22 responses

  1. TheSKAGooner

    This has been a top series, Phil. I’ve thoroughly enjoyed reading your breakdown and analysis.

  2. Dark Prince

    Have you noticed why Abramovich is not willing to spend £25 million on David Luiz?? Its reported that he’s scared of the Financial Fair-Play Rule. That rule wil not come into effect for another year or 2…but still he’s unwilling to spend that amount now, why? – its bcoz of Amortisation. Buying someone now on a 4 year contract for £25 mil means getting £6.25 mil deducted from your profits for d next 4 consecutive years, and between these years the financial fair play rule will come into effect which can seriously make them think about transfers from now on itself. Though i doubt City are thinking about this.

  3. Keith

    Dark Prince

    I am no accountant but perhaps Man City owners might “gift” the current expenditure so it’s not a debt, but how they are going to get around the high wages being more than their income is any bodies guess-unless they feel they can massively uplift their revenue somehow?

  4. WalterBroeckx

    Another great and informative article Phil.

    I think “flexible accounting” should be banned as much as possible. I think it should be one of the tasks for the FA (and every FA in the world or Fifa/uefa) to tell the clubs how they should keep there accounts and how to present them to the world.

    I don’t want to know how much Cesc or Walcott is earning as this is a private matter between the person and the club (and the tax man) for me. But yes knowing how much money is spend on the basic salary, image rights and and bonusses in total by the club is relevant information.

    Also the amount paid for transfers should be made public and also how much each transfer has cost the club. I think in some countries this is already happening. (France I think?)

    And also the amount of money paid to players agents should be made more publich than the general amount that a club now has to give. Why not give the amounts for each agent separate? After reading the suspicious things going on at United it could rule those dark and under the table payements out.

    The more transparancy the better in the long run.

  5. Phil

    Keith: financial fair play is worked out based on the P+L, so it’s not actually about debt, but the costs of it that matter. So amortisation charges and wages, if they make the club have a loss of more than the acceptable deviation under FFP, will cause clubs issues.

  6. Shard

    @dark prince

    so are you saying that amortisation is actually a good accounting principle for clubs to follow??

  7. Keith


    I understand what you are saying but what I was trying to imply was that could the owners gift their current expenditure such that the transfer fees are not then amortised so lessoning their future loss side of their accounts?

    This wouldn’t obviously take into account their wage bill which outstrips their income hence the need for their revenue to go up enormously to attempt to balance the books.

  8. Phil

    Thanks SKA Gooner, I figured it’d be worthwhile to get what I’d worked on out there.

    Walter – that’s exactly it. There’s so much flexibility it’s crazy. When I’ve got more time, I might have a look at City and the FFP regs and see what they could bend and twist in order to massage their figures. I daresay such actions will be as important as cost-cutting when it comes to getting themselves into Europe.

  9. Phil

    Shard: mortisation is good as it is causing City difficulties by making it take four years for any heavy spending to get out of the system. However, it doesn’t accurately reflect the payment of transfers, so a club could spend big on transfers on four year contracts and still feasibly turn a profit that year, to the confusion of the average Joe. I plan on trying to come up with a better alternative, but I haven’t had chance to sit down and work it all out just yet.

    keith: im not sure what you mean by “gift their current expenditure”. They can’t simply chuck them a ton of money to cover their losses, as that would represent cash coming into the club and would go onto the cash flow statement. As it’s not a revenue stream of the club, strictly speaking, it wouldn’t enter the profit and loss, and that is where the FFPs are calculating break even from.

  10. Shard


    Thanks. I would really like to read the better system you could think of. I just think there are too many open ends here. Also, as regards keith’s question, while they may not be able to gift the club the money, what’s to prevent the owners buying thousands of replica shirts or other merchandise, which would be a genuine revenue stream for the club?

  11. Phil

    IT’s all covered in the FFP, they can’t just decide to sponsor the club to the tune of 200m a year for example. For the purposes of such a deal, they’d mark the deal down to what would be it’s market value, say 20m, and base it’s value in the P+L on that.

