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UEFA Club Licensing
Discussion Paper
Private & Confidential
March 2010 - Version 0.98
This is a working document and is subject to amendment and change. This document is confidential toUEFA and the parties involved in UEFAs consultation process. The document must not be disclosed,
made available or communicated to any other party.
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CONTENTS
INTRODUCTION 1
GENERAL PROVISIONS
1. Scope of application 6
2. Objectives 6
3. Definition of terms 6
RESPONSIBILITIES
4. Responsibilities of UEFA 9
5. Responsibilities of the CFC Panel 9
6. Responsibilities of the licensor 10
7. Responsibilities of the clubs 10
8. Responsibilities of the Organs for the Administration of Justice 119. The club monitoring process 11
10. Confidentiality 12
BREAK-EVEN REQUIREMENTS
11. Introduction 13
12. Information to be prepared and submitted by a club 15
13. Definitions of relevant income and relevant expenses 19
14. Assessment of the break-even requirements 23
NO OVERDUE PAYABLES REQUIREMENTS
15. Enhanced No overdue payables requirements 27
FUTURE FINANCIAL INFORMATION REQUIREMENTS
16. Enhanced Future financial information requirements 29
TRANSITIONAL ARRANGEMENTS
17. Implementation of the club monitoring requirements 31
APPENDIX 1: EXPLANATORY NOTES 34
APPENDIX 2: DRAFT TEMPLATE 49
APPENDIX 3: ILLUSTRATIVE BREAK-EVEN SCENARIOS 50
APPENDIX 4: MONITORING PROCESS 55
APPENDIX 5: DEBT MONITORING 57
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INTRODUCTION
On 15 September 2009 UEFAs Executive Committee approved the financial fair play concept for the
well-being of European club football. This followed the recommendations made in August by the
Professional Football Strategy Council, which in turn had followed unanimous support by the UEFA
Club Licensing Committee, UEFA Club Competitions Committee and approval by the European ClubAssociation Board.
In January 2010, UEFA circulated to the football family a draft Discussion Paper (Version 0.93), which
set out a proposed approach for the new club monitoring requirements. We sought, and welcomed,
your feedback which has been taken into consideration during the development of this updated draft
Discussion Paper (Version 0.98).
Purpose
The UEFA club licensing regulations represented a major step forward for higher standards within
European club football. To supplement and complement the existing UEFA Club Licensing
Regulations, some new club monitoring requirements have been drafted to meet the approvedobjectives and principles. In developing the new requirements, UEFA has taken into consideration
experience and feedback from European club footballs stakeholders. Therefore, the updated
Regulations will comprise both the club licensing criteria (largely as exist at present) and club
monitoring criteria (being the new requirements from the financial fair play concept).
The new club monitoring requirements aim principally to:
Introduce more discipline and rationality in club football finances;
Decrease pressure on players salaries and transfer fees and limit inflationary effect;
Encourage clubs to compete with their revenues;
Encourage investment for the long-term benefit of clubs, such as investment in infrastructure
(sports facilities) and in youth;
Protect the long term viability and sustainability of European club football; and
Ensure clubs settle their liabilities on a timely basis.
These approved objectives reflect the view that UEFA has a duty to consider the systemic
environment of European club football in which individual clubs compete, in particular the wider
inflationary impact of clubs spending on salaries and player transfer fees and increasing levels of
indebtedness across European club football. In recent seasons, many clubs have reported repeated,
and worsening, financial losses.
Further, the wider economic situation has created difficult market conditions for clubs in Europe and,
in particular, this can negatively impact revenue generation and creates additional challenges for
clubs in respect of availability of financing and assessment of going concern. Many clubs have
experienced liquidity shortfalls, for instance leading to delayed payments to other clubs, employees
and social/tax authorities. Therefore, as requested by the football family, and in consultation with the
football family, UEFA aims to develop sensible and achievable club monitoring requirements to
supplement the existing club licensing requirements and to safeguard the future sustainability of
European club football.
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Multi-dimensional and risk-based approach
The consistency of application of club licensing requirements by licensors and the monitoring of clubs
will be overseen by the Club Financial Control Panel that was created in 2009. In order to meet the
above objectives, a multi-dimensional approach is being adopted for assessing a clubs financial
situation, in the wider context of European club football. This approach is illustrated in the diagram
below.
The existing club licensing criteria
and the new club monitoring
requirements will, when combined,
enable a multi-dimensional
assessment of a club across the
different facets of its financial
situation (the die on the left) the
balance between a clubs income
and expenses, its balance sheet
position (including debt), and abilityto meet liquidity requirements.
The club licensing criteria (in respect of going concern, no overdue payables and liquidity plan) are
primarily designed to enable an assessment of a clubs financial situation in the short term. These
existing criteria have been built on and enhanced in the new club monitoring requirements. In
addition, a new measure has been introduced the break-even requirement which requires a
clubs relevant expenses to be no more than its relevant income over time. This break-even result will
be calculated annually, but assessed using a multi-year approach. Together, the existing club
licensing criteria and the new club monitoring requirements will involve a multi-year assessment of a
clubs financial situation, enabling a longer term view to be formed and within the wider context of
European club football.
Club monitoring will focus more on those clubs in UEFA club competitions that exhibit warning signs
with less onerous requirements than for other clubs. This risk-based approach uses defined
indicators to bind together existing club licensing and the new monitoring requirements.
In performing the assessment, the CFC Panel will consider each criterion individually, but also in the
context of the multi-dimensional approach in order to appreciate and understand a clubs overall
financial situation. Clubs will therefore be assessed on an individual basis as well as in the wider
context of the European club football environment; i.e. an individual clubs behaviour may be
sustainable for that club, but it may be considered to have a negative impact on the European club
football system as a whole.
Thus a clubs financial situation will be judged via a series of different indicators and requirements
which will take into consideration whether the club is considered to be a going concern, its ability to
meet its liabilities as they fall due, its balance sheet position in particular its debt situation and its
balance between expenditure, in particular salaries and transfer fees, and income generated.
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The requirements
Existing club licensing financial criteria:
Going concern addressed through the criteria for audited annual financial statements and
interim financial statements;
No overdue payables criteria; and
Future financial information.
In conjunction with key stakeholders, UEFA has been working to develop some draft requirements to
meet the approved objectives and principles. These new requirements will supplement, complement
and enhance the current UEFA Club Licensing Regulations. Clubs will continue to prepare their
annual financial statements in accordance with their national accounting practice or IFRS. The new
club monitoring requirements will apply to clubs that are entered into a UEFA club competition and
include:
The break-even criterion;
No overdue payables criteria enhanced version; and
Future Financial Information enhanced version.
The approved objectives and principles of the financial fair play concept implicitly included the aim of
better controlling clubs debt levels to be at sustainable levels. The multi-dimensional approach has
been developed such that club monitoring requirements address debt control in a variety of ways and
from different angles.
A club may also be requested to provide additional information if it is considered to exhibit other
warning signs, such as a ratio of salary costs to revenue greater than 70%.
Within the approved financial fair play concept there was also a proposed sporting measure to limit
the number of registered players for each club. This specific matter is being addressed separately and
is not considered in this Discussion Paper.
These new club monitoring requirements aim to have positive benefits for individual clubs and for
European club football. Therefore, UEFA recommends that each member association should
consider also implementing the club monitoring requirements at a national level.
