The Financial Accounting Standards Board on Wednesday proposed a rule that would require companies to disclose key terms and the size of their supply-chain financing, a move aimed at helping investors better understand the short-term borrowing mechanism, the Wall Street Journal reported. Supply-chain finance, often provided by banks, pays a company’s suppliers earlier than they would normally be paid, at a slight discount. The company pays the bank the full amount later, allowing the business to hold on to its cash for longer. Financial institutions that offer such funding include Citigroup Inc. and JPMorgan Chase & Co. Retail giant Walmart Inc., airplane manufacturer Boeing Co., drinks-maker Keurig Dr Pepper Inc. and many other blue-chip companies make use of supply-chain financing. Until now, U.S. companies haven’t been required to disclose supply-chain financing arrangements in their financial statements. Often, they classify their programs as accounts payable, which are amounts owed by the companies to their suppliers or vendors. Accounting firms have pressed the U.S. accounting standard setter to issue clear guidance on how to disclose supply-chain finance. Wednesday’s proposal would force companies to release key terms of their financing programs, potentially including details about any involvement they may have in the arrangement between the supplier and the finance provider.
