Reference Rate Reform
Overview
ASC 848 comprises five Subtopics, below is an overview of each Subtopic
848-10 Overall
ASC 848-10 notes the following:
Reference rates such as the London Interbank Offered
Rate (LIBOR) are widely used in a broad range of financial
instruments and other agreements. Regulators and market participants
in various jurisdictions have undertaken efforts, generally referred
to as reference rate reform, to eliminate certain reference rates
and introduce new reference rates that are based on a larger and
more liquid population of observable transactions. As a result of
the reference rate reform initiative, certain widely used reference
rates such as LIBOR are expected to be discontinued.
This Topic provides optional expedients for applying
the guidance in certain Topics or Industry Subtopics for contract
modifications or other situations affected by reference rate
reform.
848-20 Contract Modifications
ASC 848-20 notes that it "provides optional expedients for contract modifications
undertaken because of reference rate reform. It specifically addresses the
accounting for modifications of contracts within the scope of Topics 310 on
receivables, 470 on debt, and 840 and 842 on leases and Subtopic 815-15 on
derivatives and hedging—embedded derivatives. This Subtopic also provides a
principle to account for modifications of contracts within the scope of other
Topics or Industry Subtopics not specifically addressed within this
Subtopic."
848-30 Hedging — General
ASC 848-30 notes that it "provides guidance on optional expedients for
allowing hedging relationships to continue when one or more of the critical
terms of the hedging relationship change because of reference rate
reform."
848-40 Fair Value Hedges
ASC 848-40 notes that it "provides guidance on optional expedients for the
accounting for and financial reporting of fair value hedges under Topic 815
that are affected by reference rate reform."
848-50 Cash Flow Hedges
ASC 848-50 notes that it "provides guidance related to optional expedients
for the accounting for and financial reporting of cash flow hedges under
Topic 815 on derivatives and hedging that are affected by reference rate
reform."