The International Accounting Standards Board (IASB) has published a landmark proposal for a new Risk Mitigation Accounting model, aimed at aligning reported financial performance with how institutions practically manage interest rate risk. Announced on 3 December 2025, this initiative seeks to resolve longstanding criticisms that the current hedge accounting framework under IAS 39 and IFRS 9 fails to faithfully represent economic risk management strategies.
Key Technical Implications:
The core proposal involves amending IFRS 9 and enhancing IFRS 7 disclosure requirements to better depict the impact of interest rate risk management on profit or loss and future cash flows. Significantly, the IASB has invited comment on the potential withdrawal of IAS 39, a move that would fully converge hedge accounting under a single, principles-based standard.
Considerations for Implementation:
Financial institutions must critically assess the operational and systems impact of transitioning to the new model. The proposal allows for portfolio-level risk management reflection, which may reduce accounting mismatch but will require robust internal documentation and valuation processes. Enhanced disclosure mandates will increase transparency but also the preparation burden.
Action Required:
The consultation period is closing on 31 July 2026. The IASB explicitly encourages entities to test the model with live portfolio data and provide evidence-based feedback on practical application challenges. Stakeholders should immediately begin gap analyses to evaluate the proposal’s effect on volatility in P&L and equity, hedging strategies, and compliance costs.
Source: IASB, 3 December 2025.