Thoughts on Financial Fair Play, Part 1

I’ve listed some thoughts and questions I had about the new FFPR.  The full document is here and my summary of the most important points is here:

  • UEFA is not just about soccer anymore, FFPR has transformed it into a financial regulator.  Effectively monitoring the financials of several hundred clubs and ensuring that enforcement is transparent and meaningful across the association are not easy tasks, just ask the SEC.  Is UEFA ready for that?
  • UEFA is going to rely on the information supplied by auditors, and like other regulators will be open to potential misreporting.  What penalties are in place to ensure that auditors will not be pressured to distort results? 
  • FFPR mentions little about penalties or enforcement.  What happens to clubs which misstate results? Accidentally? Purposefully? Are there financial penalties? Competition penalties?  It is worrying that none of these details are spelled out. 
  • Creative bookkeeping seems inevitable.  There is going to be a large incentive to move as many costs as possible into the columns marked ‘Youth Development’ and ‘Stadium Construction’.  See entry about auditor pressures above.
  • Valuation of Players.  How are clauses in player contracts going to be booked on the balance sheet? It could cause quite a lot of havoc for clubs with smaller balance sheets.  For example, Club A sells a striker to Club B for an upfront fee and a ‘payment after X goals scored’ clause.  Is the clause an asset for the selling club?  What about for the buying club, is it a contingent liability?  
  • ‘Sugar Daddy’ limits.  Over the next seven years (2011-2018) the maximum amount that an owner will be able to subsidize a club will be EUR 105m.  Expenditures on stadium and youth development are still theoretically unlimited.
  • Really break even?  The language of the first scenario that fulfills the Break Even Requirement is unclear.  It seems to say that if a club operates at a surplus for the first two years (T-2, T-1) of a Monitoring Period then the Break Even Req. is considered fulfilled.  Why would this be true?  Couldn’t a club have a much larger deficit in the current year and thereby cause an aggregate deficit without violating one of the indicators?
  • Why not be consistent?  If the goal is to encourage steady management of finances taking into account two previous years in the case of a deficit over the current Monitoring Period seems counterproductive.  In fact it encourages ‘lumpiness’ by allowing a club to run a deficit for up to four years as long as it made a large surplus in one season five years ago.  
Thoughts on Financial Fair Play, Part 1

One thought on “Thoughts on Financial Fair Play, Part 1

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s