Club Licensing Disc 701933a

8/9/2019 Club Licensing Disc 701933a

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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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UEFAClubLicensingDiscussionPaper(Version0.98) Private&Confidential 1

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 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

Club Licensing Disc 701933a

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