The end of financial 'fair' play?

[Mugatu]

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.

 

[bluemoondays]

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.

 

[SWP's back]

Commercially the Nike and Etihad deals should help with that, but I still have a feeling Etihad will be treated as a related party and the value of the deal will questioned by UEFA.

Once again, accounting standards define who is a "related party" and how these must be reported and FFP just regurgitates that word-for-word. We've not declared Etihad as a related party and UEFA has no say in the matter.

Right ok, so in theory Sheik Mansour's brother could set up a new company called Dave's Dildo's and sponsor our training kit for £3bn pounds a season and as long as we don't declare Dave's Dildo's as a related party in our accounts then UEFA won't look in to the "fair value" of the deal?

Seems like a rather large, easily exploited loophole. If UEFA have no say in the matter if we do that, I'm sure they may look at tweaking the regulations!

For the record I think FFP is an absolute disgrace and clearly set up by UEFA in collusion with the old G-14 clubs specifically to stop the likes of us and Chelsea over throwing the old guard. I hope we can find a way around them, but articles like the one below give me cause for concern that the Etihad deal might not pass the regulations.

http://www.bbc.co.uk/sport/0/football/14490740

It's not a loophole and you are not listening or you don't understand.

Tell you what, I'll bet you whatever you can afford that the Etihad deal will be fine.

 

[Mugatu]

Hope this helps explain it.

It does, thanks for taking the time.

 

[Shaelumstash]

Once again, accounting standards define who is a "related party" and how these must be reported and FFP just regurgitates that word-for-word. We've not declared Etihad as a related party and UEFA has no say in the matter.

Right ok, so in theory Sheik Mansour's brother could set up a new company called Dave's Dildo's and sponsor our training kit for £3bn pounds a season and as long as we don't declare Dave's Dildo's as a related party in our accounts then UEFA won't look in to the "fair value" of the deal?

Seems like a rather large, easily exploited loophole. If UEFA have no say in the matter if we do that, I'm sure they may look at tweaking the regulations!

For the record I think FFP is an absolute disgrace and clearly set up by UEFA in collusion with the old G-14 clubs specifically to stop the likes of us and Chelsea over throwing the old guard. I hope we can find a way around them, but articles like the one below give me cause for concern that the Etihad deal might not pass the regulations.

http://www.bbc.co.uk/sport/0/football/14490740

It's not a loophole and you are not listening or you don't understand.

Tell you what, I'll bet you whatever you can afford that the Etihad deal will be fine.

No. Maybe you don't understand. I appreciate under UK accounting law the Etihad deal would not be considered a related party transaction, as so eloquently explained by Preswich Blue, who I have a lot of respect for.

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.

The law states that you may not sponsor a club out of line with market value if you have influence over the sponsoring company. If you get your brother who is part of the same Royal family, with access to the same soverign wealth fund to use his company to sponsor your club, I fear UEFA may consider that a related party transaction.

I appreciate Sheik Mansour's name may not be on Etihad's board. But if UEFA had an axe to grind against us (which I fear they might have) then I fear they may consider his status as a brother of the chairman of Etihad, a member of the family which owns that company, and a member of the government for which Etihad is the flag bearer, that he may have some "influence" over it.

I sincerely hope the deal is allowed and that we are not affected by FFP. I certainly will not bet money that we will fail because I don't want us to. I hope you are right, and that the Etihad deal sails through with no problems and we can continue to compete for the top players and top trophies.

My concern is that these rules have been brought in specifically to penalise us and Chelsea and stop us from upsetting the status quo at the top of European football. And even if we have found a way around the rules in their current state, they may well tweak the rules in future to penalise us.

You may not consider using your brothers company instead of your own to sponsor the club as a "loophole" but I will bet you as much as you can afford that the chairman of Bayern fucking Munich will, and he'll let that be known to his chums at UEFA!

http://www.bbc.co.uk/sport/0/football/14490740

When asked what his reaction was when he first heard about City's deal, the chairman of Uefa's Financial Control Panel, Jean-Luc Dehaene, said: "I had some questions, yes.

The 71-year-old former Prime Minister of Belgium confirmed his panel would "benchmark" all deals to make sure they were "fair value".

"If we see clubs that are looking for loopholes we will act," he said. "It is not enough to say 'we've got a sponsorship contract and that's OK' if the contract is out of line."

 

[Damocles]

I fear UEFA may consider that a related party transaction.

They don't and won't. "Related party transactions" have been defined in the FFP rulings, and the Etihad does not qualify as a related party to MCFC.

 

[Shaelumstash]

I fear UEFA may consider that a related party transaction.

They don't and won't. "Related party transactions" have been defined in the FFP rulings, and the Etihad does not qualify as a related party to MCFC.

That's great news in the short term. As I said, my fear is that in the long term the rulings will be tweaked.

UEFA somehow pursuaded the G-14 to disband. It is remarkably unlikely they they would agree to do this if UEFA had not given them assurances that they would protect their long term interests. They have gone to the trouble to introduce the ridiculous FFP regulations to protect those G-14 clubs, and stop clubs like City from competing with them.

It would be extraordinary if UEFA and the old G-14 clubs were to say "Oh well, we tried to stop them, he got his brother to sponsor them for £400m though and the rules say it's ok so there's nothing we can do."

 

[Chris in London]

I fear UEFA may consider that a related party transaction.

They don't and won't. "Related party transactions" have been defined in the FFP rulings, and the Etihad does not qualify as a related party to MCFC.

That's great news in the short term. As I said, my fear is that in the long term the rulings will be tweaked.

UEFA somehow pursuaded the G-14 to disband. It is remarkably unlikely they they would agree to do this if UEFA had not given them assurances that they would protect their long term interests. They have gone to the trouble to introduce the ridiculous FFP regulations to protect those G-14 clubs, and stop clubs like City from competing with them.

It would be extraordinary if UEFA and the old G-14 clubs were to say "Oh well, we tried to stop them, he got his brother to sponsor them for £400m though and the rules say it's ok so there's nothing we can do."

Two points. First, the current FFP rules not only mirror existing UK law, they also reflect something called Generally Accepted Accounting Policies (GAAP). These are in almost universal usage throughout the western world. For UEFA to change their rules on what amounts to a related party transaction they would not be just stepping out of line with English tax law but with the tax law of every major economy in the western world.

Secondly, I think you would not find it difficult to find a respectable body of accountancy professionals who take the view that the Etihad deal is, far from being inflated, something of a bargain. If the TV deal is anything to go by, the commercial value of exclusive rights in relation to premier league products just went up by about 40%. 650 million people (estimated) watched the derby at the Etihad stadium. Millions more watched as a team with 'Etihad' on their chests in big letters won the title in such a dramatic way. And where do Etihad fly to? Western Europe, transatlantic, the far east, Australia. Where lots of people follow the premier league. When you look at the naming rights for the Emirates stadium for instance and look at what Etihad are getting for their part of the bargain, I think you would be very hard pressed to say definitively that Etihad haven't paid market value for what they have got in return.

Various Eurocrats might have said various things about looking at the Etihad deal, if they get past the first hurdle of it not being a related party transaction. What this ignores is that in commercial terms the PL dwarfs many of the similar transactions which you see on the continent. If you are used to advertising on billboards in small market towns, the cost of a neon display in Times Square or Piccadilly Circus is going to seem excessive. But only because the comparables are in a different league.

Short version: the derby and the title have launched us into a new orbit. Etihad have hitched a ride and you are going to be hard pressed to say that they haven't got fair value for what they paid for it.

 

[Colins Bellend]

No wages at City anymore lads ?

 

[Prestwich_Blue]

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.