Source · Select Committees · Business and Trade Committee
Recommendation 17
17
We did not receive evidence that the use of circular trading between companies is a...
Conclusion
We did not receive evidence that the use of circular trading between companies is a systemic issue, but note the potential criminal liability associated with the worst examples of financial engineering between businesses. Despite repeated reassurances from GFG Alliance, we remain unconvinced by Sanjeev Gupta’s attempts to re- structure and re-finance his businesses. We are not satisfied that Sanjeev Gupta is adequately addressing the many fundamental issues and concerns associated with the corporate governance, leadership, transparency, funding and operations of his businesses and remained concerned that this poses a threat to the long-term prospects of Liberty Steel UK. (Paragraph 87) Coronavirus Large Business Interruption Loans Scheme
Government Response
Not Addressed
HM Government
Not Addressed
25. The International Accounting Standards Board (IASB) has an active project on its agenda in respect of supply chain finance (reverse factoring) arrangements. On 26 November 2021, the IASB issued an Exposure Draft which proposed amendments to IAS: 7 Statement of Cash Flows and IFRS: 7 Financial Instrument Disclosures. 26. The proposed amendments include a requirement to disclose information about supplier finance arrangements that enable a user of the financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows, disclosure of the terms and conditions of each supplier finance arrangement and, for each arrangement, the carrying amounts of financial liabilities and ranges of payment dates. 27. The Government welcomes these proposals, however any formal endorsement of the standards will be undertaken by the UK Endorsement Board, the independent body which considers whether international accounting standards should be adopted for use in the UK. Should the exposure draft be issued as an amendment, the UK Endorsement Board will consider whether to adopt the amendment for use in the UK under its normal processes. 28. The Financial Reporting Council will also, as part of its regular reviews of UK GAAP, consider whether these amendments should be reflected in UK GAAP, again, under its normal processes. 29. The Government will continue to closely monitor Liberty Steel UK’s restructuring and refinancing efforts, whilst continuing to engage with representatives of the company and trade unions.