Audit Report

OIG-18-021

FINANCIAL MANAGEMENT

Audit of the Exchange Stabilization Fund’s Fiscal Years 

2017 and 2016 Financial Statements

December 7, 2017

Office of Inspector General

Department of the Treasury
This Page Intentionally Left Blank
OFFICE OF

INSPECTOR GENERAL

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

December 7, 2017

MEMORANDUM FOR ANDREW BAUKOL

PRINCIPAL DEPUTY ASSISTANT SECRETARY FOR 

 INTERNATIONAL MONETARY AND FINANCIAL POLICY

FROM: James Hodge /s/

Director, Financial Audit

SUBJECT: Audit of the Exchange Stabilization Fund’s Fiscal Years 2017

and 2016 Financial Statements 

I am pleased to transmit the attached subject report. Under a contract monitored 

by our office, KPMG LLP (KPMG), an independent certified public accounting firm,

audited the financial statements of the Exchange Stabilization Fund (ESF) as of 

September 30, 2017 and 2016, and for the years then ended, and provided a 

report on internal control over financial reporting, and a report on compliance with 

laws, regulations, and contracts tested. The contract required that the audit be 

performed in accordance with U.S. generally accepted government auditing 

standards, Office of Management and Budget Bulletin No. 17-03, Audit 

Requirements for Federal Financial Statements, and the Government Accountability 

Office/President’s Council on Integrity and Efficiency Financial Audit Manual.

In its audit of ESF, KPMG found

• the financial statements were fairly presented, in all material respects, in 

accordance with U.S. generally accepted accounting principles;

• no deficiencies in internal control over financial reporting that are considered 

material weaknesses; and

• no instances of reportable noncompliance with laws, regulations, and 

contracts tested.

In connection with the contract, we reviewed KPMG’s reports and related 

documentation and inquired of its representatives. Our review, as differentiated 

from an audit performed in accordance with U.S. generally accepted government 

auditing standards, was not intended to enable us to express, and we do not 

express, opinions on the ESF’s financial statements or conclusions about the 

effectiveness of internal control or compliance with laws and regulations. KPMG is 

responsible for the attached auditors’ reports dated December 7, 2017, and the 
Page 2

conclusions expressed in the reports. However, our review disclosed no instances 

where KPMG did not comply, in all material respects, with U.S. generally accepted 

government auditing standards.

Should you have any questions, please contact me at (202) 927-0009, or a 

member of your staff may contact Catherine Yi, Manager, Financial Audit, at (202) 

927-5591.

Attachment
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

Financial Statement

September 30, 2017 and 2016 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

Table of Contents

Page

1 

3 

5 

6

7

8

9

Policy and Operations Statements (Unaudited)

Independent Auditors’ Report

Independent Auditors’ Report on Internal Control Over Financial Reporting

Independent Auditors’ Report on Compliance and Other Matters

Statements of Financial Position

Statement of Operations, Comprehensive Operations and Retained Earnings

Statement of Cash Flows

Notes to Financial Statements 10
EXCHANGE STABILIZATION FUND

POLICY AND OPERATIONS STATEMENTS

FISCAL YEAR 2017

Unaudited – see accompanying auditor’s report 1

The Nature and Function of the Exchange Stabilization Fund

The Gold Reserve Act of 1934 established a fund to be operated by the Secretary of the Treasury, 

with the approval of the President. Section 10 of the Act provided that “For the purpose of 

stabilizing the exchange value of the dollar, the Secretary of the Treasury, with the approval of the 

President, directly or through such agencies as he may designate, is authorized, for the account of 

the fund established in this section, to deal in gold and foreign exchange and such other instruments 

of credit and securities as he may deem necessary to carry out the purpose of this section.” To this 

end, the Congress, in 1934, appropriated to the Exchange Stabilization Fund (ESF) the sum of $2 

billion out of the increment resulting from the reduction in the “weight of the gold dollar.” 

Subsequent amendments to the Gold Reserve Act approved the operation of the ESF through June 

30, 1945. Section 7 of the Bretton Woods Agreements Act, approved July 31, 1945, continued its 

operations permanently.

The Bretton Woods Agreements Act also directed the Secretary of the Treasury to pay $1.8 billion 

from the ESF to the International Monetary Fund (IMF), for the initial U. S. quota subscription in 

the IMF, thereby reducing the ESF’s appropriated capital to $200 million.

Reflecting termination of the fixed exchange rate system, legislation enacted in 1976 (P.L. 94-564, 

October 19, 1976) amended the language of Section 10 of the Gold Reserve Act to specify that the 

ESF is to be utilized as the Secretary “may deem necessary to and consistent with the United States 

obligations in the International Monetary Fund.” This amendment became effective on April 1, 

1978, the date of entry into force of the Second Amendment of the IMF Articles of Agreement. In 

1977, P.L. 95-147 further amended Section 10 of the Gold Reserve Act. The Gold Reserve Act,

the following codification, now provides in relevant part:

“Consistent with the obligations of the Government in the International Monetary Fund on 

orderly exchange arrangements and a stable system of exchange rates, the Secretary or an 

agency designated by the Secretary, with the approval of the President, may deal in gold, 

foreign exchange, and other instruments of credit and securities the Secretary considers 

necessary. However, a loan or credit to a foreign entity or government of a foreign country 

may be made for more than 6 months in a 12-month period only if the President gives Congress 

a written statement that unique or emergency circumstances require the loan or credit be for 

more than 6 months (31 U.S.C. 5302 (b)).”

Pursuant to the Special Drawing Rights Act of 1968 (P.L. 90-349, amended by P.L. 94-564), 

Special Drawing Rights (SDRs) allocated by the IMF to the United States or otherwise acquired 

by the United States are resources of the ESF.

