$5.3 Billion Worth American Owners’s $511 Million Spending Spree Prompts European Soccer to Bring Big Change

The Premier League giants Chelsea is on a spending spree since Todd Boehly took over last year. Boehly, who owns stakes in La Lakers, is on a mission to strengthen Chelsea, who currently sits at the 10th position in the table. Chelsea already has set a Premier League record for the highest spending in a single season under Boehly, who has prompted the European soccer body to change the Financial Fair Play (FFP) regulations over contract length. 

Chelsea has spent $511 million already since the start of the 2022-23 season. They are anticipated to sign more reinforcements before the January transfer window closes. Despite FFP in place, what has made them go berserk in the transfer market? The answer is simple. Chelsea has managed to find a small loophole in the FFP, and now UEFA is in action mode to shut it.

UEFA to change contract lengths for players

As per FIFA regulations, the player’s contract should be a maximum of five years. But there is a country-specific exception for the length of the contract. Currently, there are no such restrictions in the UK over specific contract lengths offered to a player signed. 

That’s where Chelsea has played brilliantly so far by offering long-term contracts to the players signed. Boehly has made the smart move by exploiting the loophole. However, now other European clubs have come forward and complained to UEFA over Chelsea’s transfer policy. European soccer governing body has promptly reacted and preparing to make necessary changes to FFP.

Read More: $5.3 Billion Worth American Owner’s $3.1 Billion Chelsea Accused of Cheating Financial Fair Play Rules

UEFA will bring down the contract lengths offered to the players to five years. It will help raise the player amortization value in the account books so clubs can’t exploit the loophole. By providing long-term contracts, Chelsea has managed to bring down this value in the account books, helping them stay within the FFP.  

How player amortization affects the soccer club’s account?

When a soccer club buys any player for a specific transfer fee, they consider the fee as an intangible asset. The club uses player services throughout his contract, and hence the initial transfer fee is written in the account books as a specific amount each year. It is this amount that is written in the account books called the player amortization cost.

The amortization costs are the annual expenses for the player in accounting terms. Clubs spread them over the contract length of the player instead of charging the entire transfer amount in the first year of the transfer. It helps the clubs in meeting the FFP regulations, and Chelsea has exploited the same. 

Let’s take an example to understand how amortization affects. A club signs a player for an $80 million transfer fee for five years. His yearly amortization will be $16 million. But, if they give the same player an eight-year contract, his annual amortization will come down to $10 million in account books. 

That’s where Chelsea played smart by offering long-term contracts to their big signings. For example, they signed Mykhaylo Mudryk on an eight-and-a-half-year contract. UEFA is all set to shut down this loophole and is planning to bring the new regulations before the summer transfer window. However, it won’t affect the Chelsea signings done so far.

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Let us know your thoughts on the Chelsea transfer policy and how they benefited from the loophole in the FFP.