The Fiscal Accounting Criteria Board issued a proposed accounting requirements update Thursday that would clarify the scope of FASB’s new reference price reform guidance.

The update addresses ASU No. 2020-04, Reference Charge Reform (Matter 848), issued by FASB in March 2020, which resulted from a FASB challenge to assist ease the opportunity accounting load of the anticipated go of world wide capital markets absent from the London Interbank Available Fee (LIBOR), the benchmark interest rate banks use to make brief-term financial loans to each and every other.

Matter 848: Facilitation of the Consequences of Reference Price Reform on Money Reporting gives short term, optional expedients and exceptions for making use of typically accepted accounting concepts to agreement modifications and hedging interactions, matter to assembly sure standards, that reference LIBOR or one more reference price envisioned to be discontinued.

Given that the launch of that ASU, stakeholders raised issues about irrespective of whether Subject matter 848 can be applied to by-product devices that do not reference a amount that is expected to be discontinued but that use an interest amount for margining, discounting or contract rate alignment that is modified as a end result of reference rate reform. Stakeholders recommended the modification, or “discounting changeover,” may have accounting implications and shared considerations about the need to reassess previous accounting determinations relevant to people contracts and about the hedge accounting penalties of the discounting changeover.

This most recent proposed ASU would explain that sure optional expedients and exceptions in Subject 848 for deal modifications and hedge accounting apply to contracts that are influenced by the discounting transition. The amendments to the expedients and exceptions in Topic 848 are incorporated to capture the incremental implications of the proposed scope refinement and to tailor the current direction to spinoff devices afflicted by the discounting changeover.

FASB also unveiled a staff members instructional paper Wednesday that delivers stakeholders with a summary and overview of a debtor’s software of steering on personal debt restructurings and modifications. The paper is out there at the COVID-19 portal located on the FASB website.

FASB, GASB and FAF logos on the wall at headquarters in Norwalk, Connecticut

Courtesy of GASB