ICAI Proposed Amendments to IAS 7 and IFRS 7 – Supplier Finance Arrangements

The Institute of Chartered Accountants of India (ICAI) has proposed amendments to IAS 7 and IFRS 7 in respect of Supplier Finance Arrangements.

Indian Accounting Standards (Ind AS) are based on the International Accounting Standards Board (IASB) of the IFRS Foundation. Before issuing new/amendments to IFRS Standards, the IASB publishes consultation materials [such as Discussion Papers (DP), Exposure Drafts (ED), and so on] to solicit public feedback from throughout the world. The Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) requests views on the IASB’s consultative materials, with the goal of allowing diverse stakeholders in India to voice their concerns early in the International Standard-setting process. It also informs Indian stakeholders on the preparations needed to execute the Indian AS in accordance with global deadlines. The IASB just released the following Exposure Draft for public comment:

The International Financial Reporting Standards (IFRS) Interpretations Committee (IFRS IC) looked at a concern about what information an entity must include in its financial statements about supply chain finance (reverse factoring) agreements. According to the credit rating agency that asked the question, entities give minimal information regarding those arrangements in their financial statements, based on its experience. In response to this question, the Committee published the Agenda Decision Supply Chain Financing Arrangements—Reverse Factoring in December 2020, which explains the applicable IFRS Standards requirements. According to comments on the draught Agenda Decision, the information that a business is obligated to disclose on this type of financing falls short of addressing user information demands. Users of financial statements seek to know how these arrangements affect an entity’s liabilities and cash flows, as well as risk management and liquidity risk.

The ideas in this Exposure Draft are meant to supplement the standards of the International Financial Reporting Standards (IFRS) that relate to reverse factoring and similar arrangements. The proposed changes to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures would require companies to provide extra information about certain arrangements in the notes.

The above-mentioned Exposure Drafts are available for public comment on the ICAI’s website until January 30, 2022, and can be found at this link: https://resource.cdn.icai.org/68013asb54470.pdf.

Any of the following methods can be used to send comments:

1. Electronically: Go to http://www.icai.org/comments/asb/ and fill out the form. to make an online comment (Preferred method)
2. Email your comments to [email protected].
3. Postal Secretary, Institute of Chartered Accountants of India, Accounting Standards Board, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi 110 002