    The same will go for shirt sales etc. The FFP should be fairly watertight, but anyone who knows finance and finacial history will know that regulations tend to be avoided by those who try hard enough. It might be tricky in football as many revenue streams are transparent (tv money, and they cant claim they make twice the matchday revenues as arsenal). But if it becomes a close-run thing, you can be sure they’ll just manage to sneak in somehow

  12. Shard

    call me a cynic, but I don’t think any of the big clubs will be barred by UEFA as long as they are SEEN to be following the guideline at least. And maybe not even then. How much would the Champions league really be worth without the likes of ManU, Chelsea, Real, Barca, Inter etc.. I’m not saying that these clubs won’t pass the criteria, just that if they don’t they will be allowed in by uefa themselves manipulating the rules.

    Anyway, this article is about English clubs and legislation to make their accounts more transparent and I guess uefa can be left out of it for now. Hope you can suggest an alternative accounting practice Phil. Would like to read it though my understanding of such things is very limited. As you would probably have realised..

  13. Phil

    The only “new” accounting practice I see the need for is amortisation, as the current system doesn’t track the value for a player at all, nor does it reflect the outgoings on transfer spends. Apart from that, I think we only really need standardisation so that club A’s accounts can be compared to Club B’s, and that would be done by additional standards on top of what we have now.

  14. Wrenny

    I’m a lot more positive about the regulations. My feeling is that a lot of clubs (and particularly their owners) will be breathing a collective sigh of relief at these measures. These are very successful businessmen we are talking about, and they have been spending insane amounts of their own money to succeed in a very crazy business. I doubt that they enjoy it, they’ve simply been forced to spend big because well…. everyone else is doing it. And if you can’t beat them, join them!

    UEFA’s regulations allow them to back out of the insane spending safe in the knowledge they won’t be left behind, because everyone will be curbing their spending too. They desperately needed UEFA to intervene and force the issue, snap them out of the path of mutually assured destruction they were going down. And so far all the big clubs look to be co-operating and planning accordingly. The likes of Abramovic and Moratti have welcomed the regulations.

  15. Phil

    Even if the regulations get dodged by some clubs, they are causing most others to bring in their spending eg Chelsea, so some good is coming of it. Whether they’re watertight will remain to be seen, but we’ve certainly seen spending curtailed recently.

  16. Bootoomee

    Totally share your optimism for the reasons you listed.

  17. Bootoomee


    My last post is directed at you.

  18. Shard


    I think most clubs and their savvy businessmen owners back these regulations mostly to mantain status quo. Chelsea did it, now they don’t want anyone else to be able to do it.To maintain their hold over it.. But let’s say even then, it is achieving it’s aims and clubs do curb their spending. I bet they won’t be as accommodating of rules if 5 years down the line they don’t win things and their ‘fans’ start to complain. Let’s face it. They didn’t get where they are by always following the rules.It only takes ONE club to do it and get away with it. Then you’ll have all of the big clubs doing it while not allowing any of the smaller ones to catch up. They’ll probably threaten to break away from UEFA if they are challenged, which has essentially already happened a few years ago.

    Anyway, as I said, I’m just a cynic 🙂 It’s good that you are positive about it. I just wish I could be. I hope I’ll be proved wrong.

  19. StoneRoses

    If I was a mega-billionaire owner of Arsenal, I would get one of my subsidiary companies to sponsor each of the players shirts for a million pounds a month each. I would then buy the stadium naming rights for £200 million a year, and there we are, a £500 million pound a year revenue stream. Genuine question, would I be allowed to do that?

  20. Richard B

    Something to remember when these new ‘rules’ come into effect is that clubs will be keeping a very close eye on each other. If a club ends the season in fifth place and therefore not qualifying for the Chaampions League they will be looking very carefully at the published accounts of those above them (plus any other inside information that they have) in order to push for a disqualification which, in turn, gets them in. Private deals can of course be done but the ammounts of money involved will be so great that they’ll have to be very attractive deals indeed!
    The greater involvement of fans (and the accountants amongst them) will also play a part in keeping everything transparent and above board.
    Ken Bates must be praying Leeds never get anywhere near Europe.

