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IASB Moves Up Timeline for Supply Chain Finance Disclosure Rule

S.J. Steinhardt
Published Date:
Mar 10, 2023

The International Accounting Standards Board (IASB) has advanced by a year the effective date of amendments to its standard on an entity’s supplier finance arrangements, which will add disclosure requirements, The Wall Street Journal reported.

Businesses subject to the standards must now disclose details such as the size and certain terms of their supply-chain finance programs as of Jan. 1, 2024, instead of Jan. 1, 2025.

The decision, made at the board’s Feb. 20 meeting, was in response to recent corporate failures involving supply-chain finance programs, the Journal reported. They include Brazilian retailer Americanas SA’s January bankruptcy filing after a roughly $4 billion shortfall was revealed to be partially covered by its supply-chain finance program. U.K. construction and outsourcing firm of Carillion PLC collapsed in 2018 when it became known that its supply-chain finance obligations far exceeded its net debt.

“The cat is out of the bag on the topic because of what’s happened in the marketplace,” IASB Vice Chair Linda Mezon-Hutter said at the meeting, The Journal reported. “There are events happening in the marketplace and the question is, ‘How do we choose to react to those events?’ And so we are reacting.”

In a supply-chain financing agreement, “banks provide funding to pay a company’s supplier of goods and services. The supplier is then paid earlier—but less—than it would be paid without the agreement. banks provide funding to pay a company’s supplier of goods and services,” as the Journal defined it.

The market for this device has expanded since the 2008 financial crisis, with companies seeking ways to preserve cash by extending payment terms with vendors. Companies have not generally had to disclose details on their supply-chain financing programs, but that will change with a new Financial Accounting Standards Board (FASB) rule that requires U.S. companies to disclose the terms and the size of their supply-chain financing. Those amendments became effective for fiscal years beginning after Dec. 15, 2022, including interim periods within those fiscal years, except for the amendment on roll-forward information—the invoiced amount that companies have yet to pay under the program—which will become effective for fiscal years beginning after Dec. 15, 2023.

In contrast to the FASB rules, the IASB’s rules don’t require a roll-forward amount, the Journal reported. 

“Both [the FASB’s and IASB’s standards] have a common direction of greater information about liquidity and risk and working capital,” Wes Bricker, vice chair at PricewaterhouseCoopers LLP told The Journal. “But the IASB has focused on the statement of cash flows and the FASB has focused on footnote disclosure in meeting that objective.”

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