Sales of trade receivables get new statement of cash flow treatment

In depth Nov 27, 2017

New guidance effective in 2018 may reduce operating cash flows for companies that sell their trade receivables.

Overview

New guidance effective in 2018 may reduce operating cash flows for companies that sell their trade receivables. Many companies sell their trade receivables to a commercial paper conduit or bank in exchange for cash and a beneficial interest (sometimes called the deferred purchase price). Receipt of the beneficial interest will now be required to be disclosed as a non-cash investing activity. When the receivables are paid, the cash the company receives to settle the deferred purchase price must be presented as an investing activity in the statement of cash flows. This is a change from current practice as many companies currently present all of the cash flows from these arrangements in the operating section.

Cash received upon sale of a trade receivable may continue to be presented in the operating section of the statement of cash flows.

To have a deeper discussion, please contact:

Donald Doran

Partner, National Professional Services Group

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Shannon Detling

Director, National Professional Services Group

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David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group
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