We comment on IFRS Interpretation Committee tentative agenda decision on supply chain financing arrangements — reverse factoring

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29 Sep 2020

We have published our comment letter on the IFRS Interpretations Committee tentative decision not to take onto the Committee’s agenda the request for clarification on how to present liabilities to which reverse factoring arrangements relate and what information is required to be disclosed in relation to these arrangements in the financial statements.

We agree that the IFRS Interpretations Committee’s conclusions regarding supply chain financing arrangements reflect the requirements of IFRS Standards and that the outcome of applying these requirements will lead to different presentations in the statement of financial position, within trade payables, other payables or in other financial liabilities depending on the terms of the arrangement and the relative similarity of the nature and function of the liability under the arrangement with more conventional trade payables. However, we are concerned that users are not benefiting from a fuller understanding of these arrangements given the lack of specific disclosures required by IFRS 7. The Board may wish to consider adding to its agenda a project to improve disclosures in this area, potentially through illustrative examples, due to the increasing prevalence of alternative financing models such as these, and the move away from obtaining finance from a broad range of suppliers to a more concentrated approach with a single or small number of financial institutions or other funding vehicles.

Click to view the comment letter and Deloitte's notes from the June 2020 IFRS Interpretations Committee meeting.

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