When Chelsea secured the signings of Mykhailo Mudryk, Enzo Fernández, Moisés Caicedo, and others during the 2023 transfer windows, the length of their contracts, spanning eight to eight and a half years, raised eyebrows across football. The club’s record-breaking fees appeared at odds with the Premier League’s Profit and Sustainability Rules (PSR). However, by using a legitimate accounting method known as amortisation, Chelsea spread the financial burden of these deals over the duration of the contracts, allowing them to present a healthier balance sheet and remain within PSR limits. While this strategy was technically within the rules, it did not go unnoticed.  Amortisation, while a lawful accounting practice, was increasingly being used in ways that pushed the boundaries of financial regulations. In response, UEFA and the Premier League introduced reforms to close what many saw as a significant regulatory gap. This article will explain the concept of amortisation, assess Chelsea’s use of this method during their 2023 transfer dealings, and examine why regulatory bodies felt compelled to intervene. To understand how Chelsea utilised this strategy, it is essential to first grasp how amortisation works in football finance.

What is amortisation?

Amortisation is an accounting method that allows football clubs to spread the cost of a player’s transfer fee evenly across the duration of their contract, rather than registering the entire amount as an immediate expense. When a player is signed, their transfer fee is recorded on the club’s balance sheet as an intangible asset. Rather than deducting the full cost in the financial year of acquisition, the club spreads, or amortises, that value incrementally over the life of the contract. For example, a player signed for £50 million on a five-year contract would be amortised at £10 million per season. After the first year, the player’s book value is reduced to £40 million, decreasing by the same amount annually until the contract expires or the player is sold.

It is important to note that amortisation is entirely separate from the actual cash flow between clubs. It is a purely accounting-based mechanism that dictates how transfer costs are reflected in financial statements, rather than when payments are actually made. This method is crucial for clubs seeking to comply with the Premier League’s Profit and Sustainability Rules (PSR), which limit allowable losses to £105 million over a rolling three-year period. By spreading the transfer fees over several seasons, amortisation enables clubs to reduce the reported financial impact of big-money signings in any single year. In doing so, it provides flexibility to continue investing in the transfer market without immediately breaching PSR limits.

Chelsea FC 2023 Case Study

In the aftermath of Russia’s invasion of Ukraine in February 2022, the UK government sanctioned Roman Abramovich and compelled him to sell Chelsea FC. In May 2022, a consortium led by American investor Todd Boehly, chairman and CEO of Eldrige Industries, alongside private equity firm Clearlake Capital, completed a £4.25 billion takeover of the club.

Under the new ownership, Chelsea embarked on an unprecedented spending spree. In the January 2023 transfer window, the club signed Enzo Fernández from Benfica for a then-British record fee of £106.8 million. Just months later, they broke their own record by securing Moisés Caicedo from Brighton & Hove Albion for £115 million after a fierce bidding war with Liverpool. What set these acquisitions apart was not only the magnitude of the transfer fees, but also the extraordinary length of the contracts offered. Fernández and Caicedo were handed deals of eight and eight and a half years respectively, far exceeding typical industry norms.