Reference Rate Reforms (Currently Unavailable)

Reference rate reform refers to the global transition away from referencing the London Interbank Offered Rate—or LIBOR—and other interbank offered rates, and toward new reference rates that are more observable or transaction-based. Currently, LIBOR is the most commonly used reference rate in the global financial market. However, concerns about the sustainability of LIBOR and other IBORs globally has led to an effort to identify alternative reference rates prior to late 2021 when LIBOR may no longer be used as an international benchmark. In the United States, the Alternative Reference Rates Committee convened by the Federal Reserve has identified the Secured Overnight Financing Rate as its preferred alternative reference rate to U.S. dollar LIBOR.Because the long-standing use of LIBOR as an international benchmark will likely cease in late 2021, the FASB has taken proactive steps to stay ahead of the migration away from LIBOR to an alternate benchmark. As an initial step, in October 2018, the Board issued Accounting Standards Update No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this proposed Update would provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this proposed Update would apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The proposed expedients and exceptions provided by the amendments would not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.