FASB Proposes Updates to Reference Rate Reform Guidance
The Financial Accounting Standards Board (FASB) published a proposed accounting standard update that would defer the sunset date of the reference rate reform guidance (Topic 848) and amend the definition of Secured Overnight Financing Rate (SOFR) swap rate to include SOFR term as a U.S. benchmark interest rate (Topic 815). The feedback period for both updates will close on June 06, 2022.
Deferral of the sunset date of Topic 848. In 2020, FASB had issued accounting standards update on reference rate reform, 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 was to provide relief during the temporary transition period. In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023. Thus, to ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the amendments in the proposed Accounting Standards Update would defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities would no longer be permitted to apply the relief in Topic 848.
Amendments to the definition of SOFR. In 2018, FASB issued accounting standards update on derivatives and hedging (Topic 815), which added the term secured overnight financing rate (SOFR) overnight index swap rate (SOFR swap rate) to the master glossary of the FASB accounting standards codification. In a previous update, FASB stated that the definition of the SOFR swap rate was specific to the Overnight Index Swap (OIS) rate based on SOFR and that it would monitor the developments of the forward-looking, term-based version of the SOFR rate (SOFR term) and consider including SOFR term as a benchmark interest rate in the future. Based on the developments of SOFR term in the marketplace, the proposed Accounting Standards Update would amend the definition of the SOFR swap rate to include other versions of SOFR, such as SOFR term, as benchmark interest rates under Topic 815.
Related Links
Keywords: Americas, US, Banking, Reference Rate Reform, Accounting Standards Update, Topic 848, Securities, Derivatives And Hedging, Topic 815, SOFR, SOFR Term, Benchmark Interest Rates, Benchmark Reforms, FASB
Related Articles
ESAs Issue Multiple Regulatory Updates for Financial Sector Entities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
EBA Finalizes Methodology for Stress Tests, Issues Other Updates
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
OSFI Sets Out Work Priorities and Reporting Updates for Banks
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
APRA Finalizes Changes to Capital Framework, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
BIS Hub and Central Banks Conduct CBDC and DeFI Pilots
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)