Below is a summary of how the existing club licensing criteria and the new monitoring requirementswill combine to enable a multi-dimensional approach to the assessment of a clubs financial situation.
i) Going concern (club licensing) - the going concern assumption, which is assessed by both
club management and the independent auditor, is a fundamental principle in the
preparation of a clubs audited annual financial statements that are submitted to the
licensor.
ii) No overdue payables (club licensing) - a club must prove that it has no payables overdue
towards other football clubs arising from transfer activities, and towards employees and
social/tax authorities, as at 31 December/31 March of the year preceding the season to
be licensed.
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iii) Future financial information (club licensing) - a club must prepare and submit (prior to the
start of the UEFA season for which a licence has been requested) a budgeted profit and
loss account, a budgeted cash flow and explanatory notes including assumptions and
risks, covering at least the period of the season to be licensed.
iv) Break-even criterion (monitoring requirement) - The cornerstone of the new club
monitoring requirements is the Break-even requirement which aims to encourage clubs to
achieve a sustainable balance between their levels of spending and income generation.
The Break-even criterion applies to all clubs that have qualified on sporting merit for, and
been granted a licence to participate in, the next UEFA club competitions. The exception
is that any clubs for whom both relevant income and relevant expenses are below 5m
will not be further assessed.
This is based on a clubs profit and loss account. In principle, a club should always
break-even on an annual basis. Broadly speaking, this means that a clubs expenses
should not be higher than its income. However, under certain specific conditions further
explained in this discussion paper, a club may still be deemed in compliance with this rule
if there is an excess of expenses over income. In particular if such an excess is relatedsolely to costs that are for the long term benefit of the club (for example, expenditure on
youth development activities or on community development activities, or depreciation of
tangible fixed assets such as a clubs stadium and training facilities) then this excess will
not be considered in compliance with this criterion. The affordability of any such excess
may be assessed by the criteria relating to a clubs liquidity (i.e. the Future financial
information). In this respect, the Break-even result will be calculated for each relevant
reporting period and will be assessed using a multi-year approach.
v) No overdue payables enhanced (monitoring requirement) - enhanced requirements such
that, in addition to the existing assessment date of 31 December for club licensing, two
additional assessment dates of 30 June and 30 September (on a risk basis) will be
introduced to ensure clubs continue to comply with requirements during the season of the
competition.
vi) Future financial information enhanced (monitoring requirement) enhanced
requirements such that some clubs (selected using a risk based approach) will be subject
to additional assessment during the season of the competition to ensure they have
sufficient liquidity to meet their obligations and will be able to fulfil the Break-even criterion
in the future.
Information to be prepared and submitted by a club
Where possible, the new club monitoring requirements are based, and build, on existing information
that is already prepared under club licensing, in order to minimise the administrative burden on clubs.
UEFA intend to develop a web-based IT tool that can be used by the clubs, licensors, UEFA
administration and the CFC Panel. This will help ensure there is an integrated and efficient process
for information flows between the parties involved. The information requirements in respect of each
criterion are summarised below.
i) Going concern (club licensing) - managements assessment and the independent auditors
opinion is included in the clubs audited annual financial statements, as submitted to the
licensor.
ii) No overdue payables (club licensing) the reporting templates/formats created for clublicensing for the 31 December assessment date, as submitted to the licensor.
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iii) Future financial information (club licensing) - the clubs budgeted profit and loss account,
budgeted cash flow and explanatory notes including assumptions and risks, as submitted to
the licensor.
iv) Break-even criterion (monitoring requirement) - clubs will extract information from their
annual financial statements and underlying accounting records for the required calculations.
v) No overdue payables enhanced (monitoring requirement) - approach and information
requirements for the 30 June and 30 September dates to be consistent with existing
requirements (based on the 31 December/31 March assessment date).
vi) Future financial information enhanced (monitoring requirement) - approach and
information requirements to be consistent with existing requirements.
Timing of implementation and transitional arrangements
The Break-even and future financial information requirements will be implemented as from 2012,
effective for UEFA competition season 2013/14. It is envisaged that there will be earlierimplementation of the enhanced No overdue payables requirements effective for UEFA competition
season 2011/12.
Next steps
This Discussion Paper represents the latest draft of the new club monitoring requirements that has
been distributed as part of the extensive consultation process with the wider European football family.
We welcome constructive feedback about the proposed requirements. UEFA is working towards the
approval of the proposed club monitoring regulations at its EXCO meeting in May 2010.
Within the approved financial fair play concept there was also a proposed sporting measure to limit
the number of registered players for each club. This specific matter is being addressed separately and
is not covered in this Discussion Paper.
After May 2010, UEFA will develop the web-based IT tool that will be used to help minimise any
additional administrative burden on clubs and licensors, and will provide additional guidance and
education to licensors and clubs working towards implementation. UEFA is committed to working
together with the key stakeholders to ensure that the new requirements are implemented
appropriately.
These new club monitoring requirements aim to have positive benefits for individual clubs and for
European club football. Therefore, UEFA and the other key stakeholders are recommending thateach member association should consider also implementing the club monitoring requirements at a
national level.
UEFA firmly believes that these club monitoring requirements will help improve financial fairness in
European competitions and the long term stability of club football. Working together we can achieve
these ambitious objectives for the future benefits of European football.
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GENERAL PROVISIONS
1 Scope of application
All clubs that received a licence from their national associations and that are entered into a UEFA club
competition must comply with the new club monitoring requirements.
For club monitoring requirements, the reporting entity (or combination of entities) in respect of which
financial information is required to be provided is to be the same as that for club licensing.
The Break-even and Future financial information requirements will be implemented as from 2012,
effective for UEFA competition season 2013/14. During the first three years and up to 2014 a
transitional period is foreseen (refer to Section 17 for further description of the transitional
arrangements). It is envisaged there will be earlier implementation of the enhanced No overdue
payables requirements effective for UEFA competition season 2011/12.
UEFA recommends that each member association should consider also implementing the club
monitoring requirements at a national level.
2 Objectives
As approved by UEFAs Executive Committee and key stakeholders, the overarching purpose of club
monitoring is to improve financial fairness in European competitions and the long term stability of club
football.
The club monitoring requirements aim principally to:
Introduce more discipline and rationality in club football finances;
Decrease pressure on players salaries and transfer fees and limit inflationary effect;
Encourage clubs to compete with their revenues;
Encourage investment for the long-term benefit of clubs, such as investment in infrastructure
(sports facilities) and in youth;
Protect the long term viability and sustainability of European club football;
Ensure clubs settle their liabilities on a timely basis.
3 Definition of terms
In addition to the terms defined below, the explanatory notes provide some further definitions in
respect of terms relating to relevant income/expenses.
Terms marked * have been defined previously for club licensing purposes (as included in the current
UEFA Club Licensing Regulations (Edition 2008) and the Club Licensing Manual version 2.0).
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acceptable deviation A clubs aggregate Break-even deficit for three reporting
periods is within an acceptable deviation if it is either (i) no
more than 5 million in aggregate if not covered by
contributions from equity participants and/or related parties, or
(ii) no more than an amount to be determined by UEFA* ifcovered by contributions from equity participants and/or related
parties.
* In assessment years 2013 and 2014, the acceptable deviation for a
club is the aggregate Break-even deficit for two/three reporting periods
being no more than 45 million if covered by contributions from equity
participants and/or related parties. In each of assessment years 2015
to 2017, the aggregate level across three reporting periods is reduced
to 30 million.
annual financial statements * A complete set of financial statements prepared as at the
statutory closing date normally including a balance sheet, profit
and loss account, a statement of cashflows and those notes
and other statements and explanatory material that are an
integral part of the financial statements.
