FASB recently approved temporary, optional guidance designed to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.
The standard will provide optional expedients and exceptions for applying GAAP to contract modifications and hedge accounting relationships affected by reference rate reform. The guidance applies only to hedge accounting relationships that reference London Interbank Offered Rate (LIBOR) or another rate that is expected to be discontinued.
FASB is expected to issue a final Accounting Standards Update in early 2020 to further address the issue of transition. It will take effect upon issuance and apply only to contract modifications made and hedging relationships entered or evaluated prior to Dec. 31, 2022.