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Chelsea has just signed winger Mohamed Salah, and according to the BBC, Chelsea paid Basel an £11m transfer fee for the privilege of the young Egyptian's services.
As we are wont to do here at WAGNH, we now turn our attention to how the deal affects Chelsea from a financial perspective. Such an analysis has become increasingly necessary in the era of UEFA's financial fair play regulations, and so let's dive in.
Salah signed a 5.5 year deal, and for the purposes of FFP accounting, when a player is purchased, the transfer fee is amortised over the life of the player's contract. Amortisation is the process by which an expenditure is paid off over time. The amortisation is simply an accounting practise that allows clubs to spread the cost of the transfer fee over the player's career with the club in order to avoid having to record a huge expense on the books. This is a uniform accounting practise and the transfer fee will be recorded as such, despite the fact that Chelsea has likely already paid Basel the full £11m.*
* Apologies for hitting our regular readers over the head with the definition of amortisation over the past few weeks, but I'm sure you understand that we explain the concept in every transfer finance article so we can help newcomers to WAGNH and FFP (welcome!) better understand the finances of the Salah deal.
When calculating a player's total cost for the purposes of FFP accounting, we need to factor in the player's wages in addition to the amortised transfer fee (note that agents' fees are also included, but it's easier to combine all the fees and record it as one lump sum, rather than try to figure out which agents were paid what).
While wages can only be estimated at this point, it's probably safe to assume that he'll be earning less than Oscar, who signed a five year deal at £40k per week in July 2012 after coming over from Internacional.
When estimating wages for the purposes of FFP accounting, it's always better to estimate high, so let's assume that Salah will earn £30k per week (the same amount Victor Moses is earning).
Note that if Salah signs an extension, the book value on his transfer fee will be amortised over the life of the new deal, so while these figures are subject to change, we can safely assume that Salah's FFP cost will remain unchanged for at least a few years.
With that, let's take a look at what Salah will cost Chelsea on the FFP books -
2013-14 - £1.78m
2014-15 - £3.56m
2015-16 - £3.56m
2016-17 - £3.56m
2017-18 - £3.56m
2018-19 - £3.56m
Salah's FFP cost is a drop in the bucket and and when you consider that Salah is a 21-year-old who has already established himself as the best player on his national team and was very impressive against Chelsea in the four recent Basel matches, this looks to be a forward-thinking deal that could very well end up being a great piece of business.
