FASB Provides LIBOR Transition Relief
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.
For more information, contact the BNN banking team at 800.244.7444.
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