CFC Panel UEFA Club Financial Control Panel
club For the purpose of this Discussion Paper, the legal entity that is
the licensee (i.e. a licence applicant that has been granted a
licence) is referred to as a club. This is the legal entity fully
and solely responsible for the football team participating in
national and international competitions.
club licensing criteria * The requirements to be fulfilled by a club to be granted a
licence.
club monitoring requirements Requirements to be fulfilled by a club after it has been granted
a licence which, in this Discussion Paper, include the Break-
even requirements, No overdue payables criteria and Future
financial information requirements.
Club Licensing Regulations * UEFA Club Licensing Regulations (current edition is 2008)
costs of acquiring a players registration * Payments to third parties for the acquisition of a players
registration, excluding any internal development or other costs.
They include:
a) transfer fee payable for securing the registration;
b) transfer fee levy (if applicable); and
c) other direct costs of obtaining the players registration.
current financial information Information in respect of the financial performance and position
of the reporting period with a statutory closing date in the year
that the UEFA club competitions commence. In this document,
current financial information is sometimes referred to as the
reporting period T.
historic financial information Information in respect of the financial performance and position
of reporting periods ending in the year(s) prior to
commencement of the UEFA club competitions. In this
document, the historic financial information for the reporting
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periods covered by the two most recent audited annual
financial statements are sometimes referred to as T-1 and T-2.
Immediately preceding club licensing cycle The most recent club licensing cycle that has been completed
prior to the commencement of UEFA club competitions. Toillustrate: As at July 2009 the immediately preceding club
licensing cycle was the cycle to May 2009.
International Financial Reporting
Standards (IFRS) *
Standards and Interpretations adopted by the International
Accounting Standards Board. They comprise:
International Financial Reporting Standards;
International Accounting Standards; and
Interpretations developed by the International Financial
Reporting Interpretations Committee or the former
Standing Interpretations Committee.
management * Describes those responsible for the preparation and fair
representation of the financial statements and other financial
information in respect of the club, including the information in
respect of club monitoring requirements.
Net debt Net debt is defined as the borrowings of the club less any cash
and cash equivalents. A clubs borrowings will include
balances such as bank overdrafts and loans, owner and/or
related party loans and finance leases. For the avoidance of
doubt, net debt does not include accounts payable relating to
player transfers, nor trade and other payables.
Organs for Administration of Justice * UEFAs Organs for Administration of Justice as set out in
UEFAs Statutes Art.32-34.
reporting entity * The registered member and/or football company or group which
must provide the information for both club licensing and club
monitoring purposes.
reporting period * The financial reporting period ending on the statutory closing
date, whether this is a year or not.
stadium * Means the venue for a competition match including, but not
limited to, all properties and facilities near to such stadium (for
example offices, hospitality areas, press centre andaccreditation centre).
statutory closing date * The annual accounting reference date of the reporting entity.
training facilities * The venue(s) at which a clubs registered players undertake
football training and youth development activities take place on
a regular basis.
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RESPONSIBILITIES
4 Responsibilities of UEFA
In conjunction with licensors, UEFA governs the club monitoring process.
In particular, UEFA must:
Establish an appropriate club monitoring administration to support the works of the Club Financial
Control Panel;
Define the club monitoring process; and
Ensure equal treatment between all clubs subject to the club monitoring process and guarantee
the clubs full confidentiality with regard to all information provided during the process.
The tasks of the UEFA administration shall include:
Preparing, implementing and further developing the club monitoring process;
Providing administrative support to the CFC Panel;
Providing administrative support to the decision-making bodies;
Serving as a contact point and assisting and advising the clubs and the licensors; and
Serving as a contact point for and sharing expertise with the licensing departments of UEFA
member associations.
5 Responsibilities of the CFC Panel
The CFC Panel:
Conducts and/or recommends on compliance audits as defined in Article 55 of the Club Licensing
Regulations; and
Assesses the documents submitted by the clubs to consider whether this is appropriate and
determine whether each monitoring requirement has been met and what further information, if
any, is needed.
In carrying out its tasks, the CFC Panel may:
Summon clubs to a hearing;
Request clubs and/or licensors to provide additional information (such as documents);
Request clubs and/or licensors to meet a specific condition within a set deadline; and
If deemed that the club monitoring requirements have not been fulfilled, and taking into
consideration other information in respect of the club, refer the case to the Organs for
Administration of Justice, which shall take the appropriate measure(s) without delay in
accordance with the procedure defined in the UEFA Disciplinary Regulations for urgent cases.
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6 Responsibilities of the licensor
UEFA is committed to continue assisting the national associations in their role as licensor and co-
operate with licensors in the assessment of the club monitoring requirements.
In particular, the tasks of the licensor include:
Assess whether the selected reporting entity/entities is consistent with club licensing and is
appropriate for the club monitoring requirements;
To receive from its member clubs covered by the scope of the club monitoring requirements the
information in respect of club monitoring requirements;
To confirm that the information in respect of each club is complete;
To undertake specific assessment procedures in respect of the information submitted in respect
of each club;
To communicate each relevant clubs full information in respect of club monitoring requirements to
the CFC Panel, together with confirmation that the licensor has completed the appropriate
assessment procedures in respect of each club;
To co-operate with the CFC Panel in respect of its requests and enquiries in respect of specific
clubs.
7 Responsibilities of the clubs
The club/licensee must provide the licensor and the CFC Panel with:
All necessary information fully and accurately completed and/or relevant documents to fully
demonstrate that the club monitoring requirements are fulfilled;
Any other document requested and deemed to be relevant for club monitoring decision-making;
and
Co-operation by ensuring relevant persons attend meetings.
A club may at any time submit a written request to the CFC Panel for a clarification of the club
monitoring requirements. Clubs are invited to put all instances of doubt or uncertainty to the CFC
Panel for decision. Any practice or procedure which, in the opinion of the CFC Panel, is calculated to
defeat in any way the overriding objective of these requirements will be deemed to have been
deliberately concealed unless previously submitted to the CFC Panel.
The CFC Panel will make available a summary of any such request for clarification, together with the
CFC Panels response (omitting any confidential or commercially sensitive information), to all
licensors and clubs.
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8 Responsibilities of the Organs for Administration of Justice
Any non fulfilment of the club monitoring requirements may be sanctioned in accordance with the
UEFA Disciplinary Regulations.
The Organs for Administration of Justice are responsible for rendering a decision based on a case
submitted by a Disciplinary Inspector (who is simultaneously a member of the CFC Panel).
As set out in UEFA Organisational Regulations (Edition 2009), three members of the CFC Panel are
simultaneously Disciplinary Inspectors who are part of the Organs for Administration of Justice
together with the Control and Disciplinary Body and the Appeals Body.
A Disciplinary Inspector represents UEFA in disciplinary proceedings. They may open disciplinary
proceedings, lodge appeals and cross appeals.
9 The club monitoring process
9.1 Overview of the club monitoring process
UEFA will define the club monitoring process for the assessment of the club monitoring criteria.
The clubs to be subject to the monitoring process are those clubs that have received a licence from
their licensor and that are entered into a UEFA club competition. The complete population of clubs
will first be known in June each year.
The monitoring process shall consist of the following key steps:
Submission of the completed club monitoring documentation by the clubs to the licensor;
Assessment and confirmation of completeness of each clubs documentation by the licensor and
submission of the documentation to the CFC Panel;
Assessment of the documentation in respect of relevant clubs by the CFC Panel;
If appropriate, the CFC Panel requests additional information from the licensor/club;
For those clubs which have breached defined indicators (risk-based approach), further
information to be provided to their licensor for assessment, and subsequently communicated to
the CFC Panel;
Monitoring activities by the CFC Panel in respect of certain clubs;
For those clubs which have not fulfilled the club monitoring requirements, referral of cases by the
CFC Panel to the Organs for Administration of Justice for their assessment and decision.
