FASB Provides LIBOR Transition Relief

CECL survey 2019

Yesterday, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU is intended to provide companies impacted by the expected transition from the London Interbank Offered Rate (LIBOR) with temporary optional guidance in order to ease the potential accounting burden resulting from the transition.

Under the new ASU, companies are provided with optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contract modifications and hedging relationships that currently utilize LIBOR as their benchmark rate, subject to certain criteria being met. The amendments in the ASU also apply to contemporaneous modifications of other contract terms related to the replacement of LIBOR.

The amendments in the ASU are effective for all entities as of March 12, 2020. Because the ASU is intended to assist stakeholders during the global reference rate transition period, it will only be in effect through December 31, 2022.

A link to the News Release from the FASB can be found here. A link to the full text of ASU 2020-04 can be found here.

For more information, contact the BNN banking team at 800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.