Capital gains and cross-shareholdings: the tricks (and pitfalls) of football clubs’ financial statements

A high capital gain does not, of course, in itself prove that the transaction was artificial. The right to a footballer’s sporting services does not, in fact, have a ‘list price’. Age, the remaining duration of the contract, sporting performance, prospects for development, physical condition, position, interest from other clubs and the stage of the player’s career are some of the variables that may affect the fee.

It follows that the central issue regarding the valuation is not so much to identify a hypothetical exact value for the footballer, but rather to ascertain whether the value actually attributed to him is reasonably justifiable in the light of the circumstances prevailing at the time of the transaction.

Consequently, indirect indicators take on greater significance: a particularly significant disproportion compared with comparable transactions, the simultaneous nature of reciprocal sales, the absence or limited nature of actual cash flows, the anomalous valuation of players with limited professional experience, or, furthermore, the systematic repetition of transactions structured in a similar manner.

The assessment therefore focuses on the substance and economic reasonableness of the transaction, whilst taking care not to turn what is necessarily a discretionary assessment into an automatic presumption of irregularity.

At times, the investigators’ attention has focused on a perspective opposite to the previous one: the transfer of a footballer between two clubs linked to a common controlling interest. The dispute did not concern the artificially inflated capital gain, but rather the conditions under which the right to the player’s sporting services had been transferred. This raised questions about the failure to include contractual mechanisms that would have allowed the transferring club to share in any future revaluation of the player. The subsequent transfer to a third party did, in fact, result in a significant capital gain which accrued in full to the acquiring club.

In this scenario, the assessment does not merely concern the value attributed to the player at the time of the first transfer but whether, on the basis of the information available at the time, a future increase in value was reasonably foreseeable and whether the decision not to participate in that increase was economically justified.

Where the transaction takes place between associated companies, the assessment is not limited to a formal review of the contract, but examines the economic interests of the individual company and the reasons behind the specific terms of the agreement. In such cases, a subsequent revaluation of the player cannot, on its own, demonstrate that the previous transfer was unreasonable. The assessment must be reconstructed ex ante on the basis of the information available at the time the decision was taken.

Player valuation: A value supported by verifiable evidence and, where possible, by comparable transactions

Related transactions: Presence of reciprocal disposals or other transactions to be assessed on a unified/comprehensive basis

Related parties: Ownership relationships or other links between counterparties that may affect their freedom to negotiate

Company’s interest: Existence of a sound economic justification for the transaction

Contractual clauses: Consistency of bonuses, future resale and price adjustments with the valuations carried out at the time of the transaction

Accounting treatment: Correspondence between actual agreements, including ancillary ones, and their accounting treatment

Traceability: Retention of assessments and the decision-making process underpinning the financial terms