PwC is pleased to offer our updated Reference rate reform
guide. Reference rate reform is the term used to refer to the efforts that have been undertaken by regulators and other market participants to introduce new reference rates that are based on a larger and more liquid population of observable transactions. This guide is intended to assist our clients and other interested parties in applying the accounting and financial reporting guidance in ASU 2020-04
, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
, ASU 2021-01
, Reference Rate Reform (Topic 848): Scope
, and ASU 2022-06
, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification), and should be read in conjunction with the applicable authoritative accounting literature.
References to US GAAP
Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to our Derivatives and hedging
guide. References to this guide are indicated by DH followed by the specific section number (e.g., DH 9.6
Summary of significant changes
The following is a summary of recent noteworthy revisions to the guide. Additional updates may be made to future versions to keep pace with significant developments.
Revisions made in December 2022
- Chapters REF 1, REF 2, REF 3, and REF 4 of this guide were updated to reflect the issuance of ASU 2022-06, which deferred the sunset date of ASC 848 from December 31, 2022 to December 31, 2024.
Revisions made in July 2022
REF 1: Reference rate reform
- REF 1.1 and REF 1.2 were updated to mention the recent exposure draft issued by the FASB that proposed extending the sunset date of ASC 848 and amending the definition of the SOFR swap rate used as a benchmark interest rate.
- Question REF 1-3 was added to address a situation when a contract is modified after previously being modified to replace USD LIBOR with SOFR.
REF 3: Hedge accounting relief
- Example REF 3-1 and Example REF 3-2 were added to illustrate how to apply the optional relief in ASC 848 to fair value hedges.
- REF 3.3.2 was added to address the relief offered under ASC 848 to change the forecasted transaction
- Example REF 3-3, Example REF 3-4, and Example REF 3-5 were added to illustrate how to apply the optional relief in ASC 848 to cash flow hedges.
- Example REF 3-6, Example REF 3-7, Example REF 3-8 and Example REF 3-9 were added to illustrate how to apply the optional relief in ASC 848 to changes in the forecasted transaction and the impact to amounts accumulated in other comprehensive income.
- Question REF 3-1 was added to address how a reporting entity should construct the hypothetical derivative when exiting the ASC 848 relief.
This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance.
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