Is F1 financial regulations total garbage?

[Xwang]

What do you think about them, their implications and enforceability?
From my point of view the cost cap in F1 is completely not enforceable and moreover all the verification process is done at the end of a championship (up to 5 years after).
I personally doubt that if a team overspend a lot and win a championship, FIA will change the results months after the championship ended.
Let's speak about it.

[ENGINE TUNER]

Nothing matters until Ferrari sign the new Concord agreement.

[subcritical71]

What makes you think that the verification process will not work. Various media outlets are already able to make good analysis of team spending based on publicly available financial data. I’m sure the FIA will have more to go on then publicly available data. There are very big companies out there whose sole job is to audit a companies books, it isn’t anything that is impossible to do.

[Big Tea]

There can be a lot of un traceable crossover not only from other series but between related F1 teams that can not be pinned. Something in someones head (or notebook) that cost a lot of time and money can move from one place to another overnight.

It is good to see some sort of effort made, though as Brawn says, it wil take a lot of tweaking in the coning seasons.

[Xwang]

What makes you think that the verification process will not work. Various media outlets are already able to make good analysis of team spending based on publicly available financial data. I’m sure the FIA will have more to go on then publicly available data. There are very big companies out there whose sole job is to audit a companies books, it isn’t anything that is impossible to do.

The huge differences in laws and accounting rules in different countries and moreover the fact that this regulations seems to be very "gray" and subjective (as everything related to economics IMHO).
For example the concept of "Fair price" is ridiculous in an environment full of Wolfs like F1.
Moreover the auditing companies often do mistakes (on purpose or not) (see https://en.wikipedia.org/wiki/Financial ... %80%932008 for example).

[FrukostScones]

another playing field for cheating.
flexi financials.

[subcritical71]

What makes you think that the verification process will not work. Various media outlets are already able to make good analysis of team spending based on publicly available financial data. I’m sure the FIA will have more to go on then publicly available data. There are very big companies out there whose sole job is to audit a companies books, it isn’t anything that is impossible to do.

The huge differences in laws and accounting rules in different countries and moreover the fact that this regulations seems to be very "gray" and subjective (as everything related to economics IMHO).
For example the concept of "Fair price" is ridiculous in an environment full of Wolfs like F1.
Moreover the auditing companies often do mistakes (on purpose or not) (see https://en.wikipedia.org/wiki/Financial ... %80%932008 for example).

Then it’s all about enforcement? No industry is perfect, but no one is going to write an article about how many get it right, are they. As for the link, I don’t see what financial risk models have to do with financial reporting like what is happening in F1. F1 teams aren’t hedging subprime mortgages.

But we will have to see how that plays out. I’m encouraged because they are doing the prudent thing and having a one year trial to see how all this will work.

They could set up a whistle blower fund, make it large enough that it will pay a persons wages for years to come (say a couple of 10 million - because their career in F1 would be over) and I don’t think any company would risk it. Who wouldn’t turn in their employer for $10M+. That $10M+ payout comes from the prize fund originally allocated to the offending team as they would most certainly be excluded and ridiculed in business circles.

[turbof1]

What makes you think that the verification process will not work. Various media outlets are already able to make good analysis of team spending based on publicly available financial data. I’m sure the FIA will have more to go on then publicly available data. There are very big companies out there whose sole job is to audit a companies books, it isn’t anything that is impossible to do.

The huge differences in laws and accounting rules in different countries and moreover the fact that this regulations seems to be very "gray" and subjective (as everything related to economics IMHO).
For example the concept of "Fair price" is ridiculous in an environment full of Wolfs like F1.
Moreover the auditing companies often do mistakes (on purpose or not) (see https://en.wikipedia.org/wiki/Financial ... %80%932008 for example).

Accounting in F1 will not be something like IFRS or US GAAP; there will standardized regulations, which will not have anything to do with national or international laws, that will apply in the exact same way for every team. Let us not confuse accounting standards set up for companies, which can differ from country to country depending on consolidated financial statements or not, with the intern set standard for F1. These will be separated in the same way management accounting is different from external accounting.

And yes, the financial rules will open a whole new window where team will try to circumvent the spirit of the rules, not to mention outright financial cheating. This will be a long proces of refinement. But it will end up being that.

