Fifa financial rules

With regard to your comment about sponsorship deals that is again where the "fair value" rule applies. It means that if a club agrees a sponsorship deal with a company owned or controlled by a related party (e.g owner) the amount of sponsorship cannot be inflated to amounts above a reasonable market value.

An example occured to me immediately. Didn't Liverpool sign a record shirt sponsorship deal with Warrior Sports, who just happen to be owned by the same guy that owns them? £25m a year apparently. Now if the auditors decide that this is actually higher than any other company would have paid (at arms length, like Sid said) then Liverpool would have to deduct the excessive income from the break even calculation. So if it is deemed that £20m is the max anybody else would have paid, the Bin Dippers would have to take £5m per annum off of their income total.

That would be nice

PS - sorry if it sounds like i'm teaching people to suck eggs, I just realised that I hadn't given a clear example of what a fair value income transaction that was in breach of regulations might be!

 

Donkey Toon I'd rep you for being so good as to actually understand the rules and trying to teach everyone else but i have to spread it unfortunatly

 

Will there be any difference between say Man City and a club like Arsenal who has Shareholders

 

No worries fella. Just occured to me that the regs come up in conversation so often on these threads but we always seem really uncertain of the facts which means we never really ever get anywhere.

 

Good question. There is a whole section which goes into defining what a related person is. Here is the relevant section in full, i'll then give you a quick personal take on it;

E. Related party, related party transactions and fair value of related party
transactions
1. A related party is a person or entity that is related to the entity that is preparing
its financial statements (the ‘reporting entity&#8217.
2. A person or a close member of that person’s family is related to a reporting entity
if that person:
a) has control or joint control over the reporting entity;
b) has significant influence over the reporting entity; or
c) is a member of the key management personnel of the reporting entity or of a
parent of the reporting entity.
3. An entity is related to a reporting entity if any of the following conditions apply:
a) The entity and the reporting entity are members of the same group (which
means that each parent, subsidiary and fellow subsidiary is related to the
others);
b) One entity is an associate or joint venture of the other entity (or an associate
or joint venture of a member of a group of which the other entity is a
member);
c) Both entities are joint ventures of the same third party;
d) One entity is a joint venture of a third entity and the other entity is an
associate of the third entity;
e) The entity is a post-employment benefit plan for the benefit of employees of
either the reporting entity or an entity related to the reporting entity. If the
reporting entity is itself such a plan, the sponsoring employers are also
related to the reporting entity;
f) The entity is controlled or jointly controlled by a person identified in
paragraph 2; or
g) A person identified in paragraph 2(a) has significant influence over the entity
or is a member of the key management personnel of the entity (or of a parent
of the entity).


4. With reference to paragraphs 1 to 3 above, the following definitions apply:
a) Close members of the family of a person are those family members who may
be expected to influence, or be influenced by, that individual in their dealings
with the entity. They may include that person’s children and spouse or
domestic partner, children of that person’s spouse or domestic partner, and
dependants of that person or that person’s spouse or domestic partner.
b) Control is the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
c) A joint venture is a contractual arrangement whereby two or more parties
undertake an economic activity that is subject to joint control.
d) Joint control is the contractually agreed sharing of control over an economic
activity, and exists only when the strategic financial and operating decisions
relating to the activity require the unanimous consent of the parties sharing
control (the venturers).
e) Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including any director (whether executive or otherwise)
of that entity.
f) Significant influence is the power to participate in the financial and operating
policy decisions of an entity, but is not control over those policies. Significant
influence may be gained by share ownership, statute or agreement.
g) An associate is an entity, including an unincorporated entity such as a
partnership, over which the investor has significant influence and that is
neither a subsidiary nor an interest in a joint venture. In the definition of a
related party, an associate includes subsidiaries of the associate and a joint
venture includes subsidiaries of the joint venture. Therefore, for example, an
associate's subsidiary and the investor that has significant influence over the
associate are related to each other.

5. In considering each possible related party relationship, attention is directed to
the substance of the relationship and not merely the legal form. The following
are not related parties:
a) Two entities simply because they have a director or other member of key
management personnel in common or because a member of key
management personnel of one entity has significant influence over the other
entity.
b) Two venturers simply because they share joint control over a joint venture.
c) Providers of finance, trade unions, public utilities, and departments and
agencies of a government that does not control, jointly control or significantly
influence the reporting entity, simply by virtue of their normal dealings with an
entity (even though they may affect the freedom of action of an entity or
participate in its decision-making process).
d) A customer, supplier, franchisor, distributor or general agent with whom an
entity transacts a significant volume of business, simply by virtue of the
resulting economic dependence.

My take: Not completely familiar with the shareholder structure of Arsenal but I think there are a small number of very significant shareholders who between them own most of the shares and form the core of the Board of Directors. There I would be inclined to say that they fit with the definition of exacting significant control over the decision making process of the club and therefore if a transaction took place with a company owned by one of them it would apply. However, this is subjective and would probably have to be ruled upon by the FIFA Authorising Committee which has been set up to rule on any issues relating to this sort of thing. You will note that clause 5 a) specifies that being a Director of both does not qualify as related in and of itself so significant control of both would have to be proven and applicable (IMO).

What I think can be established is that this process is going to have alot of reviews/appeals/modifications to look forward to before the process is fully perfected and there will be alot of decisions for FIFA to rule upon.

 

Well that will keep FIFA busy

Cheers

 

good effort DT acctually understand some of what is being said

 

Rep for that DT

edit: failed