Section 286p of Title 22 of the United States Code allows for SDRs to be monetized/demonetized 

through the issuance/redemption by the Secretary of the Treasury of SDR certificates to the Federal 

Reserve Banks in exchange for dollars. The total amount of SDR certificates outstanding cannot 

exceed the dollar equivalent of ESF (i.e., U. S.) holdings of SDRs; such certificates are a liability 

of the ESF.
EXCHANGE STABILIZATION FUND

POLICY AND OPERATIONS STATEMENTS

FISCAL YEAR 2017

Unaudited – see accompanying auditor’s report 2

I. Foreign Currency Operations

a. Euros and Japanese Yen

The ESF had a net valuation loss of $390.8 million on its holdings of euros and yen. The 

ESF had investment expense of $(14.5) million equivalent on its euro and yen assets.

b. Mexico

In October 2016, the Treasury and Federal Reserve Bank of New York, acting as 

Treasury’s fiscal agent, renewed the Exchange Stabilization Agreement with Mexico for 

another year to December 2017. The agreement was subsequently renewed November

2017 for another year to December 2018.

II. SDR Operations

As of September 30, 2017, U.S. holdings (assets) of SDRs totaled SDR 36.4 billion 

($51.4 billion equivalent), a net increase of 539.5 million SDR during Fiscal Year 2017. In 

November 2016 the ESF transacted to purchase 500 million SDRs from the Arab Republic 

of Egypt with a dollar equivalent of $681 million. Additionally, as the SDR appreciated

against the dollar in this period, there was a net valuation gain of $653.9 million on U.S. 

holdings of SDRs. The ESF reimbursed the Treasury’s General Fund $51.7 million for SDRs 

received from the IMF as remuneration on the U.S. reserve position in the IMF. The ESF 

received interest of $159.6 million equivalent on its SDR holdings.

As of September 30, 2017, cumulative allocations to (liabilities of) the United States totaled 

SDR 35.3 billion ($49.9 billion equivalent). These liabilities would come due only in the 

event of liquidation of, or U.S. withdrawal from, the SDR Department of the IMF, or 

cancellation of SDRs.

There were $5.2 billion of SDR certificates that had been issued to the Federal Reserve 

System prior to fiscal year 2017.

III. Income and Expense

Interest revenue totaled $330.3 million, consisting of $143.5 million in interest on dollar 

holdings invested in U.S. Government securities, $201.3 million equivalent in interest on 

SDR holdings, and $(14.5) million equivalent in interest on foreign currency investments.

Interest expense totaled $195.6 million, primarily representing interest charges on SDR 

Allocations.
KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

Independent Auditors’ Report

Inspector General

Department of the Treasury

Report on the Financial Statements

We have audited the accompanying financial statements of the Department of the Treasury’s Exchange 

Stabilization Fund (ESF), which comprise the statements of financial position as of September 30, 2017 and 

2016, and the related statements of operations, comprehensive operations and retained earnings, and cash 

flows for the years then ended, and the related notes to the financial statements. 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in 

accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and 

maintenance of internal control relevant to the preparation and fair presentation of financial statements that are 

free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted 

our audits in accordance with auditing standards generally accepted in the United States of America, in 

accordance with the standards applicable to financial audits contained in Government Auditing Standards

issued by the Comptroller General of the United States, and in accordance with Office of Management and 

Budget (OMB) Bulletin No. 17-03, Audit Requirements for Federal Financial Statements. Those standards and 

OMB Bulletin No. 17-03 require that we plan and perform the audit to obtain reasonable assurance about 

whether the financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of 

the risks of material misstatement of the financial statements, whether due to fraud or error. In making those 

risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation 

of the financial statements in order to design audit procedures that are appropriate in the circumstances, but 

not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we 

express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and 

the reasonableness of significant accounting estimates made by management, as well as evaluating the overall 

presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion.

Opinion on the Financial Statements

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial 

position of the Department of the Treasury’s Exchange Stabilization Fund as of September 30, 2017 and 2016, 

and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally 

accepted accounting principles.

3
Other Matters

Other Information

Our audits were conducted for the purpose of forming an opinion on the basic financial statements as a whole. 

The Policy and Operations Statement section is presented for purposes of additional analysis and is not a 

required part of the basic financial statements. Such information has not been subjected to the auditing 

procedures applied in the audits of the basic financial statements, and accordingly, we do not express an 

opinion or provide any assurance on it. 

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 7, 2017 

on our consideration of the ESF’s internal control over financial reporting and our report dated December 7, 

2017 on our tests of its compliance with certain provisions of laws, regulations, contracts, and other matters.

The purpose of those reports is to describe the scope of our testing of internal control over financial reporting 

and compliance and the result of that testing, and not to provide an opinion on the internal control over financial

reporting or on compliance. Those reports are an integral part of an audit performed in accordance with 

Government Auditing Standards in considering the ESF’s internal control over financial reporting and 

compliance.

December 7, 2017 

4
KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

Independent Auditors’ Report on Internal Control Over Financial Reporting Based on an Audit of 

Financial Statements Performed in Accordance With Government Auditing Standards

Inspector General

Department of the Treasury

We have audited, in accordance with auditing standards generally accepted in the United States of America, in

accordance with the standards applicable to financial audits contained in Government Auditing Standards

issued by the Comptroller General of the United States, and in accordance with Office of Management and 

Budget (OMB) Bulletin No. 17-03, Audit Requirements for Federal Financial Statements, the financial 

statements of Department of the Treasury’s Exchange Stabilization Fund (ESF), which comprise the 

statements of financial position as of September 30, 2017 and 2016, and the related statements of operations,

comprehensive operations and retained earnings, and cash flows for the years then ended, and the related 

notes to the financial statements, and have issued our report thereon dated December 7, 2017. 

