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Deloitte comments on FASB's proposal to expand the list of benchmark interest rates for hedge accounting

Published on: Mar 30, 2018

Deloitte & Touche LLP comments on the FASB's proposed 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, which was issued in February 2018.

An excerpt from the comment letter is shown below:

We support the Board’s effort to add a SOFR-based reference rate as an acceptable benchmark interest rate in GAAP in the United States. Use of a SOFR swap rate has appeal because it will be based on actual transactions in an active market and incorporate a low level of credit risk. The Board’s proactive addressing of the acceptability of the OIS rate based on SOFR as a benchmark rate in the United States will eliminate some uncertainty that could hamper its market acceptance. However, if the Board deems it appropriate to move forward with designating the OIS rate based on SOFR as a benchmark interest rate in the United States despite the lack of a current market for derivatives that reference that rate, it is unclear why there should be significant concerns with designating a broader SOFR-based swap rate as a benchmark interest rate if that broader rate would have the same limitations.

For more information, see the full text of the comment letter which is available below.

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