FASB extended the period of time preparers can use the reference rate reform relief guidance by two years on Wednesday, issuing Accounting Standards Update No. 2022-06, Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848.
The guidance in Topic 848 is expected to provide relief during the temporary transition period, so FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published.
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.
FASB proposed the extension in April.
In 2021, the timeline for the LIBOR phaseout was delayed. The U.K. Financial Conduct Authority moved the intended cessation date of certain tenors of the U.S. dollar LIBOR to June 30, 2023.
In 2020, FASB 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.
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