A diagrammatic summary of the club monitoring process is included in Appendix 4 of this Discussion
Paper.
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9.2 Timing
The deadlines of the key monitoring process steps will be clearly defined by UEFA and timely
communicated to the clubs concerned by the licensor.
To illustrate, anticipated dates for monitoring information to be submitted to the CFC Panel are:
15th
July - the historic financial information in respect of the Break-even requirements (covering
reporting periods described as T-2 and T-1) and the documentation in respect of the No overdue
payables requirements as at 30th
June; and
15th
October if applicable (i.e. for those clubs that have breached the defined indicators, ref.
12.4), submission of the current financial information in respect of the Break-even requirements
(covering the reporting period described as T), the documentation in respect of the No overdue
payables requirements as at 30th
September, and the information in respect of Future financial
information requirements (at least covering the reporting period described as T+1).
9.3 Method of submission of information
UEFA envisage developing a web-based IT tool that can be used by the clubs, licensors, UEFA
administration and the CFC Panel. This will help ensure there is an integrated and efficient process
for information flows between the parties involved, and with confidentiality protections. The IT tool
will have access and security controls built within the tool that only allows restricted personnel to
submit data and have read access to the data submitted.
The IT tool will have functionality to address language and currency translation.
The IT tool will provide templates for completion by the management of each club for information tobe submitted firstly to the licensor, and thereafter from the licensor to the CFC Panel. This approach
aims to improve efficiency for clubs management, assist the interpretation of the requirements, and
encourage greater reliability and consistency of the information provided.
For example, the templates may include:
Calculation of relevant income/expenses for the Break-even requirements and other supporting
templates (see Section 13); and
Transfer payables table for the No overdue payables requirements (see Section 15).
10 Confidentiality
The licensor, UEFA and the CFC Panel shall guarantee the club full confidentiality with regard to all
information submitted during the process. Anyone involved in the club monitoring process or
appointed by the licensor, UEFA or the CFC Panel must sign a confidentiality agreement before
starting its tasks.
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BREAK-EVEN REQUIREMENT
11 Introduction
11.1 Principles
The Break-even requirement has been developed in accordance with the approved objectives (as set
out in Section 2 of this Discussion Paper) and principles.
The Break-even requirements will be an enhancement to the current Club Licensing Regulations and
will build on the existing objectives and purpose of the club licensing financial criteria. In general, the
Break-even requirement utilises information already prepared and disclosed by clubs in their audited
annual financial statements (in accordance with the existing requirements of Article 45 of the Club
Licensing Regulations), and also use terminology consistent with the existing club licensing
requirements.
Clubs will continue to prepare their annual financial statements in accordance with their national
accounting practice or IFRS and there is no obligation for a clubs annual financial statements toreport a profit.
For the purpose of the Break-even requirement, a clubs management will need to calculate relevant
income and relevant expenses as defined in Section 13. For the vast majority of clubs this will be a
relatively straightforward calculation based on information disclosed in the clubs annual financial
statements and underlying accounting records.
The key principle of the Break-even requirement is that a club should always aim to at least break-
even excluding expenditure for the long term benefit of the club - that is, in a reporting period, a
clubs relevant expenses should be no greater than the clubs relevant income - and must not
repeatedly spend more than the income it generates. In this respect, the Break-even result will be
calculated for each relevant reporting period and will be assessed using a multi-year approach. The
requirements allow a club to have a limited amount of deficit over time, as long as covered by
contributions.
11.2 Purpose
Implementation of the Break-even requirement will help deliver both short and long term
improvements for individual clubs and for European club football in general by:
Introducing more discipline and rationality in club football finances, with a reasonable balance
between income generated and expenses, and helping to protect the long term viability and
sustainability of European club football, and thereby helping to improve the image and credibility
of European club football;
Encouraging clubs to compete with their income. There is no obligation imposed on clubs to be
profitable. The multi-year approach aims to encourage more clubs to achieve an improved ratio
between the income they generate and their expenses;
Limiting inflationary pressure on players salaries and transfer fees within European club football.
The break-even requirement aims to achieve a sustainable level of salaries and transfer fees for
an individual club as well as limiting inflationary effects on the whole of European club football and
thereby improving the image and credibility of the game. The requirement allows for contributions
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from equity participants and related parties to cover a limited amount of deficit over time, but do
not allow debt-funding to cover a deficit; and
Encouraging spending on facilities and activities for the long-term benefit of clubs investment
and expenditure on infrastructure, youth development activities and community development
activities over shorter-term speculative spending. The existing Club Licensing Regulations
(Edition 2008) set minimum requirements for a clubs infrastructure and youth development
activities and, together with the Break-even criterion, encourage investment and expenditure on
facilities and activities for the long-term benefit of a club. The Break-even requirement does not
prevent clubs benefiting from contributions from an owner/related party, instead encouraging
those to be more directed towards spending on facilities and activities for the long-term benefit of
a club.
11.3 Scope and exemption
All clubs that received a licence from their national association and that are entered into a UEFA clubcompetition must comply with the Break-even requirement, albeit those clubs that submit information
demonstrating they have relevant income and expenses below 5m in respect of both the reporting
period with a statutory closing date ending in the year before commencement of the UEFA club
competitions and the preceding reporting period will not be required to submit further information and
will not be further assessed (unless otherwise requested by the licensor and/or the CFC Panel) and
will be exempt from the Break-even criterion.
If a clubs annual financial statements are denominated in a currency other than Euros, then to
determine whether a club should be exempt or not from the Break-even requirement the relevant
figures must be translated to Euro equivalent figures at the average exchange rate during the
reporting period, as published by the European Central Bank.
If the reporting period of the annual financial statements are greater than or less than twelve months,
then the thresholds of 5m (relevant income/expenses) will need to be flexed accordingly. The
applicable threshold levels will be flexed up or down for the length of the clubs reporting period and
the flexed threshold levels will be compared to the clubs relevant income and expenses as
appropriate.
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12 Information to be prepared and submitted by a club
12.1 Summary of the reporting periods that will be assessed by the
licensor and the CFC Panel
A multi-year and risk-based approach to assessment is foreseen for all licensed clubs in UEFA clubcompetitions.
Please refer to Appendix 4 that summarises the monitoring process described in sections 12.1 to
12.6.
In July, for all clubs except the exempt clubs, the following reporting periods are assessed:
A clubs Break-even calculations for the reporting period with a statutory closing date ending in
the calendar year before commencement of the UEFA club competitions (reporting period T-1),
and for the preceding reporting period (reporting period T-2). That is, the reporting periods
covered by the two most recent audited annual financial statements.
In October, only for those clubs in breach of certain indicators, three reporting periods are assessed:
A clubs Break-even calculations for the reporting period with a statutory closing date ending in
the calendar year before commencement of the UEFA club competitions (reporting period T-1),
and for the preceding reporting period (reporting period T-2). That is, the reporting periods
covered by the two most recent audited annual financial statements; and
A clubs Break-even calculation for the reporting period with a statutory closing date ending in the
calendar year that the UEFA club competitions commence (reporting period T).
12.2 Historic financial information
A clubs management must prepare the historic financial information for Break-even requirement and
submit to the licensor who will then transfer it to the CFC Panel by no later than 15th
July.
The club must prepare and submit the Break-even financial information in respect of the reporting
period with a statutory closing date ending in the year before commencement of the UEFA club
competitions (for the reporting period described as T-1). That is, the reporting period covered by the
audited annual financial statements as submitted to the licensor for the immediately preceding club
licensing cycle
In addition, if a club was not subject to the club monitoring process in the previous year (that is, the
club did not participate in a UEFA club competition for the previous season), the club must also
prepare and submit the Break-even financial information in respect of the reporting period covered by
its preceding audited annual financial statements (for the reporting period described as T-2).
