How are Chelsea still spending? loads are asking. And it is a valid question considering that they are now close to £1b under their new owners.

Back in May, I explained how Chelsea had spent so much in such a short time, and not much has changed since then.

Amortisation is not something new that Chelsea discovered, nor is it an accounting fiddle or loophole. It is a method that has been used by every club for decades. It is also used by businesses when they are buying expensive assets.

In football terms, it involves spreading the cost of a transfer over the length of the contract – although from 2023/24 the maximum a club may amortise a fee for is 5-years after FIFA changed the rules in response to Chelsea handing out 8 and a half year contracts.

So that means if a club buys a player for £50m, they only need to declare £10m in that years accounts. And then a further £10m for each of the next 4-years.

It is important to note that amortisation is different to paying the selling club in installments. You can pay 100% of the fee upfront but still amortise the fee over the length of the contract.

In 2021/22, the year before Todd Boehly and his team took over, Chelsea’s player amortisation was around £160m.

My back of a fag guestimation is that it has only risen to around £180m (prior to Moises Caicedo joining). Why has it risen so little? Two reasons.

Contract lengths

In the last 18 months, Chelsea were signing players to long term contracts not really seen before in football. 7, 8 or 9 year deals (that are common place in American sports). They were then able to amortise those fees over the length of the contract.

As above, FIFA (or it might have been UEFA) have since changed the rules and clubs can no only amortise for a maximum of 5-years, no matter the contract length. This only comes in for deals done from the 2023/24 transfer window onwards.

Had Chelsea not got in before the rule change, their player amortisation would be around £30m more a season than it is now, which in turn would show a £50m increase on 2021/22.

That £30m a year is worth around an additional £150m in transfer fees over 5-years.

Player sales

When a club sells a player, any remaining amortisation value is due within the same financial year.

Each player has a “book value” which is what the club has yet to amortise into the club accounts.

As an example, if you buy a player for £50m and sell them for 2-years later for £30m, this would show a break even in the accounts. Whilst if you sold them for £40m, it would actually show as a profit.

Players also leaving on a free transfer after their contract expires also represents a “break even”. And if that player was costing you £7m a year, it is £7m a year you can spend elsewhere without seeing an increase in your total player amortisation.

Also, players that come through the academy or on a free transfer have zero amortisation value. Sales of these players is 100% book profit.

So far in this window, Chelsea have sold around £250m worth of players. Their departures represent around a £50m saving in amortisation.

In basic terms, that means that they can spend £250m on players, with 5-year deals, and their yearly amortisation would not increase.

On top of that, the departures have generated around a £130m profit once remaining amortisation values of those departing has been offset.

---

So a mixture of longer contracts and some some good sales has “financed “free’d up” around £80m a year in player amortisation costs. Spread over 5-year deals, that is close to £400m in additional signings.

Now whilst a lot of people will be saying “why does every club not doing this?”, there is a simple answer. It is a huge risk.

Player amortisation is like an ocean current. It flows in and out.

At the end of every season, a club would normally have some level of amortisation drop off the accounts (either due to sales or that players fee being fully amortised). That then free’s up space in the budget to add new players without see expenditure increase from the previous year.

Chelsea are securing players on long term contracts. That means that these players will not be fully paid up within the accounts for up to 9 years.

At the end of the 2023/24, they do not have a single player whose original transfer fee will be fully amortised. That means any new players will have to come from new revenue (either an increase in commercial / TV revenue or player sales).

Taken further, up until 2026, they only have Hakim Ziyech, Malang Saar and Romelu Lukaku whose contracts will be fully accounted for. That will give them the space to spend £155m on new players over the next across the summers of 2024, 2025 and 2026 unless they make sales.

Meanwhile, Arsenal have Nicolas Pepe, Jorginho, Martin Odegaard, Thomas Partey, Takehiro Tomiyasu, Nuno Tavares, Ben White, Aaron Ramsdale, Oleksandr Zinchenko, Leandro Trossard, Kieran Tierney and Albert Sambi Lokonga set to become fully accounted for over the next 3 seasons.

That would free up £385m that can be spent over the 3 periods mentioned above. Obviously some might be sold prior to these, giving us more (and less to spend), or new commercial deals / Champions League money gives us even more freedom.

I bet by the end of 2026, Arsenal would have spent around the same in 5 years as Chelsea. The difference will be we spent ours across 5 seasons, they spent it across 2.

To put simple, Chelsea have done 5 years business in 2 seasons. They have taken a huge risk and are relying on these players on long contracts to become superstars.

As always, sums and figures are approximations. No one knows the exact amount a team has spent on transfers. But hopefully this shows how Chelsea are doing it, and staying within FFP. But are also banking on this crop of players being the ones that take them to the top.

Chelsea have very little room for error with this transfer strategy.

Keenos

New in to the store!

What we saying Arsenal fans?https://t.co/0H7NBI8lXt pic.twitter.com/CJVcMZoVH5

— Kick Off Merchants (@KOMerchants) August 3, 2023