IASB: ED Proposed new accounting model to reflect how financial institutions manage interest rate risk

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IASB: ED Proposed new accounting model to reflect how financial institutions manage interest rate risk

• 23 December 2025
• Accounting
• South African Accounting Academy

Summary:
The International Accounting Standards Board (IASB) has issued an Exposure Draft, which proposes a new accounting model to better reflect how financial institutions manage interest rate risk throughout their portfolios.

Article:
The proposed Risk Mitigation Accounting model responds to feedback from financial institutions and investors that the current hedge accounting requirements do not adequately reflect how interest rate risk is managed in practice. The model aims to provide greater transparency into how interest rate risk management affects financial performance and future cash flows in a dynamic environment.

The proposed Risk Mitigation Accounting model aims to bring accounting and risk management closer together to enhance internal efficiency and strengthen communication between financial institutions and their stakeholders.

To integrate the new accounting model and enhance companies’ disclosures about their interest-rate risk management activities, the IASB is proposing amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. The IASB is also seeking feedback on its proposal to withdraw IAS 39 Financial Instruments: Recognition and Measurement.

The IASB’s consultation on the Risk Mitigation Accounting model is open for comment until 31 July 2026. 

Submit a comment letter or fieldwork response at https://www.ifrs.org/content/ifrs/home/projects/work-plan/dynamic-risk-management/ed-cl-risk-mitigation-accounting.html 

This consultation is made up of 3 parts:

1. Exposure Draft Risk Mitigation Accounting—Proposed amendments to IFRS 9 and IFRS 7 (54 pages)
2. Basis for Conclusions on Exposure Draft Risk Mitigation Accounting (42 pages) https://www.ifrs.org/content/dam/ifrs/project/dynamic-risk-management/bc-iasb-2025-4-risk-mitigation-accounting-ifrs9-ifrs7.pdf 
3. Illustrative Examples and Implementation Guidance on Exposure Draft Risk Mitigation Accounting (26 pages) https://www.ifrs.org/content/dam/ifrs/project/dynamic-risk-management/ie-iasb-2025-1-risk-mitigation-accounting-ifrs9-ifrs7.pdf 

Additional resources:

• Snapshot of the Exposure Draft Risk Mitigation Accounting (25 pages) https://www.ifrs.org/content/dam/ifrs/project/dynamic-risk-management/snapshot-iasb-2025-1-risk-mitigation-accounting-ifrs9-ifrs7.pdf 
• Request for fieldwork on the proposed risk mitigation accounting model (12 pages) https://www.ifrs.org/content/dam/ifrs/project/dynamic-risk-management/request-fieldwork-risk-mitigation-accounting-ifrs9-ifrs7.pdf 

Click here to download the 54-page Exposure Draft document:

https://www.ifrs.org/content/dam/ifrs/project/dynamic-risk-management/ed-iasb-2025-4-risk-mitigation-accounting-ifrs9-ifrs7.pdf 

Relevance to Auditors, Independent Reviewers & Accountants:

• As an auditor and independent reviewer, you need to consider your clients’ compliance with accounting standards.
• Auditors, Independent Reviewers and Accountants should be aware of the latest publications and guidance issued by regulators and standard-setting boards, such as the IASB – especially those relating to sustainability reporting.
• As an accountant and compiler of financial statements, you need to consider amendments and proposed amendments to standards that are issued by the standard-setting bodies, e.g. IASB, IAASB, etc.

Relevance to Your clients:

• An entity compiling filing financials need to consider amendments and proposed amendments to standards that are issued by the standard-setting bodies, e.g. IASB, IAASB, etc.
• Entities should demonstrate awareness of sustainability and the effects on financial reporting.

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