The Accounting Standards Committee (ASC) has issued Exposure Draft ED/2025/1, Risk Mitigation Accounting, marking a significant potential evolution in hedge accounting under IFRS 9 Financial Instruments and related disclosures in IFRS 7. The consultation period closes on 17 April 2026.
Core Technical Impact
The draft introduces a dedicated accounting model for entities managing repricing risk on a net basis, a common practice not fully accommodated under current IFRS 9. This aims to better align accounting outcomes with risk management strategies for portfolios or groups of items, potentially reducing profit and loss (P&L) volatility.
Key Practical Considerations
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Model Applicability: Firms must critically assess whether their net risk management strategies qualify. This requires a clear link between designated risk exposures, hedging instruments, and the entity’s documented risk framework.
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Operational Complexity: Implementing the proposed model may necessitate significant changes to systems, processes, and internal controls for tracking, documentation, and effectiveness testing.
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Disclosure Burden: Enhanced IFRS 7 disclosures will be required, demanding more granular quantitative and qualitative information on risk mitigation activities and their financial statement effects.
Call for Fieldwork
The ASC concurrently seeks participants for related fieldwork. Entities actively engaged in net risk management are urged to engage. This is a critical opportunity to evaluate the model’s operational feasibility and uncover practical implementation challenges ahead of finalisation.
Action Required:
Accounting and finance teams, particularly in financial services and treasury, should review the ED promptly to assess potential impacts and consider contributing to the fieldwork or submitting a comment letter.
Source: ACRA, 5 December 2025.