Reporting Requirements for Annual Financial Reports of State Agencies and Universities
Resources
Agency Fiscal Year-End USAS Adjustments and AFR Checklist
Step 8 – Notes to the Financial Statements
Note 7 – Derivative Instruments (Submitted through the ONDSS web application)
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Note 7 is required if the agency has investment and/or hedging derivative instruments.
Disclosures about derivative instrument activities should be organized by:
- Governmental activities
- Business-type activities
- Fiduciary funds
Additionally, the information within those activities is divided into two categories:
- Hedging derivative instruments (distinguishing between fair value hedges and cash flow hedges)
- Investment derivative instruments
Within each category, derivative instruments should be aggregated by type (for example, receive-fixed swaps, pay-fixed swaps, swaptions, rate caps, basis swaps and futures contracts).
- All derivative instruments on the Summary of Derivative Instruments activity table must be aggregated by type (for example, receive-fixed or pay-fixed interest rate swaps, basis swaps, futures contracts) within each of the two categories, hedging and investment derivative instruments.
- The Summary of Derivative Instruments activity table must include the following aggregated by type:
- Notional amount
- Changes in fair value during the reporting period and the classification on the financial statements where those changes in fair value are reported
- Fair values as of the end of the fiscal year and the classification on the financial statements where those fair values are reported
- Fair values of derivative instruments reclassified from a hedging derivative instrument to an investment derivative instrument
- For business-type activities and fiduciary funds, verify the total fair value in the Summary of Derivative Instruments activity table ties to USAS:
- Hedging derivative instrument assets tie to the following GL accounts:
- 0170 – CA Hedging Derivative Instrument Assets
- 0481 – NC Hedging Derivative Instrument Assets
- Hedging derivative instrument liabilities tie to the following GL accounts:
- 1143 – CA Hedging Derivative Instrument Liabilities
- 1471 – NC Hedging Derivative Instrument Liabilities
- Investment derivative instruments tie to the following GL accounts:
- 0059 – CA ST Inv – Derivative Instruments
- 0105 – NC Inv – Derivative Instruments
- Hedging derivative instrument assets tie to the following GL accounts:
- For governmental activities, verify the total fair value in the Summary of Derivative Instruments activity table ties to USAS:
- Hedging derivative instrument assets tie to the following GL accounts:
- 0570 – BC CA Hedging Derivative Instrument Assets
- 0781 – BC NC Hedging Derivative Instrument Assets
- Hedging derivative instrument liabilities tie to the following GL accounts:
- 1543 – BC CA Hedging Derivative Instrument Liabilities
- 1971 – BC NC Hedging Derivative Instrument Liabilities
- Investment derivative instruments tie to the following GL accounts:
- 0559 – BC CA Inv – Derivative Instruments
- 0705 – BC NC Inv – Derivative Instruments
- Hedging derivative instrument assets tie to the following GL accounts:
- Verify the ineffective hedging derivative instruments that were reclassified to investment derivative instruments in the DINSS web application are marked as such.
- Verify the disclosures for the deferral amount reported within the investment revenue for the reclassification of investment derivative instruments. Disclosures are also required for the following:
- Fair Value Measurement:
- Market Approach
- Cost Approach
- Income Approach
- Fair Value Hierarchy:
- Level 1
- Level 2
- Level 3
- Fair Value Measurement:
- Submit a copy of the agency’s Note 7 from its published AFR through the ONDSS web application. The required format is a Microsoft Word document (latest version: docx) with header information that includes: agency name/number and note number/name. If Note 7 contains a table, include the table in the Word document — rather than as a separate Excel document or other database application file. If Note 7 does not apply, do NOT submit a note to indicate “not applicable.”