Barcelona & Real Madrid dealt major Financial Fair Play blow by UEFA

Barcelona & Real Madrid dealt major Financial Fair Play blow by UEFA

UEFA has determined that Barcelona and Real Madrid are required to include the sales of future revenue streams as debt in their financial records.

The two fierce rivals in the Clasico face potential consequences due to the implementation of financial mechanisms.

Barcelona and Real Madrid began engaging in such agreements in 2021 following a decision by La Liga, which recognized the activation of these mechanisms as revenue according to their own financial regulations.

However, UEFA recently admonished Barcelona for inaccurately reporting “profits on disposal of intangible assets (excluding player transfers),” which are not considered relevant income under the regulations. As a result, Barcelona received a fine of €500,000.

Last summer, Barcelona faced scrutiny for their decision to sell merchandising and TV rights, as well as their in-house production studio, in exchange for immediate cash injections. This move was intended to provide them with more financial flexibility in the transfer market.

However, their agreement with investor group Sixth Street, worth €266 million, was considered an illegitimate source of revenue in terms of Financial Fair Play (FFP) regulations.

On the other hand, Real Madrid has come under questioning regarding the reporting of €122 million in “other operating expenses” in their recent financial records. Of particular interest is their agreement with private equity group Providence, which is currently being closely examined.

According to The Daily Telegraph, the publication leading the investigation into Real Madrid’s financial reporting, UEFA has notified both Barcelona and Real Madrid that any future sales of revenue streams must be categorized as debt rather than revenue.

Under new Financial Fair Play (FFP) regulations, clubs will undergo assessment over a calendar year, and their expenditures will be limited to a certain percentage of revenue. This percentage starts at 90% in the first year and decreases to 70% in the following two years.

During this three-year period, clubs are only allowed to accumulate losses up to €60 million, which could pose challenges for both Barcelona and Real Madrid.

Barcelona may be compelled to sell players as they have already faced UEFA sanctions regarding their financial records from the previous year. The club had hoped to generate an additional €400 million this year by selling more revenue streams. However, Barcelona recently avoided a ban from the next season’s Champions League in relation to the Negreira case, as UEFA decided against punishment for the time being.

Taking into account their own €360 million deal with Sixth Street, Real Madrid would have reported operating losses of €293 million last year based on UEFA’s criteria.

Barcelona & Real Madrid dealt major Financial Fair Play blow by UEFA

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