mrjc

Difficult (impossible) to clarify definitively, as the test isn't a direct read across from the accounts. For more context / detail though... The test is on a rolling three-years - you are allowed to lose £35m for each season in the PL, and £13m for each season in the Championship. That means that up to season 15/16, our maximum cumulative loss would have been £105m (3 x PL years). We exceeded these losses based on the pure accounting loss shown in the accounts, which was cumulatively -£112m (13/14 -£4m, 14/15 -£27m, 15/16 -£81m). So, given we didn't have any penalties, we must have been able to excluding some of the losses for the purpose of the FFP test - I figure some of the exceptional losses in 15/16 were deemed allowable. Bringing that forward a year, our rolling loss from the accounts becomes -£122m (14/15 -£27m, 15/16 -£81m, 16/17 -£14m), despite the current season being better than last. And that is against a more strict test of an allowable loss of £83m (2 x PL years, 1 x EFL year). However, given this was last season, I'm pretty sure we would know already if we had breached on this basis (so again, some of the exceptional losses must have been excluded from the FFP test). Including this season, the test will become even more strict with an allowable loss of £61m (1 x PL year, 2 x EFL years). Our losses may reduce a bit from last season, but I don't think materially. So it's complicated (without full visibility of the information). But given the club have said we are tight, it gives me confidence that it is being very closely looked at. They will know to a reasonable level of accuracy what our revenue will be, and what our cost base is. I'm therefore presuming that the last two windows have been managed with this very much in mind - and it would therefore be a big big error if we do face penalties.

Yep, generally agree. Although other moving parts in the 'stay-down' scenario.: If Terry and Gabby are no longer here, we will be saving maybe £100k per week in wages, or £5m annually? (Although Terry wasn't included in the numbers above, others were). Admittedly this is a half good / half bad scenario, as replacing Terry with no money to spend on fees and wages would be pretty disastrous! Or we keep him and only make savings on the Gabby wages. A suggestion I heard a while ago was that we have loaned, rather than sold, some players so that we can make profits on their sales over several years (important given the EFL rolling three-year test). Amavi's fee will be helping in this respect for the current season. We don't really have any prize assets out on loan now, but maybe realising some fees from RDL / Elphick / Gollini / Gardner / Tshibola could help a bit. You're right though, I think staying down puts enormous pressure on the FFP test, which would likely mean us competing for promotion with a much weaker squad (I doubt we could afford the likes of Snodgrass on loan, for example). Big relief that things are looking up so much!

Ah yes, true - hopefully then!

Agreed. Although it’s interesting, the new PL rights deal looks like it may be lower than the current one (although with some packages yet to be sold). So alongside all our general mismanagement over the last decade or so, we will have even timed our (hopefully short) stint out of the PL to have avoided the most lucrative years! Unbelievable

Not straightforward (or completely known), but... Reduction in losses from £80m to £14m is due to one-offs in the prior year. We had £80m of ‘exceptional items’ - details weren’t disclosed, but this probably resulted from the acquisition, and the Doc writing off things that were overvalued previously. You can see that it was made up of £35m under player transactions and £45m under non-player operations. My guess is that the £45m may have been something to do with the stadium being ‘worth’ less due to being relegated, but I’m not sure. I also strongly suspect that that it was a technicality that was able to be excluded from the FFP test - probably their motivation for doing it. Also, as a new owner - it can almost be blamed on the old regime, and then makes the first year under new ownership look better. Reduction in property of £30m - I can’t see that? Our tangible assets (stadium, BMH etc) were about flat at £40m. The £57m - would have been something to do with the investment at the time of acquisition. It wasn’t new this year though, it was in the 2016 numbers too. Not sure that helps...maybe clear why accountants get a bad rep!

Maybe it’s the wording, but their own rules seem to be pretty free-form, rather than specific tests. https://www.premierleague.com/news/102374

So I was looking into the FFP regulations in the Premier League (this is what new-found optimism does for me!). It seems as though, simplistically, there aren't specific regulations. So there are EFL rules, and UEFA rules (hopefully something we need to consider in the coming years), but nothing specific for the Premier League. It means that if we are able to get up, we are clear, short term at least, of a very big headache - a potential huge swing compared to what would be a disaster if we were to stay down. We still need to make sure we don't breach this year, as the EFL can then retrospectively punish us (I think), but going forward it lifts a huge burden (as long as we don't spend loads to then go and get relegated again!). Maybe it's a subtle point, and maybe it's even already known...but to me it makes the financial benefit of promotion even bigger than I had previously realised.