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements as of and for the year ended September 30, 

2017, we considered the ESF’s internal control over financial reporting (internal control) to determine the audit 

procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial 

statements, but not for the purpose of expressing an opinion on the effectiveness of the ESF’s internal control. 

Accordingly, we do not express an opinion on the effectiveness of the ESF’s internal control. We did not test all 

internal controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial 

Integrity Act of 1982. 

A deficiency in internal control exists when the design or operation of a control does not allow management or 

employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, 

misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in 

internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial 

statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a 

deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet 

important enough to merit attention by those charged with governance. 

Our consideration of internal control was for the limited purpose described in the first paragraph of this section

and was not designed to identify all deficiencies in internal control that might be material weaknesses or 

significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal 

control that we consider to be material weaknesses. However, material weaknesses may exist that have not 

been identified.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and the result of that 

testing, and not to provide an opinion on the effectiveness of the ESF’s internal control. This report is an 

integral part of an audit performed in accordance with Government Auditing Standards in considering the ESF’s 

internal control. Accordingly, this communication is not suitable for any other purpose.

December 7, 2017

5
KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

Independent Auditors’ Report on Compliance and Other Matters Based on an Audit of Financial 

Statements Performed in Accordance With Government Auditing Standards

Inspector General

Department of the Treasury

We have audited, in accordance with auditing standards generally accepted in the United States of America, in

accordance with the standards applicable to financial audits contained in Government Auditing Standards

issued by the Comptroller General of the United States, and in accordance with Office of Management and 

Budget (OMB) Bulletin No. 17-03, Audit Requirements for Federal Financial Statements, the financial

statements of Department of the Treasury’s Exchange Stabilization Fund (ESF), which comprise the 

statements of financial position as of September 30, 2017 and 2016, and the related statements of operations,

comprehensive operations and retained earnings, and cash flows for the years then ended, and the related 

notes to the financial statements, and have issued our report thereon dated December 7, 2017. 

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the ESF’s financial statements are free from material 

misstatement, we performed tests of its compliance with certain provisions of laws, regulations, and contracts, 

noncompliance with which could have a direct and material effect on the determination of financial statement 

amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, 

and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of 

noncompliance or other matters that are required to be reported herein under Government Auditing Standards

or OMB Bulletin No. 17-03. 

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of compliance and the result of that 

testing, and not to provide an opinion on the ESF’s compliance. This report is an integral part of an audit 

performed in accordance with Government Auditing Standards in considering the ESF’s compliance. 

Accordingly, this communication is not suitable for any other purpose.

December 7, 2017

6
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

STATEMENTS OF FINANCIAL POSITION

(In Thousands)

As of September 30 2017 2016

Assets

Cash and Cash Equivalents (Note 2) $ 34,743,569 $ 34,439,182

Investment Securities and Other Foreign Currency Denominated Assets, at fair value (Note 4) 8,471,708 9,780,061

Special Drawing Right Holdings (Note 3) 51,443,262 50,053,600

Interest Receivable 67,934 58,538

Interest Receivable on Special Drawing Right Holdings 47,338 4,171

Total Assets $ 94,773,811 $ 94,335,552

Liabilities and Equity

Liabilities:

Special Drawing Right Certificates Issued to Federal Reserve Banks (Note 6) $ 5,200,000 $ 5,200,000

Special Drawing Right Allocations (Note 3) 49,911,652 49,293,980

Interest Payable on Special Drawing Right Allocations 45,928 4,108

Other 598 726

Total Liabilities 55,158,178 54,498,814

Commitments and Contingencies (Note 8)

Equity:

Appropriated Capital 200,000 200,000

Retained Earnings 39,295,824 39,261,611

Accumulated Other Comprehensive Gain (Notes 1 and 5) 119,809 375,127

Total Equity 39,615,633 39,836,738

Total Liabilities and Equity $ 94,773,811 $ 94,335,552

See accompanying notes to financial statements. 

7
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

STATEMENTS OF OPERATIONS, COMPREHENSIVE OPERATIONS AND RETAINED EARNINGS

(In Thousands)

For the year-ended September 30 2017 2016

Interest Income

Interest on Cash and Cash Equivalents, net $ 117,637 $ 16,273

Interest on Investment Securities and Other Foreign Currency Denominated Assets 11,330 29,106

Interest on Special Drawing Right Holdings 201,345 25,425

Total Interest Income 330,312 70,804

Interest Expense

Interest on Special Drawing Right Allocations (195,581) (25,040)

Interest on Special Drawing Rights -

 Remuneration due to the U.S. Treasury (30) (1)

Total Interest Expense (195,611) (25,041)

Net Interest Income 134,701 45,763

Net Gains/(Losses) 

Gain/(Loss) on Foreign Currency Valuation of:

Special Drawing Right Holdings 655,342 (284,295)

Special Drawing Right Allocations (619,073) 280,024

Investment Securities and Other Foreign Currency Denominated Assets, net (Notes 1 and 4) (Includes net 37,490 751,525

 gain of $349,223 and $0 in fiscal years 2017 and 2016, respectively, in accumulated other comprehensive

 income reclassifications for previously unrealized net gains/losses on available-for-sale securities)

Other-Than-Temporary Losses on Investment Securities (172,945) (206,864)

International Monetary Fund Annual Assessment and Other (1,302) (2,122)

Total Net Gains/(Losses) (100,488) 538,268

Results of Operations 34,213 584,031

Other Comprehensive Gain/(Loss)

Unrealized Holding Gain/(Loss), net (Notes 1 and 5) (255,318) 1,022,758

Comprehensive Gain/(Loss) $ (221,105) $ 1,606,789

Retained Earnings, Beginning of Year $ 39,261,611 $ 38,677,580

Results of Operations 34,213 584,031

Retained Earnings, End of Year $ 39,295,824 $ 39,261,611

See accompanying notes to financial statements. 

