Without going back into a lot of history, the \u201cscandal\u201d in the early 2000\u2019s surrounding several banks manipulating LIBOR has resulted in a very real likelihood that when the obligation banks have to provide information to determine LIBOR expires, this index rate may \u201cdisappear\u201d.\u00a0 Given the number of instruments and number of markets that use LIBOR, the transition from this rate to some other reference rate has the potential to create significant risks and cause significant disruption.<\/p>\n
Both the SEC and the FASB have been working on guidance to assist companies in their disclosure and reporting obligations before, during, and after this potential transition.<\/p>\n
On July 12, 2019, the SEC published a \u201cStaff Statement on LIBOR Transition<\/a>\u201d.\u00a0 The Staff Statement addresses several issues companies may want to consider in managing this transition including addressing risks in existing contracts, processes for new contracts, IT considerations, and impact on risk management practices.\u00a0 The Staff Statement also reviews disclosure considerations for companies before, during, and after a transition.<\/p>\n In addition, the FASB has undertaken a project<\/a>\u00a0and on September 5, 2029 issued a proposed ASU to provide accounting and reporting relief will be appropriate for this transition.\u00a0 The project summary is available here<\/a>, and the proposed ASU is available here<\/a>.\u00a0 While no decisions are final, the Board is considering relief for hedging relationships and whether such a change in reference rate could be a debt modification.<\/p>\n In case you are not familiar with one of the likely new reference rates, \u201cSOFR\u201d or Secured Overnight Financing Rate, here is information about this rate from the Federal Reserve Bank of New York<\/a>.<\/p>\n As we approach third quarter-end and year-end, these resources hopefully\u00a0\u00a0provide helpful information as we evaluate the impact of this risk of change.<\/p>\n As always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":" Without going back into a lot of history, the \u201cscandal\u201d in the early 2000\u2019s surrounding several banks manipulating LIBOR has resulted in a very real likelihood that when the obligation banks have to provide information to determine LIBOR expires, this index rate may \u201cdisappear\u201d.\u00a0 Given the number of instruments and number of markets that use … Continue reading Libor, Libor, Wherefore Art Thou?<\/span>