$4 Billion Accounting Scandal Exposes Supplier Finance Risks (1)

The accounting scandal that led to a $4 billion hole in the balance sheet of major Brazilian retailer Americanas SA centers on a common funding tool with notoriously opaque reporting: supplier finance.

Americanas, which nosedived into bankruptcy protection last week, is an extreme example of how the arcane practice, also called supply-chain finance or reverse factoring, can take advantage of loose accounting rules to flatter a company’s balance sheet. The process involves a bank or third party paying a buyer’s suppliers at a discount earlier than they would be otherwise.

Americanas hasn’t revealed much detail of how it used supplier ...