Reporting Requirements for Annual Financial Reports of State Agencies and Universities
Resources
Agency Fiscal YearEnd USAS Adjustments and AFR Checklist
Step 8 – Notes to the Financial Statements
Note 7 – Derivative Instruments (Submitted through the ONDSS web application)

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
 Businesstype activities
 Fiduciary funds
Additionally, the information within those activities is divided into the following categories:
 Hedging derivative instruments (distinguishing between fair value hedges and cash flow hedges)
 Investment derivative instruments
 Other Derivative Instruments (does not meet the definition of an investment derivative instrument or the effectiveness criteria of a hedging derivative instrument)
Within each category, derivative instruments should be aggregated by type (for example, receivefixed swaps, payfixed 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, receivefixed or payfixed 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:
 The 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
 If a hedge termination event occurred: The balance of the deferred outflow (or inflow) of resources is reported separately from the investment revenue classification and captioned increase (decrease) upon hedge termination.
 For businesstype activities and fiduciary funds, verify that 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 – CL 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
 Other derivative instrument assets tie to the following GL accounts:
 0186 – CA Other Derivative Instrument Assets
 0486 – NC Other Derivative Instrument Assets
 Other derivative instrument liabilities tie to the following GL accounts:
 1148 – CL Other Derivative Instrument Liabilities
 1378 – NC Other Derivative Instrument Liabilities
 Hedging derivative instrument assets tie to the following GL accounts:
 For governmental activities, verify that 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 CL 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 Instrument Assets
 0705 – BC NC Inv – Derivative Instrument Assets
 Other derivative instrument assets tie to the following GL accounts:
 0586 – BC CA Other Derivative Instrument Assets
 0786 – BC NC Other Derivative Instrument Assets
 Other derivative instrument liabilities tie to the following GL accounts:
 1548 – BC CL Other Derivative Instrument Liabilities
 1978 – BC NC Other Derivative Instrument Liabilities
 Hedging derivative instrument assets tie to the following GL accounts:
 If a hedge termination event occurred, verify that the balance of the deferred outflow (or inflow) of resources in the Summary of Derivative Instruments activity table ties to USAS:
 4845 – Increase / (Decrease) Upon Hedge Termination
 Verify that the ineffective hedging derivative instruments that were reclassified to investment derivative instruments in the DINSS web application are marked as such.
 Verify that 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.”