The FASB has issued an Exposure Draft that is intended to improve the information available to financial statement users related to the effects of supplier finance programs on a buyer’s working capital, liquidity and cash flows.  Supplier finance programs are commonly known as reverse factoring, payables finance or structured payable arrangements. In these programs, a buyer offers its suppliers the option to be paid by a third party in advance of an invoice due date based on invoices that the buyer has confirmed as valid. 

Current guidance does not include any explicit disclosure requirements and allows diversity in practice as to the balance sheet presentation of these liabilities. The Exposure Draft would require disclosures of additional information that will allow users to understand the nature of the program, activity during the reporting period and the potential magnitude.  Specific disclosures would include key terms, a rollforward of obligations confirmed as valid and the line item where the liability is included on the balance sheet.

The effective date of the Exposure Draft would be determined after feedback has been considered. Entities would apply the amendments retrospectively for all periods for which a balance sheet is presented. Comments on the Exposure Draft are due by March 21, 2022.

The full text of the Exposure Draft is available here.

^{Readers should not act upon information presented without individual professional consultation.}