The Financial Accounting Standards Board added the Secured Overnight Financing Rate (SOFR) Oct. 25 to its list of permissible U.S. benchmark interest rates for the purposes of hedge accounting, according to a FASB statement.

“The new Accounting Standards Update adds the Overnight Indexed Swap rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes,” FASB said.

FASB made the decision eight months after SOFR began publication.

“Based...