Commentary: Juventus case lays bare football’s rotten finances

Football may be the beautiful game, but success on the pitch requires an ugly financial battle to sign top players and pay their vastly inflated wages. 

Monday’s resignation of Juventus Football Club SpA’s entire board of directors,

including chairman Andrea Agnelli, amid multiple investigations into the club’s financial reporting, is a searing moment for the club and the wider football universe.

Though the sport is governed by so-called financial fair play guidelines, teams continually look for creative ways to secure an advantage. After all, relegation to a lower league or failure to qualify for or win major competitions can be economically disastrous.

With Italian regulators and public prosecutors continuing to probe financial statements made by Juventus in recent years, the fresh start the resigning board members said they are seeking looks unlikely, and any potential buyers of the team may be deterred. 

As a publicly traded club, albeit one with the wealthy Agnelli family holding company Exor behind it, Juventus has to be especially careful about how it communicates financial information.

At least in one respect – player wages – it fell short, prompting auditor Deloitte to qualify its opinion on Juventus’ latest accounts last month.

The board’s resignation over this issue might seem excessive, but it’s not the first misstep. Losses have ballooned, in part due to the pandemic’s impact on ticket sales, while the much ballyhooed signing of Cristiano Ronaldo in 2018 did not deliver a long sought-after Champions League victory.

Juventus raised a total of €700 million (S$991 million) in two rights offerings in 2019 and 2021, which is roughly the same as its current much-diminished market capitalisation. And Agnelli’s much-criticised attempt to form a European Super League came to nought last year.

Juventus has faced two big question marks over its accounting.

First, players waived tens of millions of euros of their wages for two seasons during the pandemic, which allowed the club to temporarily book lower expenses.

However, many players had side deals guaranteeing them much of the foregone money in subsequent seasons. Italian financial regulator Consob and auditor Deloitte say Juventus should have recognised that liability at the time (Ernst & Young audited Juventus’ accounts until June 2021).

The club plans to amend its financial reporting of this matter, while noting there was no impact on cash or net debt. In effect, the €254 million loss Juventus reported in 2021-2022 was overstated, whereas prior years were understated.

A second, more controversial, probe involves financial gains from player sales, which have been a key source of revenue for Juventus and other European clubs in recent years.

The issue is whether the capital gains Juventus booked when team members were effectively exchanged with those from rivals in so-called cross transactions were excessive, given many players were young and relatively inexperienced.

Consob forced Juventus to disclose alternative financial figures earlier this month, saying the club had failed to supply adequate evidence of “reasonableness” of the fair value for players involved in several transfers.

Juventus says its accounting is in line with the rest of the football industry, the value of players is ultimately subjective and any fair value gains are amortised over several years (and thus do eventually impact profits).

Deloitte did not raise any objections over this issue when it signed off on the latest accounts, but rivals have not been so understanding:

Spain’s La Liga wants immediate sanctions on the Italian club over its accounting issues.

European football’s governing body Uefa overhauled financial fair play rules in 2022 to include new financial stability, solvency and cost-control tests, and introduced a requirement that all transactions are conducted at fair value.

While there is hope this will curb the growth in player wages and promote a more financially sustainable industry, I fear the temptation to cut corners to secure victory on the pitch will remain. BLOOMBERG OPINION