I’ve been watching Formula 1 for a while now. The strategy, the engineering, the politics in the paddock — it’s endlessly interesting. But recently I found something that made me even more interested as an accountant: you can pull the actual financial filings for McLaren, Mercedes, and Red Bull and read them side by side.
What I found wasn’t a scandal. It wasn’t fraud. It was something far more interesting to anyone who works with financial statements: three companies doing virtually identical work — designing, building, and racing Formula 1 cars — accounting for that work in three genuinely different ways. All of them audited. All of them compliant. All of them correct.
Why F1 Financials Are Public
Most people don’t realize this, but the majority of F1 teams are registered as UK companies. That means they’re legally required to file full annual accounts with Companies House, Britain’s public company registry. These are 60–70 page filings covering revenue breakdowns, operating margins, staff headcount, executive compensation, asset schedules, and accounting policy notes — all free to download.
A Little Context: The Cost Cap Changed Everything
Before 2021, F1 had almost no financial regulations. The biggest teams spent $300–500 million a season. Then the FIA introduced the cost cap — a hard annual spending limit on all costs related to designing and running the car, currently around $140 million per year. Driver salaries, executive pay, and marketing are excluded, but everything touching the car itself is in scope.
The cost cap required something F1 never really needed before: rigorous, audited, line-item financial reporting. Teams submit hundreds of pages of documentation annually. The FIA’s Cost Cap Administration spends roughly seven months reviewing every dollar. McLaren posted a £54 million profit in 2024 — after years of chronic losses — largely because they won the Constructors’ Championship for the first time since 1998. F1 teams have gone from money-burning hobbies to profitable franchises with PE and sovereign wealth fund backing.
Three Teams, Three Sets of Books
McLaren operates as a commercially independent entity backed by Bahrain’s Mumtalakat sovereign wealth fund. Its P&L lives and dies by on-track performance.
Mercedes is manufacturer-backed. Mercedes-Benz Group views the racing team as a global marketing platform. Team principal Toto Wolff personally owns 33% of the entity.
Red Bull Racing is a wholly-owned subsidiary of Red Bull GmbH. Profitability at the racing entity isn’t the primary objective — the team exists to generate brand value for the parent.
The Clearest Example: How Each Team Accounts for Next Season’s Car
Every F1 team spends significant money during the season designing and building the car they’ll race next year. Same activity. Same purpose. Same underlying cost. Here’s how each accounts for it:
Mercedes (~£54M) capitalizes next-season car development as a distinct current asset — labeled “Race Car Development” on the balance sheet. The logic: this design work creates a future economic benefit, so defer the cost to the period it generates revenue.
Red Bull (~£17M) carries cars under construction as work-in-progress inventory — consistent with how a manufacturing subsidiary thinks about its production pipeline.
McLaren (~£20M) bundles car development into a mixed inventory line alongside physical parts. No clean separation between intangible design work and physical stock.
All three approaches have support under IAS 2 (Inventories) and general accounting principles. None of them is wrong. But they produce materially different balance sheet presentations — and different signals about how each team thinks about its business.
The Margin Story: Structure Shapes the Numbers
McLaren’s margin swings dramatically with results. Mercedes shows moderate, improving margins. Red Bull? Flat 3–5% every single year — winning seasons, losing seasons, COVID year.
That flat line isn’t a racing outcome. It’s a policy decision made at the parent level. Red Bull GmbH funds the racing entity on a cost-plus basis — the subsidiary earns a small fixed return while economic value accrues at the parent. This is transfer pricing in action, and it’s entirely legitimate.
What This Means for Accountants
Two judgment calls stand out from this comparison:
1. Capitalize vs. expense. When does spending on next year’s product become an asset rather than a period cost? Mercedes says capitalize it. A more conservative preparer might expense as incurred. Both have support in the standards. Under US GAAP and IFRS, this decision requires genuine professional judgment — not a lookup in a table. The choice affects your asset base, EBITDA, return on assets, and every ratio your stakeholders use to evaluate you.
2. Intercompany structure and transfer pricing. What margin does a subsidiary earn? What costs flow to the parent? Red Bull’s flat margin is a direct consequence of how Red Bull GmbH has structured the relationship. Every company with subsidiaries, divisions, or intercompany transactions faces this question — and the answer shapes reported profitability in ways that have nothing to do with how well the underlying business performed.
The Bottom Line
The next time someone tells you “there’s only one way to account for this” — think about McLaren, Mercedes, and Red Bull. Three world-class finance teams. Three external auditors. One sport. Three very different books.
GAAP isn’t a racing line. It’s a lane. The professional judgment you exercise within that lane shapes every number your stakeholders use to make decisions. That judgment is the job.
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