Therefore, all other things being equal, clubs which qualify for a UEFA club competition but had not
qualified for the previous season will be assessed on the same multi-year basis as those clubs which
qualify for a UEFA club competition in consecutive seasons.
A clubs management will need to prepare a reconciliation from the clubs audited annual financial
statements and underlying accounting records to relevant income/expenses for the purpose of the
Break-even requirement.
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12.3 Current financial information
If a club has demonstrated compliance with certain conditions, being full compliance with all of the
indicators as described in Section 12.4, then the club is exempt from the requirement to prepare and
submit current financial information for Break-even requirement (for the reporting period described as
T), unless otherwise requested by the licensor or the CFC Panel.
If a club is required to prepare and submit current financial information for Break-even requirement,
then management must submit the information to the licensor who will then transfer it to the CFC
Panel by no later than 15th
October.
The current financial information will be in respect of the reporting period with a statutory closing date
ending in the year that the UEFA club competitions commence. To illustrate, relative to the UEFA club
competitions commencing in 2009 (i.e. season 2009/10):
For a club with a reporting period to 30th
June, current financial information (T) will be in respect of
the reporting period ending 30th
June 2009; and
For a club with a reporting period to 31st
December, current financial information (T) will be in
respect of the reporting period ending 31st
December 2009.
To illustrate, the current financial information for Break-even requirements (covering the period
described as T) will be based on a clubs accounting records as follows:
For a club with a May or June statutory closing date, a clubs management will need to prepare a
reconciliation from the clubs unaudited actual profit and loss account and underlying accounting
records (or, if available, from the audited annual financial statements and underlying accounting
records) to relevant income/expenses. If a clubs current financial information (submitted in
October) has been based on audited annual financial statements, then, if relevant, the club will
not need to submit duplicate information for the following years club monitoring process.
For a club with a November or December statutory closing date, a clubs management will need
to prepare a reconciliation from the clubs accounting records to relevant income/expenses, using
a combination of actual and budgeted figures. To the extent that the current financial information
uses budgeted financial information (for some months), it shall be based on assumptions that are
not unreasonable.
12.4 Conditions which result in a club having to submit further
information
If a club exhibits any of the conditions described by IND.01, IND.02, IND.03 or IND.04 (below), the
club shall be considered as being in breach of the indicator.
IND.01: The auditors report in respect of the audited annual financial statements (for the
reporting period T-1) submitted in accordance with club licensing requirements includes an
emphasis of matter or a qualified except for opinion in respect of going concern, and/or (for
applicable clubs) the auditors review report in respect of the reviewed interim financial statements
submitted in accordance with club licensing requirements expresses an emphasis of matter or
qualified conclusion in respect of going concern.
IND.02: The audited annual financial statements (for the reporting period T-1) submitted inaccordance with club licensing requirements disclose a net liabilities position that has deteriorated
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relative to the comparative figure at the preceding statutory closing date. A net liabilities position
will include a clubs debt.
IND.03: Breach of the No overdue payables criterion as at 30th
June, as described in Section 15.
IND.04: The Break-even calculation for either or both of the reporting periods covered by the two
audited annual financial statements preceding the immediately preceding club licensing cycle (i.e.
for the reporting periods described as T-1 and T-2) has a deficit, as relevant expenses exceed
relevant income. As salaries and player transfer costs are key cost categories for a football club,
in effect the Break-even calculation limits these costs relative to income.
For the avoidance of doubt, IND.01 and IND.02 are already defined indicators for club licensing
purposes, as described in Article 50 of the Club Licensing Regulations (Edition 2008).
In the case that any indicator (defined above) is breached, the club must submit further information to
the licensor who will then transfer it to the CFC Panel by 15th
October. In the case that any indicator
is breached, the club must subsequently prepare and submit the following information:
Current financial information for Break-even requirements for the reporting period described as T
(see Section 12.3); and
Future financial information covering at least the 12 month period commencing immediately after
the balance sheet date of the current financial information. As further described in Section 16, the
future financial information must include disclosure of the clubs projected Break-even result for
the reporting period described as T+1.
In the case that IND.03 is breached, the club must also submit information to demonstrate compliance
with the No overdue payables requirements as at 30th
September.
The CFC Panel will reserve the right to request a club to prepare and submit additional information.
A decision to request a club to prepare and submit additional information may be influenced by, but
not limited to, a clubs financial ratios such as:
Employee benefits expense (typically referred to as salaries) as a percentage of total revenue, in
particular for a club for which this figure exceeds 70%; and
Net debt as a multiple of a clubs total revenue, in particular for a club for which this figure
exceeds a multiple of 1.0.
12.5 Other information to be submitted by a club
Consistent with club licensing requirements, the club must provide the licensor and CFC Panel with
information about the reporting entity:
The name (and legal form), domicile and business address of the reporting entity and any change
in that information from the preceding statutory closing date;
Whether the financial information submitted for Break-even requirements covers the individual
licensee or a group of entities or some other combination of entities and a description of the
structure and composition of any such group or combination;
The statutory closing date and the period covered by the financial information;
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The presentation currency; and
A brief statement confirming the completeness and accuracy of the Break-even information in
respect of a club completed and signed by:
- The clubs General Manager and Finance Officer;
- At least one member of the executive body of the club, on behalf of the executive body of the
club; and
- At least one member of the executive body of the ultimate controlling party of the club.
12.6 Method of submission of information
As noted in Section 9, UEFA envisage developing a web-based IT tool that can be used by the clubs,
licensors, UEFA administration and the CFC Panel to provide an integrated and efficient process for
information flows and with confidentiality protections.
The IT tool will provide templates for completion by the management of each club for information to
be submitted firstly to the licensor, and thereafter from the licensor to the CFC Panel. This will include
a template for the calculation of relevant income/expenses for the Break-even requirements, and may
also include supporting templates, for example to help clubs management appropriately determine
their expenditure on youth development activities and community development activities.
The IT tool will have functionality to address language and currency translation.
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13 Definitions of relevant income and relevant expenses
13.1 Summary of the Break-even calculation
Illustrative representation of the Break-even requirement (details set out in Sections 13.2 and
13.3)
The principle of the Break-even requirements is that a club should always aim to at least break-even
(excluding expenditure for the long term benefit of the club) and cannot repeatedly spend more than
the income it generates. A clubs relevant income/expenses to be calculated for each reporting period
and to be assessed using a multi-year approach.
RELEVANTEXPENSES RELEVANT INCOME
Operating expenses **:
Cost of sales
Employee benefits expenses
Other operating expenses
Revenue **:
Gate receipts
Broadcasting rights
Sponsorship and advertising
Commercial activities
Other operating income
Player transfer amortisation or expense* Player transfer profit or income*
Finance costs
Finance income
Excess proceeds on disposal of
tangible fixed assets
EXPENSES FOR LONG TERM
BENEFIT NO LIMIT***
Infrastructure costs (depreciation of
tangible fixed assets)
Youth development activities
Community development activities
* : For the purpose of calculating relevant income/expenses, each club will use the same method of accounting for player
registrations as for its annual financial statements.
** : For calculating relevant income/expenses for the Break-even requirements, related party income/expenses to be adjusted
to fair value.
*** : Aim to encourage investment and expenditure on facilities and activities for the long-term benefit of the club.
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If a clubs relevant expenses are less than relevant income for a reporting period, then the club has a
Break-even surplus for the reporting period.
