The Financial Accounting Standards Board has put a new proposal on the table, and companies that run hedging programs should read it closely before the comment window closes. On June 17, 2026, the FASB issued a proposed Accounting Standards Update (an exposure draft, not a final standard) that would make three targeted improvements to hedge accounting under Topic 815. For organizations that rely on audit and assurance services to keep their financial reporting defensible, the proposal matters because it could change which instruments and risks qualify for hedge accounting treatment. The comment period runs through August 17, 2026.
Quick answer: The FASB’s June 17, 2026 proposed ASU is an exposure draft, not final guidance. It proposes three targeted hedge accounting improvements: permitting entities to hedge the interest rate risk of held-to-maturity (HTM) debt securities, amending the SOFR overnight index swap rate definition to allow designation of any tenor of SOFR, and expanding eligible net investment hedging instruments to include certain float-to-float cross-currency swaps with different reset dates. Stakeholders can submit comments to the FASB until August 17, 2026.
This Is a Proposal, Not a Rule Yet
The most important point to understand is the document’s status. This is a proposed Accounting Standards Update open for public comment, which means none of it is in effect and the final version could differ from what the Board has put forward. Companies should treat the proposal as a planning signal, not a basis for changing current accounting.
The FASB describes these as three discrete issues, each tied to an exception or limitation in the general hedge accounting model. The Board has said the proposal addresses issues identified by the American Bankers Association and other stakeholders pressing for changes that better reflect how institutions actually manage interest rate and currency risk. You can read the FASB’s own materials and the proposed ASU on the FASB website.
Because the Board added these items to its agenda earlier in the year and moved them quickly, the proposal is narrow by design. It does not reopen the broader hedge accounting model that the FASB finalized in late 2025 under ASU 2025-09, which the Board issued in November 2025 to refine several other aspects of Topic 815. Instead, this proposal addresses three specific friction points that have kept some economically sound hedges from qualifying for hedge accounting. Reading the two efforts together helps, since the current proposal builds on the same goal of aligning hedge accounting with real risk management, but the changes here are separate from anything already finalized.
The Three Targeted Improvements
The first proposed change would permit an entity to hedge the interest rate risk of held-to-maturity debt securities. Under current guidance, HTM classification carries restrictions that make interest rate hedging difficult, even when an institution has a genuine economic exposure. The proposal would let entities apply hedge accounting to those positions without undermining the HTM designation, which is a meaningful shift for banks and other holders of large fixed-income portfolios.
This item carries weight because of recent history. After the 2023 failure of Silicon Valley Bank, the way GAAP treats HTM securities drew criticism for effectively discouraging sound interest rate risk management. Allowing hedge accounting on these positions responds directly to that concern, while leaving the HTM classification itself intact. For institutions sitting on sizable held-to-maturity books, the practical effect could be a closer match between how they manage rate risk and how that activity shows up in earnings.
The second change targets benchmark rates. The proposal would amend the current GAAP definition of the SOFR overnight index swap rate to permit designation of any tenor of SOFR as the hedged benchmark interest rate. Today the definition constrains which SOFR tenor an entity can designate, and that constraint does not always match the instruments companies use. Broadening the eligible tenors would give hedgers more flexibility to align the designated rate with their actual risk management strategy.
The third change addresses net investment hedges. The proposal would expand the population of eligible net investment hedging instruments by permitting the use of certain float-to-float cross-currency swaps that have different reset dates. Companies that hedge the currency exposure of foreign operations have argued that the current rules exclude common, economically appropriate instruments. The proposed change would bring more of those swaps inside the qualifying set.
Across all three items, the through-line is the same. The FASB is proposing to remove exceptions and limitations so that hedge accounting can apply to a wider range of instruments that are already used to manage real risk. The Journal of Accountancy and Accounting Today have both summarized the proposal, and their reporting aligns with the FASB’s stated objectives.
Which Clients Should Pay Attention
Financial institutions sit at the center of this proposal. Banks and credit unions that hold large HTM debt portfolios have the most direct interest in the first change, because the ability to hedge interest rate risk on those securities could reduce earnings volatility and improve the link between risk management and reported results. The SOFR tenor change also lands squarely on institutions that have transitioned their benchmark exposures to SOFR-based instruments.
Manufacturers with international operations are the natural audience for the net investment hedge change. A company with foreign subsidiaries often uses cross-currency swaps to protect the value of its net investment abroad, and the proposed expansion to float-to-float swaps with different reset dates could let more of those positions qualify for hedge accounting. Manufacturing clients evaluating their hedging documentation should map their existing instruments against the proposed eligibility criteria. Our manufacturing practice works with companies that carry exactly these kinds of cross-border exposures.
Mortgage banking clients also have a stake here, given how central interest rate risk and benchmark rate designation are to their operations. Firms that hedge pipeline and servicing exposures, and that have moved to SOFR-based benchmarks, should track whether the any-tenor SOFR change would simplify their designations. Our mortgage banking practice regularly addresses the documentation and effectiveness-testing questions these programs raise. Private companies with hedging programs should note that effective dates and transition provisions in any final ASU typically differ for entities other than public business entities, so timing will matter once the Board finalizes its decisions.
What to Do During the Comment Period
Comments are due to the FASB by August 17, 2026, and the comment period is the right time to act. Companies that would benefit from any of the three changes, or that see drafting problems in the proposal, should consider submitting a comment letter or supporting an industry response. The Board weighs stakeholder input directly, and the proposal itself reflects how much earlier feedback shaped the agenda.
Beyond commenting, this is a good moment to inventory your current hedging relationships and documentation. Identify which of your hedges fall into the three affected areas, and assess how a final standard might change qualification, designation, or effectiveness testing. Doing this now means you are ready to move quickly if and when the FASB issues a final ASU, rather than scrambling after the fact.
Coordination with your auditor is part of that preparation. Because hedge accounting decisions flow through your financial statements, the team that provides your audit and assurance services should be part of the conversation early, especially on documentation and effectiveness-testing implications. Engaging your advisers during the comment period, rather than after a final rule, keeps surprises out of your year-end close.
A practical caution applies here. Do not change your accounting based on the proposal. Until the FASB votes on a final standard, current guidance governs. The value of acting now is in understanding your exposure and shaping the outcome through comment, not in early adoption of rules that do not yet exist.
Frequently Asked Questions
Is the FASB hedge accounting proposal final?
No. The document issued on June 17, 2026 is a proposed Accounting Standards Update, also called an exposure draft. It is open for public comment through August 17, 2026, and the FASB has not finalized any of the three proposed changes. Current hedge accounting guidance remains in effect until a final ASU is issued.
What are the three targeted improvements in the proposal?
The proposal would permit hedging the interest rate risk of held-to-maturity debt securities, amend the SOFR overnight index swap rate definition to allow designation of any tenor of SOFR, and expand eligible net investment hedging instruments to include certain float-to-float cross-currency swaps with different reset dates. Each item targets a specific exception or limitation in the existing hedge accounting model.
When is the comment deadline?
The FASB is accepting comments on the proposed ASU until August 17, 2026. Companies and industry groups can submit comment letters during this window, and the Board will consider that feedback before deciding whether to issue a final standard.
Who is most affected by the proposal?
Financial institutions holding HTM debt portfolios and using SOFR-based benchmarks are most directly affected, along with companies that hedge net investments in foreign operations, including many manufacturers. Mortgage banking firms and private companies with hedging programs should also review their positions against the three proposed changes.
