GASB: Replacement of Interbank Offered Rates

GASB: Replacement of Interbank Offered Rates

Governmental Accounting Standards Board (GASB) has introduced an exposure draft to address issues when LIBOR goes away for hedges and leases for governmental entities. Trying to ease the burden on governments, the proposal would allow entities to continue using hedge accounting for certain hedging derivative instruments that are amended or replaced due to the LIBOR transition. Comments are due November 27, 2019.

Reference Rate Reform & Balance Sheet Classification of Debt

Reference Rate Reform & Balance Sheet Classification of Debt

This week’s blog covers two big proposals from FASB that just came out. The first proposal relates to the movement away from LIBOR. As LIBOR has come under scrutiny there has been a movement to replace LIBOR as a reference rate. However, changing the reference rate can cause significant issues for hedging and other relationships. As a result, FASB is proposing a gentler approach to reference rate reform that will help those impacted by LIBOR’s replacement. The second proposal addresses the never-ending drama related to balance sheet classification of debt. While it sounds like an easy area, the movement to a principles-based approach has identified some impacts that may be unexpected. As such, FASB is reproposing the standard to gather feedback. Both standards will impact many entities so we wanted to get them out there in a timely manner!