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Deloitte comments on FASB’s proposal related to effects of reference rate reform

Published on: Oct 08, 2019

Deloitte & Touche LLP has commented on the FASB’s proposed ASU, Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

An excerpt from the comment letter is shown below: 

We support the Board’s efforts to provide optional expedients and exceptions to the requirements in U.S. GAAP related to contracts, hedging relationships, and other transactions affected by reference rate reform. Such accommodations will facilitate the market-wide transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates.

We recognize the challenges that financial statement preparers and users may face related to reference rate reform and agree that application of existing GAAP to modifications of contracts or hedging relationships caused by such reform could impose operational burdens on preparers. Further, the financial reporting that results from such application may not ultimately provide decision-useful information to financial statement users or faithfully represent entities’ intended risk management strategies. We also understand that the pace of reform is unpredictable and that the proposed expedients need to incorporate flexibility to provide meaningful relief.

We believe, however, that any relief provided should be limited to modifications that are directly related to reference rate reform. This also seems to be the Board’s intent; however, it appears that such linkage would not necessarily be required for certain hedging relief granted by the expedients.

For more information, see the full text of the comment letter which is available below.

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