Obtainable borrowing rate (OBR)
A practical approach to estimating the IBR using a benchmark rate plus a credit spread and any lease-specific adjustment.
Definition
The obtainable borrowing rate is not a term defined in the accounting standards, but it describes a widely used method for estimating the IBR in practice. It starts from a risk-free benchmark rate (such as SONIA for GBP leases or €STR for EUR leases), adds an entity-level credit spread, and may include a further lease-specific adjustment for the nature or term of the lease.
Why it matters
Many entities do not have access to a directly observable borrowing rate for every lease. The OBR approach gives a structured, auditable method for arriving at a defensible IBR estimate. The calculation should be documented with the rate components and their sources.
In AuditLease
AuditLease is developing an OBR suggestion engine (Phase J) that will help users calculate and document a suggested rate using live benchmark rates and their saved entity credit spread. Users must accept or override the suggested rate.
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.