Exposure Draft: Supplier Finance Arrangements - ifrs.org

1 ifrs Standards Exposure Draft ED/2021/10 November 2021 Comments to be received by 28 March 2022 Supplier Finance ArrangementsProposed amendments to IAS 7 and ifrs 7 Exposure DraftSupplier Finance ArrangementsProposed amendments to IAS 7 and ifrs 7 Comments to be received by 28 March 2022 Exposure Draft ED/2021/10 Supplier Finance Arrangements is published by the International AccountingStandards Board (IASB) for comment only. Comments need to be received by 28 March 2022 andshould be submitted by email to or online at comments will be on the public record and posted on our website at unless therespondent requests confidentiality.

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3 978-1-914113-55-0 Copyright 2021 ifrs FoundationAll rights reserved. Reproduction and use rights are strictly limited. Please contact the Foundationfor further details at of IASB publications may be ordered from the Foundation by or visiting our shop at Foundation has trade marks registered around the world (Marks) including IAS , IASB , theIASB logo, IFRIC , ifrs , the ifrs logo, ifrs for SMEs , the ifrs for SMEs logo, InternationalAccounting Standards , International financial Reporting Standards , the Hexagon Device , NIIF and SIC.

4 Further details of the Foundation s Marks are available from the Foundation on Foundation is a not-for-profit corporation under the General Corporation Law of the State ofDelaware, USA and operates in England and Wales as an overseas company (Company number:FC023235) with its principal office in the Columbus Building, 7 Westferry Circus, Canary Wharf,London, E14 pageINTRODUCTION4 INVITATION TO COMMENT5[DRAFT] AMENDMENTS TO IAS 7 STATEMENT OF CASH FLOWS8[DRAFT] AMENDMENTS TO ifrs 7 financial INSTRUMENTS:DISCLOSURES11 APPROVAL BY THE BOARD OF Exposure DRAFT Supplier FINANCEARRANGEMENTS PUBLISHED IN NOVEMBER 202113[DRAFT] AMENDMENTS TO GUIDANCE ON IMPLEMENTING ifrs 714 BASIS FOR CONCLUSIONS ON Exposure DRAFT Supplier FINANCEARRANGEMENTS15 Supplier Finance Arrangements ifrs Foundation3 IntroductionWhy is the Board publishing this Exposure Draft?

5 The ifrs Interpretations Committee (Committee) considered a question about theinformation an entity is required to provide in its financial statements about supplychain Finance (reverse factoring) Arrangements . The credit rating agency that submittedthe question said, based on its experience, entities provide little information in theirfinancial statements about those Arrangements . In response to that question, inDecember 2020 the Committee published the Agenda Decision Supply Chain FinancingArrangements Reverse Factoring to explain the applicable requirements in ifrs those requirements go some way towards meeting the information needs ofusers of financial statements, feedback on the draft Agenda Decision including frominvestors and analysts suggested that the information an entity is required to provideabout this form of financing falls short of meeting user information needs.

6 Users offinancial statements want to understand the effects of these Arrangements on an entity sliabilities and cash flows, as well as on liquidity risk and risk in this Exposure DraftThe proposals in this Exposure Draft are intended to complement the requirements inIFRS Standards that apply to reverse factoring and similar Arrangements (as explained inthe Agenda Decision). The proposed amendments to IAS 7 Statement of Cash Flows andIFRS 7 financial Instruments: Disclosures would require entities to disclose additionalinformation in the notes about those Arrangements . The Exposure Draft uses supplierfinance arrangement to refer to a reverse factoring or other similar paragraphs 44F 44I of IAS 7 set out the main proposals that would apply to allsupplier Finance Arrangements (as described in proposed paragraph 44G).

7 Who would be affected by the proposals?The proposed amendments would affect an entity that, as a buyer, enters into one ormore Supplier Finance Arrangements (as described in the proposals), under which theentity, or its suppliers, can access financing for amounts the entity owes its of financial statements would be able to obtain from financial statements theinformation that enables them to assess the effects of Supplier Finance Arrangements onan entity s liabilities and cash flows, as well as on its liquidity risk and risk stepThe International Accounting Standards Board (Board) will consider the comments itreceives on the proposals in this Exposure Draft before deciding whether and how toproceed with the proposed standard-setting workThe US financial Accounting Standards Board has a project on Disclosure of SupplierFinance Program Obligations with the objective of developing disclosure requirementsthat enhance transparency about the use of Supplier Finance DRAFT NOVEMBER 20214 ifrs FoundationInvitation to commentThe Board invites comments on the proposals in this Exposure Draft, particularly on thequestions set out below.

8 Comments are most helpful if they:(a)address the questions as stated;(b)indicate the specific paragraph(s) to which they relate;(c)contain a clear rationale;(d)identify any wording in the proposals that is difficult to translate; and(e)include any alternative the Board should consider, if Board is requesting comments only on matters addressed in this Exposure for respondentsQuestion 1 Scope of disclosure requirementsThe [Draft] Amendments to IAS 7 and ifrs 7 do not propose to define Supplier financearrangements. Instead, paragraph 44G of the [Draft] Amendments to IAS 7 describes thecharacteristics of an arrangement for which an entity would be required to provide theinformation proposed in this Exposure Draft.

9 Paragraph 44G also sets out examples ofthe different forms of such Arrangements that would be within the scope of the Board BC5 BC11 of the Basis for Conclusions explain the Board s rationale for you agree with this proposal ? Why or why not? If you disagree with the proposal ,please explain what you suggest instead and Finance Arrangements ifrs Foundation5 Question 2 Disclosure objective and disclosure requirementsParagraph 44F of the [Draft] Amendments to IAS 7 would require an entity to discloseinformation in the notes about Supplier Finance Arrangements that enables users offinancial statements to assess the effects of those Arrangements on an entity s liabilitiesand cash meet that objective, paragraph 44H of the [Draft] Amendments to IAS 7 proposes torequire an entity to disclose:(a)the terms and conditions of each arrangement.

10 (b)for each arrangement, as at the beginning and end of the reporting period:(i)the carrying amount of financial liabilities recognised in the entity sstatement of financial position that are part of the arrangement and theline item(s) in which those financial liabilities are presented;(ii)the carrying amount of financial liabilities disclosed under (i) for whichsuppliers have already received payment from the Finance providers; and(iii)the range of payment due dates of financial liabilities disclosed under (i);and(c)as at the beginning and end of the reporting period, the range of payment duedates of trade payables that are not part of a Supplier Finance 44I would permit an entity to aggregate this information for differentarrangements only when the terms and conditions of the Arrangements are BC12 BC15 and BC17 BC20 of the Basis for Conclusions explain the Board srationale for this you agree with this proposal ?