If a clubs relevant expenses are greater than relevant income for a reporting period, then the club has
a Break-even deficit for the reporting period.
In addition to the terms defined below, the explanatory notes (Appendix 1) provide some furtherdefinitions in respect of terms relating to relevant income/expenses. An illustrative draft template to
help calculate a clubs relevant income/expense is included in Appendix 2.
Consistent with the approach for club licensing, whilst the development of the Break-even criterion
does, in some respects, draw from the content of certain International Financial Reporting Standards,
UEFA recognises that, at this stage, the total harmonisation of the preparation and presentation of
financial statements by European football clubs is impractical and, therefore, has not been requested.
To facilitate the implementation of the requirements, clubs will continue to prepare their annual
financial statements in accordance with their national accounting practice or IFRS.
13.2 Relevant income
Relevant income is defined as revenue plus either profit on disposal of player registrations or income
from disposal of player registrations*, plus excess proceeds on disposal of tangible fixed assets, plus
finance income, less any non-monetary items.
* For the calculation of relevant income, whether a club includes either (a) profit on disposal of player registrations, or (b)
income from disposal of player registrations, will depend on each clubs method of accounting for player registrations in its
annual financial statements.
13.3 Relevant expenses
Relevant expenses is defined as cost of sales, employee benefits expenses, other operating
expenses, plus either amortisation or costs of acquiring players registrations*, plus finance costs.
For the avoidance of doubt, relevant expenses include all expenses in respect of the activities of the
club except depreciation/impairment of tangible fixed assets, amortisation/impairment of intangible
fixed assets (other than player registrations), expenditure on youth development activities,
expenditure on community development activities, and any other non-monetary items.
* For the calculation of relevant expenses, whether a club includes either (a) amortisation/impairment of player registrations, or
(b) costs of acquiring player registrations, will depend on each clubs method of accounting for player registrations in its annualfinancial statements.
13.4 Treatment of the acquisition and disposal of players registrations
For the avoidance of doubt, the Break-even requirement will not necessitate any changes to a clubs
method of accounting treatment for the acquisition and disposal of players registrations in its annual
financial statements.
The calculation of relevant income/expenses must be on a basis consistent with each clubs method
of accounting for player registrations in their annual financial statements, such that (a) some clubs will
report figures using the capitalisation & amortisation method, and (b) some clubs will report figures
using the income & expense method.
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For a club using the capitalisation & amortisation method of accounting for player registrations, the
cost of acquiring player registrations is capitalised (i.e. not immediately expensed) and then amortised
over the period of the players registration contract. On the disposal of a players registration, any
profit(loss) on the disposal of player registrations will be included within the clubs audited annual
financial statements and should be included within relevant income/expenses. The existing Club
Licensing Regulations set out some minimum accounting requirements in Annex VII, including thatclubs must not re-value upwards the carrying value of a players registration nor capitalise youth
development costs.
For a club using the income & expense method of accounting for player registrations, the cost of
acquiring player registrations will be fully included as an immediate expense within the clubs annual
financial statements and should be included within relevant expenses. Similarly, the income from the
disposal of player registrations will be included as income within the clubs audited annual financial
statements and should be included within relevant income. Clubs that are using the income &
expense method in their annual financial statements can elect to apply the capitalisation &
amortisation method for the purpose of the Break-even calculation. If a club elects to adopt this
approach for Break-even purposes, it must be applied on a consistent basis from one reporting period
to the next.
13.5 Other potential disclosures and adjustments
Expenses in respect of the activities of the club not otherwise recorded in the annual financial
statements:
For the calculation of relevant expenses, management must include any expenses incurred in the
reporting period in respect of the activities of the club that are not otherwise recorded in the audited
annual financial statements of the reporting entity that forms of the basis for preparation of the Break-
even calculation.
Given the existing club licensing requirements for financial information to be submitted in respect of
the reporting entity (or combination of entities) that reflect the relevant financial results and position in
respect of the entity which is the member of a licensor, then in practice this type of adjustment is
expected to be rare. Also, as specifically set out in Annex VII of the Club Licensing Regulations
(Edition 2008), all compensation paid to players arising from contractual or legal obligations and all
revenues arising from gate receipts must be accounted for in the books of the licence applicant, i.e. in
the books of one of the entities included in the consolidated perimeter.
Excess proceeds on disposal of tangible fixed assets:
Relevant income does not include the profit or proceeds on disposal of the clubs stadium or training
facilities unless the clubs management demonstrates that the proceeds are in excess of capital
investment requirements (if any) for the club to continue to have use of a stadium and/or training
facilities. In practice, this type of adjustment is expected to be rare.
Finance costs:
If a club has finance costs directly attributable to the construction of tangible fixed assets (up until the
time when the asset is ready for use), then such costs can be excluded from the calculation of
relevant expenses. In practice, this type of adjustment is expected to be rare.
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Related party transactions:
Related party transactions are a minimum disclosure requirement for a clubs audited annual financial
statements as set out in Club Licensing Regulations (Edition 2008) Annex VI.
If a club has a related party transaction(s) then the clubs management will need to determine the fairvalue of any such transactions in accordance with the approach described herein. If the fair value is
different to the recorded value then, for the purpose of the Break-even requirements, the relevant
income/expenses must be adjusted accordingly.
Non-football operations:
The income and expenses of non-football operations which are clearly and exclusively not related to
the activities, locations or brand of the football club must be excluded from the calculation of relevant
income/expenses. In practice, this type of adjustment is expected to be rare.
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14 Assessment of the Break-even requirements
14.1 Licensors assessment procedures
Following the submission deadline in July, the licensor undertakes assessment procedures in respect
of the information submitted by relevant clubs which, will be all clubs that received a licence and thatare entered into a UEFA club competition.
Following the submission deadline in October, the licensor undertakes assessment procedures in
respect of the information submitted by relevant clubs which will be those clubs that have breached
one or more of the indicators (IND.01 to IND.04) as described in Section 12.4, or a club that has
otherwise been requested to submit further information as part of ongoing monitoring procedures.
The licensor may decide:
To assess itself the information submitted by clubs in accordance with specific assessment
processes to be defined by UEFA; or
To have independent auditors carry out assessment procedures, in which case the licensor must
review the auditors report and carry out any additional procedures considered necessary.
In respect of the club monitoring process, the licensor must perform some minimum assessment
procedures, including:
Assessing whether the selected reporting entity/entities is consistent with club licensing and is
appropriate for the club monitoring requirements;
Checking that information is complete and arithmetically accurate; and
Checking the calculation of relevant income/expenses (for Break-even purposes) to a clubsfinancial statements and underlying accounting records.
The licensor must communicate to the CFC Panel (via the UEFA administration) the documentation
as submitted in respect of each relevant club, confirmation that the licensor has completed the
appropriate assessment procedures in respect of each club, and any other additional information that
may be of relevance to the CFC Panels assessment.
14.2 CFC Panels assessment procedures
The CFC Panel will receive from the licensor the information in respect of each club covered by thescope of the club monitoring requirements.
The CFC Panel will perform the following minimum assessment procedures in respect of each club:
Assess that the information in respect of each club as submitted by the licensor is accurate and
appropriate;
As appropriate, request written explanations and/or additional documentation from the licensor
and the clubs management to clarify matters;
In respect of the Break-even requirement, assess the submitted information and identify the
Break-even result for each relevant reporting period and in aggregate. If applicable, the CFCPanel will also assess the level of contributions from equity participants and related parties; and
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Identify those clubs for which the Break-even deficit exceeds the acceptable deviation and
thereby have not fulfilled the Break-even requirements, and which will be referred to the Organs
for Administration of Justice.
