IASB proposes disclosure requirements to enhance the transparency of supplier finance arrangements

The International Accounting Standards Board (IASB) has today published for public comment 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, payables finance or reverse factoring arrangements.

The proposed targeted amendments to the current disclosure requirements are designed to meet investors’ demands for more detailed information to help them analyse and understand the effects of such arrangements.

Under the IASB’s proposals, a company would be required to disclose information that enables investors to assess the effects of the company’s supplier finance arrangements on its liabilities and cash flows. These proposals 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.

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.

Andreas Barckow, Chair of the IASB, said:

Investors require more detailed disclosures about companies’ supply chain finance arrangements as these funding practices are becoming increasingly common. 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 Exposure Draft Supplier Finance Arrangements is open for comment until 28 March 2022.

Access the latest Investor Perspectives article by IASB Member Zach Gast, who explains the IASB’s proposals.