The first annual disclosure is more than a finance-provider balance
For an Ind AS entity with a year beginning 1 April 2025, the supplier-finance disclosures in Ind AS 7 paragraphs 44F–44H apply to FY 2025–26. Identify liabilities within the arrangements, the subset for which suppliers have already been paid by finance providers, the payment-due-date ranges and non-cash changes. First-year relief does not remove all opening information: paragraph 63(b) relieves opening information under 44H(b)(ii)–(iii), not the opening carrying amount and balance-sheet line items under 44H(b)(i).
The relevant text is Ind AS 7, Statement of Cash Flows, including the supplier-finance amendments notified by G.S.R. 549(E) dated 13 August 2025. Paragraph 62 sets annual application from 1 April 2025. This article is framed for the first annual period, FY 2025–26, and explains the disclosure and financial-analysis working; it does not treat an arrangement’s commercial name as a conclusive accounting classification.
Identify arrangements by their substance
Paragraph 44G describes arrangements in which finance providers offer to pay amounts the entity owes suppliers and the entity agrees to pay according to the arrangement on the same date as, or later than, suppliers are paid. Such arrangements provide extended payment terms to the entity or early payment terms to its suppliers compared with the related invoice due date. They may be called supply-chain finance, payables finance or reverse factoring.
A guarantee or letter of credit used solely as credit enhancement is outside this description. Instruments used to settle directly with the supplier, such as credit cards, are also excluded by 44G. Review the contractual flow of obligations and payment rather than including every bank-supported purchase. Conversely, an arrangement need not carry the words reverse factoring to fall within the substance described.
Build the note from liabilities, not just the bank’s funded figure
Paragraph 44H(b)(i) calls for the carrying amount of financial liabilities that are part of the arrangement and their associated balance-sheet line items. Subparagraph (ii) then identifies, within those liabilities, the carrying amounts and line items for which suppliers have already received provider payment. The second figure is a subset, not an additional debt to add again. A provider’s facility limit is neither figure.
Reconcile the arrangement population to the relevant payables or other financial-liability lines based on the entity’s properly determined accounting classification. Separately verify the provider-paid subset, for example through confirmations and settlement reports. A supplier may have an early-payment option that has not been used at year-end, so assuming that every enrolled invoice is already funded can distort the disclosure.
| Disclosure element | Required distinction | Working-paper control |
|---|---|---|
| Terms and conditions under 44H(a) | Explain dissimilar arrangements separately | Agreements, extended terms and security/guarantee details |
| Liability and provider-paid subset under 44H(b)(i)–(ii) | Identify the subset without adding it twice | General-ledger linkage and provider-paid confirmation |
| Payment ranges and non-cash changes under 44H(b)(iii) and (c) | Compare relevant payables and explain movements | Due-date population, comparable group and movement bridge |
Explain payment ranges using a consistent basis
Disclose the range of payment due dates for arrangement liabilities and for comparable trade payables outside the arrangement. For example, ranges may be expressed in days after invoice date. Identify an appropriate comparable population, such as the same line of business or jurisdiction, rather than selecting an unrelated set of unusually short-term suppliers to exaggerate the difference.
If ranges are wide, paragraph 44H(b)(iii) requires explanatory information or additional ranges, such as stratification. Do not replace the required range with a single average. Retain the date basis, currency or business grouping where relevant, invoice dates, contractual due dates and evidence supporting outliers. The note should help readers understand the effect on liquidity rather than merely reproduce the maximum facility tenor.
Non-cash movements must not become invented cash flows
Paragraph 44H(c) requires the type and effect of non-cash changes in the carrying amounts. These can include business combinations, exchange differences and other transactions without use of cash or cash equivalents. Identify transfers into the arrangement population separately from actual cash settlements and show the direction of exchange differences correctly.
Paragraph 43 excludes investing and financing transactions without cash or cash equivalents from the statement of cash flows and requires disclosure elsewhere sufficient to explain them. A non-cash transfer of an obligation is not evidence of an entity cash outflow and inflow. Determine the actual cash flows and their appropriate classification from the underlying facts; the new disclosure paragraphs alone do not declare every arrangement to be borrowing or every settlement to be financing.
