The Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) on Dec. 21 that extends the period of time for financial statement preparers to use the reference rate reform relief guidance.

In 2020, the FASB released ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for—or recognizing the effects of—reference rate reform on financial reporting.

Topic 848’s objective is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published. In 2021, the U.K.’s Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023.

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To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from Dec. 31, 2022, to Dec. 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848, the FASB said.