Methodology & standards

ARRC & LMA Standards Alignment

Our compounded-SOFR calculation engine is built to follow the conventions published by the Alternative Reference Rates Committee (ARRC) for US syndicated loans and the Loan Market Association (LMA) for UK and European facilities. This page documents that alignment, topic by topic, so treasury and finance teams can see exactly how each convention is handled.

The comparisons below reference widely used ARRC and LMA conventions for SOFR-referenced loans. Where a convention doesn't require an explicit user-facing setting (for example, day-count basis), alignment is inferred from the calculation engine's underlying logic and output rather than a separate configuration screen.

Convention-by-convention comparison

Topic	Our Calculator	ARRC Practice	LMA Practice	Assessment
Compounded in arrears	Yes	Standard	Standard	✓ Aligned
Day count	Implied Act/360 (from daily factors)	Act/360	Act/360	✓ AlignedAligned (inferred)
Lookback	5 business days	Common / standard	Common	✓ Aligned
Observation shift	No	Common for US syndicated loans (no shift)	Often permits with or without shift; some templates use a shift	✓ AlignedAligned with ARRC; acceptable under LMA — though some LMA-governed facilities apply a shift
Non-business days	Rate held constant; grouped into the following business day's weight	Standard	Standard	✓ Aligned
Margin handling*	Margin (e.g. 2.50%) added to compounded SOFR	Standard	Standard	✓ Aligned
Spread adjustments (IBOR fallback)	None applied (new SOFR-referenced facility — margin only)	Typical for new SOFR loans	Typical	✓ Aligned
Rounding / precision	Effective rate shown to 5 decimal places; interest to the cent; daily factors shown to 6 decimal places in the ledger	Rates typically shown to 5–6 dp; interest to currency minor units	Similar	✓ AlignedAppears aligned — exact internal precision isn't publicly mandated, but the displayed output is reasonable

* The 2.50% margin shown is an illustrative example only — the calculator accepts any margin or spread you enter and is not limited to this figure.

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This page is provided for informational purposes only and does not constitute legal, compliance, or accounting advice. ARRC and LMA guidance can evolve, and individual facility agreements may specify different conventions — always confirm the terms that apply to your own facility against the underlying agreement and, where appropriate, independent counsel.