MUFC are looking at a budget of about £100m, due to FFP (The Athletic)

[JPRouve]

Who gives a shit about FFP? Buy the lot and cry to CAS when a weak effort to ban comes in

You are not wrong about this. People tend to mix things up when it comes to FFP, in our case the issue would be the break even rule which is something that many clubs break for various reasons but mainly due to inconsistent revenues, you are not going to be strongly penalized if you don't comply all the time. Where people are confused is that they often refer to City, City didn't do that, City are pretending that they break even and are suspected of fraud.

 

[Chief123]

Yup, I'll explain. Going to keep it simple here, so will ignore wages and one-time fees like signing bonuses and agent fees.

The transfer fee you pay for a player is the value that goes on your books. So you pay £100m for Kane and he's recognized as a £100m asset. He signs a 5 year contract, so that asset value is amortized over the 5 years. In other words, every year his asset value goes down £20m (100/5).

This £20m amortization expense is what gets counted against FFP each year, not the actual transfer fee outlay of £100m. So it's treated as if we're spending 20m this year, 20m next year, and the following three years.

Back to Henderson. Let's say we sell him for £20m this summer. That is an immediate benefit that frees up the £20m FFP space for Kane this year. It doesn't provide a benefit for next year and beyond, so it doesn't mean you can go crazy with spending, but it does give you the near-term FFP flexibility needed to manage this summer's constraints.

Thanks for the explanation. I think my understanding of it was close to how you’ve explained it. The only thing I didn’t understand is how Henderson in particular frees up an extra £100m this window which is what the OP was suggesting. I don’t believe he’s on a huge contract with enough years left to free up £100m? I can’t imagine us getting more than £30m for him in transfer fees.

 

[roseguy64]

Are you referring to the thread by Messier1994 (SwedishRumble on Twitter)?

Think it was mentioned as being a thread on here.

 

[Big Ben Foster]

Thanks for the explanation. I think my understanding of it was close to how you’ve explained it. The only thing I didn’t understand is how Henderson in particular frees up an extra £100m this window which is what the OP was suggesting. I don’t believe he’s on a huge contract with enough years left to free up £100m? I can’t imagine us getting more than £30m for him in transfer fees.

If we get £20m for him, we can sign a £100m player on a five year contract, and their respective FFP impacts for this year cancel out. (+£20m benefit from player sale, -£20m expense for new player)

Of course, it's not that simple - we'd be on the hook for £20m each of the next four years, which Henderson's sale wouldn't impact. And there's also the impact of wages, agent fees, signing bonuses, etc. that would need to be considered.

 

[Vidyoyo]

There’s no way I see us recouping £200m from sales this summer. In fact I’d be amazed if we even recouped £100m. We have to be the worst selling club in the league. Mainly down to the fact we are trying to dispense players who are on huge contracts that buyers won’t match.

I was taking the piss based on the usual overestimations of how much we'd get for our deadwood

 

[Dominos]

I think you're right. He signed a 6 year contract when he joined so his book value would be roughly 26m (80 ÷ 6 × 2 remaining years), so we'd have to take a hit there. We'd get some FFP room from his wages (reportedly about 10m / year) falling out. In net terms, not much of a gain.

Just out of interest.

What is the book value of a player once his initial contract is up but has been renewed/extended. I assume all players must have some asset value on the balance sheet even if their initial contract length has expired?

For a simple example, let's say you sign a player for £100m on 5 year deal and those 5 years are up so value goes to 0, but he then signs a new 3-year deal?



I think when it's brought up that because we spread the P&L expense of a transfer fee across multiple years so we can spend a lot more than we think, people forget that by the same principle we're still taking P&L hits from previous years transfers. We're still paying the price for years of overspending on absolutely dross.

 

[Big Ben Foster]

Just out of interest.

What is the book value of a player once his initial contract is up but has been renewed/extended. I assume all players must have some asset value on the balance sheet even if their initial contract length has expired?

For a simple example, let's say you sign a player for £100m on 5 year deal and those 5 years are up so value goes to 0, but he then signs a new 3-year deal?



I think when it's brought up that because we spread the P&L expense of a transfer fee across multiple years so we can spend a lot more than we think, people forget that by the same principle we're still taking P&L hits from previous years transfers. We're still paying the price for years of overspending on absolutely dross.

I'm not sure, to be honest.

Normally, when a new contract is signed, the remaining book value is amortized over the life of the new contract.

If the book value has already been fully amortized (as in your example), I believe it would remain that way until the player was sold or the new contract ran out - unless a new valuation was assessed by an auditor at some point.