[63l8qrrfy6]

Utter garbage.

Many teams share HQs with non-F1 businesses . Who will watch every single employee to make sure non-F1 staff don't do F1 work every now and then ?

Where do you draw a line with the expenses ?

If the cook feeds both F1 and non-F1 personnel does that make him F1 staff ? You can see where this is going..

[wesley123]

The cost cap is a great example of people forgetting it is a team sport. The teams can still spend as much and just hire more manpower.

[izzy]

Then it’s all about enforcement? No industry is perfect, but no one is going to write an article about how many get it right, are they.

I can see how it'll make them spend less than now, but not how it'll make them spend the same. There are so many ways to buy things that can be cheap or expensive depending on the development, if it's 'a sponsor' etc etc. So many loopholes.

Cheat's charter really. And already we know the big teams are spending big on their infrastructure, so for years their same budget will go further. And as the op says are FIA really going to, for example, DQ Ferrari years later after they've finally finally won a championship again?

So it is about enforcement, and teams know there won't really be any. Even if FIA somehow nailed them with evidence, they won't destroy the sport: the problem teams are all 'too big to catch'

[turbof1]

If the cook feeds both F1 and non-F1 personnel does that make him F1 staff ? You can see where this is going..

In management accounting there are ways to allocate that. You'd just take total cooking costs (and believe me, there are intern accountancy records of that) and allocate costs based on the F1/noneF1 staff ratio. Any costs shared and not immediately being able to directly allocate to a specific F1 cost post will be dealt roughly that way. Yes, this will require refinement because you can under or over allocate costs this way, but it is possible.

Also, I want to stress again this not a national or international accountancy standard, meaning you are neither dealing with the associated institutions that decide on accountancy regulations. There are no intricacies, trade rules, etc to be considered. That makes governing and adjusting the financial regulations a lot easier.

[63l8qrrfy6]

If the cook feeds both F1 and non-F1 personnel does that make him F1 staff ? You can see where this is going..

In management accounting there are ways to allocate that. You'd just take total cooking costs (and believe me, there are intern accountancy records of that) and allocate costs based on the F1/noneF1 staff ratio. Any costs shared and not immediately being able to directly allocate to a specific F1 cost post will be dealt roughly that way. Yes, this will require refinement because you can under or over allocate costs this way, but it is possible.

But that would imply very robust regulations that explicitly deal with any such ambiguous situations - I totally agree it is possible, however I highly doubt it will ever be implemented effectively.

I would think that the technical and sporting regulations are relatively easy to define and police compared to the economical regulations yet look at all the controversies we've had this season!

Hell, skimming is an art perfected long before this sport even existed..
If people are amazed by engineers pushing the rules just wait and see what the accountants can do.

[turbof1]

If the cook feeds both F1 and non-F1 personnel does that make him F1 staff ? You can see where this is going..

In management accounting there are ways to allocate that. You'd just take total cooking costs (and believe me, there are intern accountancy records of that) and allocate costs based on the F1/noneF1 staff ratio. Any costs shared and not immediately being able to directly allocate to a specific F1 cost post will be dealt roughly that way. Yes, this will require refinement because you can under or over allocate costs this way, but it is possible.

But that would imply very robust regulations that explicitly deal with any such ambiguous situations - I totally agree it is possible, however I highly doubt it will ever be implemented effectively.

I would think that the technical and sporting regulations are relatively easy to define and police compared to the economical regulations yet look at all the controversies we've had this season!

Hell, skimming is an art perfected long before this sport even existed..
If people are amazed by engineers pushing the rules just wait and see what the accountants can do.

It will the same philosophy basically: there will be financial rules to be circumvented, and the FIA will have to react. And no, nobody is expecting a full clear on the first pass. It will be years of refining. But again: this is neither international accountancy. This is not a case where a company can make use of one country's accountancy rules to get financial benefit out of a different country.

It will be difficult. They are doing a trial run for a reason next year. But the deep dive has to be made.

[3jawchuck]

... If the cook feeds both F1 and non-F1 personnel does that make him F1 staff ? You can see where this is going..

Catering is not a performance part of the team, so would be exempt from the budget I think.