UEFA Financial Fairplay

UEFA Financial Fair Play Regulations

What are the stated aims of the Financial Fair Play Regulations?

  • To put stability and economic commonsense back into football and protect
    the long-term viability of European club football by:
  • Introducing more discipline and rationality in club football finances.
  • Decreasing pressure of player wages and transfer fees and to limit
    the inflationary effect on these.
  • Encouraging clubs to compete within their revenues. Income and
    expenses of clubs should be balanced over a period of time
    covering 4 – 6 transfer windows such that clubs do not live beyond
    their means.
  • To ensure that liabilities are paid in a punctual manner.
  • To stimulate long-term planning for areas such as youth development and
    improving/ upgrading sports facilities.

When will this happen?

A phased implementation will be undertaken over three years. The main component

the ‘break-even’ requirement – will come into force for financial statements in the
reporting period ending 2012, which will be assessed during the 2013 – 2014
season.

Initial sanctions against clubs who do not fulfil the break-even requirement can be
taken by UEFA in the 2013 – 2014 season.

 

Who must do this?

All clubs who have qualified for a UEFA club competition and the leagues that
represent them.

Exemption is only granted if:

A club qualifies for a UEFA club competition on sporting merit but has
not gone through the process because it has gone through a licensing
process which is lesser/not equivalent to the one applicable for top
division clubs (because it belongs to a division other than the top
division). Special permission may be granted in this circumstance for
the specific club and the season in question.

The licensee has relevant income and expenses below EUR 5 million
in respect of each of the two reporting periods before the start of the
UEFA club competitions.

 

How will this work?

Under the break-even requirement, clubs may not spend more than the income they
generate.

UEFA Financial Fair Play regulations are based on “relevant income” and “relevant
expenses.” Specifically:

 

Relevant income is defined as revenue from:

  • Gate receipts
  • Broadcasting rights
  • Sponsorship and advertising
  • Commercial Activities
  • Other operating income
  • Profit on disposal of player registrations
  • Income from disposal of player registrations
  • Excess proceeds on disposal of tangible assets and finance income
    NB: This does not include any non-monetary items or certain income from non-
    football operations (for example, the income from Arsenal’s sale of the Highbury
    properties would not count as relevant income).

 

Relevant expenses is defined as:

  1. Cost of Sales
  2. Employee benefits expenses
  3. Other operating expenses
  4. Plus amortisation or costs of acquiring player registrations (Note 1)

  5. Finance costs and Dividends

Note 1: Amortisation in club profit and loss statements usually amortises (writes off) the cost of player registrations over a five year period. This means that players signed up to five years ago will still be showing as relevant expenses for a fifth of their cost in each financial year.

Note 2: Relevant costs does not include depreciation of tangible fixed assets eg: stadia, intangible
fixed assets other than player registrations, expenditure on youth development
activities, expenditure on community development activities, any finance costs
related to construction of fixed assets (eg: stadia or training ground), tax
expenses.

Note 3: Most of the figures for relevant income and relevant expenses can be
found in clubs’ Profit and Loss accounts although these may not be broken down to
detail the amounts spent on youth or community projects.

 

Figures submitted by clubs as being their Relevant Income and Relevant Expenses
will be reconciled by the relevant league, in the English case the Premier League
and must be adjusted if they are not considered to reflect “fair value. ”

 

An example of how the UEFA Financial Fair Play regulations would work if used on
the European qualifying clubs from 2009/2010 and their financial figures for that year
can be seen at

http://andersred.blogspot.com/2011/04/financial-fair-play-crunching-numbers.html

According to these figures (which have estimates for youth development costs and estimates
of player wage data) Manchester United, Arsenal and Tottenham (just and only after player disposals) would comply with the Financial Fair Play break-even requirement. Manchester City would be furthest away, largely on the basis of
player wages and the cost of amortising player registrations. This might explain why
Manchester City are one of the 20 clubs across Europe who have been invited to
take part in the “soft implementation” of the UEFA FFP rules next season to show
that they are moving in the right direction.

 

What will happen if clubs do not meet the UEFA Financial Fair Play break-even
requirement

It is going to be hard for many clubs across Europe to meet the new UEFA rules and
the credibility of Michel Platini and UEFA are on the line in making these work, which
makes it likely that they will be enforced, even if that means banning a major club
from Europe.

The only exemptions as highlighted above are:

  • Clubs below the top level who qualify (through the FA Cup or Carling Cup)
    could claim to be a “special case.”
  • The other possible basis for exemption appears in Annex XI 2 (page 85 of the
    UEFA guidelines) which states:

    “For the purpose of the first two monitoring periods ie: monitoring periods assessed in the seasons 2013/14 and 2014/15” that an additional “transitional” factor will be considered by the Club Financial Control Panel. Effectively what this Annex to the rules means is that if a club breaches the "break-even" target in either of these first two seasons because of wages paid, or amortisation (legacy payments left over in the Profit and Loss account on player registration value) because of players already under contract before June 2010 but: a) is showing a positive trend in the annual break-even deficit b) has a concrete strategy for future compliance c) can prove that the break-even deficit is only in the first year monitored (reporting period ending 2012) d) AND that it is down to wages/amortisation of player contracts signed before 1 June 2010

then the club would escape sanction.

This seems to be a significant “get out” and may mean that the clubs who do not
meet the break-even requirement do not face the immediate prospect of a European
ban, although this is only a temporary exemption.

In real terms, the UEFA FFP rules mean that many clubs will need to cut their wage
bills, cut the amount spent on players AND/OR radically boost their revenues in the
coming seasons to comply with the regulations.