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FASB proposes to expand the list of benchmark interest rates for hedge accounting

  • FASB document Image

Feb 20, 2018

The FASB has issued a proposed Accounting Standards Update (ASU), “Inclusion of the Overnight Index Swap (OIS) Rate Based on the Secured Overnight Financing Rate (SOFR) as a Benchmark Interest Rate for Hedge Accounting Purposes.”

The proposed ASU would amend ASC 815, Derivatives and Hedging, to “add the OIS rate based on SOFR as a fifth U.S. benchmark interest rate to help companies and other organizations avoid the potential cost and complexity associated with using different cash flows and discount rates to measure the hedged item and the hedging instrument.” Currently, the four eligible benchmark interest rates under ASC 815 are:

  • Interest rates on direct Treasury obligations of the U.S. government.
  • The London Interbank Offered Rate swap rate.
  • The Overnight Index Swap Rate based on the Fed Funds Effective Rate.
  • The Securities Industry and Financial Markets Association municipal swap rate.

Comments on the proposed ASU are due by March 30, 2018. For more information, see the press release and proposed ASU on the FASB’s Web site.

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