Kevin de Bruyne to Wolfsburg: What it means for Chelsea's finances

Joern Pollex

We break down the deal from a financial perspective and explain how it affects Chelsea's bottom line with regards to financial fair play accounting.

Chelsea just sold Kevin de Bruyne to Wolfsburg, and according to the BBC (relying on reports from Germany), the fee is a tidy £16.7m.  However, that does not mean that the club just recorded a £16.7m profit.

Let's take a look at exactly how much profit Chelsea earned from the KdB sale in terms of financial fair play accounting (which, to be frank, is really the only figure that matters where Chelsea is concerned).

Chelsea originally bought de Bruyne from Genk for a fee of around £8m (I've seen the transfer fee reported as low at £6.7m, but when using figures for FFP accounting, it's always best to use a higher figure with regards to spending just to be safe).

When de Bruyne signed a 5.5 year deal, the transfer fee was then amortised over the life of the contract for accounting purposes.  Amortisation is the process by which an expenditure is paid off over time on the books, and it is a uniform accounting practise employed by football clubs (i.e. it's not just something Chelsea decided to do on its own to make the books look better).*

* Note that this is just an accounting practise.  In reality, Chelsea likely paid Genk the full £8m immediately.  Similarly, Wolfsburg will likely be paying Chelsea the full £16.7m immediately or in a few installments over the next few months.

De Bruyne's transfer fee, then, is reduced to £1.45m annually (£8m spread evenly over 5.5 years).

When a player is sold, however, his entire book value becomes due.  Put simply, book value is the remaining portion of the transfer fee that has not yet been accounted for on the books due to amortisation.  Given that de Bruyne had 3.5 years left on his contract, the remaining book value on his transfer fee was around £5.08m.

So, the £16.7m transfer fee from Wolfsburg is partially offset by the remaining £5.08m of de Bruyne's book value.  This reduces the profit to £11.62m.

Chelsea also has to account for the wages paid to de Bruyne during the 2013-2014 season.  He was earning around £30,000 per week at Chelsea, and a half-season's worth of wages adds up to £780,000.  Chelsea will have to account for these wages as an expenditure, so it further reduces the overall profit on De Bruyne to £10.84m.

Note that we are only accounting for the wages paid this year, as wages previously paid have already been accounted for in previous years' financial statements.

Chelsea will record the entire £10.84m profit from the sale on the 2013-2014 financial statement (which differs from when a club purchases a player and the transfer fee is amortised over the life of the player's contract).  This £10.84m profit will help show that Chelsea's finances are moving in a "positive trend."  Chelsea lost nearly £50m last season, and if it wants to use the wage exemption during the second UEFA Financial Fair Play monitoring period, it will have to reduce its losses.  The wage exemption is worth nearly £80m, so it behooves Chelsea to reduce its losses.

That said, with both the new adidas deal and the new broadcasting deal kicking in this season, Chelsea should have no problem reducing losses.  So, any narrative you see about Chelsea having to sell Juan Mata, David Luiz, or anyone else because the club has FFP problems is nonsense.

For those tempted to try to tie the de Bruyne deal in any way to the Nemanja Matic deal, know that Matic only costs £3.7m this season on the FFP books.  If Chelsea was trying offset Matic's costs with the de Bruyne sale, Chelsea would have been better off loaning him to Wolfsburg for the rest of the season and then making the sale official this summer, when the de Bruyne profit would count on the 2014-2015 books (when Matic will cost £7.4m).

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