Disclosure requirements for supplier finance arrangements would change under a new proposal issued by the International Accounting Standards Board (IASB).
The proposed targeted amendments are designed to provide investors with more detailed information to help them understand the effects of supplier finance arrangements on a company’s liabilities and cash flows.
Supplier finance arrangements also are often referred to as supply chain finance, payables finance, or reverse factoring arrangements.
The proposal would amend IAS 7, Statement of Cash Flows, and IFRS 7, Financial Instruments: Disclosures. The proposals complement an agenda decision published by the IFRS Interpretations Committee in 2020.
“Investors require more detailed disclosures about companies’ supply chain finance arrangements as these funding practices are becoming increasingly common,” IASB Chair Andreas Barckow said in a news release. “The proposed requirements are designed to give investors the information they need to assess the effects of such finance arrangements on a company’s liabilities and cash flows.”
The proposed amendments would affect a company that, as a buyer, enters into one or more supplier finance arrangements, under which the company, or its suppliers, can access financing for amounts the company owes its suppliers.
Comments can be submitted through the IFRS website through 28 March.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is FM magazine’s editorial director.