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House Subcommittee Brings Back Long-Delayed LIBOR Hearing

Bill Flook  Editor, Accounting and Compliance Alert

Bill Flook  Editor, Accounting and Compliance Alert

A House Financial Services subcommittee will finally get to its hearing on the transition away from the London Interbank Offered Rate (LIBOR), more than a year after it originally set the hearing. The hearing was one of several that were postponed in March 2020 during the early stages of the COVID-19 pandemic in the U.S.

The April 15, 2021, hearing, entitled “The End of LIBOR: Transitioning to an Alternative Interest Rate Calculation for Mortgages, Student Loans, Business Borrowing, and Other Financial Products,” comes as financial regulators, accounting standard-setters, banks, and others scramble to adjust to the upcoming end of the benchmark rate, which is slated to be phased out completely by mid-2023. The Secured Overnight Financing Rate (SOFR) is widely expected to replace LIBOR.

The Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, chaired by Rep. Brad Sherman, a California Democrat, will hold the hearing. Sherman is a CPA and has sharpened the panel’s focus on accounting issues since becoming chairman in late 2019.

The FASB in March 2020 issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to facilitate the transition away from the LIBOR. The changes are designed to help companies avoid undertaking costly and complex accounting approaches in moving away from the LIBOR and other rates, and to maintain their existing hedging strategies.

And in January, the FASB issued clarifying rules in ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, allowing banks that centrally clear derivatives with the Chicago Mercantile Exchange (CME) and other clearinghouses to access easier accounting guidance that facilitates the LIBOR transition. (See FASB Amends Rate Reform Rules to Capture Recent Developments in the Derivatives Market in the January 8, 2021, edition of Accounting & Compliance Alert.)

 

This article originally appeared in the April 1, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.

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