Hedge Accounting May Gain Fifth Benchmark Interest Rate
In February, FASB plans to release a proposal to add a fifth benchmark interest rate to the acceptable rates for hedge accounting. The proposed benchmark rate is being considered by the Federal Reserve as an alternative to the London Interbank Offered Rate (LIBOR), which was tarnished by the 2012 rate-rigging scandal. “The staff believes it meets the criteria to be a benchmark rate; it’s close to risk free and is indicative of high-quality borrowing rates,” FASB assistant project manager Julie Um said in reference to the Secured Overnight Financing Rate for Overnight Indexed Swaps (SOFR OIS). FASB has no plans to remove LIBOR from U.S. GAAP, a FASB spokesperson said.
Reintroduction of Goodwill Amortization to IFRS Rejected
On December 14, the IASB rejected, by an 11-3 vote, the idea of reintroducing the amortization of goodwill to IFRS as part of its project to amend the guidance for goodwill. The board has yet to determine what changes it will make, but at its most recent meeting it ruled out reverting to the old standard, which allowed companies to amortize goodwill. “Many participants think the impairment test is complex, time consuming, expensive, and involves significant judgments. Nothing we are talking about here removes any of that—it adds to it,” IASB member Gary Kabureck said. The board also rejected other ideas for amending the accounting for goodwill, including providing relief from the mandatory annual impairment testing, allowing goodwill to be tested for impairment at the business level or at the level of reportable segments, requiring disclosure of the payback period of an investment in a business combination, and changing the current requirement for determining the recoverable amount of an asset. The board plans to discuss the issue again when it meets in February.
Clarification of Retirement Benefits Accounting Offered in Implementation Guide
The GASB published an implementation guide to provide a clarification of the accounting requirements for retirement and other employee benefits. This guidance, released on December 19, is presented in a question-and-answer format and was put together with the help of an advisory panel. It was issued to address questions that had been put to the GASB about GASB Statement 75 since the statement was issued in June 2015. GASB Statement 75 became effective for financial statements for fiscal years that started after June 15, 2017.