Accountants have traditionally been the butt of rather too predictable jokes.
Generally they are perceived as boring, bespectacled, bean-counters whose idea of a good time is a single glass of sherry followed by lights out by 9.45pm.
In truth, accounting professionals are amongst the most creative folk one could happen across.
From next month, accountants working in the highest echelons of European football will require every ounce of their creative prowess as UEFA’s ‘Financial Fair Play’ rules come into force.
Oxymoronic they may sound, but an end to what Arsenal manager Arsene Wenger calls ‘financial doping’ has driven their introduction from the start of the 2011-12 season.
Clubs competing in the Champions League and Europa League will no longer be able to post aggregate losses exceeding £41 million, spread over two years, an arbitrary figure designed to ensure that wealthy clubs cannot spend ‘excessively’.
Failure to comply could, in extreme cases, result in expulsion from European competition.
However, though the rules apply from the new accounting year, which for most football clubs begins on August 1, UEFA will not commence its assessment of club accounts until the 2013-14 season.
At that point, UEFA’s licensing unit will analyse leading clubs’ annual accounts from the previous two seasons.
Ideally, it wants them all to be breaking even at least, but will allow an ‘acceptable deviation’ of €45 million (£41 million) over the period. From 2013-14, the ‘acceptable deviation’ reduces on a sliding scale.
Since this time last year, the bean-counters at Manchester City have been working on an acceptable accounting procedure which ensured that their employers did not fall foul of the new regulations.
According to last year’s accounts, City’s astronomic wage bill (of £131 million) resulted in an annual loss of £121 million.
Any repeat of these figures would mean that the club would not be permitted to compete in the Champions League, but - hey presto! - the men with the calculators appear to have done the trick for City.
Facing almost certain expulsion from European competition, those creative folks at Eastlands conveniently came up with a multi-faceted sponsorship deal worth £400 million over ten years.
The deal, with ubiquitous Abu Dhabi airline Etihad, covers the naming rights of City’s Eastlands Stadium, shirt sponsorship and financial assistance towards infrastructure development around the ground.
When this injection of cash is combined with a possible transfer fee of £42 million for Carlos Tevez and, say, a further £21 million shaved from their wage and other costs, City appear to be home and dry in terms of UEFA’s ‘acceptable deviation’ vis-à-vis accounting losses.
How so? Assuming £21 million could be trimmed from Manchester City’s cost base, the club’s losses would be further reduced should they receive an estimated minimum of £15 million a year as a result of playing Champions League football for the next two seasons.
Once the £40 million in new sponsorship receipts was added and Tevez’s transfer fee paid over two years (£21 million a year), the club’s aggregate losses would amount to £38 million, well within UEFA’s limits.
Granted, this is a simplified summary, underpinned by the crucial assumption that City’s annual costs are actually reduced (though this would not necessarily affect the club’s wage bill), but it shows that by using a modicum of creative thinking, the prospect of being expelled from European competition can be avoided.
However, City’s accounting methods have been criticised.
For example, Liverpool’s managing director Ian Ayre pointed out that clubs cannot circumvent UEFA’s rules and offset losses simply by sponsoring themselves.
