Cash Flows: Location Matters
Wednesday, December 5, 2018 at 11:00 am EDT
Over the past few years, companies have been using two discreet techniques to flatter their cash flow: a) reverse factoring (aka supplier factoring, structured payables programs, confirming, and/or supply chain financing) and b) receivables factoring (aka discounting receivables, selling receivables, receivables financing). Location matters as under IFRS companies classify reverse factoring differently in the Statement of Cash Flow, impacting comparability. For the sale of receivables, a new accounting standard update (ASU) shifts certain cash flows from receivables securitizations from operating to investing, resulting in declines in free cash flow for some U.S. companies and making comparisons across geographies more challenging.
During this webinar, Jennifer Latz discussed the implications of this accounting standard change, reverse factoring, and how these arrangements can skew quantitative screens, analysis of cash flow and/or net debt.
We reviewed a few case studies of companies engaging in both the sale of receivables and supply chain financing, highlighting their differences in disclosure, and the effect on various ratios and analysis.
Presented by: Jennifer Latz, Senior Research Analyst, CFRA
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