Benchmark rate
A published reference interest rate used as the starting point for calculating borrowing rates.
Definition
Benchmark rates are observable, published rates that represent a risk-free or near risk-free cost of borrowing in a given currency. The most relevant for UK lease accounting are SONIA (GBP), €STR (EUR), and SOFR (USD). A credit spread is added to the benchmark to arrive at an entity's specific borrowing rate.
Why it matters
Using a published benchmark rate provides an auditable, objective starting point for IBR determinations. It is more defensible than a purely judgemental rate.
In AuditLease
The Phase J OBR suggestion engine in AuditLease will use live benchmark rates as the foundation for suggested IBR calculations.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence — so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.