Uefa release Financial Fair Play regulations
Slipping out quietly yesterday were Uefa’s Financial Fair Play regulations. These could have a bigger impact on City’s ability to compete at the highest level than anything done by United or Real Madrid, etc.
Many City fans believe Sheikh Mansour will be able to easily circumvent these by a crafty sponsorship deal or two. That remains to be seen as Michel Platini has said that such deals would not be allowed as they do not constitute “fair value”.
Financial Fair Play regulations, page 73:
For the purpose of the break-even result, the licensee must determine the fair value of any related party transaction(s). If the estimated fair value is different to the recorded value then the relevant income must be adjusted accordingly, bearing in mind, however, that no upward adjustments can be made to relevant income.
Examples of related party transactions that require a licensee to demonstrate the estimated fair value of the transaction include:
• Sale of sponsorship rights by a club to a related party;
• Sale of corporate hospitality tickets, and/or use of an executive box, by a club to a related party; and
• Any transaction with a related party whereby goods or services are provided to a club.
Examples of related party transactions that must be adjusted because they must always be excluded from relevant income are:
• Monies received by a club from a related party as a donation; and
• Settlement of liabilities on behalf of the club by a related party.
Financial Fair Play regulations, page 83:
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. An arrangement or a transaction is deemed to be ‘not transacted on an arm’s length basis’ if it has been entered into on terms more favourable to either party to the arrangement than would have been obtained if there had been no related party relationship.
Who decides what is “fair value” for a commercial deal? Uefa does, and the person appointed by Platini is the former Belgian Prime Minister Jean-Luc Dehaene. It will interesting to see if he’s a busy man.
It’s noticeable how Chelsea have started to fall into line by turning down Joe Cole’s attempts to secure an inflated salary. Instead Carlo Ancelotti will be promoting members of their successful youth team.
The senior people at City will surely be aware of the implications of the regulations, yet we are continuing to offer huge, long term contracts to proposed signings. One of the figures being bandied about for David Silva is 5 million euros per year net. That’s something like 150 – 160k per week. Robinhoesque!
With deals like this our wage bill is likely to be higher than our revenue next season. The new regulations are the elephant in the room which no-one at City speaks about in any detail.
The club must surely have some plan to increase revenues, otherwise we couldn’t be offering these long term deals to Silva and Yaya Toure.
It will be fascinating to see what the plan is, as qualifying for the Champions League and a few thousand extra seats in the North Stand won’t be enough.
A copy of the new regulations is available here. Anyone willing to analyse them and pass comment below is greatly appreciated.
Jon
25 June 2010 - 3:05 pm
5.000,000 euros a year is nearer to 80k a week. Perhaps shows some wage restraint is returning?
Thanks for the UEFA extracts though, very useful.
Blue Days
25 June 2010 - 4:07 pm
Hi Jon, the 5 million euros a year has been reported as being net. With the UK’s 50% tax rate, the amount being paid out by the club would be around the 150-160k mark per week. At least as I understand it, and I admit I’m no expert. Granted the figures may not be accurate, but the general point is that we’re still happy to hand out huge contracts – which is great for those of us in the stands who like seeing top players!
CiTyBlUe
25 June 2010 - 3:15 pm
Nothing to worry about and I have done my research, City are also a business and Arabians are not stupid, they will adapt and adjust as will City.
Zorrin Drax
25 June 2010 - 3:58 pm
City have tended to pay “cash on the nose” to other clubs for players, rather than the usual yearly increments over the course of the contract.
City just have to sell a few expensive players in 2012. All our players will be fully paid for, and we will receive cash, year after year, for the ones we sell.
If we are in the “Sky 4” by then, we will have no problem. If not, a certain ex belgium prime minister will have to be added to the wage bill.
That’s the great thing about the french-speaking world – they are so corruptible. The sort of money city have can bend space/time itself.
Big transactions can be checked, but millions of small ones would need thousands of accountants. Expect Manchester City stores t in the middle east to show big profits.
Perhaps player wages can be fully paid for the length of their contract into an independent “trust fund” in 2011.
City and Chelsea can contribute equally to start the “Petro Dollar Cup”, to be played between the two teams every July.
Winner receives £251M prize money. The loser, £249M.
Mike
25 June 2010 - 4:00 pm
This is no problem for our owners, as our owner can continue to issue shares to himself at whatever value he wishes. There is nothing UEFA can do about that.
Harry Dowd
25 June 2010 - 4:12 pm
The Silva wage is quoted net of tax at 50%. Therefore the gross amount is £160K per week.
Sheil Mansour can issue as many shares as he likes but that is not classed as ‘football income’ and will count as fair value.
Paul (mcfc)
25 June 2010 - 4:38 pm
I am loving the petro chemical cup idea, that is truly enlightned thinking, you need to mail your thoughts to Brian Marwood at city, well impressed, !!!COME ON YOU BLUES!!!
Harry Dowd
25 June 2010 - 5:22 pm
Petro chemical cup is a great idea but £250m sponsorship to each side will not be considered fair value by UEFA and cannot count towards income.
Zorrin Drax
25 June 2010 - 5:31 pm
The £1bn sports and leisure complex being built by City should rake in a few quid every year. It’s counted as infrastructure investment, so it will be unhindered by the UEFA rules.
If it brings in £100M a year for the club, will it be allowed? Can football teams run football-themed casinos?
I’m guessing that Barcelona residents won’t be paying for Barca players with their council tax anymore, or for Real Madrid players with their income tax (which they’ve always resented).
The spanish economy is the 3rd “mediteranian basket case” in the house of cards (after Greece and Italy) expected to topple. They can’t devalue their way out like us, they have the euro and germany won’t let them, so they will have to ditch the low tax cap for high earners which has allowed them to get the best players on the cheap.
Overnight, Manchester City and Chelsea will become very attractive destinations to players in Spain.