Supplier finance: reconcile what the business owes and what suppliers have received
A supplier-finance programme contains £120,000 of the buyer's liabilities, but the provider has paid suppliers for only £90,000 of those invoices. The disclosure cannot stop at £90,000 or add the two figures together. IAS 7 requires the arrangement balance and the already-paid supplier subset, alongside terms, due dates and noncash changes.
Identify the arrangement before requesting balances
IAS 7 paragraphs 44F to 44H require information that helps users assess how supplier-finance arrangements affect liabilities, cash flows and liquidity risk. The arrangements involve a finance provider offering to pay amounts the buyer owes its suppliers, with the buyer agreeing to pay the provider on the same date or later.
An arrangement may offer the buyer extended payment terms or let suppliers receive payment earlier than the related invoice due date. Unchanged buyer terms therefore do not automatically put a programme outside the requirements. Read the whole agreement, including the supplier's early-payment option.
The boundaries matter. Arrangements that are solely credit enhancements, such as financial guarantees, are excluded, as are instruments used by the buyer to settle directly with a supplier, such as credit cards. The presence of a bank alone does not establish a supplier-finance arrangement.
This article concerns UK-adopted full IFRS annual accounts for a calendar 2026 period, without an IFRS 19 reduced-disclosure election or early IFRS 18 application. The supplier-finance amendments have applied to annual periods beginning on or after 1 January 2024. Their first-application concessions do not remove ordinary calendar 2026 comparative requirements.
Separate the programme total from the paid subset
All figures and terms below are hypothetical pounds. Assume one material programme with buyer due dates of 60 to 90 days from invoice. Suppliers may take provider payment on day 10. Comparable trade payables outside the programme, in the same business and jurisdiction, fall due in 30 to 60 days. Assume no security, fees, foreign exchange or acquisitions.
At 1 January, the programme contains £80,000 of financial liabilities, including £50,000 for which suppliers have already received provider payment. At 31 December, the programme contains £120,000, including an already-paid subset of £90,000. All these liabilities are assumed to be presented within trade and other payables.
The remaining £30,000 at year end still belongs to the arrangement even though the provider has not yet paid those suppliers. The £90,000 is part of the £120,000, not an additional liability and not evidence that £90,000 has left the buyer's bank account.
| Disclosure data | Opening | Closing |
|---|---|---|
| Arrangement liability in trade and other payables | £80,000 | £120,000 |
| Of which suppliers already paid by provider | £50,000 | £90,000 |
| Buyer programme due dates from invoice | 60 to 90 days | 60 to 90 days |
| Comparable non-programme trade-payable due dates | 30 to 60 days | 30 to 60 days |
Sources and context, checked :
Explain movements without inventing a cash flow
Assume £220,000 of other invoices enter the programme, £20,000 of existing trade-payable invoices transfer into it without cash, and the buyer pays £200,000 to settle programme liabilities. The bridge is £80,000 + £220,000 + £20,000 − £200,000 = £120,000.
IAS 7 paragraph 44H requires the types and effects of noncash changes in the arrangement carrying amounts. The £20,000 transfer therefore needs identification. The closing programme statement alone cannot explain whether each movement was a buyer payment, invoice entry or noncash transfer.
Collecting disclosure data creates no journal by itself. The disclosure requirements do not automatically turn every programme liability into a borrowing or every settlement into a financing cash flow. Recognition, derecognition, balance-sheet presentation and cash-flow classification need their own assessment of the transactions and terms.
Sources and context, checked :
Request an invoice file that can support the note
Ask the provider for opening and closing invoice-level records showing the amount owed by the buyer, provider-payment status and date, buyer due date and movement type. Reconcile the file to the purchase ledger and the programme agreement. Record the financial-statement line item for the programme total and the already-paid subset.
Compare due-date ranges with comparable trade payables outside the programme. Preserve material differences in terms rather than combining unlike arrangements into an unexplained total. Keep the noncash movement analysis beside the opening-to-closing bridge.
IFRS 7 identifies accessed or accessible supplier-finance facilities as potentially relevant to liquidity-risk management disclosures. Review concentration, cancellation terms and replacement funding on the actual facts. A reconciled balance is the starting point for that explanation; it does not establish that access will continue.