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<p>The Companies Act 2006 does not include specific requirements for finance secured
through reverse factoring. However, section 393 places a requirement on directors
that the accounts must provide a true and fair view of the assets, liabilities, financial
position and profit or loss of a company or group. This places a responsibility to
provide such information as is necessary to ensure that requirement is met, including
where reverse factoring is used in supply chain arrangements.</p><p> </p><p>The correct
accounting treatment for reverse factoring is dependent on the terms and conditions
of the factoring arrangement in place. The International Financial Reporting Standards
(IFRS) Interpretations Committee and the Financial Reporting Council (FRC) have both
issued guidance addressing the accounting standards requirements for reverse factoring,
including guidance on additional disclosures. Copies of the guidance are attached
below. The International Accounting Standards Board is also considering whether to
add a project on reverse factoring to its agenda, as part of their responsibility
for issuing International Financial Reporting Standards.</p>
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