David Bowman with the Federal Reserve Board has asked the Association for Finance Professionals (AFP) to be the voice of Corporate Treasury in terms of addressing LIBOR for the Alternative Reference Rates Committee (ARRC) as part of the Coordination Subgroup.
What’s the Issue? Britain is ending support of the London Interbank Offered Rate (LIBOR) on or about 2021. US regulators currently plan to replace LIBOR with the Secured Overnight Financing Rate (SOFR) curve. The pending “Illiquid LIBOR Market” and related lack of transparency will render valuations of LIBOR priced instruments troublesome.
LIBOR has been referred to as the plumbing buried in many financial contracts, and the end of LIBOR will cause a seismic shift in the financial markets.
If you use Hedge Trackers’ Outsourcing and/or Software suite (Capella) services, you might be wondering what’s going to happen when interest rate reform occurs and SOFR replaces LIBOR in early 2021.
As a follow up to FASB’s June initiative to provide accounting relief to organizations that will need to modify their contracts as LIBOR is replaced by SOFR, FASB released a proposed Accounting Standards Update on Thursday.