French club Paris Saint-Germain (PSG) just keeps on spending like a drunken sailor with a limitless credit card. This week the Paris club acquired three more players at an initial cost of around $150M.

Uruguay striker Edinson Cavani arrived from Napoli for $84M followed later in the week by two young defenders – Lucas Digne (Lille) $19M and Marquinhos (Roma) $42M.

Edinson Cavani has a pedigree having earned international recognition with Uruguay first at the FIFA under-20s in 2007 then at the 2010 World Cup Finals.

As a teenager he moved to Italy to play for Palermo but it was move to Napoli that turned him into a world star.

Digne has a couple of senior seasons under his belt but he wasn’t even the best left back at the recent FIFA under-20 World Cup in Turkey. Marquinhos has only played one season Europe and PSG decided that was enough the make him the 5th most expensive defender in history.

Roma paid less than $5M a year ago and so their return of 8 times on their investment in just 12 months is truly astounding.

But there again, everything to do with PSG over the last couple of years has just been additional degrees of astounding. This week’s spending brings PSG’s total transfer outlay to around half a billion dollars since the summer of 2011. The onslaught of spending kicked off when the Qatar Investment Authority bought the club two summers ago for $135M.

It started with transfer spending of $142M but that wasn’t sufficient to win Ligue 1. Close to $200M was spent in 2012/13 and that brought a Ligue 1 championship and got PSG to the last eight of the UEFA Champions League.

PSG was only formed in 1970 and has rarely been profitable. Prior to the Qatar buyout the club had recorded losses for over a decade. The year prior to the takeover PSG recorded a loss of $37M.

So with such profligate spending surely PSG must be drowning in red ink?

Well, not according to PSG’s financial statements for 2011/12.

To everyone’s great surprise the loss for the year to June 2012 – the first full year of operations under the new owner ship – was only $7M.

We do know that rather than booking transfer fees in the year the player was acquired clubs are able to write-off the fee over the life of the player’s contract – just as a company would do in accounting for a fixed asset.

That means that fees of $150M would be written down by $37.5M each year assuming each player signed four year deals. But even with an accounting break it seems odd that PSG’s loss for 2012 would be $30M less than the year previous.

Salaries and wages went up from $62M ($91M to $153M) and overall expenses increased by over $127M. That means in order to reduce their year to year loss PSG increased their revenues in one year by around $160M and that is pretty spectacular.

No other club has managed to engineer such explosive revenue growth.

So, where did the money come from between 2011 and 2012?

Commercial deals – dropped by $18M

TV revenue – up by $2.7M

Gate receipts – up by $9M

That amounts to an overall reduction of $6.3M rather than an increase of $160M.

In fact, the increase in revenue did not come from what we might be described as regular football and associated activities.

It was down to the excellent and insightful website Financial Fair Play.co.uk to identify the smoking revenue gun.

Line four of PSG’s financial statement for 2012 has “Autre produits” (other revenue) of €125M or $160M – that means over 50% of revenue came from money the owners found down the back of the couch.

Well not quite, Financial Fair Play.co.uk has another explanation although not necessarily a more satisfactory one.

FFP.co.uk makes a pretty good case that the other revenue is in fact a very questionable deal made between PSG and the Qatar Tourism Authority. Announced in late 2012 the deal was reported to be worth $900M over 4 years.

The value of the deal is larger than anything else seen in world soccer and what is more the QTA doesn’t seem to get much for their money. No naming rights, no kit deal – all PSG is obliged to do is to help promote Qatar as a tourist destination.

But it gets worse. I am sure that a number of you will have noticed a discrepancy – some of you might even have already written a comment about “lazy journalism” or “inadequate fact checking.”

Yes the financial statement was for the year to June 2012 and yes the deal was not in place till late 2012. So how can one impact on the other?

Good question and not one that seems to have bothered the preparer of said statements. The $160M in “other revenue” almost certainly accrued from a commercial deal that had very little to do with a commercial transaction and that wasn't even consummated during the financial year in question.

So how can PSG hope to get away with something like this when UEFA Financial Fair Play (approved and signed off by over 200 of Europe’s leading clubs) and the drive towards sustainability is now a reality and 2012 is the first year of monitoring?

That question is one that will not be completely answered until the spring of 2014 when it is expected that the independent Club Financial Control Panel completes the review of clubs’ statements for 2012 and 2013 and assesses one of nine possible sanctions on transgressors.

The legitimacy of the PSG/QTA deal will be central to the Control Panel’s review.

The first question is whether or not the PSG/QTA deal constitutes a Related Party Transaction.

If it is not a RPT then UEFA can not reassess or review the transaction. Simply put if you are daft enough to given an already rich owner more money for little or no return then good luck to you.

However, if it is found to be a RPT then things change dramatically.

The Financial Fair Play regulations define a RPT and it can be found by clicking on the link and moving to pages 83 through 85.

The simple explanation is that the RPT exclusion is there to prohibit the seemingly conventional wisdom loophole of an owner getting another of his companies to buy seats at $5,000 a game or some other ridiculous amount.

If a transaction is deemed to be a RPT then the only revenue that can be recognized for the purpose of the break-even calculation is that deemed to be at “fair value.” “Fair value” is a well recognized concept and essentially prices a transaction at what two individuals negotiating in good faith would agree to.

If PSG and QTA are deemed to be related parties – and there is a very good chance that they will given that they are both arms of the Qatar government – then it is impossible for PSG to meet the break-even provisions of UEFA Financial Play. (Others have suggested that all PSG and clubs in a similar situation need to do in order to avoid sanctions is to show financial progress. That interpretation is dependent on costs attributable to contracts signed prior to June 2010 being the cause of the shortfall. Financial progress alone is not enough).

PSG may find that there are lots of clubs willing to take their money for overpriced players but there will be even more cheering should UEFA use them as a high profile example.

There again between PSG and the on-going controversy of the 2022 World Cup Finals award Qatar is guaranteed a lot of name checks. Nice to know that you get something for a few billion dollars.

Qatar facts

So what will $900M over four years promote in Qatar?

Qatar has a population of 1.8M.

The number of tourists visiting Qatar has increased from 964,000 in 2007 to 2.5M in 2011.

Projections show a continued increase through to 2022 with 3.7M visitors expected.

A report from Deloitte estimated that Qatar will spend $200B to host the 2022 World Cup Finals.

$140B will go into the likes of transportation infrastructure and another $20B to support infrastructure for tourism.

For comparison purposes Las Vegas attracted 39M visitors in 2011.