FASB Proposes Guidance to Ease Libor Transition

As banks work to reduce their dependence on the London Interbank Offered Rate, the Financial Accounting Standards Board yesterday proposed guidance that would help ease the potential effects of reference rate reform on financial reporting. The proposed guidance would offer optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform, provided they meet certain criteria.

The guidance would apply only to contracts and hedging relationships that reference Libor or another reference rate expected to be discontinued, and would not cover contract modifications made and hedging relationships entered into or evaluated after Dec. 31, 2022. Comments on the proposal will be due Oct. 7.