On or about 26 Nov 2021, the International Accounting Standards Board (IASB) has published for comments on the proposed changes in disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on a company’s liabilities and cash flows.
Supplier finance arrangements are often referred to as supply chain finance, payable finance or reverse factoring arrangements.
The proposed amendments are designed to meet investors’ demands for more detailed information to help them analyse and understand the effects of such arrangements.
Under the proposals, a company would be required to disclose information to enable investors to assess the effects of the company’s supplier finance arrangements on its liabilities and cash flows.
These proposal (ED/2021/10 Supplier Finance Arrangements) makes disclosure-only amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures. The proposals also complements an agenda decision published by the IFRS Interpretations Committee in 2020.
The proposals also highlights the required disclosure of liquidity risk and risk management and non-cash changes in financing liabilities arising from supplier finance arrangements.
It would affect a company that entering as a buyer with one or more supplier finance arrangements, under which the company or its suppliers can access financing for amounts the entity owes its suppliers.
The Exposure Draft (ED/2021/10) is open for public consultation until 28 March 2022.