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FASB Proposes Two-Year Extension of Date to Transition Benchmark Interest Rate from LIBOR to SOFR

Ruth Singleton
Published Date:
Apr 21, 2022

The Financial Accounting Standards Board (FASB) has issued a proposed accounting standards update (ASU) recommending that the date to transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) be moved back, from Dec. 31 of this year to Dec. 31, 2024. The proposed ASU would also amend the definition of the SOFR.  

According to Accounting Today , financial regulators have been trying to move away from the traditional LIBOR because it was found to be prone to manipulation by traders at major banks. The markets are scheduled to move to SOFR instead, and FASB has been working on updating its accounting standards to ease this transition. Yet some banks need more time to make the adjustment. 

In its proposal, the FASB explained, “The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the Board included a sunset provision within Topic 848 based on expectations of when the LIBOR would cease being published. At the time that Update 2020-04 was issued, the UK Financial Conduct Authority (FCA) had established its intent that it would no longer be necessary to persuade, or compel, banks to submit to LIBOR after December 31, 2021. As a result, the sunset provision was set for December 31, 2022—12 months after the expected cessation date of all currencies and tenors of LIBOR.”  

The FASB noted, however, that in “March 2021, the FCA announced that the intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848.” It added, “Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, the Board decided to defer the sunset date of Topic 848 to December 31, 2024.” 

With regard to the change in definition, the FASB stated, “In Update 2018-16, the Board stated that the definition of the SOFR Swap Rate was specific to the OIS [Overnight Index Swap] rate based on SOFR and that it did not include the forward-looking, term-based version of the SOFR rate (SOFR term) because no cash or derivative instruments that were indexed to SOFR term existed at that time. It also was not clear whether a SOFR term rate would emerge in the marketplace. However, the Board also stated that it would monitor the developments of SOFR term and was prepared to consider SOFR term as a benchmark interest rate if and when it emerged in the marketplace. Considering the development of SOFR term, the Board has decided to amend the definition of the SOFR Swap Rate so that it is no longer limited to the OIS rate based on SOFR but would include other rates based on SOFR, such as SOFR term.” 

The FASB is inviting comments on both proposals until June 6, 2022. Interested parties may submit comments in one of three ways: Using the electronic feedback form available on the FASB website at Exposure Documents Open for Comment; emailing comments to, File Reference No. 2022-001; and Sending a letter to “Technical Director, File Reference No. 2022-001, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.” All comments received will be part of the FASB’s public file and will be available at 

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