FASB releases new standards on Supplier Finance

The Financial Accounting Standards Board (FASB) has issued its long-awaited Accounting Standards Update (ASU) covering the disclosure of supplier finance programmes. 

Under the newly-published rules, a company that uses a supplier finance program will be required to disclose sufficient information about the program,  'To allow a user of financial statements to understand the programme’s nature, activity during the period, changes from period to period, and potential magnitude.'

​Specifically, a buyer will be required to provide the following qualitative and quantitative information:

1. The key terms of the program, including a description of the payment terms (including payment timing and basis for its determination) and assets pledged as security or other forms of guarantees provided for the committed payment to the finance provider or intermediary
2. For the obligations that the buyer has confirmed as valid to the finance provider or intermediary:
   1. The amount outstanding that remains unpaid by the buyer as of the end of the annual period (the outstanding confirmed amount)
   2. A description of where those obligations are presented in the balance sheet
   3. A rollforward of those obligations during the annual period, including the amount of obligations confirmed and the amount of obligations subsequently paid.

​The buyer should disclose the outstanding confirmed amount as of the end of each interim period.

'The new ASU responds to requests from investors for greater transparency around a buyer’s use of supplier finance programs,', said FASB Chair Richard R. Jones. 'It enhances transparency by requiring new disclosures intended to help them better consider the effect of these programs on a company’s working capital, liquidity, and cash flows over time.'

The new rules will apply to fiscal years beginning after December 15, 2022.

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The new regulations  - and the future of supplier finance - will be the topic for a special session at Working Capital Forum Europe in Amsterdam on 1st December.