Timing of SOFR Transition Likely to Be Staggered, says Chatham Financial

Rob Barton, director of global real estate accounting advisory at Chatham Financial, participated in a video interview at Nareit’s REITwise: 2019 Law, Accounting & Finance Conference in San Antonio.

Barton discussed the timing of the transition away from the London Interbank Offered Rate (LIBOR) in favor of the Secured Overnight Financing Rate (SOFR). He noted that part of the shift could happen immediately, while another part of the conversion could be more of a trickle.

Barton also commented on how the LIBOR/SOFR transition impacts the probability assessment required under hedge accounting.

Meanwhile, Barton noted that the Financial Accounting Standards Board (FASB) is currently focusing on technical issues relating to hedge accounting guidance.

In the future, FASB may look at other issues such as foreign exchange hedging, Barton said. In certain cases, acquiring a business combination that’s foreign-denominated is going to be difficult for hedge accounting, he noted: “That is a pain point in some cases for REITs.”