Creative Accounting, the Italian way

I read with great interest today that BT’s value on the stock market has dropped by 21% thanks to accounting irregularities from their Italian subsidiary.

BT originally estimated what the auditors KPMG called ‘improper accounting practises’ would cost £145 million, but has now risen to £530 million, to add to the £8 billion loss of value on the stock market.

A disastrous day for BT, which may yet have wider repercussions. This story of creative accounting echoes back to when Italian football clubs embraced improper accounting practices.

In the 1990s, as Italian football was at its peak, clubs overextended themselves on exorbitant transfer fees, so they developed a system of accounting called ‘plus-valenze‘.

One aspect of plus-valenze was that sales went immediately into the accounts, but purchases were spread over the duration of the contract, to give balance sheets a healthier look. Another way Italian clubs creatively avoided handing over money was by swapping players for the same price. The classic example of this is when the legendary Fabio Cannavaro went from Inter to Juventus for €10 million, whilst reserve goalkeeper Fabian Carini went the other way for the exact same price. Officially, both clubs spent €10 million, but money did not really change hands.

Two clubs that were the most creative with plus-valenze were Lazio and Parma. They were bankrolled by Sergio Cragnotti and Calisto Tanzi, both of whom were heads of huge food corporations (Cirio and Parmalat) and who spent huge amounts of money they did not have to compete with the likes of Juventus, Inter and AC Milan. Both Cragnotti and Tanzi are now in prison for bankrupting their respective companies, with Tanzi presiding over one of the greatest financial scandals in European history as a €14 billion pound black hole was found in Parmalat’s accounts.

As the old maxim goes, ‘history does not repeat itself, but it does rhyme,’ Italian accounting comes closest to disproving that.


The information for Italian football’s creative accounting comes from John Foot’s seminal work Calcio: A History of Italian Football (2006), pp. 537-545.


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