The size and popularity of soccer, which has increased greatly in recent years, has initiated a process of regulation of football clubs: control rules, regulation of the legal form and formal obligations, particularly the preparation of financial statements.
The preparation of financial statements of soccer clubs, unlike “classic” companies, has some distinctive peculiarities:
- the regulatory sources are prepared by the FIGC and they are the Internal Organizational Rules of the Football Federation (N.O.I.F.), the Unified Chart of Accounts and the Accounting Recommendations;
- other regulatory sources are the Civil Code, from which certain rules specified by the FIGC may derogate, and international rules specified by UEFA or FIFA;
- the administrative period coincides with the sports season: July 1-June 30.
The financial statements must consist of Balance Sheet, Income Statement, Cash Flow Statement and Explanatory Notes to the Financial Statements.
The typical items that characterise the Balance Sheet Assets are:
- Intangible fixed assets: players’ registration rights, concessions, licences and trademarks;
- tangible fixed assets: stadium, facilities, land, plant and machinery owned by the club.
Players’ registration rights correspond to the acquisition value of the player’s card, including costs related to the acquisition such as agent’s commissions, signing bonuses and bonuses; the account is entered in the balance sheet net of the amortisation fund, where the amortisation fund is the sum/accumulation of the amortisation made at the end of the period.
Trademarks are characterised by registered and protected property rights, such as, for example, logos, club colours, coat of arms, names and, more generally, distinctive club and brand rights.
The Income Statement, on the other hand, shows the following items:
- VALUE OF PRODUCTION
- Stadium revenues: tickets and season tickets;
- Television rights;
- Revenues from sponsor;
- Merchandising;
- Player trading assets: revenues from the loan of players and capital gains from the outright sale of players.
- PRODUCTION COSTS
- Personnel costs: players’ wages ad salaries;
- Expenses: travel, transport, catering, scouting, youth sector, etc.;
- Rent of stadium and sport facilities (if not owned);
- Marketing and advertising;
- Player trading liabilities: capital losses from the outright sale of players and costs from the loan purchase of players;
- Amortisation of players.
We can see how, in contrast to civil law provisions, football clubs record capital gains and capital losses in their ordinary operations, whereas for ‘typical’ companies they are extraordinary income/costs.
Let us now look at a clear example to understand how a purchase of a football player, its relative cost in the balance sheet and its possible future sale works.
In the example below, the player was purchased (assuming at the beginning of the accounting period) at a cost of EUR 55,000,000, including incidental expenses. A 5-year contract was signed, so the cost will be spread over several years: 55,000,000 / 5 = 11,000,000.
| TAG COST | INCIDENTAL EXPENSES (agent fees) | Contract duration | Annual amortisation |
| 50,000,000 | 5,000,000 | 5 | 11,000,000 |
At the end of each year’s period we will write:
| END OF PERIOD | PURCHASE COST | ANNUAL AMMORTISATION (Income Statement) | AMORTISATION FUND | Players’ registration rights (Balance Sheet) |
| N | 55,000,000 | 11,000,000 | 11,000,000 | 44,000,000 |
| N + 1 | 55,000,000 | 11,000,000 | 22,000,000 | 33,000,000 |
| N + 2 | 55,000,000 | 11,000,000 | 33,000,000 | 22,000,000 |
| N + 3 | 55,000,000 | 11,000,000 | 44,000,000 | 11,000,000 |
| N + 4 | 55,000,000 | 11,000,000 | 55,000,000 | 0 |
Assume, for example, that the player is sold for 40,000,000 at the beginning of year N + 2. At the end of year N + 1, the player was worth 33,000,000 on the balance sheet, so the same value is carried forward to the beginning of year N + 2. Well, the difference of 7,000,000 (40,000,000 – 33,000,000) we will enter in the balance sheet in the Income Statement recording a revenue, more precisely a capital gain.
| SALES | BOOK VALUE | CAPITAL GAIN |
| 40,000,000 | 33,000,000 | 7,000,000 |
To get an idea of the real size of the football industry, let us now analyse the balance sheets of the Serie A football clubs with their differences and peculiarities.
The figures refer to the 2022/2023 football season.
The costs do not only indicate the so-called ‘production costs’, but also include depreciation, provisions, write-downs, financial expenses and taxes; this method was used to better understand the derivation of profit.
| CLUB | INCOME | COST | NET PROFIT |
| ATALANTA | 195,4 | 189,8 | 5,6 |
| BOLOGNA | 117,32 | 133,62 | -16,3 |
| CAGLIARI | 69,7 | 72 | -2,3 |
| EMPOLI | 81,6 | 85,6 | -4 |
| FIORENTINA | 159,6 | 179,1 | -19,5 |
| FROSINONE* | 1,48 | 18,24 | -16,76 |
| GENOA | 116,9 | 148,9 | -32 |
| INTER | 425,5 | 510,8 | -85,3 |
| JUVENTUS | 507,7 | 631,4 | -123,7 |
| LAZIO | 153,3 | 182,8 | -29,5 |
| LECCE | 59 | 58,2 | 0,8 |
| MILAN | 404,5 | 398,4 | 6,1 |
| MONZA | 68,3 | 128,6 | -60,3 |
| NAPOLI | 359,2 | 279,5 | 79,7 |
| ROMA | 277 | 379,7 | -102,7 |
| SALERNITANA | 70,6 | 100,2 | -29,6 |
| SASSUOLO | 140,2 | 147,2 | -7 |
| TORINO | 101,1 | 110,66 | -9,56 |
| UDINESE | 126,2 | 129,8 | -3,6 |
| VERONA | 98,4 | 110,1 | -11,7 |
*Balance sheet of Frosinone Calcio Srl (as at 30 June 2023). 18.08 million the assets of Together F.C. S.p.A. the holding company of the sports infrastructure branch. The company is 55% owned by PSC Gestione Partecipazioni S.r.l. and 45% by BS Holding S.p.A. Both companies are entirely owned by the Stirpe family. Together FC controls the Together Infrastrutture Sportive S.r.l. Società di Progetto which is the Company that manages the infrastructures used by Frosinone Calcio, such as the ‘Benito Stirpe – PSC Arena’ stadium and the ‘Cittadella dello Sport di Ferentino’.
The numbers speak for themselves: the football industry has a considerable turnover. The real issue, however, is how these clubs ‘burn through’ the huge turnovers from player sales, television rights, stadiums, merchandising and sponsors; the question is much debated and, as the most analytical balance sheets can suggest, cutting costs, particularly those related to player purchases and player salaries, is the key to long-term economic-financial sustainability. A further solution may be the inclusion of regulation of the sector through legal impositions in terms of budget quotients or spending capacity, although this route does not seem to be considered by the authorities. In fact, looking at the strategies of leagues, federations and international organisations (FIFA and UEFA), the key seems to be more towards increasing turnover than reducing costs: how? New competitions, such as the Nations League, the Club World Cup and the new format of the Champions League, may induce clubs to have higher revenues from television rights and to have the possibility of a larger budget, which suggests an ever-increasing increase in fees and salaries.
Sources:
- Sole24ore
- Calcio e Finanza
- Ufficio camerale (online site)
- Economia e sport (blog)
By Alessandro Caldera
