RE: Any qualified accountants...2 Sep 2020 00:15
Prospectus (p. 38):
"the inventory asset, having been sold to the Stock Company, is no longer an asset of the customer and accordingly is no longer required to be treated as an asset on the customer’s balance sheet (“asset derecognition” pursuant to IFRS) [sic]. Supply@ME’s inventory monetisation service is therefore not debt financing and does not increase the customer’s leverage levels. This is an important benefit compared to traditional asset-backed supply chain finance; the customer digitally “re-purchases” the inventory when it is required for onwards selling to its end-customer. THE CUSTOMER IS ENTITLED TO "RE-PURCHASE" THE INVENTORY AS THE STOCK COMPANY WILL HAVE ENTERED INTO A CONSIGNMENT AGREEMENT WITH THE CUSTOMER UNDER WHICH THE STOCK COMPANY WILL HAVE AGREED NOT TO HAVE DISPOSED OF THE INVENTORY.
[My emphasis caps not in original]
see IFRS 15 (extracted below to the extent relevant):
B64 A repurchase agreement is a contract in which an entity sells an asset and also promises or has the option (either in the same contract or in another contract) to repurchase the asset. ...
B65 Repurchase agreements generally come in three forms:
[...]
(b) an entity’s right to repurchase the asset (a call option);
B66 If an entity has [...] a right to repurchase the asset (a call option), a customer does not obtain control of the asset because the customer is limited in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset even though the customer may have physical possession of the asset. Consequently, the entity shall account for the contract as
[...]
(b) a financing arrangement in accordance with paragraph B68 if the entity can or must repurchase the asset for an amount that is equal to or more than the original selling price of the asset.
Account for the contract as a finance arrangement which is neither off balance sheet nor derecognition. I will be interested to see how the auditors, GT, get around these words in the standard which look clear enough.
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