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”.
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 relevantÂ 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:
â€¢ Sale of sponsorship rights by a club to a related party;
â€¢ Sale of corporate hospitality tickets, and/or use of an executive box, by a club to a related party; and
â€¢ 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:
â€¢ Monies received by a club from a related party as a donation; and
â€¢ Settlement of liabilities on behalf of the club by a related party.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an armâ€™s length transaction. An arrangement or a transaction is deemed to be â€˜not transacted on an armâ€™s length basisâ€™ 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.