IMA Financial Reporting Committee comment letter on the FASB’s Proposed Accounting Standards Update (ASU) No. 2019-770, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Wednesday, October 16, 2019

The IMA Financial Reporting Committee (FRC or Committee) issued a comment letter in response to the FASB’s Proposed ASU No. 2019-770, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In this exposure draft, the FASB proposes to ease, for a limited time, the effects of the markets’ elimination LIBOR and other reference rates that many contracts such as loans, leases, and derivative instruments reference in setting agreed upon interest terms. Practitioners refer to these market changes as “reference rate reform.” 

The FRC’s letter expresses appreciation that the FASB is addressing the effects of reference rate reform on financial accounting and reporting. The Committee supports proposed guidance that, if adopted, would allow entities to characterize contractual changes attributed to reference rate reform as the continuation of an existing contract rather than as a new contract. However, the Committee encourages the FASB to reconsider or clarify aspects of the proposed amendments, including the scope, the effects on net investment hedges, and the planned sunset date for these limited-term guidelines.