ASU 2022-04 Supplier Finance Program Disclosure — Required Disclosures for Buyer Entities

💡 Accountant's Note

ASU 2022-04 (Liabilities — Supplier Finance Programs — Topic 405-50) was issued December 2022 in response to the FASB's concern that supply chain finance programs were being used to obscure leverage — companies had billions in bank-financed payables classified as 'accounts payable' with no disclosure. The SEC had also begun requiring companies to disclose SFP programs. Under ASU 2022-04: companies operating SFPs must disclose: (1) KEY TERMS: what the program involves, which financial intermediary (bank or other third party) is involved, the payment terms extended to participating suppliers vs. non-participating suppliers, (2) OUTSTANDING OBLIGATIONS: the amount of obligations outstanding at period-end that were confirmed in the SFP (the amount the bank has agreed to pay suppliers early, which the buyer will later repay), (3) CHANGES DURING PERIOD: a rollforward of SFP-enrolled obligations (opening + confirmed + settled = closing). Annual disclosure: all the above. Interim (quarterly) disclosure: just the outstanding balance. The disclosure does NOT require reclassification of SFP payables from AP to debt — but the transparency forces analysts to assess whether the reclassification is warranted.