8
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

STATEMENTS OF CASH FLOWS

(In Thousands)

For the year-ended September 30 2017 2016

Cash Flows from Operating Activities:

Interest Received/(Paid) on:

 Cash and Cash Equivalents $ 110,757 $ 18,984

 Investment Securities and Other Foreign Currency Denominated Assets 129,790 137,619

 Other (1,235) (11,375)

Net Cash Provided by Operating Activities 239,312 145,228

Cash Flows from Investing Activities:

Purchases of Investment Securities and Foreign Currency Denominated Assets, Available-for-Sale 0 (1,563,196)

Maturities of Investment Securities and Foreign Currency Denominated Assets, Available-for-Sale 3,788,052 4,307,082

Sales of Investment Securities and Foreign Currency Denominated Assets, Available-for-Sale 1,979 0

Purchases of Investment Securities and Foreign Currency Denominated Assets, Trading (2,719,090) 0

Purchases of Special Drawing Rights (681,021) 0

Reimbursement for Remuneration Received (51,718) (7,556)

Other 1,435 1,743

Net Cash Provided by Investing Activities 339,637 2,738,073

Effect of Exchange Rate on Cash (274,562) 600,641

Net Increase in Cash and Cash Equivalents 304,387 3,483,942

Cash and Cash Equivalents,

 Beginning of Year 34,439,182 30,955,240

Cash and Cash Equivalents,

 End of Year $ 34,743,569 $ 34,439,182

Reconciliation of Net Loss to Net Cash Provided by

 Operating Activities 

Results of Operations $ 34,213 $ 584,031

Adjustments to Reconcile Net Income to Net Cash Provided by 

 Operating Activities:

 Net Exchange Rate Gain on FCDAs and Investment Securities (37,490) (751,525)

 (Increase)/Decrease in Special Drawing Right Holdings Due to Valuation (653,896) 284,325

 Net Increase in Special Drawing Right Holdings (4,462) (385)

 (Increase)/Decrease in Accrued Interest Receivable (52,563) 8,890

 Net Amortization of Bond Premium 121,202 92,735

 Increase/(Decrease) in Special Drawing Right Allocations Due to Valuation 617,671 (280,053)

 Increase in Accrued Interest Payable and Other 41,692 346

 Other-Than-Temporary Losses on Investment Securities 172,945 206,864

Total Adjustments 205,099 (438,803)

Net Cash Provided by Operating Activities $ 239,312 $ 145,228

See accompanying notes to financial statements. 

9
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

10

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES 

A. Entity 

The Exchange Stablization Fund (ESF) was originally established pursuant to section 10 of the Gold Reserve 

Act of 1934 for the purpose of stabilizing the exchange value of the dollar. Section 10 has been amended

several times since 1934. This section currently authorizes the Secretary of the Treasury, with the approval of 

the President, to deal in gold, foreign exchange, and instruments of credit and securities consistent with U.S. 

obligations in the International Monetary Fund (IMF) on orderly exchange arrangements and a stable system 

of exchange rates. 31 U.S.C. 5302(b). 

The Federal Reserve Bank of New York (FRBNY) acts as the fiscal agent for the ESF, as permitted by the 

Federal Reserve Act. As the fiscal agent, the FRBNY plays a significant role in the processing of foreign 

currency transactions that the Secretary of the Treasury authorizes. The manager of the ESF foreign currency 

portfolio at the FRBNY consults regularly with the Federal Open Market Committee and the U.S. Department 

of the Treasury (Treasury) about the disposition of investments and the status of the portfolio. The level and 

currency composition of the ESF foreign currency portfolio are the products of Treasury policy 

determinations. The ESF management is responsible for the record keeping and investment decisions for 

foreign currency transaction activity carried out by the FRBNY.

By law, the ESF is not available to pay administrative expenses. Instead, the Treasury’s Office of International 

Affairs has responsibility for managing ESF operations, and Treasury’s Office of the Deputy Chief Financial 

Officer provides the recordkeeping and financial reporting services for the ESF. These Treasury offices bear 

all administrative expenses of the ESF. Accordingly, there are no administrative expenses reported in the 

financial statements.

B. Basis of Accounting and Presentation

The American Institute of Certified Public Accountants (AICPA) has designated the Federal Accounting 

Standards Advisory Board (FASAB) as the standards-setting body for financial statements of federal 

governmental entities, with respect to the establishment of accounting principles generally accepted in the 

United States of America. SFFAS 34, issued by FASAB, provides authoritative guidance allowing federal 

entities to prepare financial statements in conformance with accounting and reporting principles issued by the 

Financial Accounting Standards Board (FASB). Accordingly, the ESF financial statements are presented in 

accordance with accounting standards published by FASB. 

C. Risks and Uncertainties

The ESF faces certain risks and uncertainties as a result of holding foreign currency securities. The price of 

ESF’s holdings of such securities may fluctuate as a result of volatility in foreign currency markets and 

changes in real and perceived credit of ESF’s counterparties. 

Credit risk related to its holdings, is the potential, no matter how remote, for financial loss from a failure of a 

borrower or counterparty to perform in accordance with underlying contractual obligations. 

The preparation of financial statements requires management to make estimates and assumptions that affect 

the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the 

financial statements and the reported amounts of revenues and expenses during the reporting period. 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

11

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Significant estimates are used in the preparation of amounts related to the valuation of investments and 

contingent liabilities. Actual results could differ from those estimates. 

