In 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which was intended to ease the potential burden in accounting for reference rate reform on financial reporting during the temporary transition period. The FASB included a sunset provision within Topic 848 based on the expectation LIBOR would cease being published. At the time of the issuance of ASU 2020-04, the UK Financial Conduct Authority (FCA) indicated that it would no longer be necessary to persuade or compel banks to submit to LIBOR after December 31, 2021. Therefore, the sunset provision was set for December 31, 2022.

In March 2021, the FCA announced a change in the intended cessation date of the overnight 1-month, 3-month, 6-month and 12-month LIBOR to be June 30, 2023. As a result, Topic 848 might not have covered a period of time during which a significant number of modifications may take place. Therefore, the FASB has voted to allow a deferral of the sunset date to December 31, 2024.

This ASU applies to all entities subject to meeting certain criteria, have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

ASU 2022-06 is effective immediately upon issuance.

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