14.3 Definition of acceptable deviation
UEFA has defined an acceptable deviation for a clubs aggregate Break-even deficit. A clubs
aggregate Break-even deficit for three reporting periods is within an acceptable deviation if it is either:
no more than aggregate 5 million if not covered by contributions from equity participants and/or
related parties; or
no more than an amount to be determined by UEFA* if covered by contributions from equity
participants and/or related parties.
*: The amount determined by UEFA for each year of assessment for the period 2013 to 2017 is set
out in Section 17.3. The limit (aggregate for three reporting periods) for 2018 and following years will
be determined by UEFA in due course and will be an amount less than 30 million.
As set out in Section 12, the three reporting periods for the assessment of a clubs aggregate Break-
even deficit are:
T-1 and T-2: The reporting periods covered by the two most recent audited annual financial
statements; and
T: The reporting period with a statutory closing date in the year that the UEFA club competitions
commence.
If a club has an aggregate Break-even deficit for the three reporting periods T-2, T-1 and T that is notwithin the acceptable deviation, then the clubs management may demonstrate that the calculated
deficit is mitigated/reduced by an aggregate Break-even surplus in respect of the two reporting
periods prior to T-2 (i.e. the aggregate Break-even surplus for reporting periods T-3 and T-4), which
may or may not reduce the aggregate deficit figure to be within the acceptable deviation.
14.4 Outcomes of a clubs Break-even result
If a club has an aggregate Break-even surplus for reporting periods T-2 and T-1 and has not
breached any of the indicators (IND.01 to IND.04 as described in Section 12.4), then the club has
fulfilled the Break-even requirement.
If a club has breached any of the indicators (IND.01 to IND.04 as described in Section 12.4), but the
club has either an aggregate Break-even surplus or a Break-even deficit within the acceptable
deviation for reporting periods T-2, T-1 and T, then the club has fulfilled the Break-even requirement.
If a club has breached any of the indicators (IND.01 to IND.04 as described in Section 12.4), but the
club has either an aggregate Break-even surplus or a Break-even deficit within the acceptable
deviation having also taken into consideration any aggregate Break-even surplus in respect of the two
reporting periods prior to T-2 (i.e. the aggregate across the five reporting periods T-4 to T), then the
club has fulfilled the Break-even requirement.
If a club has an aggregate Break-even deficit for reporting periods T-2, T-1 and T that exceeds the
acceptable deviation, having also taken into consideration any aggregate Break-even surplus in
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respect of the two reporting periods prior to T-2 and/or any contributions from equity participants
and/or related parties, then the club has not fulfilled the Break-even requirements.
For the avoidance of doubt, if a club has an aggregate Break-even deficit that exceeds the acceptable
deviation in respect of reporting periods T-2, T-1 and T, combined with the aggregate Break-even
surplus in respect of the two reporting periods prior to T-2, then regardless of any contributions from
equity participants and/or related parties, the club has not fulfilled the Break-even requirements.
Appendix 3 sets out some scenarios to help illustrate the Break-even requirements.
14.5 Other factors to be considered in respect of the Break-even
requirements
If the Break-even requirements are not fulfilled then, having also taken into consideration other
factors, the CFC Panel may refer the case to the Organs for Administration of Justice, which shall
take the appropriate measure(s) without delay in accordance with the procedure defined in the UEFADisciplinary Regulations for urgent cases. For the avoidance of doubt the CFC Panel will not levy
sanctions.
Additional factors (aggravating and mitigating factors) to be considered by the CFC Panel and, if
appropriate, Disciplinary Inspector(s) and the Organs for Administration of Justice include, but are not
limited to, the factors listed below.
Factor Guidance about the possible considerations for each
factor in isolation
Quantum/trend of the Break-even
result
The larger the quantum of a Break-even deficit relative to a clubs
relevant income, in a reporting period and in aggregate, the less
favourably it will be viewed.
An improving trend in the annual Break-even results is likely to be
viewed more favourably than a worsening trend.
Projected Break-even results (plan
for compliance)
As an integral part of its future financial information (covering the
reporting period T+1), a clubs management must provide a Break-
even calculation of projected relevant income and expenses.
If the projected relevant expenses are less than income (i.e. a plan
for compliance), this will be viewed more favourably than if the
projected relevant expenses exceeds income.
A clubs longer term business plan may also be requested (say for
reporting periods covering T+1, T+2 and T+3) in which a Break-even
calculation of projected relevant income and expenses will be an
integral component.
If the projected relevant expenses are less than relevant income in
reporting periods T+1, T+2 and/or T+3, then it will be viewed more
favourably than projected deficits.
Budgeting accuracy A clubs Break-even result will be compared to the plan for
compliance previously submitted to the licensor/CFC Panel.
The circumstances giving rise to the Break-even result will beconsidered e.g. results arising from normal trading,
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exceptional items, player trading impact.
If the Break-even result is considered to be favourable
compared to the plan for compliance, the clubs case will be
viewed more favourably.
If the Break-even result is considered to be adverse comparedto the plan for compliance, the clubs case will be viewed less
favourably.
Debt situation. In conjunction with review of a clubs longer term business plan,additional information may also be requested from a club in respect ofits debt situation. This may include aspects such as:
Source of debt;
Ability to service interest and principal payments;
Debt covenant compliance;
Maturity profile of debt
Debt ratios may be considered as part of the assessment, includingratios to help assess:
Degree of leverage to help assess the capital structure of aclub and the level of debt relative to earnings and underlyingassets;
Profitability and coverage to help assess the level of earningsrelative to debt servicing costs;
Cash flow adequacy analysis of cash flow patterns can reveala level of debt-servicing capability covering both interest andprincipal repayments - that is either stronger or weaker thanmight be apparent from earnings.
Appendix 5 illustrates in detail the debt monitoring approach
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NO OVERDUE PAYABLES REQUIREMENTS
15 Enhanced No Overdue Payables requirements
15.1 Principle
The principle of the enhanced no overdue payables criterion is to ensure that clubs meet their
obligations to other clubs in relation to transfer activities and to employees in respect of contractual
obligations on a timely basis.
15.2 Purpose
The current Club Licensing Regulations already contain the no overdue payables criteria (Art. 47 and
48) that are aimed at ensuring that clubs have met their financial obligations to players, tax and socialauthorities and to other clubs at a given moment in time (i.e. 31
stDecember / 31
stMarch). However,
liabilities coming to maturity after these dates do not fall within the scope of the criteria and so it is
possible that clubs playing in UEFA competitions have overdue debts. It is therefore important that the
criteria are reinforced to help ensure that clubs competing in UEFA competitions have honoured their
debts towards other clubs and employees on a timely basis (according to the contractual terms).
The reinforcement of the no overdue payables requirements foresees one additional assessment date
as of 30th
June (after winter transfer window) and one more on a risk basis as of 30th
September
(after the summer transfer window).
In contrast to the Club Licensing Regulations, no three month period is given for clubs to report in
respect of the criteria.
The new requirements will further cement and improve the current criteria in the club licensing
system. The existence of overdue payables may also highlight to the licensor and CFC Panel wider
financial issues in respect of a clubs debt situation.
15.3 Criterion
The club must prove that as at 30th
June of the year of commencement of the UEFA club competitions
it has no overdue payables towards its employees and nor towards football clubs arising from transfer
activities.
Applying a risk-based approach, if the club has any overdue payables as of 30th
June it must also
prove that as at the following 30th
September it has no overdue payables towards its employees and
towards football clubs arising from transfer activities. Note: Payables towards tax and social
authorities in respect of contractual and legal obligations with employees will be covered by the check
done by the licensors at 31st
December for club licensing requirements.
