The Big Four auditing firms — EY, Deloitte, KPMG and PwC — have recently requested that the Financial Accounting Standards Board (FASB) provide clarity in how corporates should classify their reverse factoring or supply chain financing agreements, adding more fuel to a long-standing debate as to whether such trade financing tools are debt.
A closer look at the discussion reveals why the uncertainty has been causing more concern than usual: in addition to the FASB introducing new accounting standards, the Big Four’s letter pointing to the rising reliance on such supplier financing agreements, as corporates look to expand their payment terms.
