Carillion collapse reveals gaps in supply chain accounting
Moody’s says Carillion’s accounting treatment of supply chain finance failed to reveal the true extent of money owed to banks.
Photo (cropped): Carillion
Flaws in the way companies account for supply chain finance may have contributed to the collapse of Carillion because it failed to reveal the true extent of the construction giant's debt, according to Moody's.
The ratings agency said the accounting meant that Carillion's 2016 balance showed £148m in bank loans and overdrafts when an additional sum, up to £498m, was owed to banks yet excluded from "borrowings".
Moody's said the confusion stemmed from the use of "reverse factoring arrangements", a form of supply chain finance which sees suppliers' invoices paid early by a third party, for example a bank, while the customer registers a d
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