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Just now, blandy said:

Paid over 3 years (if reports are correct) rather than a one off in terms of income calcs and FFP.

Payment structure of a transfer only impacts cash flow, not profit and loss account.The whole £100m is accounted as profit at the date of sale.

They could structure they payments over 100 years, but it still gives us £100m profit for FFP purposes this year.

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2 minutes ago, blandy said:

Paid over 3 years (if reports are correct) rather than a one off in terms of income calcs and FFP, so the last payment in 2 years time will still be part of calcs  in 5 years.

I don't think this is right - the FFP calc is on profit, not cash.  So even if the cash is paid over 3 years, the profit is all recognised now, both in accounting and FFP terms

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44 minutes ago, Czarnikjak said:

Payment structure of a transfer only impacts cash flow, not profit and loss account.The whole £100m is accounted as profit at the date of sale.

They could structure they payments over 100 years, but it still gives us £100m profit for FFP purposes this year.

Hmmm.

The Premier League rules don't say that, anywhere I've ever seen. Maybe the UEFA ones do?

The PL handbook just says (for a given year) "estimated profit and loss account and balance sheet for T" is what the clubs submit for the purposes of Profit and Sustainability Rules. It appears that there's a degree of leeway as to how the clubs choose to manage their finances/accounting for the purposes of PSR submissions. The PL PSR seems to be as concerned with ongoing sustainability as it is with just profit/loss.

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1 minute ago, blandy said:

Hmmm.

The Premier League rules don't say that, anywhere I've ever seen. Maybe the UEFA ones do?

The PL handbook just says (for a given year) "estimated profit and loss account and balance sheet for T" is what the clubs submit for the purposes of Profit and Sustainability Rules. It appears that there's a degree of leeway as to how the clubs choose to manage their finances/accounting for the purposes of PSR submissions. The PL PSR seems to be as concerned with ongoing sustainability as it is with just profit/loss.

This fact does not originate from Premier League or UEFA rules. It's just how accounting works. They decided to use profit and loss account for FFP  calculations and not actual cash flows.

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4 minutes ago, Czarnikjak said:

They decided to use profit and loss account for FFP  calculations

Who is "they"?

In this case it's The Premier League, right? The Premier League doesn't have "FFP" it has "PSR". Within the PSR section of their handbook it does not identify either way how they adjudge compliance. It appears, as I say, that a level of flexibility is in place. They talk about "inclusion of net cash flow in respect of transfers of Players’ registrations;" and "The accounts referred to in Rule E.3 shall: E.4.1. include separate disclosure within the balance sheet or notes to the accounts, or by way of supplementary information separately reported on by its auditors by way of procedures specified by the Board, of the total sums payable and receivable in respect of Compensation Fees, Contingent Sums and Loan Fees; and E.4.2. include a breakdown within the profit and loss account or the notes to the accounts, or by way of supplementary information separately reported on by its auditors by way of procedures specified by the Board, of revenue in appropriate categories such as gate receipts, sponsorship and advertising, broadcasting rights, commercial income and other income"

For the PSR 3 year calc it references: 
 

Quote

 

Earnings Before Tax after:

(a) write back of: (i) amortisation and/or impairment of Players’ registrations; and (ii) profit or loss on the transfer of Players’ registrations; and

(b) inclusion of net cash flow in respect of transfers of Players’ registrations;

 

Which to me indicates a large degree of wriggle room around transfer fees.

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To detract from the high brow debate between blandy and czar, surely leaving any of the FFP allowance this year hinders us long term...

I'm going to simplify this massively to try and make my point... Let's say we keep the 100m in the bank. It means means 3 years from now, our FFP yearly balances could look like this and we'd be OK per current rules:

+100 this year, -100 next year, -105 year after.

 

Average over 3 years is -35, everyone's happy and we comply.

However, year 4 calcs have us at -100, -105 and needing to make a 100mill profit to comply.

 

If instead we spend up to our limit or close to it this year, and have a position that looks more like this:

Net 0m this year, -52.5m next year, -52.5m year after

Then we net out the same over the 3 years, but our FFP position in year 4 is way more flexible and we only have to break even in Yr 4 to comply.

 

Long story short, it is way better for us to spend a fair bit more this year, than keep some in the bank, assuming we intend to go big at any point, to allow more flexibility long term.

Edited by MrBlack
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@blandy

Apologies, I should have been clearer when I said "they". I meant Premier League and UEFA. And when I mentioned FFP, in relation to Premier League I obviously meant P&S rules.

