FASB proposes targeted improvements to hedge accounting
Defining Issues | June 2026
The proposal is intended to better align accounting with risk management activities and enhance operability.
The proposed ASU addresses three discrete issues identified by stakeholders to broaden the application of hedge accounting. The proposal would permit an entity to hedge interest rate risk for held-to-maturity debt securities, amend the definition of the SOFR benchmark rate, and expand the population of eligible net investment hedging instruments.
Applicability
- Proposed ASU
- All entities that elect to apply hedge accounting
Relevant Dates
- Proposed ASU issued June 17, 2026
- Comments due August 17, 2026
Proposed amendments
- Held-to-maturity (HTM) debt securities: The proposal would permit an entity to hedge the interest rate risk of HTM debt securities in both fair value and cash flow hedges.
- SOFR benchmark: The proposal would amend the SOFR benchmark rate from the SOFR Overnight Index Swap Rate to the SOFR Swap Rate. This change would enable any tenor of SOFR, such as Term SOFR, to be designated as a benchmark interest rate.
- Net investment hedges: The proposal would expand the population of float-to-float cross-currency interest rate swaps that can be used as hedging instruments in a net investment hedge. The proposal does this by replacing the requirement that both legs of the swap have the same repricing interval and dates with a requirement that the repricing intervals and dates occur every six months or more frequently.
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Mahesh Narayanasami
Partner, Dept. of Professional Practice, KPMG US
Danielle Imperiale
Managing Director, Dept. of Professional Practice, KPMG US
Mahesh Narayanasami
Partner, Dept. of Professional Practice, KPMG US
Danielle Imperiale
Managing Director, Dept. of Professional Practice, KPMG US