FASB Issues Proposed Update On Supply Chain Financing Programs

For over two years, the SEC staff and advisory committees, credit rating agencies, investors, the Big Four accounting firms and other interested parties have been making noise about a popular financing technique called "supply chain financing."  It can be a perfectly useful financing tool in the right hands—companies with healthy balance sheets.  But it can also disguise shaky credit situations and allow companies to go deeper into debt, often unbeknownst to investors and analysts, with sometimes disastrous ends. Currently, there are no explicit GAAP disclosure requirements to provide transparency about a company's use of supply chain financing. That may be why  Bloomberg has referred to supply chain financing as "hidden debt." Late last month, the FASB  announced that it had issued a  proposed Accounting Standards Update intended to help investors and others "better consider the effect of supplier finance programs on a buyer's working capital, liquidity, and cash