But that's just an educated guess on my part. Full disclosure, I'm a finance guy, not an accountant, so when it comes to accounting rules, I really only have a surface-level understanding.

 

[JPRouve]

I'm not sure, to be honest.

Normally, when a new contract is signed, the remaining book value is amortized over the life of the new contract.

If the book value has already been fully amortized (as in your example), I believe it would remain that way until the player was sold or the new contract ran out - unless a new valuation was assessed by an auditor at some point.

But that's just an educated guess on my part. Full disclosure, I'm a finance guy, not an accountant, so when it comes to accounting rules, I really only have a surface-level understanding.

The valuation is the monetary value of the contract. It's easier to spot with a free agent, his book value is the value of his contract(wage, bonuses and signing fee), you average that total figure and amortize it over the useful life of the asset which in our case is the length of the contract or a maximum of 5 years.

 

[Chief123]

If we get £20m for him, we can sign a £100m player on a five year contract, and their respective FFP impacts for this year cancel out. (+£20m benefit from player sale, -£20m expense for new player)

Of course, it's not that simple - we'd be on the hook for £20m each of the next four years, which Henderson's sale wouldn't impact. And there's also the impact of wages, agent fees, signing bonuses, etc. that would need to be considered.

Ok I see where you’re coming from. Yeah it makes sense in that aspect. I think the challenge is obviously trying to shift these players who are unlikely to get a better deal at the new club.

 

[RU Devil]

I'd be more than happy if we brought in 50. Anyone lower?

It depends on how many actually get sold. If only 3 (including Henderson), probably less than 50. The big ones are Maguire and McFred. If those 3 are sold, we are over 50M.

 

[sifi36]

Just out of interest.

What is the book value of a player once his initial contract is up but has been renewed/extended. I assume all players must have some asset value on the balance sheet even if their initial contract length has expired?

For a simple example, let's say you sign a player for £100m on 5 year deal and those 5 years are up so value goes to 0, but he then signs a new 3-year deal?



I think when it's brought up that because we spread the P&L expense of a transfer fee across multiple years so we can spend a lot more than we think, people forget that by the same principle we're still taking P&L hits from previous years transfers. We're still paying the price for years of overspending on absolutely dross.

We will almost never renew a player once his contract is up (De Gea if signed will be a rare exception). Extensions are normally signed when the player has 1-3 years remaining.

An example:
100m signing signs for five years
After three years remaining book value is 40m
Signs an extension that increases the contract length to a further 4 years from the date the extension is signed
Remaining book value is divided over the length of the extension
Amortisation from this point is therefore 10m per annum

 

[Big Ben Foster]

Ok I see where you’re coming from. Yeah it makes sense in that aspect. I think the challenge is obviously trying to shift these players who are unlikely to get a better deal at the new club.

Definitely. There's also the caveat that this only covers FFP allowable spend. If we don't physically have the money to spend (and I'm not saying we do or don't, just making the point), then what FFP allows is of little relevance anyway.

 

[Chief123]

Definitely. There's also the caveat that this only covers FFP allowable spend. If we don't physically have the money to spend (and I'm not saying we do or don't, just making the point), then what FFP allows is of little relevance anyway.

I’m interested to know what impact a takeover which wipes away all our debt has on our ability to spend. I’d imagine that debt is on having an affect on the numbers on the book. Or it’s possibly having no impact at all if it’s not factored into FFP.

 

[Woziak]

Selling Henderson alone could add another £100m to the budget, very misleading headlines as usual.

Totally agree they say this all the time and don’t even have end of year accounts yet ?

 

[Big Ben Foster]

I’m interested to know what impact a takeover which wipes away all our debt has on our ability to spend. I’d imagine that debt is on having an affect on the numbers on the book. Or it’s possibly having no impact at all if it’s not factored into FFP.

The annual interest expense going away would be a benefit. Don't remember the exact amounts but I think that currently comes out to an annual expense of 20-25m.

 

[NotThatSoph]

Just out of interest.

What is the book value of a player once his initial contract is up but has been renewed/extended. I assume all players must have some asset value on the balance sheet even if their initial contract length has expired?

For a simple example, let's say you sign a player for £100m on 5 year deal and those 5 years are up so value goes to 0, but he then signs a new 3-year deal?



I think when it's brought up that because we spread the P&L expense of a transfer fee across multiple years so we can spend a lot more than we think, people forget that by the same principle we're still taking P&L hits from previous years transfers. We're still paying the price for years of overspending on absolutely dross.

