Chelsea football club have outdid themselves as top spenders in the 2022/2023 transfer window signing a total of 18 players including the likes of Noni Madueke and Carnie Chukwuemeka both of Nigerian descent and recently made Enzo Fernández the most expensive signing in Premier League history.
With over €278.9 million spent during the summer transfer window and over €318 million spent during the January transfer window, Chelsea’s spending for the 2022–2023 season is a whopping €597.4 million, which has many football fans on social media platforms wondering if Chelsea has flouted the Financial Fair Play (FFP) rule.
In addition to breaking the previous record of 328 million euros set by Manchester City in the 2017–18 season, Chelsea has spent more money in their first season under new ownership than they ever did under previous owner Roman Abramovich’s reign and more than any other team in a single season in the history of the Premier League.
What is FFP?
Different governing bodies and competitions place various forms of financial spending and loss limits, each with their own specific rules and guidelines. However, they frequently all get grouped together in the media and by football fans and are simply referred to as FFP.
Financial Fair Play, or FFP, refers to the Premier League’s profits and sustainability rules, which state that teams cannot suffer losses of more than £105 million over any three-year period, excluding what the league refers to as virtue spending, which includes any spending on areas like infrastructure, women’s teams, youth teams, and academies, as well as community projects or charitable work.
FFP was introduced generally to ensure clubs do not spend more money in transfers and wages than they are able to earn. In working out that balance, transfer fees are accounted for over the entire length of the player’s contract, with add-ons only included as and when they are triggered.
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In recent years, the Premier League’s FFP regulation has also been relaxed in acknowledgment of the revenue decline experienced by all Premier League teams as a result of the COVID 19 pandemic, which resulted in matchday revenue losses brought on by playing a complete season of games behind closed doors.
However, UEFA’s financial and sustainability standards, which are far harsher than the Premier Leagues and applied to every team that competes in any UEFA competition, promote its own version of FFP.
Unlike the Premier League, the UEFA financial and sustainability regulations count the team’s losses at £53 million over three seasons, and that includes all spending, virtuous or otherwise. Additionally, starting with the 2023–2024 season, UEFA has set a limit of 90 percent of revenue that can be used for transfer fees, salaries, and agent fees. This limit will drop to 80 percent in the 2024–2025 season and stabilize at 70 percent starting with the 2025–2026 season.
Chelsea according to their financial statement published in 2021 have lost 387 million pounds over the last three years which is far above the £53 million rule by the UEFA and yet have not been sanctioned as a result of the leniency of UEFA to clubs whose finances where deeply affected by the COVID 19 pandemic.
In Europe, at least, COVID hasn’t had a significant impact on club finances either this season or last season, so even though the Premier League and UEFA haven’t yet clarified recent club financial issues, next season should mark the final one in which teams will be eligible for COVID hardship allowances over a three-year period. Teams will then need to make sure that their financial affairs are in order.
Given the amount Chelsea has spent, it may be challenging to imagine how they may escape breaking those rules. However, there are three factors to consider. The first is amortization, the second is Chelsea’s transfer income from player sales, and the third is their previous wage bill before the arrival of their new owners. In this article we’ll focus more on Amortization since it involves football financing through player transfer.
Amortization
The FFP calculation is based on an accounting procedure called “amortisation”. It is an accounting term used to describe how an asset – such as a brand new centre-forward – loses value over time.
This procedure involves spreading an asset’s initial purchase price over time. In football, things are a little bit different. While many transfers’ fees are typically paid in installments over six or 12 months depending on the clauses and accomplishments they triggered, in amortization, even if a transfer’s full amount is paid upfront, it won’t appear as a single expense in the club’s account.
Mykhailo Mudryk, a Ukrainian international who recently joined the blues, reportedly cost Chelsea €70 million plus €30 million in potential future add-ons, which is what Arsenal reportedly offered for the player. However, Shakhtar Donetsk preferred Chelsea’s offer because the €70 million guaranteed outlay would be paid up front.
whilst the club will receive that income instantly, the fact that Chelsea have given Mudryk an eight and a half year contract which is the longest contract for a player in English football it means that is roughly 100 million euros fee subject to add ons will be averaged out at roughly 12 million euros a season for the next eight and a half years in Chelsea’s accounts. As far as the Premier League or UEFA are concerned, Chelsea only paid about 6.5 million for sure in the remainder of the 2022/2023 season.
This loophole might seem dodgy by most football fans but in football accounts it looks all perfectly above board with other clubs reported to have practised amortization only that Chelsea have just taken it a bit extreme. This seems to be a system well adopted by Todd Bohley as the two time champions league winners look to rebuild a squad formidable enough to compete for champions league spot in the Premier league or go as far as winning the champions league for automatic qualification next season.
