J.3 Relevant expenses - Club Licensing

Expenses – Costs of sales/materials

Costs of sales for all activities, such as catering, medical care, kits and sports materials, and costs of purchase of merchandise.

Expenses – Employee benefit expenses – players

All forms of consideration in exchange for services rendered during the reporting period by registered players. Includes consideration for the termination of employment.

Expenses – Employee benefit expenses – other employees

All forms of consideration in exchange for services rendered during the reporting period by all employees other than registered players, including directors, management and those charged with governance. Includes consideration for the termination of employment.

Expenses – Other operating expenses

All other operating expenses, such as match expenses, rental costs, lease costs, depreciation charges in respect of right-of-use assets, administration and overhead expenses, and non-football operation expenses. In accordance with the minimum disclosure requirements set out in Annex F.3, the depreciation, amortisation and impairment of tangible and intangible assets are not included in other operating expenses and are to be disclosed separately in the profit and loss account.

Amortisation/impairment of player registrations and/or costs of player registrations

For the calculation of relevant expenses, whether a club includes either (i) amortisation/impairment of player registrations or (ii) costs of a player’s registration will depend on the club’s method of accounting for player registrations in its financial statements and the minimum accounting requirements as described in Annex G.3.

For the calculation of football earnings:

A club that uses the capitalisation and amortisation method of accounting for player registrations in its annual financial statements must apply the same method to relevant income and relevant expenses;
A club that uses the income and expense method of accounting for player registrations in its annual financial statements can elect to apply either the income and expense or the capitalisation and amortisation method (to be set out in restated financial statements as per Annex G). The selected method must be applied consistently from one reporting period to the next.

Loss on disposal of player registrations

For the calculation of relevant expenses, the loss on disposal of player registrations will depend on each club’s method of accounting for player registrations in its financial statements and the application of the requirements defined below:

For a reporting entity that uses the capitalisation and amortisation method of accounting for player registrations in its annual financial statements:

the loss on the disposal of a player’s registration is calculated by deducting the net book value of the player’s registration at the time of the transfer, from the net disposal proceeds received and receivable;
a loss on the disposal of the player’s registration will be reported if the net disposal proceeds are less than the net book value of the player’s registration at the time of the transfer. Any such loss must be included within relevant expenses for the calculation of football earnings.

For a reporting entity that uses the income and expense method of accounting for player registrations, the costs of acquiring a player’s registration are recorded in a reporting period.

For the calculation of football earnings:
A club that uses the capitalisation and amortisation method of accounting for player registrations in its annual financial statements must apply the same method to relevant income and relevant expenses;
A club that uses the income and expense method of accounting for player registrations in its annual financial statements can elect to apply either the income and expense or the capitalisation and amortisation method (to be set out in restated financial statements as per Annex G). The selected method must be applied consistently from one reporting period to the next.

Amortisation/impairment of release costs for other personnel or release costs for other personnel

In respect of released costs to another party for a club to acquire the services of a head coach and/or other personnel other than players:

A club that uses the capitalisation and amortisation method of accounting must recognise the amortisation/impairment of compensation paid and/or payable for personnel other than players in the reporting period;
A club that uses the income and expense method of accounting must recognise the costs of compensation paid and/or payable for personnel other than players in the reporting period.

Other non-operating expenses

All other non-operating expenses not otherwise included in another non-operating line in the profit and loss account.

Finance costs and dividends

Finance costs include interest and other costs incurred by an entity in respect of the borrowing of funds, including interest on bank overdrafts and on bank and other loans, and finance charges in respect of leases.

Regardless of whether the dividends are presented in the profit and loss account or in an alternative statement, if dividends are recognised in the financial statements, then the amount of dividends must be included as relevant expenses.

Expense transaction(s) below fair value

For the calculation of football earnings, the licensee must determine the fair value of transactions as defined in Annex J.7. If the estimated fair value is different to the recorded value, then the relevant expenses must be adjusted accordingly, bearing in mind, however, that no downward adjustments can be made to relevant expenses.

Examples of expense transactions that may require a licensee to demonstrate the estimated fair value of the transaction:

Any expense transaction whereby goods and/or services are provided for free to an entity;
Employee benefit expenses in respect of employees of entities outside of the reporting perimeter if those employees contribute to the football activities of entities in the reporting perimeter;
Non-interest-bearing loans received by the licensee.

For the purpose of calculating football earnings, if the result of player transactions is different to the requirements set out in Annex J, then the licensee must apply the adjustments as set out in Annex J.

Non-monetary debits/charges

Appropriate adjustments may be made such that non-monetary debits/charges are excluded from relevant expenses for the calculation of football earnings.

Non-monetary items (e.g. tangible assets and intangible assets such as goodwill and inventories) are items which do not meet the definition of monetary items. Monetary items are defined as units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency. The essential feature of a monetary item is a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency.

Examples of non-monetary debits/charges:

Downwards revaluations of inventories;
Foreign exchange losses on non-monetary items.

Expenditure directly attributable to non-football operations not related to the club

Expenditure directly attributable to non-football operations not related to the club (i.e. not related to the football activities, locations or brand of the football club) may be excluded from the calculation of relevant expenses.

Costs related to decisions of the CFCB

For the calculation of football earnings, an appropriate downward adjustment may be made in respect of any costs of a financial contribution set out in a settlement agreement and/or a financial contribution imposed by the CFCB in respect of the football earnings rule and/or squad cost rule paid and/or payable in the licence season.