The anticipated phase-out of the London InterBank Offered Rate (LIBOR) carries significant accounting implications, given the large number of rules, standards, contracts, debts, loans and policies that reference it, according to Bloomberg. 

The LIBOR is the most widely-used benchmark interest rate used by financial institutions when making short-term loans to each other in the international market. It serves as a globally accepted key benchmark interest rate that indicates how much it costs to the banks to borrow from each other. However, the rate became suspect during the financial crisis when it was found that, for years, currency brokers at major banks had been coordinating with each other over instant messaging to fix the rates in order to boost profits and obscure financial difficulties. The scandal rocked the LIBOR's previously sterling reputation as a reliable rate. In the wake of the scandal, the United Kingdom's Financial Conduct Authority, its chief financial regulator, said that the rate is no longer tenable and so would phase out its use by 2021. 

However this leaves behind a key problem, according to Bloomberg: No one knows what's actually going to replace it. Since the scandal, a number of alternatives have been developed, such as the U.S. Federal Reserve's Secured Overnight Financing Rate (SOFR) but none have gained the market traction that LIBOR had. This leaves many open questions on the part of every major player connected to the financial system that had used the LIBOR as a benchmark. For example, loans that had previously based their rates on the LIBOR may need to be renegotiated, as a new benchmark will likely produce different financial conditions that must be considered. Similarly, U.S. GAAP rules on debt modifications call for a new contract if the terms change to the point that it could be considered a new agreement, which could happen if the lender, which had previously based terms on the LIBOR rate, now uses another metric. 

Bloomberg said that accounting standard setters are well aware of the implications and are working to study how it will affect them. Both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have launched commissions to look into the matter in more detail.