As we discussed in a previous post, last October the Financial Accounting Standards Board (“FASB”) added the development of guidance on disclosure requirements with respect to trade payables programs to their agenda. At the same meeting, FASB explicitly decided not to address the issue of how trade payables programs should be characterized for accounting purposes – a separate issue from disclosure that may be taken up by FASB in the future.
In the year since FASB voted to take up the issue of disclosure requirements for trade payables programs, the most significant development was the June 2021 decision to include in FASB’s draft proposal a requirement that companies with payables programs disclose the key terms of the programs, the total confirmed amounts payable under the programs and a description of where those amounts are presented in the balance sheet. This is intended by FASB to provide investors with a broader view of certain companies’ liquidity positions.
At a board meeting on September 22nd, FASB took another step forward, voting in favor of a requirement that companies utilizing trade payables programs include a roll-forward of amounts confirmed under those programs in their annual disclosures. However, the board voted against developing any specific disclosure requirements for interim reporting periods.
The next step in the process is expected to be for FASB to develop a draft proposal setting forth in detail their proposed disclosure requirements, which is anticipated before the end of 2021. A 90-day public comment period will follow the release of the draft proposal, after which FASB will develop its final guidance. Given the longstanding and extensive use of payables programs by many large corporations, no doubt industry watchers will keep a close eye on FASB’s next moves related to payables programs.
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