In November 2025, the FASB issued Accounting Standards Update (ASU) 2025-09, Hedge Accounting Improvements in order to more closely align hedge accounting with the economics of an entity’s risk management activities. The amendments refine existing hedge accounting rules to clarify and expand how hedge accounting applies in practice, better reflect economic risk management activities and address implementation issues and gaps in current guidance, including those highlighted by reference rate reform.  Key changes include allowing groups of forecasted transactions with similar (not identical) risk exposures to qualify for cash flow hedge accounting and the introduction of an optional model for hedging forecasted interest payments on choose-your-rate debt. Overall, the update reduces unnecessary hedge de-designations and aligns accounting outcomes more closely with economic hedging strategies.

Entities are to apply the guidance on a prospective basis. At adoption, entities are allowed to modify certain terms of certain existing hedging relationships without de-designating the hedge.  The amendments are effective for all public business entities for fiscal years beginning after December 15, 2026, and for all other entities for fiscal years beginning after December 15, 2027; early adoption is permitted on any date after this issuance of the ASU.

The full text of the ASU can be found here. 

 

Published: 01/05/2026

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