Simplified transition method to new lease standard still requires extensive effort.
As the 2019 public company effective date for FASB's lease accounting standard looms, financial professionals have been warning about the massive data collection effort required. Speaking on an April 4 webcast, accounting executives from two companies said they were glad for FASB's offers of relief, but they still had a lot of work to do. “They all sound good on the surface,” said Tracy Krause, vice president of accounting and external reporting for Verizon. “But we need to make sure, is it worth having two different processes going forward?” Companies are not sure how the simplified transition will affect the amount of data they need to collect, said Katie Lindsey, senior manager of accounting policy and procedure at Bridgestone. “They dictate how you extract data,” she said of the practical expedients. “If you extract based on the fact that you will take the practical expedient, you might have to go back to all of those contracts and re-extract all those data elements.”
Comment letters back addition of benchmark interest rate for hedge accounting.
Comment letters from banks, audit firms, and professional organizations support FASB's proposed addition of an interest rate benchmark for hedges of interest rate risk. The proposed benchmark rate, the Secured Overnight Financing Rate (SOFR), was developed by the Federal Reserve as an alternative for banks and other financial firms. It calls for adding the SOFR, which is based on the overnight financing rate (SOFR OIS), as a benchmark rate that can be used to designate hedges of interest rate risk. “The use of derivative instruments in managing various financial risks is critical to the operations of many banks and other entities, and it is important that in this time of industry transition away from the London Interbank Offered Rate (LIBOR) that the accounting standards are proactive and meet the needs of the developing markets,” the American Bankers Association wrote in its comment letter.