On July 12, the SEC’s Divisions of Corporation Finance, Investment Management, and Trading and Markets, along with the Office of the Chief Accountant, issued a statement on LIBOR transition. As noted in the statement, LIBOR, formerly known as the London Interbank Offered Rate, has been used throughout the world for many years as a benchmark or reference rate for a wide variety of borrowings and other contractual obligations. However, the banks that currently provide the information used to set LIBOR will stop doing so after 2021, at which point (or conceivably sooner) LIBOR will no longer be published.
While the US and other countries are seeking to develop and implement alternative reference rates, the discontinuation of LIBOR may pose significant risks, particularly if the transition to alternate rate(s) is not completed in a timely manner. The Statement contains general guidance that public companies and others should consider in anticipation of the transition, as well as specific guidance from each of the Divisions and the Office of the Chief Accountant.
Public companies and other market participants that currently use or rely upon LIBOR are urged to read the statement carefully, In particular, public companies should consider whether and to what extent the LIBOR transition may need to be reflected in disclosure of risk factors, management’s discussion and analysis, board risk oversight, and financial statements.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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