With the financial fair play (FFP) rules coming into effect over the next few seasons, I thought I would take the time to put up a post that explains them fully for people who aren’t aware.
The predominate reason for financial fair play is to stop clubs that have extremely wealthy benefactors, such as Chelsea and Manchester City, from spending above their means in terms of turnover.
Failure to comply with FFP will result in banning from European competition which would impact clubs such as Chelsea or Manchester City who spend far and beyond what is possible under their actual turnover.
Theoretically this will stop the spending of clubs to get an unfair advantage against those in the same league who may not have benefactors who are as rich. Of course, bigger clubs will have bigger turnovers anyway, but it means that specific high spending clubs, such as the ones mentioned previously, will have to manage their finances if they want to compete in the UEFA Champions League or Europa League.
Below is a full set of details regarding FFP rules which was originally published in January via Yahoo Eurosport:
Background
The Financial Fair Play (FFP) plan is designed to stop reckless spending by clubs and rich benefactors from injecting large amounts of cash, a practice which distorts the transfer market, pushes players’ wages to astronomical levels and has a knock-on effect as other clubs try to keep up.
* Clubs will instead have to live within their means by ensuring that their expenditure is not more than the revenue they generate through their activities — the “break-even rule”.
* A UEFA report last year said that around 50 percent of top European clubs were losing money and 20 percent were producing serious deficits.
* Inspired by UEFA President Michel Platini, the plan took two years to formulate. Stricter licensing rules came in last June, while the enhanced rules come into force on June 1 this year.
The new rules
* When the new rules are fully enforced, clubs will only be allowed to enter European competition if their generated revenues — money from sources such as television rights, gate receipts, competition prize money and sponsorship — is equal to or greater than their expenditure
* Clubs are also barred from owing money to other clubs, players, tax authorities and social service departments.
Practicalities
* UEFA has set up a Club Financial Control Panel, headed by former Belgium Prime Minister Jean-Luc Dehaene, which is responsible for scrutinising clubs’ accounts and enforcing the club licensing system.
* The next key step comes on June 1 this year when the rule which bans clubs from owing money to other clubs, players, tax and social security departments will come into force.
* The break-even requirement, banning clubs from spending more than their generated revenues, will take effect for the financial statements of the reporting period ending 2012.
* The first season where a club could be barred from European competition will be 2013-14.
Exceptions
* Money invested in stadiums and youth development does not count in the expenditure for FFP purposes. The main targets are high wages and high transfer fees.
* Benefactors are allowed to contribute up to a maximum of 45 million euros for the 2013-14 and 2014-15 seasons together.
* This will be reduced to 30 million euros for the period covering 2015-16, 2016-17 and 2017-18.
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