The AVFC FFP thread

[hippo]

In my opinion there are that many flavours FFP - with that many sub sections, exemptions etc - you can basically spend or not spend that find a bit of FFP legislation that justifies your actions.

[mrjc]

17 hours ago, TRO said:

The bit I do not understand with FFP .....I don't understand most of it to be honest other than strapping the successful clubs to success......The man city owners knew exactly what they was doing and ours were naive in knowing what was coming.

• is it a permanent tourniquet or is it something that you can escape from in time?
• does it follow on season after season?......is there a reducing balance?
• When and how can we realistically get shut of it.?

 

 

It's tested on a rolling three-year basis (in theory on an ongoing basis, so no real end to it).  So the test for this season will be based on the actual profit for 2015/16 (Prem), 2016/17 (Champ) and an estimate that we submit in the spring for 2017/18 (Champ).

In reality, we can't completely get shot of it....so the best way to 'solve' it is to (a) increase revenues or (b) reduce our costs.  Sounds simple, but fundamentally that's what we need to do.  (A) is only materially done by getting promotion...if we need to do (b) without promotion, we could be in a for a really painful time.

Also though - Man City have taken a penalty of sorts, in that I think they had a fine and a reduced-size CL squad a couple of years ago.  So they made the call to breach it, and take the penalties (risky for us I think).

[mrjc]

17 hours ago, Grasshopper said:

What I dont quite understand about ffp is this:

Say we are borderline but on the good side, we then sell Hogan for 5mill (is a 7mill loss on the 12mill figure.).

We buy or pay a 1mill loan fee for a player and pay him the same wages (just fir calculation sake) who bangs em in for fun or not.

Is it the correct calculation that says

1. a 12mill asset sold at 5mill creates a further loss of 7mill which is added to our „loss“ figure thus takes us over the ffp borderline into the bad side

2. Our new 1mill players value as an asset does not increase regardless if he bangs em in or not. a profit will only incurr IF A, he‘s bought for 1mill sold for more (decreasing our losses?) or B, said parent club are happy with our „development“ of their player and reward us 5million for doing so (not that it would happen)

My point is, once an outlay is made regardless if it keeps us within or pushes us over the ffp legal line, the successful or unsuccessful performances dont come into the calculation untill he‘s either (bought) -> sold (loan) -> we are rewarded.

?????

If so

Selling Hogan for an amount less than we paid for him is pointless because that loss effectively increases our overall loss.

Does anyone know enough about ffp to explain either way? please -> thanx

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!

 

 

[Grasshopper]

7 minutes ago, mrjc said:

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!

 

 

Thanx

Could you please dissect my „Buy Benteke - Refurbish the bogs“ post?

[Grasshopper]

@mrjc

Could this be a reason for not selling McC for less than

 Outlay fee - 1 year right off?

thus loaning him out

meaning

possible loan fee and saved wages = reducing outgoings

Question - does this amount count as a direct „profit“ or not?

[mrjc]

16 hours ago, Grasshopper said:

It seems that Chelski, Citeh, Real and PSG (probably others too) have „creative methods“ to get around ffp by investment through sponsorship.

Am I being too far fetched (or off the radar) to think something along the lines of the following example.

Say, for instance, Benteke became available. Palace would want a fee to reinvest in other players. Say 15mill fee and Benteke would want 80kpw plus bonuses. (call it 100kpw) 100kpw for the remaining 25 weeks (or so) till 01.06.2018 (would it be our cut off for the last year of the 3 -or is it another date?)

We‘re talking an immediate outlay of 15mill spread over 5years = 3mill per year (immortation ?)

So if we refurbish the Holte End toilets and call them „The Recon Waste Management facilities“ for an initial outlay of say 20mill ( the true cost for the modern crappers being 5mill) with running/maintenance costs of 101kpw (bog-roll cant be that expensive plus a few flushes of grade C water from Perry Hall park) surely we have not accrued a loss, and, an Income has covered an expenditure.

or is it not that simple.

Hey, why not have the best bogs in the world. A tourist attraction with the slogan „Shit like a King - Shit at the Villa“

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!

 

[mrjc]

1 hour ago, Grasshopper said:

@mrjc

Could this be a reason for not selling McC for less than

 Outlay fee - 1 year right off?

thus loaning him out

meaning

possible loan fee and saved wages = reducing outgoings

Question - does this amount count as a direct „profit“ or not?

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.

 

[Grasshopper]

1 minute ago, mrjc said:

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.

 

thanx

I was an apprentice accountant after leaving school - the most mundane 6 months of my life - not for me

[HanoiVillan]

21 hours ago, sne said:

Any such fines or penalties wouldn't come during this season surely?

They have started spending big in the last 2 seasons, but I think it's counted over 3 seasons and before this they had among the very lowest salaries and outlays in the whole league.

Should they fail to go up the will likely be in some trouble, if they go up they are probably fine.

Calculated gamble by their owners.

 

I'm not really arguing with you I don't think, but I don't buy the idea that it's a 'calculated' gamble. It's just a gamble. Someone finishes top and looks smart whatever they did. 

[TRO]

2 hours ago, Grasshopper said:

thanx

I was an apprentice accountant after leaving school - the most mundane 6 months of my life - not for me

now I just haunt houses or argue with TRO

[ender4]

19 hours ago, Grasshopper said:

 

So if we refurbish the Holte End toilets and call them „The Recon Waste Management facilities“ for an initial outlay of say 20mill ( the true cost for the modern crappers being 5mill) with running/maintenance costs of 101kpw (bog-roll cant be that expensive plus a few flushes of grade C water from Perry Hall park) surely we have not accrued a loss, and, an Income has covered an expenditure.

or is it not that simple.