If he signs after the 5 years, then his book value is 0. Just like the book value of academy products is 0.

Normally you extend contracts ealier. Say it happens after 4 years, the book value at that time is £20m. If the new contract is 4 years (a 3 year extension), then those remaining £20m are amortised over the new contract, i.e. by £5m each year.

 

[JPRouve]

I’m interested to know what impact a takeover which wipes away all our debt has on our ability to spend. I’d imagine that debt is on having an affect on the numbers on the book. Or it’s possibly having no impact at all if it’s not factored into FFP.

First the UEFA had/have a rule about takeovers which gave new owners more freedom but I don't know if it's still the case. Otherwise wiping the debt mainly affects two things, the cash flow, there is less money leaving the club but it can also affect the amount of taxes that will have to be paid at the end of the financial exercise.

In other words, it's difficult to answer your question without actual figures and having experience with taxes in the UK.

 

[golden_blunder]

The irony of you crying about condescension after someone called out your attempt to mock a poster for posting a basic fact is indeed very funny, yes.

Where was I mocking a poster?

 

[Moriarty]

The annual interest expense going away would be a benefit. Don't remember the exact amounts but I think that currently comes out to an annual expense of 20-25m.

And the dividends.

 

[Big Ben Foster]

And the dividends.

That's unrelated to the debt, but yes, that'll be another benefit of the Glazers going away. Both from an FFP and a cash flow perspective.

 

[Woziak]

I just disagree with the idea that selling Henderson alone will equate to an extra 100 million. I’m not a financial expert so I was just laughing at that notion. Happy for someone to explain how that one sale will free up that wiggle room?

Ok Dean Henderson cost nothing as we brought him through our youth set up so he represents 100% profit on our net position. Selling him for £30m means that we have the £30m to add to our net position, The current issues are two fold ;

1 FSP (New Financial sustainability period)
We can spend up to 90% of our snowless revenue this summer based on last years turnover. We still don't have season 22/23 final financials but if we base a quick guesstimate on the previous year but without CL money last year.The Club probably has a revenue of £550m the club lost £115m the year before and had wages of £385m. Let’s assume the loss last year was the same however wages reduced with Europa League clause and Ronaldo, Cavani, Pogba all leaving so a wage bill of maybe £340m

This would mean that the club would already allocate £340m , £115m loss in financials so that’s an allocation of £455m against an allowance of £495m(90% of £550m predicted revenue for Season 22/23) that leaves about £40m current net transfer budget.

Assume we will amortise all sales by 5 years and are allowed to pay up to 10% upfront on Agent and signing on fees. We set aside £15m for Agent fees as they are paid up front when we sign players we then have £25m left which could be multiplied by a 5 year contract giving you £125m potential spend.

2. Actual Cashflow to purchase players, we had no money in January and the Glazers have run the club into the ground, should new owners come in clear the debt and help with revolving credit line and free up cash to spend on transfers. Instantly as new owners they are allowed to lose up to £60m in the first three years but they would immediately clear the debt and therefore the £30m that service the interest payments of the debt annually .


Now if you add D Henderson £30m sale value the club can add this as actual net profit because we never paid a penny for the player and now the £40m that I detailed earlier becomes £70m, put £20m aside for agent and signing on fees then you have £50m left or £200m budget(
4 year contracts) and
£250m budget (5 year contracts)

It’s important to notice that if we make a new signing it’s not just the transfer fee but the wages too must be balanced so losing D De Gea, D Henderson automatically gives you a. Net saving on wages of £25m per year.

The Club then buy Diego Costa to be the new number for £50m on a 5 year contract on £160k per week the. This will show on the accounts as
D Costa Sale £50m Wages £160k p/w
Amortised Cost £10m + ££8m = £18m

The total left in this budget line will now be £40m left to buy other players reduced from the £50m

 

[golden_blunder]

Ok Dean Henderson cost nothing as we brought him through our youth set up so he represents 100% profit on our net position. Selling him for £30m means that we have the £30m to add to our net position, The current issues are two fold ;

1 FSP (New Financial sustainability period)
We can spend up to 90% of our snowless revenue this summer based on last years turnover. We still don't have season 22/23 final financials but if we base a quick guesstimate on the previous year but without CL money last year.The Club probably has a revenue of £550m the club lost £115m the year before and had wages of £385m. Let’s assume the loss last year was the same however wages reduced with Europa League clause and Ronaldo, Cavani, Pogba all leaving so a wage bill of maybe £340m

This would mean that the club would already allocate £340m , £115m loss in financials so that’s an allocation of £455m against an allowance of £495m(90% of £550m predicted revenue for Season 22/23) that leaves about £40m current net transfer budget.