  21. Rhys Jaggar

    A good article, Phil, but with the caveat that you, like me when I was younger, think the world is full of nice people who will admire admirable people. Trust me: they don’t. They’ll do anything to tear them to pieces if they can. So, secrecy becomes more important to people as they get older, just as solid defending becomes more important when talented youngsters decide they’d like to win the League. Which is why accounts don’t always contain all that they might do. In Europe, we’re much more secretive than US public companies, but considerably more open than many US private companies.

    Segmental reporting in football’s really not that important. I’ll tell you why.

    1. You don’t need to be Einstein to work most bits out.

    Matchday revenues can be calculated from average attendance linked to price and games played. You make separate calculations for corporates but it’s all simple. I managed it for Arsenal in 10 minutes 7 years ago. Because I knew the Club deck prices, could see the season ticket prices, heard the Diamond Club prices in the Press and could impute the rest.

    TV money is pretty easy to estimate too. There’s a core Sky TV payment allied to a performance-related payment. As the latter is smaller than the former, you can’t be hugely wrong on this one no matter where a club finishes. The figures are in the public domain and you can work them out. If it’s that important to you.

    Sponsorship and other commercial is where the most uncertainty is. Major sponsorship deals are usually made public e.g. Emirates, Standard Chartered at LFC etc, but the smaller deals may go under the radar. Income from selling merchandise is hard to guage, whereas programmes are pretty easy to estimate. At Arsenal it’s about 0.6*attendance*games*£3, although this will decrease now that programmes are free for Platinum members.

    But if you know the first two segments, you can of course work out the third from the total revenue number.

    The key thing for financial instability is what might be termed ‘future liabilities’. In football, this is all about player contracts, since in this strange industry, you can’t be fired without having your contract paid off in full. Most of us survive on 3 months notice and a contract without a fixed duration, but footballers are different and that’s where the biggest problem will arise if wages are not linked in any way to income.

    If I were Arsenal CEO, all my contracts with players would be:
    1. This is your basic if we are in the EPL – linked to Sky TV core payment and matchday income assuming a reasonable performance (say at Arsenal a crowd of 55,000).
    2. Your bonus payments will be linked to team performance and personal performance. The total pool for the team bonus will come from the following:
    i. Sky bonus money and prize money from all competitions.
    ii. Gate receipts in all Cups.
    iii. Retail sales of club merchandise (% of net profits of that operation, if any).
    iv. Any other income accruing to the club due to performance (e.g. performance payments by sponsors for winning trophies).
    3. Should the Club fail to remain in the EPL, your base salary will be cut sharply to align the club to future revenues, taking into account parachute payments. You will be obliged to stay at the club for 12 months after relegation unless the manager wishes to sell you, however the club will agree to allow offers for players thereafter from EPL or foreign clubs if promotion in the first season is not achieved.

    The thing with that kind of strategy is that it removes the disconnect between the uncertainty of future revenues (e.g. £20 – 30m difference from Champions League qualification) and the fixed, certain values of the player liabilities.

    It makes it clear to players that their pay is linked to their performance and it will be possible to show the players reasonable predictions of what will happen under various scenarios. It links players to poor pitch performance and holds them to responsibilities whilst allowing the manager leeway to reorganise should the need arise.

    No system is ever perfect, but the simplest way to manage uncertainty is to link uncertain revenues to liabilities in a way that the two move in the same direction.

    All the disasters at football clubs occur when the revenues go south but the liabilities remain absurdly high.

    You don’t need to be Einstein to see how to change that.

    It’s just that bolshie agents and Prima Donnas would bankrupt football clubs before accepting such a mature approach to remuneration.

    Something for HOC to think about, perhaps??

  22. Phil

    Interesting comment Rhys, and I largely agree with you. I do however think that stricter regulation of reporting would imrpove transparency, and allow more accurate monitoring. That’s enver going to be a bad thing!

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