Handbook: Reference rate reform

Key impacts

LIBOR is a reference rate used in a wide variety of contracts, including loans, leases, investments, deposits and derivatives. However, LIBOR is being wound down and LIBOR’s administrator has ceased publishing information based on its historical panel bank methodology.

The array of affected contracts and transactions has led many companies to commit significant resources to transitioning contracts away from LIBOR in preparation for its eventual discontinuation. On top of managing the economic, operational and legal ramifications of the transition, companies also must determine the appropriate accounting for their transition activities.

To mitigate some of the accounting burden, the FASB issued ASC 848 (reference rate reform) – unique because it is dedicated to providing relief from otherwise applicable US GAAP requirements via optional expedients. Further, the guidance in ASC 848 is temporary in nature and sunsets on December 31, 2024.

Although ASC 848 provides significant relief, that relief has boundaries. Many of the optional expedients do not eliminate existing accounting requirements but instead permit entities to apply different – and generally less burdensome – analyses. In addition, each expedient has qualifying criteria that must be met.

We hope you will find this publication helpful in understanding the available relief – and when it is appropriate to apply that relief – as you manage your transition away from LIBOR.