True Sale

Definition

True Sale. It is an accounting and legal expression showing that a financial asset or negotiable instrument has been sold by one party to another in the sense of no longer being recorded in the balance sheet of the vendor. It is recorded on the balance sheet of the buyer. When this occurs effectively, the buyer will not be affected by any insolvency proceedings subsequently initiated against the vendor. It is not restricted or does not provide an absolute title to the asset in question. In this sense, it is different from secured or collateralized lending. The true sale is an important concept. It underlies many securitisation and financial transactions. Some procurement finance instruments, such as forfeiting and factoring, aim to achieve the true sale.