Deloitte comment letter on IASB’s proposed amendments to IAS 7 and IFRS 7 regarding supplier finance arrangements

Published on: 25 Mar, 2022

We have commented on the IASB's exposure draft Supplier Finance Arrangements — Proposed amendments to IAS 7 and IFRS 7.

We support the Board’s initiative to improve the disclosures an entity provides about supplier financing

We agree with the approach taken by the Board to identify the scope of the arrangements for which additional information should be provided by describing the characteristics of these arrangements. As further explained in our detailed response, we suggest that some changes to the proposed characteristics may be required to ensure that relevant supplier finance arrangements are appropriately identified. It would also be useful if the Board clarified that arrangements such as credit card arrangements and other similar trade line of credit arrangements and financial guarantee contracts may also provide a means for an entity to finance amounts owed to their suppliers and that when this is the case, entities are required to provide the relevant disclosures.

We agree with the proposed disclosure objective and believe that, in general, the proposed required disclosure would help to achieve this objective. However, we do not support the proposal that an entity that enters into supplier finance arrangements should disclose the carrying amount of financial liabilities for which the suppliers have already been paid by finance providers. As noted in the ED, an entity would need to obtain this information from the finance provider(s) and as such we are concerned about the entity’s ability to obtain and verify this information that would not be subject to the entity’s internal controls. We also question whether the disclosure would necessarily provide relevant information about the situation of the entity.

Separately from the finalisation of this project, and consistent with our response to the Board’s recent agenda consultation, we suggest that the Board takes on a medium-sized targeted project to improve certain aspects of IAS 7, which would include, among others, the presentation of the effect of supplier finance arrangements on an entity’s statement of cash flows.


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