CERTYNEX IFRS ACADEMY

Cobra SA has transferred to a single finance provider the payment of 85% of its trade payables, under a supplier finance arrangement (case facts). Which analysis is consistent with the disclosures on liquidity risk management?

The arrangement does not affect liquidity risk, because the payables remain ordinary trade payables whose contractual maturity is unchanged for Cobra.

The arrangement reduces liquidity risk, since a single counterparty is easier to manage than many suppliers with different due dates.

Payables concentrated with a single provider, rather than spread across many suppliers, can create liquidity risk: the arrangement is a factor to be described.

The arrangement falls under IAS 7 and need not be taken into account in the IFRS 7 disclosures on liquidity risk management.