.

One thing that isn't quite clear in FFP is at what level you report. So Manchester City Football Club Limited is wholly owned by Manchester City FC Ltd, which is wholly owned by ADUG. I think we currently report at the level of Manchester City FC Ltd, the holding company, so any income belonging to that entity that meets UEFA's regulations can be included.

You are quite right with what you are saying Preswich Blue. The point I was trying to make (not very well) is that I am not aware of any other industry where you are only allowed to spend relative to income, and a capital injection is not allowed (or restricted).

For example, as I understand it, we can use capital investment for youth and infrastructure projects, but not the core business - i.e the first team squad. As I understand it, other than a deviation of 30-40m over the first 3 years, all spending on the first team squad must be balanced by the revenue of the club (or associated companies).

If our owner wanted to invest new capital of say 200 million in the first team squad, unless revenue increased in the following years to allow for this, we would not receive the European licence. Is there any other industry you know of where capital investment is outlawed / penalised?

Not as such no. There are restrictions on banks in that they have to maintain capital ratios plus there are anti-monopoly restrictions so that supermarkets like Tesco or Sainsburys can't dominate the market.

There's nothing wrong with the concept of ensuring financial stability in sport but FFP, in the way it restricts responsible investment and encourages debt, is the wrong way to go about it.

 

[Shaelumstash]

There's nothing in FFP that stops us (or any other club) including non-core income. From a financial reporting point of view, we'd have to show any income derived from companies which were owned, either wholly or in part, by ADUG. So if Etihad were to set up their call centre on the campus site and paid us rent, then that would be part of our commercial income. Arsenal included the income generated from the sale & development of the Highbury site and Bolton include the revenue from the hotel at the Reebok.

FFP allows any revenue generated from commercial activities that take place at or in close proximity to the ground or training complex to be included or any income derived from commercial activities that use the club brand. So if ADUG built the Manchester City hotel in Abu Dhabi then we could probably report the income from that.

One thing that isn't quite clear in FFP is at what level you report. So Manchester City Football Club Limited is wholly owned by Manchester City FC Ltd, which is wholly owned by ADUG. I think we currently report at the level of Manchester City FC Ltd, the holding company, so any income belonging to that entity that meets UEFA's regulations can be included.

You are quite right with what you are saying Preswich Blue. The point I was trying to make (not very well) is that I am not aware of any other industry where you are only allowed to spend relative to income, and a capital injection is not allowed (or restricted).

For example, as I understand it, we can use capital investment for youth and infrastructure projects, but not the core business - i.e the first team squad. As I understand it, other than a deviation of 30-40m over the first 3 years, all spending on the first team squad must be balanced by the revenue of the club (or associated companies).

If our owner wanted to invest new capital of say 200 million in the first team squad, unless revenue increased in the following years to allow for this, we would not receive the European licence. Is there any other industry you know of where capital investment is outlawed / penalised?

Not as such no. There are restrictions on banks in that they have to maintain capital ratios plus there are anti-monopoly restrictions so that supermarkets like Tesco or Sainsburys can't dominate the market.

There's nothing wrong with the concept of ensuring financial stability in sport but FFP, in the way it restricts responsible investment and encourages debt, is the wrong way to go about it.

I think the only fair way possible is to have a wage cap like in American sports. In that way everyone can compete on a level playing field, stop spiraling costs and allow club owners the freedom to run their business how they deem fit. However I appreciate this is not possible under European employment law.

Is there something similar in European law which stops UEFA from restricting the level of debt a company is in if it is to gain a licence to compete in Europe? Or do you think this is purely politically motivated to protect the huge European clubs in huge debt?

Also, I'm sure you have been asked this question before, but do you think in their current state there is a case for City and other affected clubs to challenge the FFP regulations? There's two thoughts in my mind, one that it is a restriction of trade, and another that UEFA has the right to grant a licence to whoever they wish for European competition. Again, football and sport in general must be a fairly unique industry in this sense.

 

[bluemanc]

Interesting stuff on City.
How does the disclosure of accounts work for the rags when the Glazers have hid their dealings in a company they have listed in Delaware USA to actually prevent disclosure.
For example they say they have paid off £250 million of PIK loans but refuse to say how & also refuse to reveal how much they are taking out of utd in wages.?

 

[bluegorton]

Bet the glazers a rubbing there hands hmmmm what can I buy......

mmmmm childrennn mmmmm

 

[mcfcdaytona]

Surely one of the biggest holes that UEFA has for this " it's my ball and I'm taking it away with me" FFP is that not every UEFA country has the same accounting standards as we do in the UK because they are outside the EU - so it is not a level playing field and so clearly can legally be challenged if one countries accounts can show a profit that might be a loss if audited under UK accounting standards.

 

[The Future's Blue]

Surely one of the biggest holes that UEFA has for this " it's my ball and I'm taking it away with me" FFP is that not every UEFA country has the same accounting standards as we do in the UK because they are outside the EU - so it is not a level playing field and so clearly can legally be challenged if one countries accounts can show a profit that might be a loss if audited under UK accounting standards.

Wouldn't it be 'Platini's Accounting Standards' for all?

Where there's discrepancies is when it comes down to individual countries terms, as in TV rights, player acquisitions etc. One thing they've introduced is Market Value, a term that can not only attributed to sponsorship but to any part of the process. Couldn't teams like Anzhi claim they have paid stupidly high prices for transfers or wages due to where they are and claim that the actual Market Value is half that?

And what about Malaga, couldn't they argue that the share of TV money is unfair and claim that if they had the same Market Value as the PL then they'd be getting a massively increased revenue stream?

There's problems with Platini's accounting, it keeps changing to suit his bosses needs as and when it looks like someone may threaten their cozy cartel.

 

[mcfcdaytona]

Surely one of the biggest holes that UEFA has for this " it's my ball and I'm taking it away with me" FFP is that not every UEFA country has the same accounting standards as we do in the UK because they are outside the EU - so it is not a level playing field and so clearly can legally be challenged if one countries accounts can show a profit that might be a loss if audited under UK accounting standards.

Wouldn't it be 'Platini's Accounting Standards' for all?

Where there's discrepancies is when it comes down to individual countries terms, as in TV rights, player acquisitions etc. One thing they've introduced is Market Value, a term that can not only attributed to sponsorship but to any part of the process. Couldn't teams like Anzhi claim they have paid stupidly high prices for transfers or wages due to where they are and claim that the actual Market Value is half that?

And what about Malaga, couldn't they argue that the share of TV money is unfair and claim that if they had the same Market Value as the PL then they'd be getting a massively increased revenue stream?

There's problems with Platini's accounting, it keeps changing to suit his bosses needs as and when it looks like someone may threaten their cozy cartel.

As bluemanc has said the fact that the scum use the delaware system to eliminate full accounts disclosure makes Twatini's ability to make his cartel look above board when we know that the scum have more skeletons in their accounts than the Pirates in Pirates of the Caribbean!