An international accounting standards-setter has moved up by a year the timing for when companies would have to disclose details on their supply-chain financing, a move aimed at improving transparency after several high-profile blowups in recent years, the Wall Street Journal reported. The International Accounting Standards Board, which sets accounting standards required in more than 140 global jurisdictions outside the U.S., tentatively agreed at a Feb. 20 meeting on a one-year acceleration for standards that aim to outline what companies disclose on their supply-chain finance programs. As of Jan. 1, 2024, instead of 2025, businesses subject to the standards will have to disclose details such as the size and certain terms of their supply-chain finance programs. Supply-chain finance is essentially a form of short-term borrowing to pay for goods and services from suppliers. These financing arrangements — which have been used by companies such as Boeing Co., Coca-Cola Co. and Walmart Inc. — free up cash generally without a lot of cost or effort, an advantage that can be particularly appealing as finance chiefs are looking to improve cash flow amid economic uncertainty. Under supply-chain financing agreements, which have been around for decades, banks provide funding to pay a company’s suppliers. Those suppliers are paid earlier than they would without the agreement, though also less, and the programs help them to avoid companies extending their payment terms. Companies haven’t typically needed to disclose supply-chain financing arrangements, often recording the transactions as accounts payable in their financial statements. This has led to criticism from some accounting experts that supply-chain finance programs can be used to cover up financial stress.
