IASB Proposes New Risk Mitigation Accounting Model for Interest Rate Risk

Posted 23 December 2025 Written by Acts Online
Category Financial and Accounting

Brought to you by SA Accounting Academy: The International Accounting Standards Board (IASB) has issued an Exposure Draft proposing a new accounting model to better reflect how financial institutions manage interest rate risk within their portfolios.

In terms of the proposed Risk Mitigation Accounting model, the IASB intends to amend IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. These amendments are designed to provide greater transparency regarding how interest rate risk management affects a firm’s financial performance and future cash flows. The model responds to feedback that current hedge accounting requirements do not adequately capture dynamic risk management practices used by financial institutions.

The IASB is also seeking specific feedback on its proposal to withdraw IAS 39 Financial Instruments: Recognition and Measurement. The consultation aims to bring accounting and risk management closer together to enhance internal efficiency and stakeholder communication.

Key Proposals and Consultation Timeline

  • Introduction of a formal Risk Mitigation Accounting model to replace existing hedge accounting frameworks for dynamic portfolios.
  • Enhanced disclosure requirements under IFRS 7 to provide more granular data on interest-rate risk management activities.
  • The complete withdrawal of IAS 39, moving all financial instrument accounting under the updated IFRS framework.
  • A consultation period open for public comment until 31 July 2026.

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

What this means for you, your business, or your clients

  • For yourself: You must familiarise yourself with the proposed Risk Mitigation Accounting model to understand how it diverges from current hedge accounting under IFRS 9 and IAS 39, particularly if you work in the banking or financial services sectors.
  • For your business: Financial institutions will need to evaluate their current risk management systems and reporting processes to ensure they can meet the enhanced disclosure requirements proposed for IFRS 7 and the potential withdrawal of IAS 39.
  • For your clients: Clients in the financial sector should be advised to participate in the fieldwork and comment process before the 31 July 2026 deadline to ensure the final standard reflects the practicalities of their specific interest rate risk management strategies.

Originally published at https://accountingacademy.co.za/news/read/iasb-ed-proposed-new-accounting-model-to-reflect-how-financial-institutions-manage-interest-rate-risk

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