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Financial Fair Play - FFP

Many of you won't know this but before I joined Charlton Life I started a blog. I've never used CL for hits on the blog as I'm not really that sort of person, and to be honest over the last year (since my wife told me she wanted a divorce) I've lost interest in it and not really bothered.

However, I read an other blog on FFP this afternoon (which I linked to) and did some reading. I found the rules around FFP and the sanctions quite interesting and I'd be interested in other's views. I must warn you I do tend to waffle a bit but their is something new as you get towards the bottom of the post.

http://kingshilladdick.blogspot.co.uk/2013/06/financial-fair-play.html

Comments

  • Good article Kings Hill, very informative.
  • Thanks, KHA, that was a good read.
  • http://www.bbc.co.uk/sport/0/football/31658677

    Probably haven't put this in the correct thread but oh well. Now, I'm nowhere near as informed or educated on the matter as some on here, but this line confused me

    "The club say £60m of shareholder loans have been written off"

    So, does this mean clubs can just write off loans to make sure they fall, or at least in QPR's case, get closer to the allowed losses?

    It may have already been explained elsewhere, but to me this just looks on the face of it, that clubs are once again just finding ways round FFP.
  • Cant believe this is allowed under FPP calculation. It would make the whole thing a waste of time
  • I suppose you can if the person its owed to has says "don't bother to pay it back, its a gift".....but I doubt they have said that.

    might as well pack up & go home. not a level playing field.
  • Not an expert, but it does not sound unreasonable - people (myself included) assume that FFP means that a billionaire cannot give as much money as they like to their club. That might not be the case.

    It might be the case that they cannot lend the money to the club (which most do) and thereby (in theory at least) have the right to have it paid back - and if you secure the loan against club property, they would have it paid back before most other creditors. This is what most club owners actually do.

    If the owner is prepared to write-off the loan, then that would mean that he does not have any right to have it paid back, so he has given the money to the club and that would be revenue like any other kind of revenue.

    Only a guess without properly looking into it!
  • Not an accountant but think if the loans were written off, the cash would become capital of the club and come under the heading of equity. It is OK to bankroll a club to cover expenditure as long as it is in the form of equity finance.

    Makes sense if you compare it to buying a house. If you take out a mortgage to buy a house you might lose your asset, the house, if you don't keep up payments, so you are exposed financially. But if you have a fairy godmother who gives you £300k to buy a house and perhaps promise to pay a share of the profits if it's sold, you are not in danger of losing your asset. Spending your own money is not expenditure to be measured against income, spending someone else's money you have to repay, is expenditure to be measured against income.

    The question with QPR is probably did they manage to get the loans written off within the accounting period. If not, the money spent was not the club's money and is expenditure against income..
  • Isn't there an equity clause in FFP somewhere that limits these types of practices?
  • I think that this is a neat trick, if it is all allowed. Basically, the fine that QPR would have had to pay would have been some £60million, which would have had to have been paid by the QPR shareholders, so by writing off £60m as wiped-out loans, it has cost them the same amount (just about) and they have a club that is still solvent (just). If they had filed figures showing a £70m loss, then the £60m fine would have bankrupted them and ultimately forced the club into closure.

    That's my take, but I may be wrong?
  • Right, read a bit online about the equity thing, which is more about losses than loans per se. An owner can issue shares to the value of £xm to pay off the loans and take it as equity - which is worthless, but gets round the FFP. So it has a value, perhaps.

    Although I guess loans can be written off if the creditor is prepared to do so - in this case, no doubt, it was Fernandez. Plus ca change and all that.
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  • The fact is, nothing short of wage caps and transfer fee caps such as those found in rugby league will ensure anything remotely close to level playing field. Until then expect football to be dominated by a cabal of billionaires' personal playthings.

    It's never going to happen.
  • KHA's excellent blog suggests QPR presumably took a punt on promotion knowing that if they got promotion the fine would be covered by PL money. If they didn't get promotion the shareholders would be burnt having to pay the fine unless the loan was able to be written off. I don't know how the accounting periods map to the playing season, but if you have to take action to write off the loan before you know if you are promoted, the shareholders have a dilemma.

    Not sure if you can complain too much about the timing of a sugar daddy putting up his own money and allowing events determine whether it should be equity or a loan if it is above board, transparent and within normal accounting rules. A loan would normally be preferable to shareholders, it has greater security with a priority over repaying equity.

    What is absolutely wrong is if shareholders go for a loan as a preferred form of financing to give them greater personal protection should the club not get promoted and goes pop, and then tries to wriggle out by using sharp accounting practices to turn it into equity which has soared in value. They get double bubble equity because it zooms in value plus get to keep all the TV money. It is the other clubs in the Championship who are being screwed.
  • Clubs make losses to be funded by equity injections and parent company loans. Two ways round this are gifts (writing off loans) and over the top advertising / sponsorship.
    In a different context Man City and PSG both had commercial deals investigated which were found not to be of a commercial nature. Sanctions were applied.

    I cannot see why QPR will be treated any differently - the owner is writing off the loans to avoid paying £30m of penalties after he (and Leicester) effectively bought two of the three promotion places by overspending. It all depends upon how the authorities have written the rules.
  • We all know that very little will be done to the rich clubs, and it will carry on as before
  • Good news. They have brought Sepp Blatter in to adjudicate matters...
  • edited March 2015
    FFP concerned the losses not how they were paid for so the rules, which I know have now changed, allowed for a certain amount of losses and that could only be funded by a certain amount of loans and a certain amount from equity investment.

    Clearly waiving loans, and/or interest reduces the costs so it does help, but as we saw from Man City you are not allowed to 'put more money in', even if you claim it's to buy services etc.
  • Bolton only added £9.1m to its debt last year - now £172.9m

    http://www.bbc.co.uk/sport/0/football/32138946
  • UEFA to relax FFP rules

    Say farewell to any chance of meaningful diversity in the Champions League. I imagine Man City and PSG will be asking for their fines to be returned if this goes through.

    Looks like UEFA have realised they will probably make more money by allowing a cabal of super-rich clubs dominate Europe than trying to enforce even the faintest of level playing fields.
  • Two years on and QPR case finally being heard next week!
  • TelMc32 said:

    Two years on and QPR case finally being heard next week!

    Probably because they've already agreed a deal.
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