A non-bank lending business is usually financed through substantial borrowings obtained from credit institutions. As the lending business grows, it may sell part of its loan book to obtain additional funding for new business.

Such transactions often require complex accounting, which has the potential to lead to material misstatements in the financial statements.

To continue recognising or to derecognise?

When a business sells its receivables to another entity, it is not always able to de-recognise the loan book.