Eumedion calls on IASB to enhance disclosures on reverse factoring arrangements

News · 02-10-2020

An increasing number of companies are asking a financial institution to pay their suppliers, while paying the financial institution at a later instance. Such arrangements are identified as reverse factoring or Supply Chain Financing (‘SCF’) arrangements. Surprisingly few companies report on these arrangements. The IFRS Interpretations Committee tentatively concluded that the IFRS standards are sufficiently clear in how reverse factoring arrangements should be treated. If there is a material difference in the payment term of the supplier and the financial institution, the entire resulting liability should be categorised as a financial liability. In such a case, the reported amounts payables become meaningless. In Eumedion's response to the tentative IFRIC interpretation, Eumedion explains why payables are important for investors and why this results an overly pessimistic picture of the company. We suggest what disclosure would help investors assess what part of the liability resulting from the SCF arrangement is an in-substance payable and what part is an in-substance financial liability.

Relevant documents

Eumedion response to tentative IFRIC interpretation on reverse factoring arrangements

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Tentative IFRIC interpretation on reverse factoring arrangements

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