Supplier finance and concentration

Learning objectives

• Explain why liabilities concentrated with a single finance provider may give rise to liquidity risk.L3
• Analyse a supplier finance arrangement to assess the concentration of liquidity risk.L3

Normative references

• IFRS 7 §B11FGuidance B11F lists factors that the entity might consider in describing how it manages its liquidity risk (para. 39(c)): in particular significant concentrations of liquidity risk in its assets or funding sources and, since the May 2023 amendments, access to supplier finance arrangements (as defined in IAS 7) that provide it with extended payment terms or its suppliers with early payment terms.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• 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?L3
• Société Vega closes a reporting period beginning on 1 January 2025 and does not early apply any amendment (case facts). It has supplier finance arrangements. Of the 2023 IFRS 7 amendments (supplier finance) and the 2024 ones (classification and measurement), which apply to this period?L3