The accounting treatments in professional football clubs in Italy from a Business Model perspective

In football-related studies, the main assumption always stated that they are merely seeking sporting results and through them an increase in entertainment-related revenues. Coherently, annual reports include revenues from entertainment activities (e.g. ticket sales, merchandising, TV rights) as the main line item in the income statements. A closer look at the economic determinants of the performance of these entities in Italian context shows that several clubs usually sell the rights of their best players instead of keeping them to produce a more entertaining sporting event. Since not all professional football teams are always high loss-producers, this paper highlights that (i) the reason of the different economic results among football firms is likely be due to the fact that not all they run the same Business Model (some clubs providing “entertainment” whilst other teams providing “developed players”), and (ii) the Accounting Model has to be modified in order to comprehend into the main line item of revenues also the sales of players rights. To strengthen the above arguments, the following have been tested: (i) the association between the “developing and trading” registration rights of worthy players and operating performance; and (ii) the association between the degree of concentration of the boards of directors (as a proxy of the degree of a for-profit orientation of the business) and the operating performance. Strong associations for both the tests have been found, thus underlining that the core activity of Italian football clubs is not merely the provision of entertainment, but there is a strong evidence that most clubs operate in accordance with proper economic criteria. The paper mainly provides a two-fold contribution: first, since it addresses the debate over the use of Business Model (“BM”) in financial reporting that has come to light in recent times (inter alia, see Penman 2007) and is a currently ongoing issue (EFRAG 2013) where the opposing positions seem to be particularly far from each other (Page 2012). Second, as it finds the reason of the “missing link” between operating (or net) results and sporting results of Football Clubs in Italian context: the Business Model profit firms run does not imply sporting results, as they are not entertainment providers. As a result, the contribution of the paper could also help International Football Institutions to better ask for financial and economic requirements and make all the “football stakeholders” (Mass Media, supporters and the Institutions) be fully aware of the current conditions of sustainability for Italian Professional Football teams.