D. Cash and Cash Equivalents

Cash equivalents are short-term, highly liquid investments that are both readily convertible to known 

amounts of cash, and so near their maturity that they present insignificant risk of change in value due to 

changes in interest rates. Cash and Cash Equivalents consist of the following:

• U.S. Government Securities, and

• Short-term Foreign Currency Denominated Assets (FCDAs) – including deposits and securities

denominated in both euro and yen.

E. Investments

Held-to-maturity securities are those securities in which the entity has the ability and intent to hold the security 

until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization and 

accretion of premiums or discounts. As of September 30, 2017 and 2016 there were no securities classified as 

held-to-maturity.

Trading securities are those which are bought and held principally for the purpose of selling them in the near 

term and therefore held for only a short period of time. ESF’s Other FCDAs and Investment Securities 

purchased after June 30, 2016 are classified as trading. Trading securities are recorded at fair value with all 

unrealized holding gains and losses reflected in earnings. Realized gains and losses from the sale of trading

securities are determined on a specific-identification basis.

Available-for-sale securities are those which are neither trading nor held-to-maturity. ESF’s Other FCDAs 

and Investment Securities purchased prior to July 1, 2016 are classified as available-for-sale. Available-forsale securities are recorded at fair value. Unrealized holding gains and losses on available-for-sale securities, 

including amounts related to foreign currency valuation, are excluded from earnings and are reported as a 

separate component of accumulated other comprehensive income until realized or deemed to be other than 

temporary. Realized gains and losses from the sale of available-for-sale securities are determined on a 

specific-identification basis. 

Interest on investments, amortization of premiums, and accretion of discounts are reported in Interest Income 

and are recognized on an accrual basis. Premiums and discounts are amortized or accreted over the life of the 

related investment security as an adjustment to yield using the effective-interest method. 

Foreign currency assets (FCA) include interest-bearing foreign deposit accounts and investments in foreign 

government securities.

FCAs also include FCDAs reported as Cash and Cash Equivalents, Other FCDAs, and Investment Securities. 

These categorizations are based on maturity. FCDAs reported as Cash and Cash Equivalents have terms of 3 

months or less. Other FCDAs have terms of less than or equal to a year but greater than 3 months and

Investment Securities have terms greater than a year. 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

12

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F. Foreign Currency Valuations

In accordance with Foreign Currency Matters (FASB ASC 830), FCAs as well as Special Drawing Rights

and related accrued interest receivable or payable, discussed below, are revalued to reflect exchange rates in 

effect as of the reporting date. Gains and losses related to foreign currency revaluations on Available-for-sale 

securities are reported as a component of Other Comprehensive Income until realized. Other such gains or 

losses, recognized in the period of the fluctuations, are reported on the Statements of Operations, 

Comprehensive Operations and Retained Earnings as Gains (Losses) on Foreign Currency Valuation.

G. Other-Than-Temporary Impairment

A decline in the market value (either due to credit, price or currency) of any investment below cost that is 

deemed to be other-than-temporary is accounted for as an impairment and the carrying value is reduced to 

fair value for financial statement reporting purposes. The impairment is charged to earnings and the charge 

establishes a new cost basis for the investment. To determine whether impairment is other-than-temporary, 

the ESF considers whether it has the ability and intent to hold the investment until a market price recovery 

and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to 

the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity 

and duration of the impairment, changes in value subsequent to year-end, forecasted performance of the 

investee, remaining maturity of the investment and the general market condition in the geographic area or 

industry in which the investee operates. ESF regularly evaluates whether unrealized losses on investment 

securities indicate other-than-temporary impairment that would require recognition in the financial 

statements. 

H. Fair Values of Financial Instruments

Fair Value Measurements and Disclosures (FASB ASC 820-10) establishes a fair value hierarchy that 

prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest 

priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) 

and lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The 

three levels of the fair value hierarchy are as follows:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities

accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset

or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent

that observable inputs are not available, thereby allowing for situations in which there is little, if

any, market activity for the asset or liability at measurement date.

All of the ESF’s investments and other foreign currency denominated assets are Level 1 measurements 

since these financial assets are traded in active markets where quoted values are readily available. 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

13

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

I. Special Drawing Right Certificates Issued to Federal Reserve Banks 

Special Drawing Right Certificates issued to Federal Reserve Banks (FRB) are reflected on the Statements 

of Financial Position at their face value. Under the terms of the agreement, there is no set repayment date 

and no interest accrued while certificates remain outstanding. As a result, the carrying amount represents

the face value. 

J. U.S. Government Securities

The ESF may invest dollars in excess of its immediate needs in overnight, nonmarketable U.S. government 

securities issued by the Treasury. The interest rate earned on the investments is equal to the overnight 

repurchase agreement rate as established by the Treasury’s Bureau of the Fiscal Service. 

K. Other Comprehensive Gain/Loss

Accumulated Other Comprehensive Gain/Loss represents changes in the fair value of investments classified 

as available-for-sale. Unrealized gains and losses, if any, are subsequently reclassified into income in the 

same period the underlying investment is either sold, matured, deemed to be other-than-temporarily 

impaired or transferred to the Trading classification. 

L. Tax-Exempt Status

As a component of the Treasury, which is a federal agency, the ESF is not subject to federal, state, or local 

income taxes, and accordingly, no provision for income taxes is recorded. 

