Supplier finance can make an ordinary purchase ledger look simpler than the economics underneath it. A supplier may receive cash early from a finance provider while the buyer pays that finance provider later. The buyer still has a liability, but the arrangement can lengthen payment timing and change the entity's liquidity profile. Ind AS 7 and Ind AS 107 therefore require disclosures that let users see the effect of these arrangements rather than infer it from one trade-payables number.
ICAI's current Compendium of Indian Accounting Standards states that the Companies (Indian Accounting Standards) Second Amendment Rules, 2025 are incorporated in the 2025-26 Compendium. ICAI's Ind AS notifications page also provides the official route to those Second Amendment Rules. The amendments inserted the supplier-finance disclosure requirements into Ind AS 7 and related liquidity-risk material into Ind AS 107.
The supplier-finance paragraphs in the current Ind AS 7 apply for annual reporting periods beginning on or after 1 April 2025. On first application, the standard provides limited transition relief: comparatives for periods before that first application year are not required; the opening-period information otherwise required by paragraph 44H(b)(ii)–(iii) is not required; and paragraphs 44F–44H need not be given for an interim period within that first annual period. The linked Ind AS 107 amendment applies when the Ind AS 7 amendment is applied.
What counts as a supplier finance arrangement?
The label used by a bank or procurement team is not decisive. The arrangement is within this disclosure area when one or more finance providers offer to pay amounts that the entity owes its suppliers and the entity agrees to pay the finance provider under the arrangement on the same date as, or later than, the suppliers are paid. Compared with the related invoice due date, the arrangement gives the entity extended payment terms, the supplier earlier payment, or both.
These structures are commonly described as supplier finance, supply-chain finance, payables finance or reverse factoring. The scope is not a catch-all for every financing product. Financing of receivables or inventory is outside this supplier-finance disclosure definition. The practical screening question is whether a finance provider has stepped into the settlement chain for amounts the reporting entity owes to suppliers.
The disclosures are designed to expose what the closing payable cannot show
Ind AS 7 requires information that helps users assess the effects of supplier finance arrangements on liabilities and cash flows and the entity's exposure to liquidity risk. That objective drives the data request. For arrangements with similar terms, the entity needs to assemble the following information, with arrangements having dissimilar terms explained separately:
- Terms and conditions. Describe the commercial features that matter, such as the payment structure and relevant security or guarantees.
- Liabilities in the arrangement. At the beginning and end of the reporting period, disclose the carrying amounts of financial liabilities that are part of the arrangements and identify the balance-sheet line items in which they are presented.
- Amounts already paid to suppliers. Within those liabilities, disclose the carrying amounts for which the suppliers have already received payment from the finance providers, together with the associated balance-sheet line items.
- Payment due-date ranges. Show the range of payment due dates for liabilities in the supplier finance arrangements and for comparable trade payables that are not in such arrangements. If a range is unusually wide, explanatory or more granular information may be needed.
- Non-cash changes. Explain the type and effect of non-cash changes in the carrying amounts of the supplier-finance liabilities. Examples include effects of business combinations, exchange differences and other changes that do not use cash or cash equivalents.
A reader-friendly overview of these requirements is also available in KPMG India's First Notes on the Ind AS amendments. The official ICAI sources above should remain the primary reference for the applicable standard.
Why the “supplier already paid” number matters
Consider two invoices that both sit within the buyer's year-end liabilities. On the first, the supplier is still waiting for payment. On the second, a finance provider has already paid the supplier and is now the party economically awaiting settlement from the buyer. A single aggregate payable can hide that difference.
The required disclosure of the portion already settled with suppliers makes that financing exposure visible. Finance teams therefore need information from the financing platform or provider, not merely the accounts-payable ledger. A year-end process that cannot identify which suppliers have already been paid may be unable to produce the disclosure reliably.
The due-date comparison is meant to show the extension, not just the programme's maturity
Reporting only that supplier-finance liabilities are due in, say, 90 days is incomplete. The standard asks for a range for those liabilities and a range for comparable trade payables outside the programme. That comparison helps a user see whether the arrangement has materially extended the buyer's payment cycle.
“Comparable” should be approached with substance in mind. Trade payables from the same line of business or jurisdiction may be more useful comparators than an unrelated pool with very different purchasing terms. Where due-date ranges are broad, stratifying or explaining them can be more informative than one range that conceals the distribution.
Ind AS 107 connects the arrangement to liquidity-risk reporting
The disclosure exercise does not stop with a note describing the programme. The amendments also bring supplier finance arrangements into the liquidity-risk analysis under Ind AS 107. Access to arrangements that extend the entity's payment terms or provide suppliers with earlier payment can be relevant when deciding what specific quantitative and qualitative liquidity information users need.
This matters because a large supplier-finance programme can create concentration around one or a few finance providers or create a refinancing-like dependency even when the underlying purchases began as ordinary trade transactions. The financial statements should allow users to understand that exposure rather than treat the programme as invisible working-capital administration.
The amendments do not automatically decide liability or cash-flow classification
The supplier-finance amendments are disclosure requirements. They do not themselves prescribe a single balance-sheet classification for every liability in such an arrangement, nor do they create a universal rule that every settlement with the finance provider is an operating or financing cash flow. Those presentation and classification conclusions still depend on the facts and the other applicable Ind AS requirements.
That separation is important in practice. A company should first determine the appropriate accounting presentation based on the contractual substance, then apply the supplier-finance disclosures to the qualifying arrangement. Calling an amount “trade payable” in the ledger does not remove the disclosure requirement, and calling an arrangement “reverse factoring” does not by itself determine its presentation.
Illustration: what the year-end note needs to capture
Hypothetical example: A manufacturer normally pays comparable suppliers 40 to 50 days after invoice. Under a supplier-finance programme, participating suppliers can be paid by a bank shortly after invoice approval, while the manufacturer pays the bank 85 to 95 days after invoice. At year-end, ₹30 crore of financial liabilities are within the programme and, of that amount, suppliers have already received ₹22 crore from the bank.
The manufacturer should not stop at disclosing “supplier finance: ₹30 crore”. Subject to its actual facts and presentation, the disclosure package needs the programme's material terms and conditions, the beginning- and end-period carrying amounts and relevant balance-sheet line items, the ₹22 crore portion for which suppliers have already been paid, the 85-to-95-day programme range against the 40-to-50-day comparable-payables range, and any material non-cash movements. Its Ind AS 107 liquidity-risk disclosures should also reflect the programme where relevant.
Build the disclosure from source data, not from the note at the last minute
A workable close process starts by maintaining a complete register of supplier-finance programmes and linking each programme to the payables and financing systems. For each reporting date, the file should be capable of reconciling:
- the contracts and material terms for each arrangement;
- the liabilities included in the programme and the balance-sheet line items in which they are presented;
- the amount for which finance providers have already paid suppliers;
- programme payment due dates and the due dates of a defensible comparable-payables population;
- cash and non-cash movements during the period; and
- the liquidity-risk implications considered under Ind AS 107.
Supplier finance is therefore not only a disclosure drafting exercise. The note depends on procurement, treasury, accounts payable and finance-provider data being joined before the reporting date. When those data points reconcile, the financial statements can show the part of the arrangement that a normal payables ageing would otherwise miss.
