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On September 29, 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which enhances the transparency about the use of supplier finance programs for investors and other allocators of capital.
The ASU affects buyer companies that use supplier finance programs in connection with purchasing goods or services. By entering into supplier finance programs with finance providers, suppliers have the option to be paid by a third party in advance of an invoice due date, based on invoices that the buyer has confirmed as valid. These arrangements are also commonly known as reverse factoring, payables finance, or structured payables arrangements.
Under the new ASU, a company that uses a supplier finance program in connection with the purchase of goods or services will be required to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.
The provisions of the new ASU require a buyer to provide the following qualitative and quantitative information:
The buyer should disclose the outstanding confirmed amount as of the end of each interim period.
ASU No. 2022-04 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022, except for the rollforward of the supplier finance program obligations, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted.
Comprised of trusted industry experts, the Wolters Kluwer CCH ARM Editorial Staff are knowledgeable and highly qualified to analyze and offer guidance on the latest, important accounting and audit topics. They ensure every topic is thoroughly researched and meticulously broken down to provide up to date and accurate information. Read more of their insights on CCH Accounting Research Manager.
CCH® Accounting Research Manager® delivers interpretive guidance and authoritative content needed to confidently make accounting, financial reporting and audit decisions.
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