Wiley GAAP 2021, 2nd Edition

58ASC 848 REFERENCE RATE REFORM

1. Technical Alert
   1. Effective Dates
   2. Sunset Provision
2. Perspective and Issues
   1. Subtopics
3. Definitions of Terms
4. Concepts, Rules, and Examples
   1. ASC 848‐10, Overall
      1. Scope
      2. Subsequent Measurement
   2. ASC 848‐20, Contract Modifications
      1. Scope and Scope Exceptions
      2. Subsequent Measurement
   3. ASC 848‐30, Hedging
   4. ASC 848‐40, Fair Value Hedges
   5. ASC 848‐50, Cash Flow Hedges

TECHNICAL ALERT

In March 2020, the FASB issued ASU 2020‐04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform. The ASU was issued in response to concerns about structural risks of the interbank offered rates and the risks of cessation of LIBOR and is designed to provide relief from the potential accounting burden when transitioning from reference rates, like LIBOR, that may be discontinued. FASB stakeholders raised concerns about contract modifications, hedge accounting, and the volume of contracts, such as debt agreements, leases, and derivatives.

If certain criteria are met, the ASU's changes offer optional expedients and exceptions for applying the Codification to the contract, hedging relationships, and other matters. ASC 848 is unique in that the guidance sunsets in 2022. When certain benchmark rates are discontinued, contracts will be modified. The optional expedients and exceptions can be applied to contract modifications and hedging relationships entered into or evaluations made until December 31, 2022.

Effective Dates

The amendments are effective ...