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Editor's letter: Football et circenses

Panem et circenses, or bread and circuses, the Latin expression coined by Roman poet Juvenal, is from a diatribe in which he described the distraction of his contemporaries from their duties as citizens of ancient Rome.

Possibly Juvenal was right. Over time, the Roman Republic, an imperfect form of democracy, evolved into the Roman Empire, a genuine form of dictatorship.

Today some think that football is the refined equivalent of the Roman circus, which alienates citizens from more important matters. Whatever may be said about it, football has become a lucrative business, and rather more than just a game.

It's one, however, in which the majority of key stakeholders, the fans, are emotionally attached to what their clubs represent. Can the accounting profession put down this extraordinary form of goodwill on a balance sheet?

Football poses further challenges for accountants. This summer Real Madrid paid a record transfer fee of £85m ($135.8m) for Gareth Bale. That's the price of the Welsh gladiator, but surely accountants must have immediately questioned what his real value is.

Bale's transfer fee topped the previous record of £80m for Cristiano Ronaldo, paid by the same club in 2009, which begs the question: is football a sustainable business when clubs are getting increasingly indebted as if there were no tomorrow?

Reporter Vincent Huck investigates the accounting perspective of this unique business (see pages 8-9) in light of the Union of European Football Associations' (UEFA) Financial Fair Play (FFP) rules, which will be implemented for the first time this season.

FFP rules are aimed at putting clubs' finances in order based on the idea that they should break-even at the end of the fiscal year. Then UEFA will check if they are compliant, assisted by Deloitte or PwC in certain cases, otherwise clubs will not qualify for participation in European competitions.

But every law has its loophole. According to Noel Tagoe, from the Chartered Institute of Management Accountants, clubs would be able to amortise the cost of a player over a period of time, such as the length of the contract, instead of taking into account the financial year in which the transfer occurs.

Moreover, clubs can offset the cost of a new signing by accounting for the profits made when other players are sold.
Therefore, Gareth Bale would represent just a £14m liability, as he is on a six-year contract, but Real Madrid could consider as profit the £42.5m it is believed to have made when striker Mesut Özil was sold to Arsenal in the same financial year.

All this happens five years on from Lehman Brothers' collapse, which triggered the current global financial crisis, a massive wake-up call to do business in a sustainable way.

Accountants are yet again called to play a fundamental role: to be champions of financial fair play, regardless of the field they work in.

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