Reforming IBOR: the financial reporting impact
Helen Shaw explains the implications of the demise of inter-bank offered rates.
Interest rate benchmarks, such as the London Inter-Bank Offered Rate (LIBOR), play
The financial reporting implications are similar for both IFRS and UK GAAP reporters, with some likely to start taking effect before LIBOR is replaced. These pre-replacement issues relate to hedge accounting. In the absence of any relief in the accounting standards, the uncertainty arising from benchmark interest rate reform could result in hedge accounting needing to be discontinued. Widespread reclassification of amounts in cash flow hedge reserves to profit or loss and the cessation of fair value hedge accounting of fixed rate debt might then follow.
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