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FASB adds OIS as a hedge accounting benchmark interest rate

  • FASB (US Financial Accounting Standards Board) Image

Jul 17, 2013

The FASB has issued ASU 2013-10, which adds the overnight index swap rate (OIS) as a U.S. benchmark interest rate for hedge accounting purposes. Previously, only the direct Treasury obligations of the U.S. government (UST) and the London Interbank Offered Rate (LIBOR) swap rate were used.

When comparing the FASB’s guidance to IFRSs, the ASU states:

Under IFRS, a hedge of interest rate risk is not explicitly limited to specified benchmark interest rates but, rather, is described in terms of a rate that is both a separately identifiable component of a financial instrument and reliably measurable.

The ASU is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.

Click to view Accounting Standards Update (ASU) No. 2013-10 Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force), on the FASB's Web site.

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