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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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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)

  1. Note 7 is required if the agency has investment and/or hedging derivative instruments.
  2. All derivative instruments on the summary of derivative 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.
  3. The summary of derivative activity table must include the following aggregated by type:
    1. Notional amount
    2. Changes in fair value during the reporting period and the classification on the financial statements where those changes in fair value are reported
    3. Fair values as of the end of the fiscal year and the classification on the financial statements where those fair values are reported
    4. Fair values of derivative instruments reclassified from a hedging derivative instrument to an investment derivative instrument
  4. For business-type activities and fiduciary funds, verify the total fair value in the summary of derivative activity table ties to USAS:
    1. Hedging derivative assets tie to the following GL accounts:
      • 0170 – CA Hedging Derivative Instrument Assets
      • 0481 – NC Hedging Derivative Instrument Assets
    2. Hedging derivative liabilities tie to the following GL accounts:
      • 1143 – CA Hedging Derivative Instrument Liabilities
      • 1471 – NC Hedging Derivative Instrument Liabilities
    3. Investment derivative instruments tie to the following GL accounts:
      • 0059 – CA ST Inv – Derivative Instruments
      • 0105 – NC Inv – Derivative Instruments
  5. For governmental activities, verify the total fair value in the summary of derivative activity table ties to USAS:
    1. Hedging derivative assets tie to the following GL accounts:
      • 0570 – BC CA Hedging Derivative Instrument Assets
      • 0781 – BC NC Hedging Derivative Instrument Assets
    2. Hedging derivative liabilities tie to the following GL accounts:
      • 1543 – BC CA Hedging Derivative Instrument Liabilities
      • 1971 – BC NC Hedging Derivative Instrument Liabilities
    3. Investment derivative instruments tie to the following GL accounts:
      • 0559 – BC CA Inv – Derivative Instruments
      • 0705 – BC NC Inv – Derivative Instruments
  6. Verify the ineffective hedging derivatives that were reclassified to investment derivatives in the DINSS web application are marked as such.
  7. Verify the disclosures for the deferral amount reported within the investment revenue for the reclassification of investment derivatives. Disclosures are also required for the following:
    1. Fair Value Measurement:
      • Market Approach
      • Cost Approach
      • Income Approach
    2. Fair Value Hierarchy:
      • Level 1
      • Level 2
      • Level 3
  8. 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.”
Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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