Defining Issues | April 2022

 

Insight

FASB proposes amendments to ASC 848 and ASC 815

Proposals would defer sunset date for reference rate reform accounting, and amend the definition of the SOFR Swap Rate.

The proposed ASU would defer to December 31, 2024 the sunset date of ASC 848, which provides relief for companies preparing for the discontinuation of interest rates such as LIBOR. It would also expand the definition of a US benchmark interest rate under ASC 815 to include all rates based on SOFR (such as SOFR term).

Applicability

  • All companies with contracts or hedging relationships that reference an interest rate expected to be discontinued or that have hedging relationships referencing a US benchmark interest rate

Relevant dates

  • April 20, 2022 – FASB issued proposed ASU
  • June 6, 2022 – Comments due

Key impacts

The proposed ASU would:

  • Defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024. After the sunset date, entities would no longer be permitted to apply ASC 848.
  • Expand the definition of a US benchmark interest rate to include all rates based on SOFR (such as SOFR term). The current definition in ASC 815 includes only the SOFR Overnight Index Swap Rate. 
The proposals would be effective for all entities upon issuance of a final update and would be applied prospectively.

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