Apply the first-year relief precisely
Paragraph 63(a) relieves comparative information for periods before the first annual application period. Subparagraph (b) relieves opening provider-paid-subset information and opening payment-range information under 44H(b)(ii)–(iii). It does not relieve opening arrangement liabilities and associated line items under (i). Subparagraph (c) provides relief for 44F–44H information in interim periods within the first annual application period. It does not waive the closing annual disclosures.
For a 31 March year-end first applying in FY 2025–26, therefore, establish the arrangement liability at 1 April 2025 as well as at 31 March 2026. Document exactly which opening/comparative relief is used. Do not carry first-year relief forward indefinitely or apply an IAS 7 commencement date in place of the notified Ind AS date.
Use the note to support financial analysis
An internal management pack can add provider concentration, near-term settlement peaks and a cash-availability stress test. Label these as management analyses, with assumptions and units; they are not newly prescribed percentage formulas under 44H. Distinguish contractual cash commitments, unrestricted cash, expected collections and committed funding. Forecast collections are uncertain and should not be reported as cash already available.
Common errors are disclosing only the bank-paid balance, double-counting the subset, omitting relevant liability line items, aggregating dissimilar terms without explanation and treating a wide range as a single average. A disciplined bridge between contracts, invoices, provider data, the general ledger and the cash-flow statement addresses these errors and gives the board a more useful view of working-capital dependency.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: The provider-paid amount is a subset
Assume arrangement liabilities have a carrying amount of ₹50 million at year-end. Suppliers have already received provider payments against ₹35 million of those liabilities. Disclose the ₹50 million population and the ₹35 million subset with their associated balance-sheet line items. The subset is 35 ÷ 50 = 70%; total liability is not ₹85 million. The percentage is explanatory analysis, not a prescribed additional ratio.
Illustrative example 2: Reconcile to the balance-sheet line
Assume the entity’s properly determined trade-payables line is ₹80 million, comprising ₹50 million within supplier-finance arrangements and ₹30 million outside them. The arrangement liability is ₹50 million, linked to the ₹80 million line, rather than the entire ₹80 million. Adding the disclosed ₹50 million to the line would create an incorrect ₹130 million total.
Illustrative example 3: Show comparable ranges rather than one average
Assume arrangement invoice terms run from 90 to 150 days and comparable ordinary terms from 30 to 60 days, all measured after invoice date. For an invoice dated 1 January 2026, the illustrative arrangement dates are 1 April and 31 May; the comparable dates are 31 January and 2 March. Disclose both supported ranges and explain a wide range where required, rather than reporting only a 90-day figure.
Illustrative example 4: A non-cash transfer is not two cash-flow entries
Assume ₹30 million of ordinary trade obligations is transferred into an arrangement liability through a transaction in which the entity uses no cash or cash equivalents. The transfer itself contributes zero entity cash flow, with its type and effect explained as applicable. A later actual ₹20 million settlement is analysed once as cash payment under its properly determined classification, not as another ₹30 million payment.
Illustrative example 5: Bridge opening and closing liabilities
In millions of rupees, arrangement liabilities start at 20; new invoices in the population add 60; a separately identified non-cash transfer adds 5; cash settlements reduce 45; and an exchange movement reduces 1. Closing amount is 20 + 60 + 5 − 45 − 1 = 39. The specified transfer and exchange movements have net effect +4. Preserve their separate types rather than presenting the net 4 as cash. The opening 20 remains relevant to 44H(b)(i) in the first year.
Illustrative example 6: Provider concentration for the management pack
Of ₹50 million arrangement liabilities, provider A accounts for ₹40 million and provider B ₹10 million. Concentrations are 80% and 20%. These percentages may help management assess reliance and consider the disclosure objective; they are not a substitute for terms, liability/subset amounts, due-date ranges and non-cash information required by 44H.
