Defining Issues | March 2020
FASB provides relief to companies for reference rate reform
FASB provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR that are expected to be discontinued.
Applicability
- All companies with contracts or hedging relationships that reference an interest rate that is expected to be discontinued
Relevant dates
- Effective immediately
- May be applied as of the beginning of the interim period that includes March 12, 2020
- Available for a limited time, generally through December 31, 2022
Key impacts
- Account for certain contract modifications as a continuation of the existing contract without additional analysis.
- Continue hedge accounting when certain critical terms of a hedging relationship change and assess effectiveness in ways that disregard certain potential sources of ineffectiveness.
- Make a one-time sale and/or transfer of certain debt securities from held-to-maturity to available-for-sale or trading.