This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IASB proposes amendments to IAS 7 and IFRS 7 regarding supplier finance arrangements

  • IASB document (blue) Image

26 Nov 2021

The International Accounting Standards Board (IASB) has published the exposure draft 'Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7)' to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that would ask entities to provide qualitative and quantitative information about supplier finance arrangements. The deadline for submitting comments is 28 March 2022.

 

Background

The IFRS Interpretations Committee received a submission about supply chain finance arrangements asking:

  • How an entity presents liabilities to pay for goods or services received when the related invoices are part of a supply chain finance (or reverse factoring) arrangement; and
  • what information about reverse factoring arrangements an entity is required to disclose in its financial statements.

In response to that submission, the Committee published an agenda decision in December 2020. However, feedback and input received — in particular from investors and analysts — suggested the information entities provide about supplier finance arrangements applying existing IFRS requirements does not meet all investor information needs.

In response to that feedback, the Board tentatively decided to amend IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that would ask entities to provide qualitative and quantitative information about supplier finance arrangements.

 

Key proposals

The main proposals in ED/2021/10 Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7) would: 

  • Not define supplier finance arrangements. Instead, the proposed amendments describe the characteristics of an arrangement for which an entity would be required to provide the proposed information and the amendments would also provide examples of the different forms of such arrangements that would be within the scope of the Board’s proposals.
  • Add a disclosure objective. Entities would have to disclose in the notes information that enables users of financial statements to assess the effects of their supplier finance arrangements on their liabilities and cash flows.
  • Complement current requirements in IFRSs by adding additional disclosure requirements about:
    • the terms and conditions of each supplier finance arrangement;
    • for each arrangement, as at the beginning and end of the reporting period:
      • a) the carrying amount of financial liabilities that are part of the arrangement and the line item(s) in which those financial liabilities are presented;
      • b) the carrying amount of financial liabilities disclosed under a) for which suppliers have already received payment from the finance providers;
      • c) the range of payment due dates (for example, 30 to 40 days after the invoice date) of financial liabilities disclosed under a); and
    • as at the beginning and end of the reporting period, the range of payment due dates of trade payables that are not part of a supplier finance arrangement.
    An entity would only be permitted to aggregate this information for different arrangements when the terms and conditions of the arrangements are similar.
  • Add supplier finance arrangements as an example within the liquidity risk disclosure requirements in IFRS 7 and the disclosure requirements regarding changes in liabilities arising from financing activities in IAS 7.

The deadline for submitting comments on these proposals is 28 March 2022.

 

Effective date

The Board intends to decide on the effective date after exposure. The amendments would be applied retrospectively in accordance with IAS 8. Earlier application would be permitted.

 

Additional information

The following additional information is available on the IASB website and on IAS Plus:

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.