Lets look at Premier League rules as an example.

Definition A.1.166:

“PSR Calculation” means, save as indicated below, the aggregation of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2.

In respect of Season 2021/22, the PSR Calculation shall be the aggregation of: (a) the Adjusted Earnings Before Tax for T;
(b) themeanoftheAdjustedEarningsBeforeTaxofT-1andT-2;and
(c) the Adjusted Earnings Before Tax of T-3;

Clearly says that Adjusted Earnings Before Tax are used for PSR calculation (allowed adjustments are listed in paragraph A.1.5)

If you look at Earnings Before Tax of any football club, you will find that the Profit on Player sales is accounted at once, regardless of the structure of the payment (as it should be if you follow correct accounting practices). 

The paragraph you are quoting is related to Secure Funding and what it should cover to be considered as adequate Secure Funding. Not strictly related to PSR calculation.

There is no place for wriggle room in terms of how these profits are booked. I am 100% sure on this point.

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1 minute ago, Czarnikjak said:

Adjusted Earnings Before Tax are used for PSR calculation (allowed adjustments are listed in paragraph A.1.5)

These are defined, as I already posted, as

Earnings Before Tax after:

(a) write back of: (i) amortisation and/or impairment of Players’ registrations; and (ii) profit or loss on the transfer of Players’ registrations; and

(b) inclusion of net cash flow in respect of transfers of Players’ registrations;

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1 minute ago, blandy said:

These are defined, as I already posted, as

 

Earnings Before Tax after:

(a) write back of: (i) amortisation and/or impairment of Players’ registrations; and (ii) profit or loss on the transfer of Players’ registrations; and

(b) inclusion of net cash flow in respect of transfers of Players’ registrations;

No, that's how Cash Losses are defined in the rule A.1.28

PSR calculation doesn't use Cash Losses at all.

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22 minutes ago, MrBlack said:

To detract from the high brow debate between blandy and czar, surely leaving any of the FFP allowance this year hinders us long term...

I'm going to simplify this massively to try and make my point... Let's say we keep the 100m in the bank. It means means 3 years from now, our FFP yearly balances could look like this and we'd be OK per current rules:

+100 this year, -100 next year, -105 year after.

 

Average over 3 years is -35, everyone's happy and we comply.

However, year 4 calcs have us at -100, -105 and needing to make a 100mill profit to comply.

 

If instead we spend up to our limit or close to it this year, and have a position that looks more like this:

Net 0m this year, -52.5m next year, -52.5m year after

Then we net out the same over the 3 years, but our FFP position in year 4 is way more flexible and we only have to break even in Yr 4 to comply.

 

Long story short, it is way better for us to spend a fair bit more this year, than keep some in the bank, assuming we intend to go big at any point, to allow more flexibility long term.

If we keep progressing though we’re likely to sell / lose a big asset each summer until we hit the champions league spots which will keep the numbers in balance. I guess the club are hoping that the academy will bear fruit year on year too so we don’t have to keep spending £100M+ every summer, that’s the theory anyway I s’pose.

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On 08/08/2021 at 09:37, Czarnikjak said:

This data is a bit misleading as number of clubs extended their accounting period that year to cover project restart.

We didn't, hence large chunk of our revenue was deferred to 20/21 set of accounts.

Still, we are very average in our ability to generate revenue, on par with teams like Southampton and Crystal Palace perhaps.

 

It was our first season back in Prem, we would have had no prize money from our Prem season as we were in Championship the previous season. We have worse sponsorship deals from our poor period etc.. many reasons for our income to be low

What is good to see is where Arsenal and Spurs are in terms of revenue. Their match day revenue always going to be higher because they're in North London and bigger stadiums etc.. Plus European revenue too. Our target needs to be 250m revenue as part of 5 year plan.

Sponsorship deals are key, match day revenue too and of course prize money via higher league position and European qualification

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On 08/08/2021 at 13:13, Czarnikjak said:

In this post I will try to show how the departure of JG for £100m changes our FFP position and what's possible with this kind of money.

For some background, you can look at one of my previous posts (linked below), where I explained our situation before JG departure. I also showed some numbers in that post explaining why I think that Buendia and Bailey came in regardless of JG money, but Ings and any further incomings will be funded by his departure:

 

Important thing to remember is that the £100m sale profit is a one-off injection and it will disappear from our FFP balance after 3 years. For this reason one would always prefer a long term revenue increase instead of a player sale, but I digress.

