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FASB defers sunset date of reference rate reform guidance

Written on Jan 3, 2023

FASB has issued an Accounting Standards Update (ASU) that extends the period of time preparers can utilize the reference rate reform relief guidance. 

In 2020, the Board issued Accounting Standards Update No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. 

The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the Board included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published. In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023. 

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from Dec. 31, 2022, to Dec. 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.