Important Notice For Your GASB Reporting Clients
Minneapolis, MN | July 27, 2022 | HedgeStar Marketing
On April 2, 2020, the Governmental Accounting Standards Board (GASB) issued Statement No. 93, Replacement of Interbank Offered Rates. GASB 93 eases certain accounting requirements related to the transition away from interbank offered rates (IBORs) including LIBOR. It also identifies appropriate benchmark interest rates for use in hedging derivative instruments.
As a result of the transition from LIBOR, governments will need to amend or replace agreements in which variable payments made or received are dependent on LIBOR. The exceptions in GASB 93 are intended to preserve the consistency and comparability when reporting derivative instruments. This means that derivative agreements with the same economic substance before and after the replacement of a reference rate should be accounted for in the same manner as before the replacement of a reference rate.
Under GASB 93, Accounting and Financial Reporting for Derivative Instruments, a governmental entity that amends a critical term of a hedging derivative instrument, such as the reference rate of a hedging derivative’s variable payment, would be required to terminate hedge accounting.
GASB 93 provides an exception to the termination provision to allow hedge accounting to continue if certain criteria are met. GASB 93 further clarifies that the term changes that may be necessary for the replacement of the reference rate also meet certain criteria.
HedgeStar can help you and your clients navigate GASB 93 as you transition away from LIBOR. To learn more, contact:
John Trefethen: email@example.com / 952-746-6040
Craig Haymaker, CPA: firstname.lastname@example.org / 952-208-5704
Megan Roth, Marketing Manager
Laura Klingelhutz, Marketing Generalist Intern