The Championship club have spent highly since Kuwaiti businessman Fawaz Al-Hasawi bought the club in the summer of 2012.
Following the death of Nigel Doughty, the club were close to relegation to League One, and Al-Hasawi brought their survival by spending upwards of £6 million on new signings.
They aimed a challenge for promotion last season after another summer of heavy spending, and, although they were in the race until the start of 2014, a poor run of form saw them fall into mid table, and manager Billy Davies lose his job.
Stuart Pearce was appointed in the summer to guide the former European Champions back into the Premier League, and he was once-again backed in the transfer market by Al-Hasawi, who spent a club record fee on Britt Assombalonga, whilst also bringing in former Sheffield Wednesday winger Michail Antonio.
Michael Mancienne and Lars Veldwijk also arrived from abroad, and, although the club sold Jamaal Lascelles and Karl Darlow for a combined fee of roughly £7 million, it has been widely reported that Forest are one of a number of Championship clubs set to be hit with a transfer embargo at the start of 2015 due to Financial Fair Play restrictions.
If the club were to achieve promotion to the top flight this season, the embargo would cause little trouble, as it would change into a fine upon their successful placement in the Premier League. However, if they remain in the Championship this year, the club could be set for a three-year embargo, before they can write off their losses to an acceptable amount.
As outlined by the FFP rules, the transfer fees spent on a player are written off over the length of the contract they sign upon arriving, thus enduring the losses incurred when signing a player. Assombalonga, who signed for a club record £5.5 million, agreed a five-year deal at the City Ground, meaning that Forest have a loss of £1.1 million to cover every season he is there.
For every season, the club are able to lose £8 million, a value that Forest are reportedly well over. Their 2012/13 accounts - which are not used in the FFP ruling - indicate a loss of £17.1 million, and it is a value that is still likely to be around that mark, with all incoming transfer funds spent on acquiring new players.
If promotion is not achieved, it will take Forest a fair while to reduce their seasonal losses to below the £8 million mark, and the club could be forced to asset strip just to be able to sign players again.
A fine can be dealt with if a place in the Premier League has been won, but an embargo will leave Pearce with the same squad for next season, and, if they can’t win promotion this year, what is to say they would be able to in the next campaign.