Financial Fair Play investigation

[Damo_1878]

Don't read all his stuff these days but just for interest sake did the esk ever ring this alarm?

Lost count of the number of times since around 2018.

Lost count. He was warning of the risks of what was going on during the summer of 2021 and last summer too.

The summer of 2021, Everton were limited to two signings for £1.7 million and were essentially in special measures and having to have signings pre-approved by Premier League. This was being kept hush hush by individuals at Everton Football Club (i.e. Baxendale).

The other independent shareholders and the EFCSA members are all very concerned about what is going on.

Yet no EFC AGM can take place as Kenwright and Baxendale have seen to its cancellation. The shareholders are being blocked from calling an EFC EGM too

It is an absolute scandal

 

[Villa_Fan]

That's interesting because it would mean that the likes of Chelsea would have to include all their massive spending this year in one accounting year even though the payments are spread over 8 years. Makes you wonder how they can get around FFP unless they are expecting a huge income from their commercial streams.

Accruals are for recognising revenue received while the purchase of players is amortised which means the cost is spread out over the life of the purchase or in the case of football the duration of the contract. These are normal accounting practices that all businesses adhere to. An easy way to think about it is if u think of a company buying a delivery van for 30k. The company will expect the van to have a life of say 4 years and then it is scrapped. But the company has to pay 30k upfront to buy the van. It would be unfair to force the company to have 30k expense on their accounts in one year as they will use the van for 4 years. So amortisation lets them write down the cost of the van as 7,500 a year for 4 years. So a new Chelsea player costing 80m and being given an 8 year contract will cost them 10m a year from an accounting perspective. So if they spend 560m on 7 new players that 'cost' 80m each they have a cost of 10m a year per player, so 7 players costing 560m would cost 70m a year for each of the next 8 years if each player has an 8 year contract.

As regards revenue, HMRC recognise revenue when the service were delivered as opposed to when the service is paid for. And if the service is the sale of a player then the sale date is when the revenue is recognised. This helps to prevent companies agreeing to pay at a later date ie a different accounting year to avoid paying tax on the sale in the year the sale was made

Hope that makes sense and apologies if u were already aware of this stuff

 

[davek]

Arbitration is essentially going to court. I'm getting tired of telling you @davek to read the rulebook

It says that arbitration will be handled in the courts of England and Wales under English law.

CAS does not have competency. The rulebook clearly states what the jurisdiction is and CAS have no ability to do anything.

It would be like a United States of America court trying to rule on the matter.

It would be contrary to English law, and the High Court (of England and Wales) could block them

The Jurisdiction of the Premier League is ENTIRELY in England and Wales. The rules in the rulebook, which are essentially a private contract between member clubs and directors : actually prohibit any other jurisdiction involvement.

Any attempt to take it to another jurisdiction could lead to the club doing so (or its directors) being immediately expelled from the Premier League.

You know more than Stephen Taylor-Heath then, an expert in sports law and former counsel to Leeds United.

OK.

I think all football fans are going to learn on the job as to what's allowable and stretchable over the coming years regarding these FFP cases.

 

[Damo_1878]

You know more than Stephen Taylor-Heath then, an expert in sports law and former counsel to Leeds United.

OK.

I think all football fans are going to learn on the job as to what's allowable and stretchable over the coming years regarding these FFP cases.

Go read the rulebook @davek

Also go read about CAS (it can only arbitrate cases where parties have agreed it can, Premier League do not allow it - clear as day in the rulebook Rule X.2)

I work in law myself Dave. Don't come with that nonsense.

 

[Villa_Fan]

Sheffield United are you sure? I remember a Sheffield Wednesday case.

Birmingham was two fold. You might be thinking of the 2nd charge relating to 2018-19. Birmingham wise it went something along these lines:

1) March 2018- Projected Accounts for the season go in along with everyone else. It showed an overspend of at least £7m to 2018 but Birmingham assured the League that it would be put right by the end of June. Sell on clauses for Butland and Gray seemed to he their plan.

2) Sometime, it might have been May 2018 a soft embargo was imposed. Soft embargo is to hold the cost side in place while giving the side every opportunity to meet their obligations.

3) Birmingham instead decided to bid for players- Bialkowski and Grabban two notables in total defiance of the advice. They also pushed through with the Pedersen signing.

4) June 30th came and went which saw some updated figures emerge. Unsurprisingly they had failed FFP and a hard embargo was imposed. A full one in other words. The League also declined to register Pedersen.

5) Eventually it was eased to the extent thst Pedersen and up to 5 loanees within wage limits and unable to pay any fees were permitted. This was under the Business Plan and on that day they were also referred to an IDC.

Had Birmingham turned down the Business Plan I don't know what would have happened. Open ended full Embargo plus charges for overspending perhaps.

6) The alleged breach of the Business Plan came when they were ordered to raise £9m maybe in January 2019. They turned down bids for Che Adams which would have rectified this issue. £12m was one.

7) Irrespective by mid March 2019 the Panel was convened and Birmingham argued for a 6 point deduction, the League argued got more. The breakdown went like this:

A) £8-10m breach bracket- 7 points
B) Escalating losses- 3 points
C) Cooperating in more general terms- 1 point given back.

The secondary charges came the following year. In relation to FFP they sold the stadium and complied that way then sold Adams in 2019-20 but the League were dissatisfied.

Lots of details, 'B' is what I was referring to. As for Blades, they got a transfer ban in Jan this year and are being monitored by the league

 

[kenada_blue]

Can’t see it.