Hey, why not have the best bogs in the world. A tourist attraction with the slogan „Shit like a King - Shit at the Villa“

All sponsorship has to have "fair value" and is checked as part of FFP.

So you have to be able to show that its comparable with the rest of the market within tolerances (and in theory).

 

[Grasshopper]

5 minutes ago, ender4 said:

All sponsorship has to have "fair value" and is checked as part of FFP.

So you have to be able to show that its comparable with the rest of the market within tolerances (and in theory).

 

My 

Fit for a king

Shit like a king

Shit at the villa

was taking an example to the extreme

But point taken.

How can Citeh justify £400mill for stadium sponsorship then?

at what point is it justifyable to

Sell Villa park to Recon for £500mill (with a conditional re-buy clause for £1 in the event of Recon selling up - rent-free) (Yes we‘d have a profit and a taxbill which we could offset by spending the 500mill)

Hell we could re-buy & re-sell VP as often as we deem neccessary

[TRO]

5 hours ago, mrjc said:

It's tested on a rolling three-year basis (in theory on an ongoing basis, so no real end to it).  So the test for this season will be based on the actual profit for 2015/16 (Prem), 2016/17 (Champ) and an estimate that we submit in the spring for 2017/18 (Champ).

In reality, we can't completely get shot of it....so the best way to 'solve' it is to (a) increase revenues or (b) reduce our costs.  Sounds simple, but fundamentally that's what we need to do.  (A) is only materially done by getting promotion...if we need to do (b) without promotion, we could be in a for a really painful time.

Also though - Man City have taken a penalty of sorts, in that I think they had a fine and a reduced-size CL squad a couple of years ago.  So they made the call to breach it, and take the penalties (risky for us I think).

**** a doodle do.

[TRO]

20 minutes ago, Grasshopper said:

My 

Fit for a king

Shit like a king

Shit at the villa

was taking an example to the extreme

But point taken.

How can Citeh justify £400mill for stadium sponsorship then?

at what point is it justifyable to

Sell Villa park to Recon for £500mill (with a conditional re-buy clause for £1 in the event of Recon selling up - rent-free) (Yes we‘d have a profit and a taxbill which we could offset by spending the 500mill)

Hell we could re-buy & re-sell VP as often as we deem neccessary

Listen.....I am not arguing on this subject, its more than my heart could bare.

but I am sick to the back teeth of it.

It seems like selective punishment to me....buy hey ho.

One way of getting one of the old top 6 clubs in the country out of the way.

 

[TRO]

5 hours ago, mrjc said:

It's tested on a rolling three-year basis (in theory on an ongoing basis, so no real end to it).  So the test for this season will be based on the actual profit for 2015/16 (Prem), 2016/17 (Champ) and an estimate that we submit in the spring for 2017/18 (Champ).

In reality, we can't completely get shot of it....so the best way to 'solve' it is to (a) increase revenues or (b) reduce our costs.  Sounds simple, but fundamentally that's what we need to do.  (A) is only materially done by getting promotion...if we need to do (b) without promotion, we could be in a for a really painful time.

Also though - Man City have taken a penalty of sorts, in that I think they had a fine and a reduced-size CL squad a couple of years ago.  So they made the call to breach it, and take the penalties (risky for us I think).

Thanx

How many clubs are strapped with it like we are?

[mrjc]

3 hours ago, TRO said:

Thanx

How many clubs are strapped with it like we are?

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). 

[villa82]

Uefa and/or the big clubs might vote for a new FFP 2.0. New rules can start this summer.

If this happen then no club can have more than 25 senior players (chelsea and city have more than 60, but send them on loan).

A club can by players for not more than 100 million euros than they sell players for, during a year.

Sponsorship from owners company can't be more than 30% of total commercial income.

Don't know if the old rules still stand after this. Hope not. 

 

[Demitri_C]

11 minutes ago, villa82 said:

Uefa and/or the big clubs might vote for a new FFP 2.0. New rules can start this summer.

If this happen then no club can have more than 25 senior players (chelsea and city have more than 60, but send them on loan).

A club can by players for not more than 100 million euros than they sell players for, during a year.

Sponsorship from owners company can't be more than 30% of total commercial income.

Don't know if the old rules still stand after this. Hope not. 

 

If old rules are out the window and this takes its place this is great for the game. Expect all the big sides to vote against it but their are more  smaller teand so if they have any sense they will vote in favour.

I think having a budget the same for all clubs definitely makes it more competitive and having smaller squads as what Chelsea do is absolutely ridiculous.

[Adam2003]

On 12/13/2017 at 07:56, mrjc said:

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!

 

 

Two questions from me... (1) how does that relate to free transfers? If we signed Neymar on a free, is he worthless as an asset in accounting terms? And (2) what about wages? Surely Hogan (to use your example)'s wages are sitting in some sort of future liability column or something? And shifting them becomes a cost we will no longer have to bear over time?

[mrjc]

50 minutes ago, Adam2003 said:

Two questions from me... (1) how does that relate to free transfers? If we signed Neymar on a free, is he worthless as an asset in accounting terms? And (2) what about wages? Surely Hogan (to use your example)'s wages are sitting in some sort of future liability column or something? And shifting them becomes a cost we will no longer have to bear over time?

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.