A club is deemed to be in breach of the criterion if at any of the assessment dates, the club has
overdue payables towards other clubs or its employees. The term employees is defined consistently
with the existing Club Licensing Regulations. Also consistent with existing Club Licensing
Regulations, amounts payable to people who, for various reasons, are no longer employed by the
club fall within the scope of this criterion and must be settled within the period stipulated by the
contract and/or defined by law.
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15.4 Information to be submitted by a club
Information to be submitted for the assessment dates is as follows:
For payables towards other football clubs:
- transfer payables table (as defined in the current Club Licensing Regulations, Article 47)
For payables towards employees:
- self declaration stating the absence/existence of overdue payables towards employees.
15.5 Assessment dates
In addition to the 31st
December/31
stMarch assessment date covered by the club licensing criteria,
the enhanced no overdue payables rule introduces two additional assessment dates as follows:
i) 30th
June:
The identity of the licensed clubs entered in UEFA club competitions is known.
After end of winter transfer window.
ii) Applying a risk-based approach, 30th September:
For those clubs showing overdue payable as of June 30th
(i.e. IND.03 as also set out in
section 12.4);
After end of summer transfer window.
Based on the information submitted for 30th
June and/or 30th
September by the club, the CFC Panel
could request further updates of the transfer payables table as well other information helping in the
assessment of the club.
15.6 Other factors to be considered in respect of the No overdue payables
requirements
If the club exhibits overdue payables at either 30th
June or 30th
September, then the case may be
referred to the Organs for Administration of Justice.
In making a decision about an appropriate sanction in respect of the No overdue payables
requirements, other information (aggravating and mitigating factors) will be considered including, but
not limited to:
Quantum of the breach;
Length of delay of payment;
Number of delayed payments;
Frequency of overdue payables in past periods; and
Other relevant aggravating / mitigating factors.
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FUTURE FINANCIAL INFORMATION REQUIREMENTS
16 Enhanced Future Financial Information requirements
16.1 Principle
The principle of the enhanced future financial information requirements is that a club should prepare
budgeted information to predict future cash flows and in particular their timing and certainty, and
should demonstrate projected compliance with the Break-even requirements.
16.2 Purpose
The current Club Licensing Regulations (Article 50) contain the obligation for a club to prepare future
financial information in respect of the period commencing immediately after the date of the annual orinterim financial statements and covering the entire season to be licensed (i.e. typically this is the
period of 18 months commencing on the 1st
of January and terminating 30th
June of the following
year.)
The enhanced requirements build on the existing objectives and purpose of the club licensing criteria.
Financial budgeting and its subsequent monitoring is good business practice. They aim principally to
improve the stability of club football, help protect creditors and ensure clubs settle their liabilities on a
timely basis, and by requiring disclosure of a plan for compliance with Break-even requirement, will
also encourage clubs to compete with their revenues.
For the licensor and CFC Panel receiving the future financial information, it can assist in predicting aclubs future cash flow and ability to meet its financial obligations, including debt servicing obligations,
in the future. The licensor and CFC Panels understanding of the financial situation and prospects of
clubs can be improved. In turn this can be used to help protect creditors and safeguard the continuity
of competitions.
For the avoidance of doubt Art 50 of the Regulations will remain in force, while Art. 51 will be
integrated as part of the monitoring requirements.
16.3 Requirements
If any of the indicators as defined in Section 12.4 are breached, then the club shall prepare and
submit to the licensor/CFC Panel in October Future financial information consisting of:
i) A budgeted balance sheet;
ii) A budgeted profit and loss account;
iii) A budgeted cash flow statement (liquidity plan);
iv) Explanatory notes, including assumptions and risks and comparison of budget to actual figures.
There must also be a statement that the future financial information has been prepared on a
consistent basis with the preceding audited annual financial statements; and
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v) A plan for compliance, comprising a Break-even calculation for the reporting period T+1 based
on the budgeted profit and loss account and including adjustments to calculate relevant
income/expenses as appropriate.
The budgeted profit and loss account and cash flow statement (liquidity plan) must be prepared on a
monthly basis for at least the 12 month period starting immediately after statutory closing date of
reporting period T.
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TRANSITIONAL ARRANGEMENTS
17 Implementation of the club monitoring requirements
17.1 Proposed implementation of the club monitoring requirements
The Break-even and Future financial information requirements will be implemented as from 2012,
effective for UEFA competition season 2013/14. It is envisaged there will be earlier implementation
of the enhanced No overdue payables requirements effective for UEFA competition season 2011/12.
17.2 First years of implementation of the Break-even requirements
Summary of the clubs reporting periods which will be assessed in the first three years of
implementation (2012-2014)
Assessment of
financial
reporting
periods ending
in:
UEFA
competition
season
Illustration of relevant financial
reporting periods for clubs with a
reporting period ending:
June December
2012 (T-1)
2013 (T)
2013/14Year to 30 June 2012
Year to 30 June 2013
Year to 31 Dec 2012
Year to 31 Dec 2013
2012 (T-2)
2013 (T-1)
2014 (T)
2014/15
Year to 30 June 2012
Year to 30 June 2013
Year to 30 June 2014
Year to 31 Dec 2012
Year to 31 Dec 2013
Year to 31 Dec 2014
The first year the Break-even requirements will be effective is for UEFA competition season 2013/14.
This will follow the conclusion of the 2012/13 club licensing cycle.
All clubs that receive a licence from their national association and that are entered into a UEFA club
competition for the 2013/14 season must comply with the Break-even requirements. By July 2013each club must have submitted financial information in respect of their reporting period ending in 2012
(T-1).
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By October 2013, those clubs in breach of the defined indicators (see Section 12.4) must also have
submitted additional information including current financial information in respect of their reporting
period ending in 2013 (T) and future financial information including a Break-even calculation in
respect of their reporting period ending in 2014 (T+1).
In the transitional period only, a club accumulated break even result will be calculated and assessed
for the first time over a period of two years. In effect, if a club has an aggregate Break-even deficit
assessed in 2013 that exceeds the acceptable deviation, then the club has not fulfilled the Break-even
requirements and the case may be referred to the Organs for Administration of Justice and a sanction
may be imposed ahead of the 2014/15 UEFA competition season.
The second year the Break-even requirements will be effective is in 2014. This will follow the
conclusion of the 2013/14 club licensing cycle.
All clubs that receive a licence from their national association and that are entered into a UEFA club
competition for the 2014/15 season must comply with the Break-even requirements. By July 2014
each club must have submitted financial information in respect of their reporting period ending in 2013
(T-1) and in 2012 (T-2). For those clubs who were also entered in the previous seasons UEFA clubcompetition (i.e. in 2013/14), the Break-even information in respect of the financial period ending in
2012 will already be held by their licensor and the CFC Panel.
By October 2014, those clubs in breach of the defined indicators (see Section 12.4) must also have
submitted current financial information in respect of their reporting period ending in 2014 (T) and
future financial information including a Break-even calculation in respect of their reporting period
ending in 2015 (T+1).
The third year the Break-even requirements will be effective is in 2015. This will follow the conclusion
of the 2014/15 club licensing cycle.
All clubs that receive a licence from their national association and that are entered into a UEFA clubcompetition for the 2015/16 season must comply with the Break-even requirements. By July 2015
each club must have submitted financial information in respect of their reporting period ending in 2014
(T-1) and in 2013 (T-2). For those clubs who were also entered in the previous seasons UEFA club
competition (i.e. in 2014/15), the Break-even information in respect of the financial period ending in
2013 (and in 2012) will already be held by their licensor and the CFC Panel.
By October 2015, those clubs in breach of the define
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