With this in mind, the sale of JG frees up ~£106.5m (including his £6.5m per season wages) from our FFP allowance this year and ~£120m (including £20m 3 years wages) over the next 3 years. Past the 3rd year, its just his wages that are freed up.

Obviously there is an unlimited number of ways how you can spend this £100m, below I will show 3 illustrative examples how we can do that from the FFP standpoint. I am not suggesting that any of these options are what we will or should do. Its just to show what's possible.

 

Option 1 - Lets go mental (aka Dr Tony's method)

Lets just spend all this money straight away, ok...we freed up £106.5m for this season and used £16m on Danny Ings (£10m amortisation and £6m wages). Still have £90m allowance left this season.

Technically, we could still buy players for about £250m to fill that allowance (£50m amortisation if signed on 5 year contracts and £40m to cover their wages) and not breach FFP this season.

Possible, but nobody in their right mind would do that as it leaves us massively exposed next year. We would need to either win the Champions League to bring in £100m extra revenue or sell players again for close to £100m just to balance the FFP books.

Option 2 - Full on but sustainable

As I mentioned before this £100m is time boxed to 3 years. Including freed up wages we have £120m allowance to play with over the next 3 years. This gives us £40m per year if divided equally.

With that in mind, we can increase our wages and amortisation by £40m this summer and it will be covered from FFP standpoint for next 3 years. In 3 years time, hopefully our revenue will be sufficiently higher to cover that, or we can simply sell a player or two.

The table below shows how that could look in terms of incomings (number of players is irrelevant as long as total wages and amortisation don't exceed £40m per season):

 

1676985240_Screenshot2021-08-08at13_03_22.thumb.png.9ed800fbdd3e3f54b32e6cf7c8eb9722.png

 

Option 3 - Cautious approach

Maybe we don't want to bring in too many players at once to destabilise the squad? Maybe we want to leave some money in reserve for next year?

We could just simply only add one more cheap CB cover (£2m amortisation + £2m wages) and only use £20m of our newly freed up FFP allowance this year. That would leave us with sizeable budget for next summer spending.

Personally I think we will end up doing something in between Option 2 and 3.

 

 

 

 

Are you sure the player sale is a one off for this season? Given we are receiving the money in 3 instalments over next three years. I would have expected that would be consider income for 3 years meaning a positive to FFP for 6 years until the final instalment rolled off?

EDID: I see this is discussed already

Edited by CVByrne
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1 minute ago, CVByrne said:

 

Are you sure the player sale is a one off for this season? Given we are receiving the money in 3 instalments over next three years. I would have expected that would be consider income for 3 years meaning a positive to FFP for 6 years until the final instalment rolled off?

I am positive. See my discussion with blandy 

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Which means if we don't sign anymore players this summer we essentially "lose" some of the Jack money. This makes the rapid Ings signing with a "large" transfer fee and a 3 year contract (with option for 1 more) make total sense. It's also why other clubs will now want higher asking prices for their players knowing the Jack money will essentially amortise over 3 years.

One would imagine we'll likely try get some January business done too. Also is it possible to sign someone onto this years accounts before next summers transfer window opens? 

Edited by CVByrne
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2 hours ago, CVByrne said:

Which means if we don't sign anymore players this summer we essentially "lose" some of the Jack money. This makes the rapid Ings signing with a "large" transfer fee and a 3 year contract (with option for 1 more) make total sense. It's also why other clubs will now want higher asking prices for their players knowing the Jack money will essentially amortise over 3 years.

One would imagine we'll likely try get some January business done too. Also is it possible to sign someone onto this years accounts before next summers transfer window opens? 

We've effectively already 'spent' the Grealish money though.  In transfer fees: Buendia + Bailey + Ings is reportedly £95m / £100m.  In wages, you would think those three + Young, in total, are earning more than Jack was. 

So unless we have any underlying headroom (previous analysis from Czarnikjak suggests there is some, but not loads) or get some sales in, I don't think we can be overloading the P&L with lots of big signings this summer / January.

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4 minutes ago, mrjc said:

We've effectively already 'spent' the Grealish money though.  In transfer fees: Buendia + Bailey + Ings is reportedly £95m / £100m.  In wages, you would think those three + Young, in total, are earning more than Jack was. 

So unless we have any underlying headroom (previous analysis from Czarnikjak suggests there is some, but not loads) or get some sales in, I don't think we can be overloading the P&L with lots of big signings this summer / January.

