FASB published a summary of the quarterly meeting of the Financial Accounting Standards Advisory Council. The members of the Advisory Council discussed the recent proposed update on facilitation of the effects of reference rate reform on financial reporting (Topic 848). The members provided feedback on three main areas: readiness and transition progress, proposed accounting relief, and potential qualitative and quantitative disclosures.
Overall, the members of the Advisory Council were very supportive of the proposed accounting relief. In terms of readiness, many companies are early in their transition process and have not begun to consider the potential impact and risks that reference rate reform may have on their financial results. The Council members from some industries, such as financial services, and larger companies generally were further along in their assessments and education about the transition when compared to other companies. Some smaller companies anticipated that they would be unaffected, given the rate structures in their contracts. The members of the Advisory Council acknowledged the temporary nature of the relief and supported the commitment of FASB to monitor and consider any future adjustments needed to the sunset provision related to the proposed relief.
Members of the Advisory Council generally disagreed that FASB should add new disclosures related to the reference rate reform. Preparers and practitioners showed concerns about the operationality and costs that could be involved and raised questions about what information could be provided. Some investors and other users indicated that additional disclosures could provide useful information in certain industries or companies where the impact was significant. Yet other investors and certain users indicated that the current Management Discussion and Analysis (MD&A) disclosures related to risks and uncertainties could provide sufficient information about risks related to the transition and additional disclosures may be unnecessary.
Keywords: Americas, US, Accounting, Banking, Securities, Reference Rate Reform, Reporting, Disclosures, Interest Rate Benchmarks, Topic 848, FASB
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