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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 7 – Derivatives
Summary of Activity Table

Provide an introduction to the agency’s derivative activity. Consider defining what a derivative is and providing an overview of why derivatives are part of the agency’s investment or risk strategy.

Provide a summary of derivative activity table disclosure organized by:

  • Governmental activities
  • Business-type activities
  • Fiduciary activities

Then divide the information into two categories:

  • Hedging derivative instruments (distinguishing between fair value hedges and cash flow hedges)
  • Investment derivative instruments

Within each category, derivative instruments are aggregated by type (for example, receive-fixed or pay-fixed interest rate swaps, basis swaps, futures contracts).

The Summary of Derivative Activity table must include:

  • Notional amount
  • Changes in fair value during the reporting period and the classification in the financial statements where those changes in fair value are reported.
  • Fair values as of the end of the reporting period and the classification in the financial statements where those fair values are reported.
    • If the derivative instrument’s fair value is based on methods other than quoted market prices, disclose the methods and significant assumptions used to estimate the fair value.
    • If a fair value is developed by a pricing service, disclosure of significant assumptions is not required if the pricing service considers those assumptions to be proprietary and, after making every reasonable effort, the pricing service declines to make that information available. This fact, however, must be disclosed.
  • Fair values of derivative instruments reclassified from a hedging derivative instrument to an investment derivative instrument.
    • Also disclose the deferral amount reported within investment revenue upon the reclassification.

Present the notional amount fair values and the changes in fair value on the Summary of Derivative Activity table in U.S. dollars or U.S. dollar equivalent for all derivative instruments.

Glenn Hegar
Texas Comptroller of Public Accounts
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