Assume we will amortise all sales by 5 years and are allowed to pay up to 10% upfront on Agent and signing on fees. We set aside £15m for Agent fees as they are paid up front when we sign players we then have £25m left which could be multiplied by a 5 year contract giving you £125m potential spend.

2. Actual Cashflow to purchase players, we had no money in January and the Glazers have run the club into the ground, should new owners come in clear the debt and help with revolving credit line and free up cash to spend on transfers. Instantly as new owners they are allowed to lose up to £60m in the first three years but they would immediately clear the debt and therefore the £30m that service the interest payments of the debt annually .


Now if you add D Henderson £30m sale value the club can add this as actual net profit because we never paid a penny for the player and now the £40m that I detailed earlier becomes £70m, put £20m aside for agent and signing on fees then you have £50m left or £200m budget(
4 year contracts) and
£250m budget (5 year contracts)

It’s important to notice that if we make a new signing it’s not just the transfer fee but the wages too must be balanced so losing D De Gea, D Henderson automatically gives you a. Net saving on wages of £25m per year.

The Club then buy Diego Costa to be the new number for £50m on a 5 year contract on £160k per week the. This will show on the accounts as
D Costa Sale £50m Wages £160k p/w
Amortised Cost £10m + ££8m = £18m

The total left in this budget line will now be £40m left to buy other players reduced from the £50m

Thanks mate that’s very helpful!

 

[JoeyJoJoJrShabadoo]

Accrual accounting is genuinely a worry? So you think a basic accounting principle that was invented over 100 years ago is now suddenly going to be the root cause of football clubs failing? Right.

What a leap. Overspending beyond their means is genuinely a worry. Lower Prem/Championship trying to keep up. The lad i was replying to followed what I was talking about.

 

[Ian Reus]

Does FFP only take into consideration player sales or is it against all revenue including commercial?

 

[Big Ben Foster]

What a leap. Overspending beyond their means is genuinely a worry. Lower Prem/Championship trying to keep up.

That's not what's being discussed though, FFP regulations are.

 

[Mainoldo]

Amortisation and player sales will mean we spend around £250m.

 

[JoeyJoJoJrShabadoo]

That's not what's being discussed though, FFP regulations are.

Thats what I was discussing with another poster but thanks for shepherding us

 

[Crashoutcassius]

It's not just the debt but it's part of it. This is our major cost this summer:

This impacts our FFP spending. So yes, it's having an impact on our ability to purchase players.

There's also amortization of previous purchases which we pay over the course of the players contracts. This is normal and done by every club which is why Chelsea are signing players on 8 year contracts, that's £10m a year for a player that cost £80m.

Purchases are amortized over the length of the contract, so yearly expenses. Sales go on the books as full value from the moment they happen. So we could actually buy 5 players for £50m each and only *spend £50m this summer (£10m each over 5 years) and bring in over £100m if the deals are structured right.

Think the number of years is now capped at 6

 

[Ian Reus]

Does FFP only take into consideration player sales or is it against all revenue including commercial?

Anyone able to answer this?

 

[Withnail]

Aren't we always looking at a budget of 100m? Seems like I read the same story every year and it's usually wrong

 

[Woziak]

Thanks mate that’s very helpful!

This is why last year all the bs rumours of £120m changed when. We sold Andreas Pereira and James Gardner for combined £25m this literally added £100-125m to our budget both players cost us nothing and sold for net profit, The Athletic which I respect by now should be producing more accurate articles, the £400-£500t budget the Glazers said be could spent are completely correct if we had a perfect window of selling.

Now today we find out that SJ bid because he’s paying the debt would instantly increase our budget by an extra £50m which I said weeks ago.

 

[Big Ben Foster]

Does FFP only take into consideration player sales or is it against all revenue including commercial?

The spending cap is a function of the club's total revenues

 

[Ian Reus]

The spending cap is a function of the club's total revenues

Thanks.
So netspend is effectively a wang waving competition?

 

[Big Ben Foster]

Thanks.
So netspend is effectively a wang waving competition?

Yes, "net spend" is a pretty worthless metric that doesn't tell you a whole lot on its own.

 

[SteveCoppellFan]

Its basically like a computer you buy for your business for £1k.

It gets put as a asset but depreciates on a straight line basis of 20%.

After one year, it depreciates by £200 and the £200 goes to your P&L as a cost for the year.

 

[Woziak]

Given his purchase price wouldn't Maguire actually be about 20 million on the books at this stage? Might not even get that extra 20m FFP room....

