The International Accounting Standards Board (IASB) issued narrow-scope amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures.
These amendments improve the information an entity provides about its supplier finance arrangements.
IASB definition of supplier finance arrangements
The IASB has used the term “supplier finance arrangements” to describe arrangements where:
- one or more finance providers offers to pay amounts an entity owes its suppliers; and
- the entity agrees to pay according to the terms and conditions of the arrangements at the same date as, or a date later than, suppliers are paid.
These arrangements provide the entity with extended payment terms, or the entity’s suppliers with early payment terms, compared to the related invoice payment due date.
The IASB’s supplier finance arrangements guidance includes arrangements often referred to as supply chain finance, payables finance or reverse factoring arrangements.
Arrangements that are solely credit enhancements for the entity (for example, financial guarantees including letters of credit used as guarantees) or instruments used to settle directly with a supplier the amounts owed (for example, credit cards) are not supplier finance arrangements.
Visit the IASB’s website to learn more about the new disclosure requirements.
The Accounting Standards Board (AcSB) will ballot the final amendments and complete its endorsement process in Q3 2023.