FASB Proposes Update to Ease LIBOR Transition

Posted on September 20, 2019 by Editor

With global markets expected to move away from discredited interbank offered rates such as LIBOR by 2022, the Financial Accounting Standards Board (FASB) have issued a proposed Accounting Standards Update (ASU). The update is designed to provide temporary and optional accounting relief that should ease the extra burden associated with accounting for contracts affected by reference rate reform.

The proposal, which is open for comment until 7 October 2019, would allow optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships affected by reference rate reform. It would only apply to those contracts that reference LIBOR or other reference rates due to be discontinued and it would be in place for a limited amount of time.

With trillions of dollars in loans, derivatives and other financial contracts referencing LIBOR, the upcoming reform is due to be extremely complex. Alongside other temporary reforms, such as the IFRS financial instrument reformswe reported on last week, FASB’s updates would allow for a temporary adjustment to help the switch over happen smoothly.

Read more and submit your comments here.

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