FINANCIAL REPORTING INSIGHTS |
Authored by RSM US LLP
Due to reference rate reform, the derivatives market is undergoing various transitions, including changes in the interest rate used for margining, discounting or contract price alignment for a derivative instrument (commonly referred to as “discounting transition”).
Topic 848, “Reference Rate Reform,” of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) provides optional expedients and exceptions for applying existing guidance to contract modifications, hedging relationships and other transactions that are expected to be affected by reference rate reform and meet certain scope guidance. Stakeholders recently have raised questions about whether ASC 848 also can be applied to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform even if those instruments do not reference a rate that is expected to be discontinued (a criterion that is required by the current scope of ASC 848).
The FASB recently issued a proposed Accounting Standards Update (ASU), which, if finalized, would clarify that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to contracts that are affected by the discounting transition. The proposed ASU, Reference Rate Reform (Topic 848): Scope Refinement, is available for comment until November 13, 2020.
This article was written by RSM US LLP and originally appeared on 2020-11-02.
2020 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Insero & Co. CPAs, LLP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.
For more information on how Insero & Co. CPAs can assist you, please call (800) 232-9547.