NOTE 2 – CASH AND CASH EQUIVALENTS

Cash and cash equivalent amounts held as of September 30, 2017 and 2016 are as follows: 

September 30 (In Thousands) 2017 2016

Cash and cash equivalents:

U.S. government securities $ 22,090,393 $ 22,680,240

Short-term FCDAs:

European euro 6,163,807 7,051,950

Japanese yen 6,489,369 4,706,992

Total short-term FCDAs 12,653,176 11,758,942

Total cash and cash equivalents $ 34,743,569 $ 34,439,182
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

14

NOTE 3 – SPECIAL DRAWING RIGHTS 

The Special Drawing Right (SDR) is an international reserve asset created by the IMF in 1969 to

supplement the existing reserve assets of IMF member countries, including the United States. In addition 

to its role as a supplementary reserve asset, the SDR serves as a means of payment within the IMF, as well 

as the unit of account for the IMF and several other international organizations. SDRs may be held only by 

the official sector – IMF member countries and certain institutions designated by the IMF as prescribed 

holders. On several occasions SDRs have been allocated by the IMF to members participating in the IMF’s 

SDR Department, including the United States. SDR transactions by the United States require the explicit 

authorization of the Secretary of the Treasury. 

The SDR’s value is based on a weighted average of a basket of key international reserve currencies issued 

by IMF members (or monetary unions that include IMF members) which have been determined by the IMF 

to be freely usable currencies. These currencies are currently the U.S. dollar, the Euro, the Japanese yen, 

the U.K. pound sterling, and, effective October 1, 2016, the Chinese renminbi. The SDR carries a variable 

interest rate, calculated weekly as a weighted average of representative interest rates on short-term debt in 

the money markets of the SDR basket currencies. The ESF’s SDR Allocations and Holdings (see below) 

are revalued monthly, based on the SDR valuation rate calculated by the IMF, and unrealized gains or losses

are recognized upon revaluation. SDR Holdings and SDR Allocations are reported as an asset and liability

respectively in the financial statements of the ESF. 

SDR Allocations

SDRs, once allocated to the United States, are permanent resources unless:

a. They are canceled by an 85 percent majority decision of the total voting power of the Board of

Governors of the IMF; 

b. The SDR Department of the IMF is liquidated;

c. The IMF is liquidated; or

d. The United States chooses to withdraw from the IMF or terminate its participation in the SDR

Department.

Due to the fact that the SDRs are able to be withdrawn, the ESF carries a liability related to such allocations.

Except for the payment of interest and charges on SDR allocations to the United States, the payment of the 

ESF’s liability related to the SDR allocations is conditional on events listed above, in which the United 

States has a controlling voice. Allocations of SDRs were made during 1970, 1971, 1972, 1979, 1980, 1981, 

and 2009. As of September 30, 2017 and 2016, the value of SDR allocations to the United States was the 

equivalent of $49.9 billion and $49.3 billion, respectively.
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

15

NOTE 3 – SPECIAL DRAWING RIGHTS(Continued)

SDR Holdings 

Pursuant to the Special Drawing Rights Act of 1968, as amended, SDRs allocated by the IMF to, or 

otherwise acquired by the United States, are also resources (holdings) of the ESF. SDR Holdings 

represent transactions resulting from these SDR activities, primarily the result of IMF allocations. Other 

transactions reported in this account are recorded as they are incurred and include any SDR acquisitions 

and sales, interest received on SDR Holdings, interest charges on SDR Allocations, and other SDR related 

activities, as well as valuation adjustments. 

Other SDR Activities

The U.S. Government receives remuneration in SDRs from the IMF on the U.S. claim on the IMF, 

represented by the U.S. Reserve Position. The ESF is the only agency within Treasury permitted to transact 

in SDRs. SDRs received become the resources of the ESF, as required by law, and the ESF pays the dollar 

equivalent to the U. S. Government’s Treasury General Account (TGA). The ESF's receipt of the SDRs 

and payment of the dollar equivalent to the TGA are not simultaneous. Typically, the payment is several 

weeks after the receipt of SDRs from the IMF. Therefore, the ESF must reimburse the TGA the interest it 

earned on the dollar equivalent of the SDRs held on behalf of the TGA during the period which elapsed 

between the receipt of the SDRs and the dollar payment to the TGA.

The ESF paid to the TGA $30,224 and $965 in fiscal years 2017 and 2016, respectively, in interest due on 

the transferred dollars. In November 2016 the ESF transacted to purchase 500 million SDRs from the Arab 

Republic of Egypt with a dollar equivalent of $681 million. The ESF did not transact to buy or sell SDRs 

to any participating members during fiscal year 2016. 

The following schedule reflects the activity related to SDR Holdings during fiscal years 2017 and 2016 in 

SDR and dollar equivalent. 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

16

NOTE 3 – SPECIAL DRAWING RIGHTS(Continued)

September 30 (SDRs In Thousands) 2017 2016

Beginning balance 35,859,895 35,855,448

SDR Purchases 500,000 - 

Interest credits on holdings 115,205 18,244

Interest charges on allocations (111,987) (17,968)

Remuneration 37,326 5,408 

IMF annual assessment (1,046) (1,237) 

Total SDR - Holdings 36,399,393 35,859,895

September 30 (Dollar Equivalent In Thousands) 2017 2016

Beginning balance $ 50,053,600 $ 50,331,727

SDR Purchases 681,021 - 

Interest credits on holdings 159,624 25,489 

Interest charges on allocations (155,162) (25,104)

Remuneration 51,718 7,556 

IMF annual assessment (1,435) (1,743) 

Net gain/(loss) on valuation of holdings 653,896 (284,325)

Total Dollar Equivalent – Holdings $ 51,443,262 $ 50,053,600

The table above reflects the actual dollar equivalent amount of SDRs received or transferred by the ESF.

