Financial Fair Play - For reference! | Vital Football

Financial Fair Play - For reference!

mao tse tung

mao tse tung

Vital Champions League
Scott
Could you pin this for future reference please?

It is not a comprehensive account of the rules but it covers most of the salient points.

The Financial Fair Play rule for Championship clubs from the 2016 17 season are as follows:

New FFP rules were introduced for Championship clubs that took effect from the beginning of the 2016 17 season.

The rules named "Profitability and Sustainability" mean that for the first time clubs will be assessed over three seasons instead of one.

This change brings Championship clubs in line with the Premier League - the rules are fully aligned.

The harmonisation of the rules was designed to avert any repeat of the stand off between the EFL and QPR - it means that there is now no hiding place for clubs that breach the rules and obtain promotion in the process.

The key changes are as follows:

  • The assessment is carried out in March (rather than December)
  • The maximum loss limit is now £13m per Championship season (or £5m a season of the owner does not inject equity to cover losses).
  • Losses are assessed over three seasons (rather than just over the single, previous season)
  • The assessment of each club’s finances is a combination of a historic assessment (looking at figures for the two previous completed season) and an assessment over the season currently taking place.
The last point is particularly significant; in addition to historic account information about past seasons, clubs now have to submit a financial projection for the season that is still taking place. All the information has to be with the Football League by the 1 March. The Football League have confirmed that they are aiming to have any punishments announced before the end of the season.

Any punishment for breach of the rules will be determined by an independent panel (the ‘Fair Play Panel’).

But what are the potential punishments?

Previously the Football League has only been able to either; fine promoted clubs (a fine the Premier League didn’t help them collect), or impose a transfer embargo for historic overspending (which always like a stable-door/horse scenario). With this change, a wide range of punishments are now available. Nothing is off the table; the Football League are now able to impose a points deduction during the current season, or demote a club from an automatic promotion position into the play-offs (or out of the play-offs altogether). Transfer embargoes are also available (with the earliest one potentially applying during the Summer Transfer window.

Clubs relegated from the Premier League are allowed to make losses of up to £35m in respect of any season spent in the top flight – this should allow clubs to better manage the transition.

The following table illustrates how the maximum permitted loss for Championship clubs is dependent on the league they were in during the two previous seasons.

Limits for clubs in Championship in 2016/17 season

1527627031820.png


*Maximum loss is assessed in March/April based on submission relating to two previous seasons plus projection for the current year.

It is important to appreciate that the Premier League will continue to carry out their FFP test ('Profit and Sustainability') for clubs in the top flight – these will work in the same way and take place at the same time as the Championship assessment is carried out, but with the Premier League carrying out their tests.

As with the Championship, the maximum overspend will be determined by the club’s division during the three rolling seasons.

The following table illustrates how the maximum permitted loss for Premier League clubs is dependent on the league they were in during the two previous seasons.

Limits for clubs in Premier League in 2016/17 season

1527627131547.png


This answers the questions regarding Newcastle's losses; they will not be punished.
 
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Pretty helpful Mao but disappointed we don't have at least four pages of argument. You have been clear and comprehensive enough but ruined some perfectly good entertainment.

Wot people gonna argue about now!
 
I think the post that led to this thread was asking where we sat in terms of FFP.

As has been said elsewhere we made a decent profit the last two years so we should be in a good position but our costs are potentially an issue.

Weren’t we spending 170% of our income on wages at one point?

If we have got our costs under control then combined with the last two seasons we could see quite a decent outlay.

Would be interested if someone else has had more of a look into our finances.
 
When clubs are making their financial projections, what limits are there on their creative accounting with that? I mean, how based on planet earth do they have to be, and can the FL come back and say, "you're dreaming mate"?

For instance, Derby have included £8m of damages from their former chairman (or whatever) in their projectiobs- a significant sum that they can have no real assurance they are going to get even if they win. That sounds a little bit too Enron to me- how speculative does the FL allow income to be?

Could we, for instance, project £9m from the sale of Ben Osborn that hasn't happened yet?
 
Pope John XXIII said:
When clubs are making their financial projections, what limits are there on their creative accounting with that? I mean, how based on planet earth do they have to be, and can the FL come back and say, "you're dreaming mate"?

For instance, Derby have included £8m of damages from their former chairman (or whatever) in their projectiobs- a significant sum that they can have no real assurance they are going to get even if they win. That sounds a little bit too Enron to me- how speculative does the FL allow income to be?

Could we, for instance, project £9m from the sale of Ben Osborn that hasn't happened yet?
Click to expand...

I presume if derby win their case, even if they cant sctually recover the damages money back (which private individual has money like that available?) it'll be offset against their losses as a bad debt. So, in the case of the ffp calculation, its effectively a credit.
 
paplane said:
I presume if derby win their case, even if they cant sctually recover the damages money back (which private individual has money like that available?) it'll be offset against their losses as a bad debt. So, in the case of the ffp calculation, its effectively a credit.
Click to expand...

What if they don't win or are awarded less though?

They are presuming the outcome of a legal action
 
I would assume that Derby have commenced legal proceedings against Sam Rush and the figure quoted is the amount listed in the Court documents.

