UEFA Financial Fair Play: How Will It Affect Chelsea?

UEFA’s Financial Fair Play rules (or FFP as it will be referred to from now on) has evoked many reactions from fans of various clubs: some are confused, others are scared, while many are indifferent. One thing is for sure: many people are unsure as to how FFP will work. I’m now going to attempt to try & make some sense of Michel Platini’s biggest decision as UEFA president.

The basic premise of FFP is to ensure that clubs aren’t spending money they don’t have. Clubs like Manchester City, PSG & even Chelsea have rich owners, so are able to spend large sums of money on players despite actually suffering losses. That’s not the case with all teams. UEFA’s aim is to bring about a sense of “normalcy” (if I may use that word) in transfer dealings. So clubs that aren’t breaking even i.e. revenue & expenditure are equal, will face UEFA sanctions, such as not being allowed permission to participate in events like the Champions League & the Europa League.

Now the criteria that UEFA have for breaking even is slightly different from the clubs accounts. Certain expenditure, such as youth development, stadium infrastructure, community development & depreciation on tangible fixed assets are not included in UEFA’s break-even calculation. Even entire transfer fees are not shown as a one-year expense, as clubs tend to amortise transfer costs over the period of their contracts. For instance, Eden Hazard’s transfer will show as a £14.4M expense for 5 years (the length of his contract), due to his transfer fee & wages being broken into 5 years. There are other safety nets present within FFP. For instance, clubs can be granted permission to play in the CL or the EL if their losses show an improving trend. Also, clubs can be excused if over-spending is caused by player wages for players contracted before 2010, when FFP was approved. This particular clause is only valid till the reporting period ending in 2012. (Source: Goal.com)

Using UEFA’s above-mentioned criteria for break-even analysis, Chelsea can deduct some charges from it’s losses last year. Also, one should throw in the fact that Chelsea have been trying to find new sources of revenue, such as sponsorship deals with Gazprom & Delta Airlines.

However, this doesn’t necessarily mean that Chelsea (or for that matter any other club) can relax. FFP is here to stay, & although Chelsea are confident of breaking even by the time it is fully implemented (which is in the season 2013/14) we must do everything in our power to ensure that the club is not barred from taking part in the Champions League.

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