Maguire was a 6 year contract which was weird at the time, he signed in August 2019 so he has been at club 4 of the 6 years. Which means he would show on the annual books as following ;
Harry Maguire.
Amortised Transfer fee £13.33m
Amortised Wages £9.88m
Total = £23.21m on our books

If we sold him for £25m
The wages are removed instantly from 2023/24 and 2024/25 seasons and the £25m would practically cover the existing £26.66m still in the books, but removing £10m from the wages this summer for a fifth place CB is hugely advantageous.


If You can Sign KmJ for £45m on a 5 year contract it means your only spending £9m per year amortised and Maguire £10m wages pay for KMJ so this deal really is a no brainier if we screw that deal up JM should be fired by the new incoming owners day 1

 

[Sandikan]

Financial fair play!
In an environment no one can lay a glove on City's shenanighans of the last decade and let them win a treble with 115 charges, which barely gets any sort of mention in any media

 

[Woziak]

The spending cap is a function of the club's total revenues

Ok a lot of people are getting confused with FFP (Financial Fair Play) and FSP (Financial sustainability Period) Both are now overlapping but going forward FSP will effectively replace FFP.

This summer for the season of 2023/24 Uefa have mandated that all clubs can only spend 90% of their total revenue earned through commercial, Broadcasting, merchandising and Matchday revenue on Wages, Financials(includes Debt, servicing debt and profit and loss), Agent snd signing on Fees.

The percentage will then reduce to 80% for the season of 2024/25 and then finally to 70% for season of 25/26. So basically all teams have three years to get their house in order. This is why PSG are trying to restructure last year their turnover was £570m and their wage bill only was over €700m so they would have been suspended this season from the CL with a ridiculous £100m+ fine.

For season 23/24 FSP all clubs will use 22/23 accounts so they could get fine but by removing Messi, Neymar and Mbappe probably reducing their wage bill by £200m.

Just a thought but I can see PSG Qatari owners becoming increasingly bored, jealous and frustrated In Ligue 1 and not having the potential to win the CL, whilst watching city win their treble, Man United is the obvious move. Assuming SJ wins and pays off the debt, the club immediately benefits by not having to service the debt of £30m on their accounts. It could actually add £100m to the transfer budget because our loss would be instantly less due to a huge cash injection and debt settled. This would have to be paid by end of June however so unlikely but possibly ?

 

[7even]

Ok a lot of people are getting confused with FFP (Financial Fair Play) and FSP (Financial sustainability Period) Both are now overlapping but going forward FSP will effectively replace FFP.

This summer for the season of 2023/24 Uefa have mandated that all clubs can only spend 90% of their total revenue earned through commercial, Broadcasting, merchandising and Matchday revenue on Wages, Financials(includes Debt, servicing debt and profit and loss), Agent snd signing on Fees.

The percentage will then reduce to 80% for the season of 2024/25 and then finally to 70% for season of 25/26. So basically all teams have three years to get their house in order. This is why PSG are trying to restructure last year their turnover was £570m and their wage bill only was over €700m so they would have been suspended this season from the CL with a ridiculous £100m+ fine.

For season 23/24 FSP all clubs will use 22/23 accounts so they could get fine but by removing Messi, Neymar and Mbappe probably reducing their wage bill by £200m.

Just a thought but I can see PSG Qatari owners becoming increasingly bored, jealous and frustrated In Ligue 1 and not having the potential to win the CL, whilst watching city win their treble, Man United is the obvious move. Assuming SJ wins and pays off the debt, the club immediately benefits by not having to service the debt of £30m on their accounts. It could actually add £100m to the transfer budget because our loss would be instantly less due to a huge cash injection and debt settled. This would have to be paid by end of June however so unlikely but possibly ?

I said already a couple of weeks ago that the sale value will decrease if the club isn’t sold before end of June. (fiscal year 22/23)

The Glazers is playing a dangerous game and if there’s no deal done before July I’m quite certain that both SJ ans SJR will draw back their recent bids with immediate effect and probably place new bids with a lower valuation. (if they’re still interested)

 

[Woziak]

I said already a couple of weeks ago that the sale value will decrease if the club isn’t sold before end of June. (fiscal year 22/23)

The Glazers is playing a dangerous game and if there’s no deal done before July I’m quite certain that both SJ ans SJR will draw back their recent bids with immediate effect and probably place new bids with a lower valuation. (if they’re still interested)

This is my view too, they want £6bn, they are not getting it let’s hope they take what’s on the table now one way or another.