International law firm Sullivan has advised ITFA (the International Trade and Forfaiting Association), on its recently published guide to accounting and legal issues under International Financial Reporting Standard (IFRS) 9 for the trade receivables and supply chain finance industry.
These are ITFA’s first set of guidelines on the standards aimed solely at the trade and supply chain finance industry, since the International Accounting Standards Board (IASB) issued IFRS 9, which came into force on January 1, 2018.
"This is something that every trade and supply chain finance banker needs to know,” says Sean Edwards, Chair of ITFA. “We are providing clarity for our members where precious little guidance exists."
Geoffrey Wynne, head of the Trade & Export Finance Group and Sullivan's London office, commented: "The detail of this guide will be incredibly useful to those who finance trade and the supply chain, looking at accounting and legal issues relating to risk transfer, true sale and the regulatory treatment of different risk distribution techniques commonly employed in trade and supply chain finance. Ultimately, having access to this information is necessary for the market, owing to increased complexity in trade and supply chain finance as a result of recent changes in accounting and banking capital standards."
The publication, titled "A guide to accounting and legal issues under IFRS 9 for the trade receivables and supply chain finance industry" looks at the following credit risk mitigation products and techniques:
• Non-payment insurance
• Unfunded sub-participations
• Funded sub-participations with transfer of an ownership interest
• Funded sub-participations without such a transfer
• Novation and assignment
The publication is the latest in ITFA’s range of publications focused on how to originate, distribute and manage trade risk and debt in supply chain finance. A copy of the guide is available to all ITFA members and will be supplemented by training at ITFA’s Annual Conference in September.
The Sullivan team advising in relation to the drafting and publication of the guide was led by Trade & Export Finance Partner Geoffrey Wynne with Managing Associate Hannah Fearn in London.
In 2019, Sullivan was named "Best Trade Finance Law Firm" 2019, by both leading trade finance publication Global Trade Review (GTR) at its annual Leaders in Trade Awards, held in May, and Trade Finance Global (TFG) at their 2019 International Trade Finance Awards held in February.