Ind AS 7 amendment is forcing companies to rethink how they manage cash flow.
For years, many Indian companies especially mid-sized manufacturers, traders and consumer businesses relied on supplier finance programmes to manage working capital.
It looked simple and harmless:The supplier gets paid early by a bank or fintech,the company pays later.
On paper, it felt like a smarter version of extended credit terms.
But in 2025, the Ministry of Corporate Affairs aligned Ind AS 7 with global IFRS updates.
And suddenly, what looked like “trade payables” might now be seen as something else:A form of short-term borrowing.
Globally, regulators realised something risky:Companies were using supplier finance to hide leverage, Balance sheets looked lighter than they actually were and Cash flows looked smoother than reality.
To fix this, the new Ind AS 7 amendment asks companies to clearly disclose:
- The terms of their supplier-finance arrangements
- The outstanding amount financed by banks/fintechs
- How much of the trade payables are actually “bank-funded”
- Any risks or concentration with a single finance provider
- Cash flow impact of these arrangements
What you previously called “trade payable” may now look like bank borrowing to investors, lenders and auditors.
Why This Matters to Indian Companies (Especially 2025–26)
1)It changes how healthy your working capital looks
Earlier, you could show “smooth” working capital cycles because payments were delayed through supplier finance.
Now, Disclosures will show how much of your “smoothness” was created by a lender not operations.
2)Banks may reassess your creditworthiness
With more transparency, lenders can see the hidden leverage,Dependency on financing arrangements and Cash flow mismatches.This may affect interest rates or limits.
3) Investors and Boards now get a clearer risk picture
Many unlisted mid-sized companies have promoter-driven finance decisions.Earlier, supplier finance helped companies “look” liquid.
Now, supplier finance helps companies look transparent.This amendment does not punish businesses.
It simply ensures nobody can hide liquidity risks under the word “payables”.This amendment forces board-level conversations about liquidity and real cash flow pressure.
Conclusion
Ind AS 7 didn’t create a new rule.
It simply put a spotlight on something companies were already doing quietly,supplier finance is not the villain but hidden supplier finance is.
For companies preparing for IPOs, PE rounds or bank financing, this transparency will matter more than ever.