Read on Twitter
I’ve been finding out a bit about how FFP is changing in the Championship this season in the light of Covid-19 and thought it might be worth sharing, along with some context/speculation for #nffc
As I understand it, there are two key changes. The first is that Covid-19 related costs or revenue losses (such as lost revenue from playing BCD) are allowable under FFP this year. So, we can add back the lost revenue and remove any additional costs in FFP calculations.
The second change is that we are working on a 4 year cycle rather than 3, with the losses for the current year and the prior year being averaged and added to the losses for years T-2 (2018/19) and T-3 (2017/18).
What does this mean for Forest? Well, we can’t say specifically because we won’t have numbers for 2019/20 until next March or for 2020/21 for 18 months, but we can deduce that it is good news in the sense that it improves our chances of passing FFP.
The 4 years of the new cycle are 2017/18 to 2020/21. Our estimated loss in 2017/18 was around £6M and keeping that in the FFP calculation for the current cycle is the key reason why our position strengthens under these new rules.
The estimated FFP loss for 2018/19 was £20M. We do not have 2019/20s number yet but the club have said that passing FFP was a primary focus so we can deduce that this loss should be no more than £13M, in order to meet the £39M limit for those 3 years.
To give us a working example, let’s assume the FFP adjusted loss for 2019/20 was £13M, making a total for the 3 years £39M, right on the limit. We sold Appiah and Osborn for substantial profits that year and also sold Soudani to Olympiacos (maybe for a profit?).
Now, suppose we are on track to make the same level of loss this year, having sold Matty Cash for £14M but also invested quite heavily in signing several new players. To make the example work let’s assume we again make an FFP loss of £13M this year.
(Remember that selling cash for £14M brings us a £14M profit in the year, as he cost us nothing and has no value on our Balance Sheet, whereas a new signing costing £3M on a 4 year contract only cost us £750k of amortisation this year).
Over the 4 year period this would give us losses of £6M, £20M, £13M and £13M. On a 3 year cycle we lose £46M and fail FFP, but on a 4 year cycle we lose £6M + £20M + £13M (the average for the last 2 years), making a total of £39M and we pass FFP.
The numbers here are not correct! The estimates for years 1 and 2 are based on the published accounts but are still estimates of what can be adjusted for, and the amounts for year 3 and 4 are unsubstantiated.
The example does, however, show how the rule changes impact the room clubs have for manoeuvre financially. I caveat this by saying it’s what I think the situation is, so feel free to let me know if you think I’ve got something wrong.
