Financial Fair Play

[Jype 6,398]

If in the profit of last season is not included the money of Luiz we are in a good situation to reach a balanced financial position. if that's not the case we still have a lot of work to do and without the sells of Mata, De Bruyne and Luiz we would have maybe 50 or 60M£ of losses.

The Luiz money was not included. I made a post on page 14 explaining why I think so and at the time was like 90% sure but since reading Jake Cohen's article analyzing the figures I am now 100% certain of it. Because the transfer did not become official until the 1st of July 2014, no payments were made by PSG before that date so it would be ridiculous to include any money from the sale in the financial reports for the 13/14 year. Including it would be almost comparable if the club had a year ago counted the £££ from the improved PL broadcasting deal for the 12/13 financial year to make it look better than it really was just because they knew the money was coming in sometime later.

For the 14/15 financial year the club already have a £62.3m 'profit' from the sales of David Luiz, Romelu Lukaku, Demba Ba, Patrick van Aanholt and George Saville. We may also see some players being sold in the January window so that figure may still rise. Even now the amount is roughly £25m more than the sales profits from the whole 13/14 season so assuming the club's expenses stay pretty much the same with newcomers such as Costa and Fabregas merely replacing former expensive players like Lampard, Cole, Eto'o, Luiz then I see no problem for the club in making an even bigger total profit next year.

It's true that we can't rely on making such significant sales every year while also remaining competitive but for the next year or so we're pretty much set with the sales we've already made now and then there's the army of loanees like Ryan Bertrand, Victor Moses, Oriol Romeu, Lucas Piazon and Marco van Ginkel, most of whom will almost certainly not have a future at the club but will still produce a significant amount of book profit when sold. And let's not forget the big elephant in the room named Fernando Torres, whose annual £18.5m cost will soon be off the books completely. There will also be new and improved sponsorship deals kicking in every year, for example the rumoured Turkish Airlines shirt sponsorship alone will fetch the club around £10m more annually. I wouldn't be concerned at all about the current situation, quite the opposite really.

[CHOULO19 24,332]

The Luiz money was not included. I made a post on page 14 explaining why I think so and at the time was like 90% sure but since reading Jake Cohen's article analyzing the figures I am now 100% certain of it.

Jake Cohen himself then said on Twitter that he was mistaken and if Ian Herbert is saying that the Luiz deal is included, then it is included:

[Jype 6,398]

Jake Cohen himself then said on Twitter that he was mistaken and if Ian Herbert is saying that the Luiz deal is included, then it is included:

Okay, well that sucks. Despite that at the moment I’m still feeling slightly sceptical about reports saying it was included because by my math it shouldn't have been, guess we’ll have to wait till December 31st when the club has to release a full report on the financial year 13/14 to know for certain. If the Luiz money indeed was there, then it'll be interesting to see what the result for next year will be like because the income from player sales would again be much, much lower with only Lukaku as a noticeable outgoing transfer.

[RoyalBlues 4,050]

Even 'expert' like Cohen confused, what could we do?

[OhForAGreavsie 6,057]

Okay, well that sucks. Despite that at the moment I’m still feeling slightly sceptical about reports saying it was included because by my math it shouldn't have been, guess we’ll have to wait till December 31st when the club has to release a full report on the financial year 13/14 to know for certain. If the Luiz money indeed was there, then it'll be interesting to see what the result for next year will be like because the income from player sales would again be much, much lower with only Lukaku as a noticeable outgoing transfer.

Interestingly, wasn't the Fabregas deal also arranged in June? If it was then perhaps that too could have been included in these figures.

[RoyalBlues 4,050]

Interestingly, wasn't the Fabregas deal also arranged in June? If it was then perhaps that too could have been included in these figures.

if Luiz deal included, no reason Fabregas deal not, so I think we will be fine

[Jype 6,398]

Interestingly, wasn't the Fabregas deal also arranged in June? If it was then perhaps that too could have been included in these figures.

if Luiz deal included, no reason Fabregas deal not, so I think we will be fine

Incoming and outgoing transfers work out differently. When a player gets sold the received transfer fee is, after writing off any remaining book value, counted as a one-off profit but the fee for a bought player is divided equally to the length of the contract.

