Thread by @SwedishRumble

(1/19) Napoli are investigated for accounting fraud due to structuring the acquisition of Victor Osimehn to cheat the #FFP / #FSR. How was this done? Will it be stopped, or can it be used by others? No it is not stopped, and yes it can be used. A 🧵

https://twitter.com/TheSunFootball/status/1617817297057366016?s=20&t=DY-xZscYkoDzoEtiBn4Jog

(2/19) It is widely reported that Napoli bought Osimehn for €72m, which also explains their high asking price for him. This is not entirely true. Napoli acquired Osimehn for a cash payment of €52m and the registration rights to four players – assigned a value of €20m.

(3/19) Who were these players? Back-up GK Orestis Karnezis (€10m) and youth players Claudio Manzi, Ciro Palmieri and Luigi Liguori (€10m in total). Karnezis played 90 minutes and the kids never got anywhere.
ilmattino.it/sport/sscnapol…

(4/19) I don’t know these players, but by all accounts the value of the players were very overblown. So why would you do that? Does it cheat the FFP rules, and if so, how? Yes it does. Lets look at the impact – which is huge – of the player swap element have for both teams.

(5/19) #LOSC bought Osimehn for 22.4m in 2019 and signed him to a five-year deal. Accounting wise, that results in them adding an asset – a registration right – to the balance sheet at 22.4m. That asset is written down (amortized) over the contract, i.e. 4.48m per season.

(6/19) One year later, #LOSC sells Osimehn to #Napoli. At this point, an asset worth 22.4 minus 4.48m = 17.92m is removed from the balance sheet and the transfer fee is added to the balance sheet. Regardless if the fee consists of cash, receivables (deferred payments) or players.

(7/19) The difference between what is removed from the balance sheet (22.4m) and what is added to the balance sheet – determines the result of the transaction. If they get 2.4m, it’s a 20m loss. If they get 122.4m, it’s a 100m profit transaction.

(8/19) Please note that it does not matter at all if payment is deferred or not, this is a common misconception. Cash and receivables count exactly the same in relation to a Clubs earnings.

(9/19) LOSC getting 52m in cash and four players assigned a value of 20m, resulted in the club making a 72m-22.4m= 49.6m profit on the sale. Without the player swap, it’s instead a 52m-22.4m=29.6m profit. 20m extra profit is a lot in relation to the FFP.

(10/19) For #Napoli, its even better, since they made a 19m profit (!) – by buying Victor Osimehn. How come? Napoli signed Karnezis for 1.5m in 2019, and signed him to a 3-year contract. After amortization of a 1/3, Karnezis had a book value of 1m for Napoli.

(11/19) The three youth players had nil€ bookvalue. Hence, accounting wise, the Osimehn transaction had the following impact: Osimehn’s registration rights of 72m was added as an asset, Napoli’s cash was reduced with 52m and their asset side was reduced with 1m (Karnezis).

(12/19) I.e. 72m-52m-1m=19m profit. From making a record signing, beat that Boehly!

(13/19) It should however be underlined that this is just a short-term gain. Osimehn got a 5 year contract. When bought for 72m, his amortization is 14.4m. At 52m, his amortization is 10.4m. I.e. they effectively in 2020 borrowed a profit of 19m from the five coming years.

(14/19) But haven’t this loophole been closed now? Isn’t this accounting fraud? Won’t UEFA throw the book at Napoli (and Juventus who have done the same)? From one perspective, its yes x3. But in reality, its complicated.

(15/19) A rumor – surely bogus – surfaced that we discussed swapping Elanga for Dortmund wonder kid Moukokou. To record that transaction in our books, we must assign Elanga a value. What is he worth? 5m? 15m? 25m?

(16/19) If we assigned him a value of 20m, could someone “prove” that it should be 15m or 25m? UEFA can try, in which case a third-party valuator will be assigned to establish Elanga’s “fair value”. In any event, any valuation that is not insane will pass through.

(17/19) Napoli bought Karnezis for 1.5m, barely played him, and “sold” him for 10m twelve month later. That will be caught. Reportedly, we only got a 15m offer for AWB last summer. What if we had swapped him to someone for 30m, could UEFA have cracked down on it?

(18/19) It would of course been very hard to prove that he was worth 30m and not 15m.

(19/19) So it is a “loophole” that still exist to some degree.