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FASB concludes deliberations on proposed accounting standards update on adding a new benchmark interest rate in the United States

Published on: 31 Aug 2018

At its August 29, 2018, meeting, the FASB concluded deliberations on its proposed Accounting Standards Update (ASU)1 related to the addition of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting. The Board reached the following tentative decisions at the meeting:

Designation of the OIS Rate Based on SOFR as a Benchmark Interest Rate in the United States

The Board tentatively (1) confirmed that the OIS rate based on SOFR would be added to the list of acceptable U.S. benchmark interest rates, (2) committed to monitor the development of the SOFR term rate in the future and to consider adding a SOFR term rate as a benchmark interest rate if warranted, (3) confirmed that entities would apply the provisions of the ASU (upon its issuance) prospectively to “qualifying new or redesignated hedging relationships entered on or after the date of adoption,” and (4) decided not to require any additional disclosure.

Project Scope

The Board tentatively decided not to expand the scope of the existing project; however, it will add a new project to its agenda to “facilitate the LIBOR to SOFR transition and mitigate the effects on financial reporting.”

Effective Date

The FASB tentatively agreed to align the effective date of the ASU, upon its issuance, with that of ASU 2017-122 for entities that have not yet adopted ASU 2017-12. If an entity has already adopted ASU 2017-12, the effective date of this ASU will be as follows:

  • For public business entities, for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
  • For all other entities, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early application will be permitted in any annual or interim period.

Next Steps

The FASB expects to issue the final ASU in the fourth quarter of 2018.

See the meeting handout and summary of tentative Board decisions for additional information.


1  FASB Proposed Accounting Standards Update, 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.

2 Accounting Standards Update No. 2017-12, Targeted Improvements to Accounting for Hedging Activities.

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