PRISMA Trial: Will the “suspicious partnership thread” collapse like a sandcastle?

The article that follows is by Prof. Fabrizio Bava, a highly esteemed figure in the field of economics and finance. He is a Full Professor in Business Economics in the Department of Management at the University of Turin. He is also responsible for the course on business auditing (third-year course, degree in business economics), co-responsible for the course on OIC balance sheets and non-financial reporting (first-year master’s degree in business administration and corporate control), and co-responsible for the course on legal audit of financial statements (first-year master’s degree in professional accounting).

PRISMA Trial: Will the “Suspicious Partnership Thread” Collapse Like a Sandcastle?
Why the Dismissal in the Orsolini Case Is Great News for Juventus (and IAS 28, par.45 Has Nothing to Do with This Matter)

Among the numerous criticisms leveled at Juventus, there is the recording of a capital gain of €11,049,000 in the balance sheet as of 30.06.19 relating to the transfer of Orsolini to Bologna. The dispute does not concern the amount of the capital gain or the failure to account for it as a swap (it was not an exchange). Instead, it arises from the discovery of a private document qualified by the prosecution as a “buyback” agreement (i.e., a clause that allows the repurchase of the player after a certain period at a predetermined price), which was not provided for in the contract and, therefore, not deposited with the competent authorities. When a player is transferred with a buyback option, it is not possible to record any capital gain in the financial statements until the club renounces the exercise of that option. The rule, as set out in Article 102 of the NOIF of the FIGC, is also consistent with IAS/IFRS regulations (the accounting principles applied by Juventus as a publicly traded company). Indeed, the selling club retains control of the player, as it can decide to exercise the option and repurchase the player in the future. Consequently, IAS/IFRS does not allow for the immediate recognition of the capital gain. The crucial question to resolve is: What value do side letters, which have not been deposited and signed by the player, have? According to the GUP of the Bologna court, which dismissed the case in response to the request of the Prosecutor, these side letters have no value. They are, as the title of the document found in the searches seems to indicate, merely a reminder, an agreement between gentlemen that cannot be enforced in any way. According to the PM (public prosecutor) and the chief prosecutor, the side letter “cannot support the legal, documented existence and, above all (with overriding value), the enforceability in the event of dissent or non-performance.” As a result, in my opinion, Juventus correctly recognized the capital gain in the financial statements for Orsolini’s transfer, as it should be classified as a definitive transfer. Furthermore, Article 102 NOIF (letter b, paragraph 4) is very clear and states: “4. In definitive transfer agreements, the selling club that transfers the right to the player’s sporting performance and the buying club that acquires that right may simultaneously include an option clause in favor of the selling club, in order to grant the latter the right to definitively repurchase the right to the player’s sporting performance transferred, subject to the following conditions: a) (omissis) b) the clause regarding the option right must be, under penalty of nullity, signed by the player with an express declaration of acceptance of all consequences of the exercise or non-exercise of the option right.” According to Avv. Mattia Grassani (as reported in the newspapers), “this is a ruling (…) that can well serve as a precedent for other pending proceedings before various ordinary judicial authorities involving similar situations. The key point, in my opinion, the real turning point of today’s decision is that it finally puts in black and white that a document with the nature of a private document, not deposited with the competent federal bodies, is of absolute irrelevance to the general legal system. And similarly, it should also be the case for the sports legal system, whose proceedings are currently suspended, with the result that what has not been submitted to the scrutiny of the technical bodies of the federation cannot give rise, in addition to criminal liability, even to disciplinary liability.” The same conclusions should also apply to other similar situations that have been widely reported in the newspapers in recent months. I would like to remind you that, with regard to the sports trial, the side letter thread has already been the subject of a plea bargain.

Link to the original article here.

A heartfelt thank you to Prof. Bava for granting permission to publish this.

A heartfelt thank you to Professor Bava for granting permission for publication.