Chelsea has taken spending to whole new level after spending over €200 million on player signings in the summer, and nearly the same amount for the same purpose so far in the January transfer window....CONTINUE READING
The interesting part is they did it without breaking the Financial Fair Play (FFP) rules, which was introduced by UEFA to ensure clubs don’t spend far beyond their income.
A loophole in the FFP amortization rules which UEFA is reportedly moving to adjust following Chelsea’s spending spree is what made it possible.
With amortization as interpreted based on FFP rules, clubs are allowed to spread the transfer and contract fees of a newly signed player over the duration of the player’s contract in their annual financial reports.
This means a player that cost €100 million will reflect as just over €20 million in a club’s annual financial report if that player signs a 5-year contract.
What Chelsea has done, which is smart as well as risky, is they offer their new signings much longer contracts, thereby reducing the overall cost of the player per year. The only risk is the player will be on their books for long if he flops.
They agreed a fee €70 million minus add-ons to sign Mykhailo Mudryk, but everything about the transfer, including his wages, will reflect as €13.3 million in their annual financial report for the next 8 years, as the player signed an 8.5 years deal worth €97,000 per week.
Such strategy is not against the rules but it is seen as by some as a loophole as it defeats the aim of introducing FFP. This is why UEFA reportedly wants to limit amortization to five years after seeing Chelsea take advantage of that rule.