Yeah I wonder if we have effectively spent all the grealiah money already?

Factoring in all transfers we are currently 18m in the green, if we include wages I assume we are close to a net zero??

So anything else we spend is as per normal / what we could have spent before this grealish money? (Ie: 80m or so?)

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6 minutes ago, MaVilla said:

Yeah I wonder if we have effectively spent all the grealiah money already?

Factoring in all transfers we are currently 18m in the green, if we include wages I assume we are close to a net zero??

So anything else we spend is as per normal / what we could have spent before this grealish money? (Ie: 80m or so?)

Out of interest, what makes you think we are £18m in the green on transfers?  I'm not sure it will be as positive as that, although I guess it depends what you assume on Buendia / Ings / Engels.

But also - I don't think £80m per window is normal / sustainable - it gets a lot more complex, but basically we wouldn't be able to keep doing what we have been the last two summers forever.  There's some good analysis from Czarnikjak on the previous page which sets out our various options - essentially it depends on whether we want to go very aggressive this year (which almost certainly WILL cause us problems down the line), or take a more (sensible) longer term view.

Very difficult to know though, ultimately - I could maybe see how we'd just about get one more big-ish signing done at most, but would seem odd if it's more than that.

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The signings (and this applies to Man City too, with Jack) we spend money (whether over one year or 3) but in return we get an asset of equal value. The value deteriorates over the length of the contract, obviously.

So for example, Man City gain an intangible asset (Jack) worth 100 million. They have outgoings of (guessing) 50 million this year, 30 million next and 20 million the year after. So this year they report that they gained an asset, spent 50 million and have future liabilities of 30 mill + 20 mill.

Villa report a book profit of 100 million on Jack (as we paid now't for him) and report cash income this year of (same guess) 50 million this year (and future income of 30 and 20 mill over the next 2 years).

From my reading of the PSR this matters. The aim (of the rules) is to determine whether the club is viable and can complete fixtures etc. it specifically names future income as a factor to be considered in compliance or not with the higher limit (105 mill over a 3 year period, if the 15 mill a year is breached). PSR is not just about this (or past) season's top line profit and loss figures (with allowance for Women's football and Community work the other stuff already covered.

4 hours ago, Czarnikjak said:

They decided to use profit and loss account for FFP  calculations

From the handbook (linked previously)

"Earnings Before Tax” means profit or loss after depreciation and interest but before tax, as shown in the Annual Accounts

but included in the losses (or profit) is cash inflow in the year from transfers.

"Cash Losses” means aggregate Adjusted Earnings Before Tax after: (a) write back of: (i) amortisation and/or impairment of Players’ registrations; and (ii) profit or loss on the transfer of Players’ registrations; and (b) inclusion of net cash flow in respect of transfers of Players’ registrations;

and

“PSR Calculation” means, save as indicated below, the aggregation of a Club’s Adjusted Earnings Before Tax of a Club’s Adjusted Earnings Before Tax for T, T-1 and T-2

and

the Club shall provide, by 31 March in the relevant Season, Future Financial Information to cover the period commencing from its last accounting reference date (as defined in section 391 of the Act) until the end of T+2 and a calculation of estimated aggregated Adjusted Earnings Before Tax until the end of T+2 based on that Future Financial Information; E.50.2. the Club shall provide such evidence of Secure Funding as the Board considers sufficient.....

So I think there's wriggle room, definitely. The simple way is as @Czarnikjak outlined, but it is not definitive - the PSR stuff is seems explicitly flexible, allowing clubs to "move" costs and income between years, to an extent, at least the way I read it. I guess we need someone like Christian Purslow to explain what is permitted and what's not in terms of meeting the requirements. I could be mistaken, of course, but it seems that the PL wants to see that clubs are viable businesses and is open to different ways of demonstrating in the accounts and submissions, that viability (domestically).

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16 minutes ago, mrjc said:

Out of interest, what makes you think we are £18m in the green on transfers?  I'm not sure it will be as positive as that, although I guess it depends what you assume on Buendia / Ings / Engels.

 

Not factoring possible add ons in, my assumptions was:

33m on buendia, 30m on Bailey, 25m on Ings = 88m

100m for grealish, 5m for samatta, 1m for Engels = 106m

That's 18m in the green, with ofc no idea how accurate that is.

If we factor add ons that might be an extra 12 to 17m (if achieved), so maybe about evens?

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