Doucs contract extended. Onana out for £50mill.

Dyche working his wonders like he did at Burnley

 

[davek]

Go read the rulebook @davek

Also go read about CAS (it can only arbitrate cases where parties have agreed it can, Premier League do not allow it - clear as day in the rulebook Rule X.2)

I work in law myself Dave. Don't come with that nonsense.

Ok.

 

[Blue peter]

Are we the baddies?

Darth Toffees

 

[everton fan number one]

Arbitration is essentially going to court. I'm getting tired of telling you @davek to read the rulebook

It says that arbitration will be handled in the courts of England and Wales under English law.

CAS does not have competency. The rulebook clearly states what the jurisdiction is and CAS have no ability to do anything.

It would be like a United States of America court trying to rule on the matter.

It would be contrary to English law, and the High Court (of England and Wales) could block them

The Jurisdiction of the Premier League is ENTIRELY in England and Wales. The rules in the rulebook, which are essentially a private contract between member clubs and directors : actually prohibit any other jurisdiction involvement.

Any attempt to take it to another jurisdiction could lead to the club doing so (or its directors) being immediately expelled from the Premier League.

Just to add to this; CAS is simply an alternative forum for an arbitration. It isn’t like the Supreme Court of Sport that can overturn other arbitrations. If it’s not in the PL rulebook to allow the parties to go to CAS then CAS doesn’t have a role to play.

By way of example, if an arbitrator awards say damages of x, you then have to go to proper uk court to get a judgment and send in bailiffs.

The English courts have the power in theory to tell the parties to do another arbitration but in practice as long as the first one under the handbook is done well there is no prospect of the uk courts telling anyone to “go to CAS”. Don’t know if anyone has suggested this as haven’t read recent pages.

 

[Neiler]

Yep, u are correct about the 2 years being averaged to be part of a 4 year cycle but the Covid losses recorded were 170m. I obviously don't know the details but I am guessing that the justification of the 170m is the big sticky point with the P&S charge. With Leeds and Burnley formally informing the PL that they will seek compensation if they were relegated the PL will no doubt be looking into the issue and I assume Leeds & Burnley were in some part a catalyst to EFC being charged

Crystallised losses due to Covid over the 2 years were in total £82.1 million mate as they are averaged - not the total headline figure. I.E. Total Covid losses for the two years are added together and divided by 2 for 19/20 & 20/21 - so your figure is total, not the average, it’s the average that applies - so £82.1mill.

 

[good times bad times]

Accruals are for recognising revenue received while the purchase of players is amortised which means the cost is spread out over the life of the purchase or in the case of football the duration of the contract. These are normal accounting practices that all businesses adhere to. An easy way to think about it is if u think of a company buying a delivery van for 30k. The company will expect the van to have a life of say 4 years and then it is scrapped. But the company has to pay 30k upfront to buy the van. It would be unfair to force the company to have 30k expense on their accounts in one year as they will use the van for 4 years. So amortisation lets them write down the cost of the van as 7,500 a year for 4 years. So a new Chelsea player costing 80m and being given an 8 year contract will cost them 10m a year from an accounting perspective. So if they spend 560m on 7 new players that 'cost' 80m each they have to 10m a year per player, so 7 players costing 560m would cost 70m a year for each of the next 8 years if each player has an 8 year contract.

As regards revenue, HMRC recognise revenue when the service were delivered as opposed to when the service is paid for. And if the service is the sale of a player then the sale date is when the revenue is recognised. This helps to prevent companies agreeing to pay at a later date ie a different accounting year to avoid paying tax on the sale in the year the sale was made

Hope that makes sense and apologies if u were already aware of this stuff

Yeah I'm aware of how it works. I was getting confused about the difference between accounting for sales and accounting for purchases - one being accounted for altogether and the other over the length of the contract. Thanks.

 

[Moderatelywarmwater]

We cannot go to CAS. No sane person is suggesting this.

Hopefully we won’t need to recourse to any type of appeal and sense will be seen.

 

[malfosse]

The concept of profit and loss is not difficult to understand at all? Neither is the Premier League rule that states you’re allowed to make losses of no more than £105m over a 3 year rolling period.

Could we not use entrapment as a defence. They knew we were breaking the rules but allowed us to continue.
@GrandOldTeam could you forward the cheque from Everton to me, as you have my address.
Thanks in advance.
I know entrapment isn't allowed in English law.

 

[Damo_1878]

Just to add to this; CAS is simply an alternative forum for an arbitration. It isn’t like the Supreme Court of Sport that can overturn other arbitrations. If it’s not in the PL rulebook to allow the parties to go to CAS then CAS doesn’t have a role to play.

By way of example, if an arbitrator awards say damages of x, you then have to go to proper uk court to get a judgment and send in bailiffs.

The English courts have the power in theory to tell the parties to do another arbitration but in practice as long as the first one under the handbook is done well there is no prospect of the uk courts telling anyone to “go to CAS”. Don’t know if anyone has suggested this as haven’t read recent pages.

Good post.

 

[Lee Smith]

As I said, we’ll have a clearer picture when we see the actual accounts. They can’t kick that can down the road for much longer as they have to be made public by April.

Minor point, but they have to be submitted to Companies House by April. It usually then takes about a week for them to be published on the website and made public. Unless the Shareholders Assoc and minor shareholders receive them same time as CH?