FASB proposes hedge accounting changes affecting KPMG finance teams

A narrow hedge accounting proposal from FASB is likely to create real work for KPMG finance, audit and advisory teams over the next few quarters. The board opened comment letters on changes to held-to-maturity debt securities, the SOFR benchmark definition and certain float-to-float cross-currency swaps. For clients, that means documentation reviews, policy updates and new questions for treasury and auditors before the August 17 deadline.

The proposal was issued June 17 by the Financial Accounting Standards Board in Norwalk, Connecticut, and it was built from feedback tied to the board’s January 2025 invitation to comment on its agenda consultation. FASB said the amendments are meant to better reflect the economics of an entity’s risk management activities in its financial statements and to improve the operability of hedge accounting. The three changes are targeted, but each one reaches directly into the day-to-day work of finance functions that have to prove their hedges still match the underlying risk.

The first issue is held-to-maturity debt securities, where FASB would allow entities to hedge interest rate risk. The second would remove the Overnight Index Swap parameter from the SOFR benchmark rate, so any tenor of SOFR can be designated. The third would expand the pool of eligible net investment hedging instruments, including some float-to-float cross-currency swaps with different reset dates. That combination matters for KPMG teams because it changes not just the accounting memo, but the treasury strategy, the designation language and the audit evidence that has to support the model.

The immediate pressure point is the comment period, but the more lasting effect will be implementation work. Audit teams will need to test whether clients updated designation documents, effectiveness assessments and hedge policy language correctly. Treasury groups will have to decide whether these changes let them align hedges more closely with actual risk management. Advisory teams should expect questions from banks, insurers, corporates and multinationals that want help translating the proposed rules into reporting and risk strategy.

The June 2026 proposal also fits a longer reset in FASB’s approach to hedge accounting. In February 2026, the board said it would tackle the topic in three stages: short-term targeted improvements, a medium-term research project on expanding the portfolio layer method to liabilities and a long-term reconsideration of the hedge accounting model. That follows ASU 2025-09, issued on November 25, 2025, and the last major overhaul, ASU 2017-12. For KPMG professionals, the signal is clear: hedge accounting is no longer a once-in-a-generation project, but a running workflow that will keep finance, audit and advisory teams tied together through the next several quarters.