Obtainable borrowing rate (OBR)
The rate a lessee would have to pay to borrow, over a similar term, an amount similar to the total undiscounted value of the lease payments to be included in the measurement of the lease liability; an FRS 102 alternative to the IBR, not an IFRS 16 term.
Definition
The obtainable borrowing rate (OBR) is the rate a lessee would have to pay to borrow, over a similar term, an amount similar to the total undiscounted value of the lease payments to be included in the measurement of the lease liability. The OBR definition does not specify the asset, security or economic-environment qualifiers that appear in the IBR definition. Under amended FRS 102 (section 20.49), when the rate implicit in the lease cannot be readily determined the lessee chooses, lease by lease, to apply either the IBR or the OBR; they are alternatives, not a hierarchy. IFRS 16 refers only to the IBR. A lender quote for comparable borrowing is one way to evidence the rate. A benchmark rate (such as SONIA for GBP leases or €STR for EUR leases) plus an entity-level credit spread is a common way to build the IBR, and can also inform an OBR.
Why it matters
Many entities do not have access to a directly observable borrowing rate for every lease. The OBR is simpler to evidence than a constructed IBR. Whichever rate is used, document its basis, the source of any quote or benchmark, and the date it was determined.
In AuditLease
AuditLease's suggestion panel estimates a borrowing rate from a benchmark rate plus your saved entity credit spread. It is AuditLease's own estimate, not a method defined by the FRC: you can use it as the FRS 102 OBR where you judge it appropriate, or as the IBR, and you must accept or override it.
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.