Basically if both Luiz and Fabregas were included in the 13/14 books, the profit from selling Luiz was around £36m but the cost of Fabregas would only have been a 1 / 60 fraction of the £27m transfer fee and a few weeks worth of his wages, totaling less than £1m.

[RoyalBlues 4,050]

Incoming and outgoing transfers work out differently. When a player gets sold the received transfer fee is, after writing off any remaining book value, counted as a one-off profit but the fee for a bought player is divided equally to the length of the contract.

Basically if both Luiz and Fabregas were included in the 13/14 books, the profit from selling Luiz was around £36m but the cost of Fabregas would only have been a 1 / 60 fraction of the £27m transfer fee and a few weeks worth of his wages, totaling less than £1m.

didn't think that

[OhForAGreavsie 6,057]

Incoming and outgoing transfers work out differently. When a player gets sold the received transfer fee is, after writing off any remaining book value, counted as a one-off profit but the fee for a bought player is divided equally to the length of the contract.

Basically if both Luiz and Fabregas were included in the 13/14 books, the profit from selling Luiz was around £36m but the cost of Fabregas would only have been a 1 / 60 fraction of the £27m transfer fee and a few weeks worth of his wages, totaling less than £1m.

Not sure that the amortisation is calculated on a monthly basis rather than a simple annual one. I'm not sure of any of it really.

[dUMB 189]

Can we send an e-mail to Abramovic and ask him?

[KamikazeBlue 337]

Regarding Luiz sale:

even though the registration happens on 1st July, surety of receving the money makes it possible to account that in the 2013/14 year. That is perfectly right according to accounting standards.Without that we would have recorded a loss for the year.Hence i presume we have included that as well in the accounts.

My two cents

[Fernando 6,585]

New piece from our favorite finance blog:

http://swissramble.blogspot.com/2015/01/chelsea-hey-hey-my-my-into-black.html?m=0

[samzilla 517]

Article on City spreading their losses:

http://www.independent.co.uk/sport/football/premier-league/manchester-city-financial-fair-play-regulations-uefa-approves-of-spreading-losses-9973985.html

[OhForAGreavsie 6,057]

New piece from our favorite finance blog:

http://swissramble.blogspot.com/2015/01/chelsea-hey-hey-my-my-into-black.html?m=0

That piece contains a passage which is potentially misleading: -

"Basically, any investment in a youth academy can be excluded from the FFP break-even calculation, while profits made from player sales are included in the analysis. Furthermore, if the players are loaned, then most of the wages are covered by the loanee clubs."

Read carefully, the passage is accurate, as we'd expect, but read casually, it might be possible to infer that money spent on signing youth players does not count against FFP when in fact it does. Any transfer fees, agents' fees and scouting costs involved in recruiting young players are included in the FFP calculation.

[Fernando 6,585]

That piece contains a passage which is potentially misleading: -

"Basically, any investment in a youth academy can be excluded from the FFP break-even calculation, while profits made from player sales are included in the analysis. Furthermore, if the players are loaned, then most of the wages are covered by the loanee clubs."

Read carefully, the passage is accurate, as we'd expect, but read casually, it might be possible to infer that money spent on signing youth players does not count against FFP when in fact it does. Any transfer fees, agents' fees and scouting costs involved in recruiting young players are included in the FFP calculation.

Good point.

But to me what keeps standing out is this:

However, it's important to note that had Chelsea not sold David Luiz, Juan Mata, Kevin De Bruyne and Jeffrey Bruma, Chelsea would've taken a £47m loss. The club earned £65m in profit from player sales (which is not included in the £319m in turnover, by the way), and for what it's worth, the underlying numbers make that loss look quite a bit less scary, especially through the lens of FFP accounting and UEFA's break-even calculation.

This why it baffles me that people think we can afford Messi....if we didn't sell those players we would barely make it with FFP.