Amounts within the financial statements are computed on an accrual basis and will thus differ due 1) to changes 

in SDR exchange rates between accrual date and transaction date, and 2) change in interest receivable/charges 

payable balances between beginning and end of year.
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

17

NOTE 4 – INVESTMENT SECURITIES AND OTHER FOREIGN CURRENCY DENOMINATED ASSETS

The amortized cost, gross unrealized holding gains and losses, and fair value of available-for-sale debt securities 

by major security type and class of security at September 30, 2017 and 2016 were as follows: 

Gross Gross

Unrealized Unrealized

September 30, 2017 Amortized Holdings Holdings

(In Thousands) Cost Gains (Losses)

Available for sale:

German Bonds $ 1,682,444 $ 47,643 $ (28,298) $ 1,701,789

French Bonds 2,005,009 79,766 (34,997) 2,049,778

Japanese Bonds 1,756,723 79,012 (23,317) 1,812,418

Total $ 5,444,176 $ 206,421 $ (86,612) $ 5,563,985

Gross Gross

Unrealized Unrealized

September 30, 2016 Amortized Holdings Holdings

(In Thousands) Cost Gains (Losses)

Available for sale:

German Bonds $ 2,190,170 $ 30,570 $ (130,404) $ 2,090,336

French Bonds 2,601,835 39,656 (146,453) 2,495,038

French Notes 648,006 - - 648,006

Japanese Bonds 3,964,923 591,681 (9,923) 4,546,681

Total $ 9,404,934 $ 661,907 $ (286,780) $ 9,780,061

 Fair Value

 Fair Value
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

18

NOTE 4 – INVESTMENT SECURITIES AND OTHER FOREIGN CURRENCY DENOMINATED ASSETS 

(Continued)

Gross unrealized losses in which other-than-temporary impairments have not been recognized and the fair 

value of those securities as of September 30, 2017 and 2016: 

September 30, 2017

Unrealized 

Losses

Unrealized 

Losses

(In Thousands)

Less Than 1 

Year

Greater Than 1 

Year

Available-for-sale:

 German Bonds -$ -$ $ (28,298) $ 454,247

 French Bonds - - (34,997) 351,513 

 Japanese Bonds (23,317) 267,734 - - 

Total $ (23,317) 267,734$ $ (63,295) $ 805,760

Fair Value Fair Value

September 30, 2016

Unrealized 

Losses

Unrealized 

Losses

(In Thousands)

Less Than 1

Year

Greater Than 1

Year

Available-for-sale:

 German Bonds $ - $ - $ (130,404) $ 1,070,232

 French Bonds - - (146,453) 1,053,599 

 Japanese Bonds - - (9,923) 378,314 

Total $ - $ - $ (286,780) $ 2,502,145

Fair Value Fair Value

There were no gross unrealized losses less than one year in which other-than-temporary impairments had not 

been recognized as of September 30, 2016.
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

19

NOTE 4 – INVESTMENT SECURITIES AND OTHER FOREIGN CURRENCY DENOMINATED ASSETS 

(Continued)

Maturities of debt securities classified as available for sale were as follows at September 30, 2017: 

September 30, 2017 (In Thousands) Amortized Cost Fair Value

 Available-for-sale:

 Due within one year $ 1,848,922 $ 1,832,084

 Due after one year but before five years 2,975,044 3,065,739

 Due after five years but before ten years 620,210 666,162 

 Total $ 5,444,176 $ 5,563,985

Impairment Assessment

As of each balance sheet date, the ESF evaluates securities holdings in an unrealized loss position. For debt 

securities, the ESF considers whether it has the ability and intent to hold the investment until a market price 

recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs 

evidence to the contrary. Based on the circumstances present at the date of evaluation, if we do not expect a 

full recovery of value or do not intend to hold such securities until they have fully recovered their carrying value, 

we recognize an impairment charge. 

During the year ended September 30, 2017, the euro has remained depreciated in value and the yen has declined 

in value. Given the level of decline and current outlook, ESF does not expect to recover the dollar equivalent 

invested for certain euro and yen-denominated securities in the near term and/or before their maturity.

Accordingly, ESF has recognized other-than-temporary impairment on the majority of German Bonds, French 

Bonds and Japanese Bonds with a maturity date before December 2018. During the year ended September 30, 

2016, the euro had continued to depreciate in value and ESF recognized other-than-temporary impairment on 

German Bonds, French Bonds and French Notes with a maturity date before the end of fiscal year 2017.
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

20

NOTE 4 – INVESTMENT SECURITIES AND OTHER FOREIGN CURRENCY DENOMINATED ASSETS 

(Continued)

Fair Value 

The fair value of securities available-for-sale and traded securities are measured using the hierarchy or lowest 

level input that is significant to the fair value measurement of the investment in its entirety. The following table 

presents assets that are measured at fair value on a recurring basis at September 30, 2017 and 2016. 

Quoted Prices

In Active Significant

Markets Other Significant

For Identical Observable Unobservable

Assets Inputs Inputs

(Level 1) (Level 2) (Level 3)

Available-for-sale:

German Bonds $ 1,701,789 $ 1,701,789 - - 

French Bonds 2,049,778 2,049,778 - - 

Japanese Bonds 1,812,418 1,812,418 - - 

 Total Available-for sale 5,563,985 5,563,985 - - 

Trading:

French Bonds 1,300,063 1,300,063 - - 

Dutch Bonds 1,607,660 1,607,660 - - 

 Total Trading 2,907,723 2,907,723 - - 

Total $ 8,471,708 $ 8,471,708 - -

September 30, 2017 

(In Thousands)

Fair Value At 

9/30/2017

Fair Value Measurements at Reporting Date Using
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

