Maintenance and consistent application

Date recorded:

Supply Chain Financing Arrangements—Reverse Factoring—Finalisation of Agenda Decision (Agenda Paper 12)

At its meeting in December 2020, the IFRS Interpretations Committee (Committee) decided not to add a standard-setting project to the work plan in response to a submission about the existing presentation and disclosure requirements that apply to reverse factoring arrangements. The Committee instead decided to publish an agenda decision that would include material explaining how the applicable principles and requirements in IFRS Standards apply to reverse factoring arrangements.

The purpose of this meeting was to ask Board members whether they object to the agenda decision, as required by paragraph 8.7 of the IFRS Foundation Due Process Handbook.

In addition to publishing an agenda decision, in June 2020 Committee members also discussed, and provided their views on, possible narrow-scope standard-setting in relation to supply chain financing arrangements. In particular, the Committee discussed whether additional, more specific, disclosure requirements should be considered to meet investor information needs in relation to those arrangements. Respondents to the tentative agenda decision provided comments on possible standard-setting in relation to supply chain financing arrangements, and the staff have also received input from outreach meetings held with investors and others earlier in 2020.

The staff plan to bring all of this input and feedback to the Board for its consideration at a future Board meeting.

Board discussion

No Board member objected to the agenda decision.

One Board member highlighted that there is a materiality problem as research shows that around 50% of companies are using supply chain financing, while only 5% are disclosing those arrangements. Another Board member said that the supply chain financing issue highlights a broader problem with the cash flow statement as there are similar transactions that are also not shown in the cash flow statement.


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