As the summer transfer window is rapidly approaching, and indeed, preliminary deals have already been made, we decided it was time to take a look at how much Chelsea can afford to spend this summer.

After crunching the numbers, we found that Chelsea can easily afford to spend £150m this summer.

If your initial reaction was "this sounds a bit ridiculous," we wouldn't blame you, but we would ask that you bear with us for a moment.

While Chelsea has been taking financial fair play seriously since the regulations were first announced, the club recorded £48m in losses during the first FFP monitoring period (covering the 2011-12 season when the club recorded a £1.4m profit and the 2012-13 season, when the club lost £49.4m).

The next monitoring period covers the 2011-2012, 2012-2013, and 2013-2014 seasons and clubs are only allowed to report around £37m in losses over the three-year period.

How, then, can we state with confidence that Chelsea can easily afford to spend £150m this summer?

First, financial fair play allows for a number of expenditures to be written off, and that £50m in actual losses is reduced considerably by the allowable write-offs. In particular, expenditures on youth development activities can be written off, as can taxes, the depreciation of fixed tangible assets, and certain exceptional items. Chelsea's youth development costs aren't made public, but based on what Barcelona reports it spends on its La Masia setup (over £16m annually), we can very conservatively estimate that Chelsea was able to write off £20m in each year.

This reduces the £48m actual loss during the first monitoring period to an £8m FFP loss, or almost £30m clear of the break-even mark.

In addition, if Chelsea needed to (which it won't), it could also use the wage exemption, which would provide close to £80m in wage write-offs. The club wasn't able use the wage exemption during the first monitoring period, and clearly had no problems meeting the break-even requirement (for reference, the wage exemption is only valid for the first two FFP monitoring periods).

Second, amortisation allows for transfer fees to be spread evenly over the life of the player's contract. Finally, and we'll discuss this in a bit, revenues have skyrocketed this season, and Chelsea can spend freely while remaining compliant with FFP.

Regular WAGNH readers will likely already be familiar with the concept, but for newcomers, amortisation is the process by which an expenditure is paid off over time on the books, and it is a uniform accounting practise employed by football clubs (i.e. it's not just something Chelsea decided to do on its own to make the books look better and it's not something clubs can opt into or out of year-to-year). It's important to note that this is just an accounting practise. Roman Abramovich and Chelsea will still have to pay the full transfer fee immediately, or if the selling club agrees, in installments over the course of a few months (clubs that don't have large amounts of capital at their disposal will often work out short-term payment plans to fund transfer purchases, but this isn't an issue Chelsea has to worry about, and I only mention it to be thorough).

So, for example, Chelsea could easily afford to buy Paul Pogba, Diego Costa, Cesc Fabregas, and Luke Shaw this summer.

On the surface, that sounds a bit absurd, but let's throw some numbers out there.

Paul Pogba - £45m transfer fee and a five-year deal at £150k per week

Diego Costa - £32m transfer fee and a five-year deal at £185k per week

Cesc Fabregas - £30m transfer fee and a five-year deal at £150k per week

Luke Shaw - £30m transfer fee and a five-year deal at £100k per week

Note that these are all fairly high estimates on transfer fees and wages, but when projecting FFP expenses, it's always best to use a higher figure (and when projecting revenues, it's best to use the lower figure).

Those four deals amount to £137m in transfer fees and £30.4m in additional wages in each of the next five years.

It seems like Chelsea would be on the hook for an additional £167.4m for 2014-15, right?

Not quite. For the purposes of FFP accounting (which is really the only sort of accounting that matters where Chelsea is concerned), transfer fees are amortised over the life of the contract. So, Paul Pogba doesn't cost £45m for 2014-15. Rather, he costs £9m in each of the next five seasons (in addition to his wages).

When we factor in the amortised transfer fee and the annual wages, we find that the annual costs are as follows -

Paul Pogba - £17m

Diego Costa - £16m

Cesc Fabregas - £13.8m

Luke Shaw - £11.2m

As we see, that £167m becomes a much more manageable £58m on the books.

While £58m looks small compared to £167m, it's still an enormous amount of money. The question then becomes, can Chelsea afford to add £58m to its FFP wage bill for the next five seasons?

The answer is "yes, easily."

Chelsea's 2013-14 finances won't be released for several months, but we project earnings to be around £340m, which represents a hefty £80m+ increase from 2012-13 (note that this figure includes not only commercial, broadcasting, and matchday revenue, but also the profit from the Juan Mata, Kevin de Bruyne, and Jeffrey Bruma sales).

Commercial revenues steadily increase each year and as the Premier League continues to establish itself as the world's best domestic football competition, broadcasting revenues will continue to increase. As such, Chelsea will likely continue to see steady growth.

The total FFP cost for Chelsea's players (wages plus amortised transfer fee less any transfer profit) decreased from £157m in 2012-13 to £143.4m in 2013-14.

As of today, the 2014-15 "FFP wage bill" is under £125m. We'll roll out an update of our player wage database in the coming weeks, but the departures of of David Luiz, Frank Lampard, Ashley Cole, and likely Samuel Eto'o reduces the wage bill by over £22m. In addition, the transfer window doesn't officially open until 1 July, and therefore, the David Luiz deal can't be finalised until then. 1 July also happens to be the first day of the 2014-15 financial year. As such, the entire £36.5m profit from the Luiz sale will be recorded on the 2014-15 books and is factored into our FFP wage bill.

However, the cost of Nemanja Matic, Mohamed Salah, Kurt Zouma, and Mario Pasalic will double next season. Since these players were purchased in January, Chelsea was only assessed a pro-rated six months worth of costs. As Chelsea is now responsible for the full year, these four players will add just over £8m to the 2014-15 books.

In addition, Kenneth Omeruo signed a new contract (essentially a one-year extension through 2018), and he'll be receiving a pay raise. For the purposes of calculating the 2014-15 FFP wage bill, we're also assuming that Romelu Lukaku, Thibaut Courtois, and Victor Moses will be returning to Chelsea next season. They were out on loan during 2013-14, and on top of paying 100% of their wages, the loaning clubs also paid Chelsea loan fees. As such, the FFP cost of Lukaku, Courtois, and Moses was £2.5m combined during 2013-14. That number rises to about £12.4m in 2014-15. Bringing these players back into the fold is money extremely well spent in my eyes (and especially so when you realise that Fernando Torres, by himself, costs £18.5m per season), but it's worth noting, as it adds nearly £10m to the FFP wage bill.

When it's all said and done, Chelsea has reduced its annual FFP player cost by more than £30m over the past two seasons, while commercial and broadcasting revenues alone have increased by £62m.

This is a £92m swing, and this is why Chelsea can absorb another £58m in FFP player costs while remaining compliant with financial fair play.

That £58m in player costs, of course, works out to over £167m in actual costs for 2014-15, and as such, we're actually being very conservative when we state that Chelsea can easily afford to spend £150m this summer.

Now, just because the club can afford to spend freely doesn't, by itself, mean that it will. However, Roman Abramovich has proven (literally billions of times over) that he is happy to spend if it will increase the club's chances of success.

As he said over ten years ago when he first bought the club, "it's not about making money. I have many much less risky ways of making money than this. I don't want to throw my money away, but it's really about having fun and that means success and trophies."

As such, we should fully expect Chelsea to have a very busy summer, and we should see quite a few new faces in both the first team as well as in the ever-growing army of young talent on loan.