Illustrative example 7: A short-term liquidity scenario
Assume ₹35 million of provider-paid obligations falls due in a selected forecast window. Unrestricted cash is ₹12 million and assumed collections in that window are ₹8 million, with no other available source or payment included. Modelled resources are ₹20 million and the shortfall is ₹15 million. This is an expressly simplified management scenario; expected collections are not cash already held, and the calculation is not a mandatory Ind AS ratio.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Confirm Ind AS applicability and the first annual period | Framework assessment and paragraph 62 application date |
| 2 | Identify arrangements meeting the paragraph 44G substance | Contracts, provider role and supplier-payment terms |
| 3 | Exclude arrangements outside that description | Credit-enhancement and direct-settlement analysis |
| 4 | Map all arrangement liabilities to balance-sheet lines | Invoice population, ledger reconciliation and classification memo |
| 5 | Determine the provider-paid subset without double-counting | Provider confirmations, settlement data and subset reconciliation |
| 6 | Explain terms and separately identify dissimilar terms | Agreement summaries, guarantees and security information |
| 7 | Calculate and substantiate both payment-due-date ranges | Invoice/due-date data, comparable population and outlier explanation |
| 8 | Explain non-cash changes and reconcile cash settlements | Movement bridge, exchange effects and cash-flow support |
| 9 | Apply each first-year relief only to the specified information | Opening/comparative/interim relief checklist and closing annual note |
| 10 | Review liquidity implications and final note consistency | Management assumptions, statutory disclosure checklist and signed reconciliation |
Sixteen practitioner FAQs
1. When do the supplier-finance amendments apply under Ind AS?
Paragraph 62 requires them for annual reporting periods beginning on or after 1 April 2025.
2. Does an arrangement need to be named reverse factoring?
No. Test the payment structure in paragraph 44G; commercial labels are not decisive.
3. Are guarantees automatically supplier-finance arrangements?
Arrangements solely providing credit enhancement, including the examples in 44G, are excluded from that description.
4. Are ordinary credit-card settlements included?
Paragraph 44G excludes instruments used by the entity to settle directly with suppliers, giving credit cards as an example.
5. Is the facility limit the disclosed liability?
No. Paragraph 44H(b) addresses carrying amounts of relevant financial liabilities and associated balance-sheet line items, not unused sanction capacity.
6. Why distinguish invoices already paid by providers?
Paragraph 44H(b)(ii) specifically identifies that subset within the overall arrangement liabilities. It reveals a different stage of funding.
7. Should the provider-paid subset be added to arrangement debt?
No. It is part of the liability population, so addition would double-count it.
8. Can every enrolled invoice be assumed to be provider-paid?
No. Establish whether suppliers actually received payment as at the reporting date using reliable evidence.
9. Must different terms be explained separately?
Paragraph 44H(a) requires separate disclosure of terms and conditions of arrangements with dissimilar terms and conditions.
10. Can an average tenor replace the due-date range?
No. The required ranges for arrangement liabilities and comparable ordinary trade payables must still be addressed.
11. What if the due-date range is very wide?
Provide explanatory information or additional ranges, such as stratification, as required by 44H(b)(iii).
12. Which ordinary payables are comparable?
Select a supported population; 44H gives the same line of business or jurisdiction as examples. Explain the basis where needed.
13. Are non-cash transfers presented as cash payments?
No cash flow arises merely from a transfer using no cash or cash equivalents. Disclose its type and effect and apply the cash-flow requirements to actual cash movements.
14. Does the first-year exemption remove opening liability amounts?
No. Paragraph 63(b) targets opening information under 44H(b)(ii)–(iii); the opening carrying amount and associated line items under (i) remain outside that relief.
15. Does interim relief waive the year-end note?
No. Paragraph 63(c) concerns interim periods within the first annual application period, not the closing annual disclosure.
16. Do these paragraphs classify all supplier finance as borrowing?
They establish disclosure requirements. Liability and cash-flow classification require the applicable standards and facts to be examined separately.
Conclusion
Build the disclosure from the full arrangement population, reconcile its funded subset and explain due-date ranges and non-cash movements. Use first-year relief only where paragraph 63 specifies it, and keep liquidity forecasts clearly identified as management analysis.