This will have to be supported by expert evidence of some sort regardless of how heavily skewed it will be in the Plaintiff's favour.

The claim will also need to be recorded in the clubs accounts as lost income that is being recovered through legal process.

So, although there are a number of possibilities surrounding the outcome - the Judge could award Derby anything from zero up to the full amount claimed, there is a clear road map for resolution.

If Derby do not get the amount that they have made provision for in the accounts an adjustment will have to be made at some point in the future; at the worst it will be justice delayed and not justice avoided.

Transfers are totally binary; they either happen or they don't.
 
Pope John XXIII said:
When clubs are making their financial projections, what limits are there on their creative accounting with that? I mean, how based on planet earth do they have to be, and can the FL come back and say, "you're dreaming mate"?

For instance, Derby have included £8m of damages from their former chairman (or whatever) in their projectiobs- a significant sum that they can have no real assurance they are going to get even if they win. That sounds a little bit too Enron to me- how speculative does the FL allow income to be?

Could we, for instance, project £9m from the sale of Ben Osborn that hasn't happened yet?
Click to expand...

"When clubs are making their financial projections, what limits are there on their creative accounting with that? I mean, how based on planet earth do they have to be, and can the FL come back and say, "you're dreaming mate"?"

I would have thought that the financial projections have to go through the same auditing process that the final accounts have to go through.

Sudden jumps in income will need to be supported by evidence, likewise sudden cuts in expenditure.
 
mao tse tung said:
"When clubs are making their financial projections, what limits are there on their creative accounting with that? I mean, how based on planet earth do they have to be, and can the FL come back and say, "you're dreaming mate"?"

I would have thought that the financial projections have to go through the same auditing process that the final accounts have to go through.

Sudden jumps in income will need to be supported by evidence, likewise sudden cuts in expenditure.
Click to expand...

Not entirely convincing in a not entirely convincing system but better than nowt I guess.
 
One of the basic concepts of accountancy is conservatism. Not seen the Derby accounts, but I'm surprised auditors would allow any income to be included which may or may not happen. Still Carillion supposedly included income for work they hadn't done yet, so as long as the auditors get paid, that's all they seem to worry about now.
 
mao tse tung said:
Scott
Could you pin this for future reference please?

It is not a comprehensive account of the rules but it covers most of the salient points.

The Financial Fair Play rule for Championship clubs from the 2016 17 season are as follows:

New FFP rules were introduced for Championship clubs that took effect from the beginning of the 2016 17 season.

The rules named "Profitability and Sustainability" mean that for the first time clubs will be assessed over three seasons instead of one.

This change brings Championship clubs in line with the Premier League - the rules are fully aligned.

The harmonisation of the rules was designed to avert any repeat of the stand off between the EFL and QPR - it means that there is now no hiding place for clubs that breach the rules and obtain promotion in the process.

The key changes are as follows:

  • The assessment is carried out in March (rather than December)
  • The maximum loss limit is now £13m per Championship season (or £5m a season of the owner does not inject equity to cover losses).
  • Losses are assessed over three seasons (rather than just over the single, previous season)
  • The assessment of each club’s finances is a combination of a historic assessment (looking at figures for the two previous completed season) and an assessment over the season currently taking place.
The last point is particularly significant; in addition to historic account information about past seasons, clubs now have to submit a financial projection for the season that is still taking place. All the information has to be with the Football League by the 1 March. The Football League have confirmed that they are aiming to have any punishments announced before the end of the season.

Any punishment for breach of the rules will be determined by an independent panel (the ‘Fair Play Panel’).

But what are the potential punishments?

Previously the Football League has only been able to either; fine promoted clubs (a fine the Premier League didn’t help them collect), or impose a transfer embargo for historic overspending (which always like a stable-door/horse scenario). With this change, a wide range of punishments are now available. Nothing is off the table; the Football League are now able to impose a points deduction during the current season, or demote a club from an automatic promotion position into the play-offs (or out of the play-offs altogether). Transfer embargoes are also available (with the earliest one potentially applying during the Summer Transfer window.

Clubs relegated from the Premier League are allowed to make losses of up to £35m in respect of any season spent in the top flight – this should allow clubs to better manage the transition.

The following table illustrates how the maximum permitted loss for Championship clubs is dependent on the league they were in during the two previous seasons.

Limits for clubs in Championship in 2016/17 season

View attachment 27191


*Maximum loss is assessed in March/April based on submission relating to two previous seasons plus projection for the current year.

It is important to appreciate that the Premier League will continue to carry out their FFP test ('Profit and Sustainability') for clubs in the top flight – these will work in the same way and take place at the same time as the Championship assessment is carried out, but with the Premier League carrying out their tests.

As with the Championship, the maximum overspend will be determined by the club’s division during the three rolling seasons.

The following table illustrates how the maximum permitted loss for Premier League clubs is dependent on the league they were in during the two previous seasons.

Limits for clubs in Premier League in 2016/17 season

View attachment 27192


This answers the questions regarding Newcastle's losses; they will not be punished.
Click to expand...

Duly stickied too Mao.
 
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