FFP and large transfer fees

[Lallana's Left Peg]

I'm aware of the purpose of FFP and general principles, but not the finer details.

 

Can anyone help me with this scenario: You have a player earning £20k a week who was brought up through the Youth System. In the summer you sell him for £30m. You receive yearly instalments of £7.5m over 4 years. You have saved £1m a year in wages which can be used pay other / new players (as long as qualified FFP income remains the same and the wage budget doesn't decrease).

 

However, you now have £30m to play with. Can you spend that on players and wages because the transfer fee qualifies as FFP eligible income or are the wages you can pay above any transfer fee dependent on other income on the commercial side growing as that is what really enables wages to be increased according to FFP?

 

I've probably not explained that too well but hopefully someone will understand where I am coming from. I am just trying to understand whether or not a large transfer fee can be spent on new players wages or whether it doesn't count as proper income in terms of FFP.

 

This may be one of the most boring threads on here ever as well

[stevegrant]

Received transfer fees are accounted for in the period in which the transaction takes place (e.g. if we were to sell Shaw for £30m in June, the full amount payable - not including add-ons - would appear in the "Profit on disposal of players" section of the accounts), which is significantly different to how transfer fees paid are accounted for.

 

Essentially, that £30m would be football income and therefore counts towards the FFP calculations.

[Lallana's Left Peg]

Received transfer fees are accounted for in the period in which the transaction takes place (e.g. if we were to sell Shaw for £30m in June, the full amount payable - not including add-ons - would appear in the "Profit on disposal of players" section of the accounts), which is significantly different to how transfer fees paid are accounted for.

 

Essentially, that £30m would be football income and therefore counts towards the FFP calculations.

 

Thanks. So basically, if you get £30m for a player then FFP practices make it highly advisable to spend it all in that accounting period (if indeed you want to)?

[david in sweden]

one of the (former) problems was that we took payments in instalments.

 

If the so-called " big clubs " can afford to bid £10 million for someone they should pay more up front, as it seems to be no problem when they pay £20+million to buy "super stars" .

ALSO..... if we were to sell someone (say Shaw for £30 million) we should always get some sort of a big % for an eventual sell-on.

Surely the whole Bale episode has taught us that. It was embarrassing to say the very least... when you look at the extent of his deal to Real. The same applies to add-ons for apps. and caps.

 

Both Walcott and Bale deals were on annual part-payments, but when our cash crisis came, we were forced to accept a lower sum just to get the cash to pay debts.

 

Admitedly, that's hardly likely to happen again, but there is a lesson to be learned, whether it's £6 million or £60 million, and always have a sell-on clause .

[stevegrant]

Thanks. So basically' date=' if you get £30m for a player then FFP practices make it highly advisable to spend it all in that accounting period (if indeed you want to)?[/quote']

Not necessarily, as I think one year's profits can be used to offset against losses in a preceding or following year, and vice versa.

[anothersaintinsouthsea]

Thanks. So basically' date=' if you get £30m for a player then FFP practices make it highly advisable to spend it all in that accounting period (if indeed you want to)?[/quote']

 

Not really. In simplistic terms: If we sold Shaw for £30m then that would go straight to profit in the year. If we then bought a replacement for £16m on a four year contract then £4m of costs would hit the profit and loss account each year for 4 years.

[positivepete]

Not necessarily, as I think one year's profits can be used to offset against losses in a preceding or following year, and vice versa.

 

Yes, I think profit and loss is calculated on a rolling three year basis starting this year.

[Lallana's Left Peg]

Yes, I think profit and loss is calculated on a rolling three year basis starting this year.

 

Aha - so that is important then. So if we sold someone for £30m and didn't buy a replacement then the accounts could show a profit of £30m+ for that year. If we then spent some money the next year and made a loss of £15m for the period, we'd still be £15m in the black as far as FFP is concerned (which even allows for losses anyway I think).

 

I was just trying to see if there was a spending strategy to be best adhered to if you sold someone for a lot of money but it seems like there is no rush to spend so that is good.