In November 2021 the IASB published its Exposure Draft ED/2021/10 Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7).
Our response to the IASB was submitted on 28 March 2022.
The IASB published an Exposure Draft (ED) on Supplier Finance Arrangements proposing amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures. The proposals were intended to complement the existing disclosure requirements in IFRS Standards that apply to supplier finance arrangements. The ED used ‘supplier finance arrangement’ to refer to a reverse factoring or similar arrangement.
The proposed amendments would affect an entity that, as a buyer, enters into one or more supplier finance arrangements, under which the entity, or its suppliers, can access financing for amounts the entity owes its suppliers.
The proposals aimed to provide users of financial statements with the information that enables them to assess the effect of supplier finance arrangements on an entity’s liabilities and cash flows, as well as on its liquidity risk and risk management.
Our outreach on this project included discussions with stakeholders and public consultation on our draft comment letter.
Thank you to all who participated in this project.
[A full version of our final comment letter is attached below].
The UKEB’s final comment letter supports the proposals in the ED as they will improve transparency about the use of supplier finance arrangements and enhance the ability of users of accounts to assess the effects of these arrangements on an entity’s liabilities and cash flows, as well as on its liquidity risk and risk management.
Our final comment letter also provides recommendations to enhance the proposals in the ED:
Whilst we welcome a narrow scope for this project as a means of providing an urgent solution to user demands for enhanced disclosures on supplier finance arrangements, we reiterate our previous request to the IASB to prioritise, as a separate project, a comprehensive review of IAS 7.