SOCPA Shares its Comments on IASB's Exposure Draft on Supplier Finance Arrangements
The International Accounting Standards Board (IASB) has published an exposure draft to introduce an amendment to IAS 7 and IFRS 7, to improve requirements regarding the disclosure of supplier finance arrangements, since entities engage in significant transactions with banks to provide the financing necessary to pay supplier invoices, whether when due or at a later date. Despite the importance of these transactions and their impact on the entity's liabilities, cash flows, and liquidity risks, the Board noted the apparent lack of disclosures that provide sufficient information to users of financial statements about such transactions.
The Saudi Organization for Chartered and Professional Accountants (SOCPA), has shared its comments on this exposure draft. SOCPA supports the Board in setting disclosure requirements based on describing characteristics of the different types of supplier finance arrangements instead of defining them with a specific definition that may not accommodate the emerging new types of these arrangements.
SOCPA endorsed the objectives and disclosure requirements proposed in the exposure draft. However, SOCPA believes that there is a need to evaluate the necessity of setting classification requirements for such transactions and presenting them on financial statements, as such arrangements might change the classification of the entity's liabilities from operational to financing.
In addition, SOCPA believes that the requirement to disclose all the terms and conditions of each supplier finance arrangement may not be practical, and therefore it suggests that the disclosure of the terms and conditions of importance to such arrangements should be limited.