Chelsea has just signed young centreback Kurt Zouma, and according L'Equipe, Chelsea paid Saint-Étienne a £12.5m transfer fee for the privilege of Zouma's services. However, there also appears to be around £2m in add-ons based on various performance clauses, which could lead to the fee rising to around £14.5m.
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.
Zouma 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 Saint-Étienne the full £12m (with a possible £2.5m in future payments based on Zouma's performance).
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).
Zouma's wages can only be estimated at this point, and when estimating wages for the purposes of FFP accounting, it's always better to estimate high, so let's assume that Zouma will earn £40k per week (in line with reports out of France that Zouma will be earning €200k per month at Chelsea). We will also be assuming that the performance clauses are met, and therefore, we're going to use a £14.5m figure for the transfer fee (as opposed to the £12m without the add-ons).
We're also going to (quite safely) assume that Chelsea will be paying 100% of Zouma's wages while he's on loan to his now-former club, Saint-Étienne.
Note that if Zouma 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 Zouma's FFP cost will remain unchanged for at least a few years.
With that, let's take a look at what Zouma will cost Chelsea on the FFP books -
2013-14 - £2.36m
2014-15 - £4.72m
2015-16 - £4.72m
2016-17 - £4.72m
2017-18 - £4.72m
2018-19 - £4.72m
The Zouma deal looks like to be a good piece of business in the short term and could very well end up being an amazing bargain for Chelsea down the road. Zouma is an extremely talented youngster who immediately becomes our top centreback prospect. Graham has even gone as far to say that Zouma will be competiting with Gary Cahill next year for a starting role at Chelsea next season.
Personally, I love this deal, as I'm a big proponent of buying up as many prospects as possible, as it is a low-cost way of building for the future and fortifying the first team. For the prospects that don't pan out at Chelsea, the investment is usually small enough for the club to cut its losses without much of a FFP hit, or they be sold on for profit (see, e.g. De Bruyne, Kevin).