THEY are the rules that critics say thwart the ambition of smaller clubs to take on the football establishment, while others believe they help cap excess in the richest league in the world.

As the summer transfer window closes, the Profit and Sustainability Regulations of the Premier League are often cited as why clubs chose to transfer or loan players or invest in future academy stars.

Last season, the league acted by fining Everton eight points, Nottingham Forest four points, and charging Manchester City with non-compliance. But how do they apply to a club like Saints after a season away in the English Football League?

The headline number is £105m, being the cumulative value of adjusted losses before tax over a three-year period that clubs need to stay under, but possible penalties can start sooner than that.

A cumulative triennial adjusted loss before tax of more than £15m but below £105m, means a club needs to demonstrate access to “secure funding” through received equity or a legally binding commitment from an equity participant, to recover loss positions from the previous two seasons, and any forecast losses in the next two years.

This means clubs can fund losses through committed equity investment up to this limit.

Otherwise, the league can invoke rule E.17, which could impose a restrictive budget, prohibiting the purchase of new players and the offer of contract extensions to existing players.

If cumulative adjusted losses over three years exceed £105m, then rule E.17 can continue to apply, along with a referral to a Disciplinary Commission, the outcome of which could be fines or points deductions.

The £105m threshold has been frozen since 2013, but what is behind the cumulative adjusted loss calculation?

First, if as of 31 March, the sum of a club’s statutory earnings before tax for its two preceding financial years are loss-making, then it must submit a calculation of its “aggregated adjusted earnings before tax” for those years and its forecast for the current season.

Adjusted earnings before tax is statutory profit before tax adjusted to exclude youth development costs, women’s football and community-related expenditure, depreciation and amortisation, other than those related to player registration costs.

These adjustments mean there is no disincentive from spending on the future, but the inclusion of the amortisation of capitalised player transfer and agent fees means big cash outflows will eventually be evenly expensed through profit and loss over the length of players’ contracts.

Previously, longer player agreements were one way to spread the cost, as Chelsea did last summer when they signed Romeo Lavia for an initial £53m for seven years, but last December the league voted to cap amortisation periods to five years.

Another is to renegotiate and extend current contracts prior to expiry, which allows the residual capitalised transfer fees to be amortised over the new longer period along with any new costs.

A heavy statutory loss before tax, at the start of the calculation, is the forerunner of non-compliance with PSR.

Everton, who took six of their eight-point deduction for breaching the limit in the three seasons to 2021-22, made total statutory losses before tax of £299m over the same period.

Meanwhile, Nottingham Forest, who were deducted four points last season, racked up statutory losses before tax in its last three published financial years to 30 June 2023 of £128m.

Meanwhile, their PSR aggregated adjusted loss threshold was reduced from £105m to around £61m because two of those years were spent in the EFL.

Leicester City may still incur penalties in relation to excess losses from their previous three years in the Premier League ending in season 2022-23, where their statutory losses before tax for the same period were £215m.

Southampton would have been closer than other seasons to the £105m threshold for their last three Premier League seasons to 30 June 2023, as the cumulative statutory pre-tax losses of parent group St Mary’s Football Group Limited, for the same period, were around £125m, before adjustments for allowable costs just kept them within the threshold.

Southampton's PSR loss threshold for the three seasons 2022, 2023, 2024 is expected to be lower at £83m to account for one year outside of the top tier, but key profits on player sales like Lavia, Tino Livramento and James Ward-Prowse also occurred in financial year 2024.