Foreign Companies’ Supply Financing to Face Greater Disclosure Rules Next Year

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 International Accounting Standards Board, which sets standards required globally, 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.

…Companies started using the tool more frequently after the 2008 financial crisis as they looked to preserve cash by extending payment terms with vendors. Forty-one companies in the S&P 500 disclosed using supply-chain finance programs in 2022 annual reports, up from 33 the previous year and 15 in 2020, according to data provider MyLogIQ. The figures don’t necessarily show the full picture, MyLogIQ said, as companies haven’t generally had to disclose details on their supply-chain financing programs.

That will change, however, as the Financial Accounting Standards Board last year approved a rule requiring U.S. companies to disclose the terms and the size of their supply-chain financing starting this year.