The use of supply chain finance (SCF) facilities is becoming increasingly common. The Dutch Authority for the Financial Markets (AFM) has therefore reviewed the way in which nine listed companies, acting as customers, recognise SCF facilities in their financial statements.
This revealed that these companies see supply chain finance as part of their operational activities and not as a financing activity. It can only concern an operational activity if the SCF programme has no material impact on the payment conditions. The method of presentation used by these companies in their financial statements means that users have little insight into the company’s SCF programme.
More transparency for users of financial statements
The AFM found very little information on SCF programmes in the financial statements it reviewed, although SCF facilities occur in many different forms. For users, it is important that they are given relevant information on significant SCF programmes, such as the nature and scale of the programme and how it is recognised. The AFM thus calls on companies to be more transparent regarding their supply chain finance facilities.
SCF facilities (also known as reverse factoring) are arranged with a financial institution as a partner. The customers state that financial flexibility and the stability of their suppliers are important. If suppliers then invoice the customer, the partner makes an offer to the supplier for an advance payment on the invoice. The suppliers can then decide whether to accept the offer. This means that suppliers can obtain finance more easily and at lower cost.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.