New Rules on Supplier Finance Programs Will Reveal Financial Health

Starting next year, U.S. companies that use supplier finance programs to buy goods or services must disclose the full terms of those programs, including assets pledged to secure the transaction. FASB has issued Accounting Standard Update (ASU) -04, Liabilities–Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires a buyer in such financing arrangements to disclose in the notes to the financial statements the details of their business impacts. Buyers must disclose the key terms of the program and where any obligations owed to a finance company have been presented in the financial statements, plus a roll forward of those obligations—information investors would find useful, according to ASU. Supplier finance programs are popular because they offer a flexible structure for paying for goods and services, enabling large companies to keep more cash on hand. But because U.S. GAAP does not require them to, companies have not been transparent about the effects those programs have on working capital, liquidity, and cash flows. That will change. “FASB’s new ASU responds to requests from investors for greater transparency around a buyer’s use of supplier finance programs,” FASB Chair Richard Jones said in a statement. “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 provisions take effect on Jan. 1, 2023 for calendar year-end filers.

Board Pressed About Federal Reserve Crypto Project

FASB was asked during a joint discussion with the International Accounting Standards Board (IASB) whether the board had “touched base” with the U.S. Federal Reserve about its project on cryptocurrencies. “If you have, what was their reaction to this project?” IASB member Bertrand Perrin asked at the Sept. 30 discussions. “We certainly talked to our regular contacts and the office of the chief accountant is well aware of our project,” FASB Chair Richard Jones replied. “And we solicited their feedback as part of our project just like we do any stakeholder. Our primary regulator, the Securities and Exchange Commission, is well aware of our project, our agenda outreach and the direction we’re heading.” The question comes amid talks by the Federal Reserve about whether to pursue or implement a central bank digital currency (CBDC), and its issuance of a related discussion paper in January for public comment. The Federal Reserve’s project, however, poses a different challenge than cryptocurrencies because a CBDC would change the U.S. monetary system. Cryptocurrencies such as Bitcoin, Ethereum, and other tokens, may or may not be utilized by interested parties. But some people have been confusing the two issues.


Three Members Added to Preparer Advisory Panel

The IFRS Foundation announced it has appointed Lily Hu, Patrick Matos, and Feifei Wang to the Global Preparers Forum (GPF), an international body of financial statement preparers who advise the IASB on various accounting projects. With the appointments, the GPF now comprises 16 members “with considerable practical experience of financial reporting and who are established commentators on accounting matters in their own right or through working with representative bodies in which they are involved.” The panel is chaired by Ian Bishop, head of accounting, consolidation, and external reporting at Roche in Switzerland.