UEFA FFP and Chelsea’s 12-13 accounts

Chelsea recently announced a £49.4m loss in their latest 2012-13 accounts. It was of significant interest that the press release stated that:

“A long-term objective was financial sustainability, and the subsequent implementation of Financial Fair Play by Uefa and by the Premier League has brought that to the top of the agenda for football clubs. We are pleased therefore that we will meet the stipulations set down by Uefa in their first assessment period.”

Chelsea explained that they would comply with UEFA’s Financial Fair Play Rules (FFPRs) which include only making a €45m loss over the 11-12 and 12-13 seasons. What most analyists presumed was that a big part of the club’s compliance policy was to use the UEFA FFPR Annex XI relief.

The aim of this blog is to illustrate how Chelsea are unlikely to be able to remove the costs of player contracts entered into before June 2010 because the club’s trend is actually getting worse. This is due to the club making a profit in 2011-12 (£1.4m) but a loss in 2012-13. Such deductions would have certainly lead to a much smaller loss for FFPR compliance purposes.

The Basics

For a summary of the FFPR basics click here. The FFPRs 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 accounts will be used to determine a club’s license application in the 2013-14 season. As such Chelsea’s 2012-12 accounts (after the FFPR calculations have been made) will form one of the two accounting periods, for the first monitoring period, that UEFA will use to assess compliance.

The Annex XI Relief