Liabilities Directly Associated with Assets Held for Sale
Loans or dues attached to assets you plan to sell, shown beside Non-current Assets Held for Sale on the Balance Sheet.
In detail
When the business decides to sell a whole unit or a major asset together with the debt attached to it, NFRS 5 asks that both sides be shown separately so the reader can see what is leaving the company. The asset moves to Non-current Assets Held for Sale and the related loan, lease or payable moves here, a current liability because the sale is expected within a year. The transfer is a Journal Entry that debits the original liability ledger and credits this one; when the buyer takes over the debt or the loan is repaid from the proceeds, this ledger is debited. Most small companies use it only when selling a vehicle with its loan or closing a branch.
Formula
Balance = Liabilities transferred with assets held for sale - Amounts settled or taken over by the buyer
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Loans and Borrowings - Non-Current | Rs 2,00,000 | |
| Liabilities Directly Associated with Assets Held for Sale | Rs 2,00,000 |
How to record it in BRAccount
- 01Record the board decision to sell and the expected completion date.
- 02Go to Invoicing > Journal Entry > New dated the decision date.
- 03Debit the loan or payable ledger being transferred and credit this account for the same amount.
- 04Move the matching asset to Non-current Assets Held for Sale in the same entry or a second one.
- 05Submit. The entry below posts.
- 06On completion, debit this ledger and credit Bank or the buyer's account for the debt settled.
When to use it
Post by Journal Entry when reclassifying a loan tied to a building or vehicle that is up for sale.
Example from the demo books
Dr Loans and Borrowings - Non-Current Rs 2,00,000, Cr Liabilities Directly Associated with Assets Held for Sale Rs 2,00,000 for the van loan.