I can see the argument for a ‘better’ manager if we get promoted (still a bit ‘if’!). However, it seems to me a part of the current success is due to what looks like a very very strong team spirit. Which leads to two points: (1) Bruce has to take some credit for that, as it’s better than we’ve had in years and (2) we would risk seriously upsetting that if he was removed after promotion. So, if we get up, I would try and continue the wave of positivity and stick (and I say that as someone who was firmly in favour of his removal earlier this season).

Agreed, shame given both Whelan and Jedi are there

It’s more that it punishes clubs for being poorly run - which we have been, exceptionally. For all the spending, Man City made a cumulative profit of more than £30m in the most recent three years. We made a loss of more than £100m. The rules aren’t perfect, but I can see why they want to discourage throwing good money after bad.

I see what you mean, just think it’s a bit more complicated. Say they inject lots of their own cash to fund transfer fees...but then lose interest / walk away / stop injecting cash...at which point the club still has to fund the wages that come about because of those funds spent on transfers. I think that’s why there was talk of a ‘fit and proper persons’ - although that’s very tricky too. Clearly not a perfect solution, but it’s very difficult to get one imo.

Free transfer: correct, there is no asset value to us. I suppose the way to think about it is that, if we sign someone on a free, then sell them for a fee, the sell-on fee is 100% profit (because of the asset being technically worth £nil). Wages: they effectively just hit our profit / loss at the same time we pay them. So if we sell someone on, we just stop incurring that cost. It’s effectively a mechanism to match the cost to the period in which it’s ‘incurred’. So a transfer fee is spread for as long as you own the player, but the wages always are just incurred in the month they’re paid.

Agree with this - would be unconventional and unpopular (with the media and some fans, and I understand why to an extent), but that wouldn't make it the wrong decision. I guess the closest similar scenario was when Southampton sacked Adkins having got them promoted and a decent enough (from memory) first few months in the PL...controversial, but it enabled them to get Pochettino so was absolutely for the greater good

Agree with this, he felt to me the only one (apart from maybe RDL actually) who was trying to attack with any real purpose. Doesn’t always come off, but he looks so comfortable on the ball which is really unusual. Real shame (for him and the team) that he didn’t convert that chance Fromm Lansbury’s pass

I’m no fan of Bruce, and clearly he has to take some responsibilty for today (as he has, in fairness). That said, our team and squad should still have had more than enough to win it. We started very quickly and well (first ten minutes) and looked like we could have won it comfortably. But we let them back in, seemed to attack with very little urgency, defended too deep, and waited for the inevitable equaliser to make the two changes (Green, who understandably looked rusty, had already been subbed). So Bruce takes his share of the blame for me today, but the players absolutely do too. Ultimately we got what we deserved - and even our much-changed team should not have been guilty of that Fwiw, I thought only O’Hare and Steer came out of it with credit

Agree with the point about the wages coming down, and that is good...however, I don’t think we’ll be able to reinvest the c£200k per week. Because of the FFP tests and the losses we will have accumulated by then, our expenditure will need to be less next year, not the same. Demonstrates the need, even more, for some genuinely good management (of the club and team), to get the best out of the playing resources we will have. And you’re right, still sadly stuck with some high earners with little / no resale value. Big mess, again

I see what you mean - and I find the timing a difficult one, as it's not ideal at this stage. For me though, it vindicates the view that he should have gone very early in the season, when (to me at least) it seemed he hadn't really made any progress on addressing last year's shortcomings. We'll now never know whether that was a risk worth taking, but I believed at that point we would not be capable of getting up automatically (if at all), and the last few months have done nothing to change my mind. I appreciate we've had injuries, but we're now almost halfway through the season and 10 points off an automatic spot, which for me was absolutely the deliverable this season. That's with more than a year in the job, and very significant resources (inherited and spent, including wages) available to him. A good manager ultimately overcomes the challenges, rather than using them as reasons for not delivering. Back to your point about timing, on which I generally see what you mean - ultimately I still don't feel at all confident he will achieve our goals this season, so I would still favour a change (assuming the club has a succession plan).

