How Fernando Torres' sale to AC Milan affects Chelsea's finances

The last time I wrote about Fernando Torres, it was over the summer when I was breaking down the financial implications of his loan to AC Milan. The last sentence of that article read: "Fortunately, we never have to talk about [Torres] again, and I am very much looking forward to the future."

Well, here we are again, talking about Fernando Torres finances. I apologise in advance, but thankfully, we have some good news and I'll be sure to keep it brief.

As we discussed in that article over the summer, it would have made a lot more sense from a financial perspective for Chelsea to foist Torres onto AC Milan permanently for nothing, rather than structure the deal as a two-year loan.

With the two-year loan, the remaining £18.2m in book value on Torres' £51.5m transfer fee would be spread out as £9.1m on both the 2014/15 and 2015/16 books.

When a player is sold, however, his entire book value automatically comes due, and as such, Torres will now cost £18.2m in 2014/15, but will be completely off the 2015/16 books.

By simply making the Torres deal a permanent transfer rather than a loan, Chelsea has essentially freed up an extra £9.1m to spend for 2015/16.

Chelsea's player costs* for 2014/15 were sitting at an estimated £117m, while the club's 2015/16 player were estimated at £189m (the £58.1m profit from the sales of David Luiz and Romelu Lukaku significantly deflates Chelsea's overall player costs this season).

* At WAGNH, we define "player costs" as wages and amortised transfer fees less any profit from transfer sales and loan fees received (we may try to properly account for agents fees in the future).

This is a difference of more than £70m, and when the loan deal was first announced, I was surprised that Chelsea didn't take the opportunity to balance the books a bit more. Admittedly, based on the timeline of UEFA's FFP monitoring periods, the extra £9.2m won't really make a difference in the break-even calculations until 2019, but why not plan ahead?

By eating the full £18.2m in remaining book value now and adding £9.1m to 2014/15, the estimated player costs increase to around £126m for this season, but for next season, player costs decrease to about £180m. This is still a fairly significant £54m difference, but it's an £18.2m swing in the right direction.

It should be noted that this £180m figure will no doubt change depending on Chelsea's plans (loan fees have obviously yet to be calculated, plus any contract extensions, and any incoming and outgoing transfers), and we'll be sure to roll out an updated version of our FFP player cost database to account for Chelsea's moves this winter.

I know I've said this before, but I think we can finally close the book on Fernando Torres now (for real this time).