I thought it would be useful with Financial Fair Play (FFP) entering into mainstream football discussion to briefly set out my top ten tips to help understand the key concepts.
1) The FFP regulations not only ensures that clubs break-even. They cover a wide range of licensing conditions which are overseen initially by national football associations. Such requirements include ensuring clubs pay their debts in a timely manner.
2) UEFA FFP relates only to Champions League and Europa League club participation, and not to domestic league participation. A wide variety of clubs (through the European Club Association) were consulted by UEFA over many months. The regulations have been drafted and implemented with the consent of the clubs. The Football League (FL) has just implemented its own version of FFP for the Championship and the Premier League (PL) is currently discussing various cost saving measures.
3) All clubs wanting to play in UEFA competition must submit the required licensing documentation to the relevant national football association (and for break-even purposes to UEFA). UEFA, through its newly constituted Club Financial Control Body (CFCB) has the power to conduct club audits and ask further questions to ensure FFP compliance. If the Panel believes that the FFP rules have not been correctly followed, it has the disciplinary power to sanction clubs in breach. It should be noted that FFP is already in action and has allowed UEFA to sanction a number of clubs including Malaga.
4) The FFP break-even rules are to ensure a club, more or less, has to balance its books. From the 2013-14 season, the UEFA licence requirements will include adherence to the FFP break-even rules. Until the 2013-14 season, there are no sanctions for breaching the FFP break-even rules.
5) The FFP break-even rules will start to bite from the 2013-14 season. The rules need to be borne in mind however from the 2011-12 season onwards because the 2011-12 and 2012-13 season accounts are used to determine a club’s licence application in the 2013-14 season.
6) Acceptable deviation is the term used to describe break-even. Acceptable deviation allows clubs to pass the FFP break-even test without actually breaking even. The acceptable deviation provisions allow a club with some losses over a certain number of seasons to ‘break even’ and therefore pass the FFP regulations. The below table sets this out.
Explanation Table for Acceptable Deviation
|Acceptable Deviation Levels|
|Monitoring Period||Number of Years||Years Included||Acceptable Deviation (€m)|
|T-2||T-1||T||Equity Investment||Non Equity Investment|
7) The table shows that the acceptable deviations (i.e. losses) vary quite considerably. The first point to stress is that if an owner does not put any money into a club by way of cash for shares, each club’s acceptable deviation (loss), by reference to the last column in the table, is a mere €5m over three years (i.e. €1.7m per season).
8) For the 2013/14 season when the FFP rules come into force, an owner can inject up to €45m over two seasons to cover the losses of the club. After the 2013-14 season an owner can on average exchange only €15m worth of cash for shares each year to spend on transfers and wages. That figure is reduced to €10m per season (€30m over three seasons) for the 2015-16 season. Should a club wish to pass the FFP break-even requirement, and it makes for example a €35m combined loss for the first monitoring period (13-14), the owners will have to inject €35m worth of equity into the club. If they do not, that club will breach the rules.
9) The FFP rules promote investment in a club’s stadium, training facility infrastructure and youth development schemes by excluding such costs from the break-even calculation.
10) The CFCB has the power to sanction clubs for breaches of the FFP rules. Such sanctions include a reprimand, a fine, withholding of prize monies, points deductions, refusal to register players for UEFA competition, reducing a club’s permitted squad size, disqualification from competitions in progress and/or exclusion from future competitions. Recently, UEFA has taken the ultimate sanction and banned Malaga (because of their overdue payables breach) from future competition should they qualify for UEFA club competition in the next four seasons.