PROJECT UPDATE

Reference Rate Reform—Deferral of the Sunset Date of Topic 848 and Amendments to the Definition of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate

Last updated on May 24, 2022. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Sections updated on the date above are indicated with an asterisk *)

 

Objective:

The objectives of this project are to defer the sunset date of the relief in Topic 848, Reference Rate Reform, and amend the definition of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap Rate.
 

Background:


Sunset Date

The relief in Topic 848 is effective through December 31, 2022. In December 2020, the ICE Benchmark Administration (IBA) published a consultation, the ICE LIBOR® Consultation on Potential Cessation, seeking feedback on its intention to defer the cessation date of certain tenors of USD LIBOR to June 30, 2023. On March 5, 2021, LIBOR’s regulator announced that certain tenors of USD LIBOR will continue to be published until June 30, 2023. The FASB is currently evaluating a possible extension of the relief in Topic 848.

Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate

The SOFR swap rate was introduced as a Master Glossary term in Accounting Standards Update No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The current definition is limited to the OIS rate based on SOFR. Before the issuance of Update 2018-16, the Board solicited feedback on whether to permit a more generic definition of the swap rate based on SOFR that would permit any swap rate based on SOFR to qualify as a benchmark interest rate. The Board concluded at that time that the SOFR term rate did not meet the characteristics of a benchmark interest rate but indicated that it would continue to monitor the development of SOFR term rates in the marketplace and would consider a SOFR term rate when that rate emerged in the marketplace. Recently, the Alternative Reference Rates Committee (ARRC) issued a formal recommendation of a SOFR term rate. The FASB is currently evaluating whether to amend the definition of the SOFR OIS rate so that any rate based on SOFR qualifies as a benchmark interest rate for purposes of applying fair value hedge accounting.

Exposure Draft(s):

On April 20, 2022, the Board issued proposed Accounting Standards Update, Reference Rate Reform (Topic 848) and Derivatives and Hedging (Topic 815): Deferral of the Sunset Date of Topic 848 and Amendments to the Definition of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate. The due date for comment letters is June 6, 2022.
  • Download the proposed Accounting Standards Update

Comment Letters:

Read comment letters on the proposed Accounting Standards Update.

There are no media releases or educational materials at this time.

Decisions Reached at Last Meetings (March 16, 2022):


Amending the Definition of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate

The Board decided to:
  1. Modify the scope of the project to include an amendment to the definition of SOFR Swap Rate
  2. Amend the definition of SOFR Swap Rate so that any swap rate based on SOFR meets the definition and, therefore, qualifies as a benchmark interest rate for purposes of applying hedge accounting
  3. Affirm the decisions made at the December 15, 2021 Board meeting that the proposed amendments would be effective immediately upon the issuance of a final Accounting Standards Update and applied prospectively and that the comment letter period would be 45 days.

Tentative Board Decisions Reached to Date (as of March 16, 2022)


A summary of the Board’s tentative decisions reached to date can be found here.

The Board meeting minutes, handouts, and videos are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

The following are links to the minutes for each meeting.  To view Board meetings and handouts from the past 90 days, click here.
 
March 16, 2022 Board Meeting—Board Meeting—The Board modified the scope of the project to include an amendment to the definition of the SOFR Swap Rate and directed the staff to continue drafting a proposed Accounting Standards Update.
December 15, 2021 Board Meeting—The Board added the project to the technical agenda and directed the staff to draft an Accounting Standards Update.

The Board will consider comment letter feedback on the proposed Accounting Standards Update.

Kenjiro Matsuo
Project Manager
kmatsuo@fasb.org

Samantha Tice
Practice Fellow
stice@fasb.org

Rosemarie Sangiuolo
Project Consultant
rsangiuolo@fasb.org

Colin Greeff
Postgraduate Technical Assistant
cgreeff@fasb.org

Matthew Shea
Postgraduate Technical Assistant
mshea@fasb.org

The staff has prepared this summary for information purposes only. Any Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
 

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