Yep, on Match of the Day just now. Also thought it seemed odd - our captain watching as a fan of another team when we’re playing

Apart from the £30m or so they spent on players... I’n not saying that’s huge money or that they’ve been great signings, but (despite Benitez making out they haven’t), they did add to the squad that went up

You’re right, there’s any wages we agree to pay him. But also, from a profit / loss point of view, his transfer fee gets spread over the life of his contract. So even if he cost us £12m in cash on day 1, in profit terms he ‘costs’ us £3m per year, if he’s on a four-year contract. That means after year 1 he has a value of £9m (initial £12m less one year’s £3m charge), then at the end of year 2 he has a value of £6m etc. So in January, approximately 1.5 years into a (say) four year deal, he is valued in our books at £7.5m, I think. If we cancel his contract, we show an acccounting loss of that amount, as we have ‘written it off’. That’s in addition to the wages we pay. Hogan was also used as an example in the FFP thread. It may seem unfair - but the flip side is McCorcmack didn’t ‘cost’ us £12m in profit terms when we first signed him, as the cost is spread.

We probably shouldn’t - just due to accounting technicalities. If we release McCormack, for example, we write off his remaining value (basically the majority of his fee which is still technically an ‘asset’). So for FFP that would count towards a fairly sizeable accounting loss - probably the last thing we need. I kind of agree wth your sentiment, but sadly it would count against us

Good point - simple answer is I genuinely don’t know. The ones that will be most impacted though are those that are genuinely badly run (as we have been). The biggest problem as I see it is building up a large wage bill which isn’t matched by on-pitch performance. It results in revenue dropping (in the extreme through relegation) and a cost base you can’t really reduce. Because even if you shift some high earners, you need to replace them with enough quality to try and get promoted. So basically - getting relegated with a high wage bill is the worst thing you can do. Quick promotion is absolutely the best solution (obviously, I guess!). I don’t know if Sunderland will be in trouble with it - when we played them I noticed they had a lot of ex-PL players, which I’m taking to mean their wage bill must be high. Their home crowds are falling, so revenue can’t be good. I suppose the Pickford fee helped them, but I can’t think of many other positives? QPR are the clearest most recent example I can think of. I don’t think they had a points deduction but they may have had a transfer ban I think? Bolton and Forest maybe too? The largest clubs get away with it in numerous ways - Chelsea through managing their youth / loan systems for years, Man City and PSG through increasing their revenues I guess (which is at least partly due to on-pitch success).

Yes, this absolutely could be the reason. We take a smaller accounting 'loss' in the early years of his contract by keeping him, maybe taking a loan fee and a % of wages paid...rather than writing off a large amount all at once due to selling him at a loss.

Haha, I see what you mean...and in theory you may well be correct. We sponsor our toilets, therefore use our higher revenue to fund out transfers. The possibly practical downside to this - Recon would have in their accounts a huge sponsorship cost. I don't know enough about their ownership structure (is it just the Doc?) or Board composition to know whether or not this would be an issue. I think for the Man City / PSG owners they are willing to manage things this way. I imagine though, most other businesses (even if sharing an owner) would be unlikely to sacrifice their own profits or financial results just to prop up Villa. We're yet to see the first year's worth of accounts under the new regime, but I'm guessing our revenue won't have gone up massively for something like this. We'll find out around February!

You're essentially correct - selling Hogan for a 'loss' now would be bad for our FFP position. The detail.... Using Hogan as an example - let's say we signed him for £12m on a five-year deal (not sure on either detail). In this case, that £12m gets spread across the life of his contract - so he 'costs' us (from an accounting point of view and excluding wages) £2.4m per year. Day 1: asset value £12m End of year 1: 'loss' recorded £12m/5 years = £2.4m Updated asset value £12m - £2.4m = £9.6m End of year 2: 'loss' recorded £12m/5 years = £2.4m Updated asset value £9.6m - £2.4m = £7.2m etc until the end of his contract. So selling him at the end of year 1 for (say) £5m: at that point he has an asset value to us of £9.6m...so we would have an accounting loss of £4.6m. This absolutely goes into the FFP calculation as a loss. It may seem unfair - but on the flip side, when we bought him for £12m that was not recognised as a 'loss', as it's spread across the contract. Basically though - if we buy high and sell low, we will be penalised by FFP for it. Sorry if that's all added to the complexity!