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Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7) [Research]

Next steps:

The IASB expects to issue an Exposure Draft in Q4/2021

Last up­dated:

June 2021

Overview

At its meeting on June 23, 2021, the Board decided to add a narrow-scope standard-setting project to its work plan on supplier finance arrangements. At a future meeting the Board will discuss the transition requirements for the proposed amendments, as well as the Board’s compliance with applicable due process steps.

  • Disclosure scope, objectives and requirements

The Board tentatively decided that the project would develop disclosure requirements for supplier finance arrangements, but not go beyond such arrangements (that is, the project would not develop requirements for arrangements an entity enters into to fund either receivables from customers or inventories).

The Board tentatively decided to explain the type of arrangements to be included within the project’s scope, instead of proposing detailed definitions.   

The Board tentatively decided to propose amending IAS 7, Statement of Cash Flows to add: 

  • an overall disclosure objective: to help users of financial statements understand the nature, timing, and uncertainty of cash flows arising from supplier finance arrangements; and
  • specific disclosure objectives:
  • to provide quantitative information that helps users of financial statements determine the effects of supplier finance arrangements on an entity’s financial position and cash flows; and
  • to provide qualitative information to help users of financial statements understand the risks that arise from supplier finance arrangements.

The Board tentatively decided to propose that, to meet the proposed disclosure objectives, entities be required to disclose:

  • the key terms and conditions of a supplier finance arrangement; and
  • at the start and end of the reporting period:
  • the aggregate amount of payables that are part of the arrangement;
  • the aggregate amount of the payables disclosed under (i) for which suppliers have already received payment from the finance provider;
  • the range of payment terms, expressed in time, of payables disclosed under (i); and
  • the range of payment terms, expressed in time, of trade payables that do not form part of the arrangement.

The Board tentatively decided to propose adding supplier finance arrangements as an example within the liquidity risk disclosure requirements in IFRS 7, Financial Instruments: Disclosures.

Other De­vel­op­ments

June 2021

At its meeting on June 23, 2021, the Board decided to add a narrow-scope standard-setting project to its work plan on supplier finance arrangements.

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