The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2022-06, Reference Rate Reform (Topics 848), Deferral of the Sunset Date of Topic 848, which defers the sunset date in Topic 848 from December 31, 2022 to December 31, 2024. The amendments in this ASU apply to all entities (subject to meeting certain criteria) that have contracts, hedging relationships, or other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform.
In 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04), which created Topic 848 and provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This guidance provided temporary relief during the transition period through a sunset provision based on the expectation of when the LIBOR would cease being published. However, the cessation date for the publication of the most common LIBOR tenors was extended. As a result, the FASB extended the period of time during which entities may apply the relief provided in Topic 848. After December 31, 2024, application of Topic 848 will no longer be permitted.