(Reuters) — Companies will have to disclose details of loans to paying suppliers from January 2024, a global accounting standards body said on Thursday, drawing lessons from the collapse of Greensill Capital.
The International Accounting Standards Board said companies will be required to disclose the terms, amounts owed, intervals for payment due dates and liquidity risks from supplier financing arrangements.
Greensill Capital was a finance company that went bankrupt in 2021 after one of its top insurers refused to renew its cover.
Companies could borrow cash from Greensill Capital to pay their suppliers early, effectively taking on debt, but such supplier financing did not have the same corporate disclosure requirements as more conventional forms of debt.
British builder Carillion also collapsed under the weight of debt, much of it undisclosed, prompting calls in Britain̵7;s parliament for accounting reforms.
“The new disclosure requirement will make visible a company’s use of supplier financing arrangements and enable investors to make better informed investment decisions by showing how that use has affected the company’s operations,” IASB chairman Andreas Barckow said in a statement.
The IASB’s accounting rules are used in more than 150 countries and are mandatory in the EU and the UK.