21

NOTE 4 – INVESTMENT SECURITIES AND OTHER FOREIGN CURRENCY DENOMINATED ASSETS 

(Continued)

Quoted Prices

In Active Significant

Markets Other Significant

For Identical Observable Unobservable

Assets Inputs Inputs

(Level 1) (Level 2) (Level 3)

Available-for-sale:

German Bonds $ 2,090,336 $ 2,090,336 - - 

French Bonds 2,495,038 2,495,038 - - 

French Notes 648,006 648,006 - - 

Japanese Bonds 4,546,681 4,546,681 - - 

Total $ 9,780,061 $ 9,780,061 - -

September 30, 2016 

(In Thousands)

Fair Value At 

9/30/2016

Fair Value Measurements at Reporting Date Using

The portion of trading gains and losses for the period related to trading securities still held at September 

30, 2017 is as follows:

Net gains and losses recognized during the period $ 234,978

 on trading securities

Less: net gains and losses recognized during the

 period on trading securities sold during the period - 

Unrealized gains and losses recognized during the

 period on trading securities still held at 

 September 30, 2017 $ 234,978
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

22

NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE GAIN

The accumulated balances for other comprehensive gain at September 30, 2017 and 2016 are as follows:

September 30, 2017 (In Thousands)

Balance at September 30, 2016 $ 375,127

Unrealized holding gains/(losses), net 

 arising during the period $ (79,040)

Less: reclassification of (gains)/losses recognized

 in net income (349,223)

Less: reclassification of losses related to

 impaired instruments recognized in net income 172,945 

 Other comprehensive loss, net (255,318)

Balance at September 30, 2017 $ 119,809

Balance at September 30, 2015 $ (647,631)

Unrealized holding gains/(losses), net 

 arising during the period $ 815,894

Less: reclassification of losses recognized

 in net income - 

Less: reclassification of losses related to

 impaired instruments recognized in net income 206,864 

 Other comprehensive gain, net 1,022,758

Balance at September 30, 2016 $ 375,127

Accumulated Other

Comprehensive Gain

September 30, 2016 (In Thousands)

Accumulated Other

Comprehensive Gain

NOTE 6 – SDR CERTIFICATES ISSUED TO FEDERAL RESERVE BANKS

The Special Drawing Right Act of 1968 authorized the Secretary of the Treasury to issue Special Drawing Right 

Certificates (SDRCs), not to exceed the value of SDR holdings, to the Federal Reserve System in return for 

interest-free dollar amounts equal to the face value of certificates issued (SDR monetization). The certificates 

may be issued for the purpose of financing the acquisition of SDRs from other countries or to provide resources 

for financing other operations of the ESF. Certificates issued have no set maturity and are to be redeemed by the 

ESF at such times and in such amounts as the Secretary of the Treasury may determine (SDR demonetization). 

As of September 30, 2017 and 2016, the amount of certificates issued to Federal Reserve Banks was $5.2 billion. 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

23

NOTE 7 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial Instruments (FASB ASC 825-10) requires all entities to disclose the fair value of financial 

instruments, where feasible, in an effort to provide financial statement users with information in making 

rational investment and credit decisions. 

To estimate the fair value of each class of financial instrument, the ESF applied the following methods 

using the indicated assumptions:

Cash and Cash Equivalents

Cash and Cash Equivalents consist of U.S. government securities and FCDAs, and are reported in the 

Statements of Financial Position at amounts that approximate their fair values. 

SDR Certificates Issued to Federal Reserve Banks

The fair value of these certificates is based on the face value of the certificate as they are not subject to 

market or interest rate risk nor are they subject to fluctuations in exchange rates.

Special Drawing Right Holdings and SDR Allocations

The fair values are based on quoted prices published weekly by the IMF. 

Investment Securities and Other FCDAs

The fair value of Investment Securities and Other FCDAs are based upon quoted market and current 

exchange rates. 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

24

NOTE 7 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The estimated fair values of the ESF’s financial instruments at September 30 are as follows:

September 30 (In Thousands) Carrying Amount Fair Value Carrying Amount Fair Value

Assets:

Cash and Cash Equivalents 34,743,569 34,743,569 34,439,182 34,439,182

Investment Securities and

 Other Foreign Currency

 Denominated Assets 8,471,708 8,471,708 9,780,061 9,780,061

 SDR Holdings 51,443,262 51,443,262 50,053,600 50,053,600

Liabilities:

 Certificates Issued to

 Federal Reserve Banks 5,200,000 5,200,000 5,200,000 5,200,000

 SDR Allocations 49,911,652 49,911,652 49,293,980 49,293,980

2017 2016

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Foreign Currency Denominated Agreements

Foreign currency denominated agreements that exist between the Treasury and foreign entities or 

governments provide for drawings of dollars by those entities or governments and drawings of foreign 

currencies by the Treasury. The Treasury enters into these agreements through the ESF. Under these 

agreements, the ESF receives repayment of an agreed-upon amount in dollars regardless of currency 

fluctuations. With the exception of the Mexico agreement noted below, there were no foreign currency 

denominated exchange stabilization agreements as of September 30, 2017 and 2016. 

Exchange Stabilization Agreements

The ESF has an Exchange Stabilization Agreement (ESA) with Mexico. In April 1994, the Treasury signed 

the North American Framework Agreement, which includes the ESA with Mexico. The ESA provides for 

a $3 billion standing swap line between the Bank of Mexico and the ESF. 

The amounts and terms (including the assured source of repayment) of any new borrowings under the North 

American Framework Agreement are subject to certain requirements of the agreement that specify the 

transactions are exchange rate neutral for the ESF and would bear interest referenced to U.S. Treasury bills. 

Drawings are contingent on certain other conditions being met.

There were no drawings outstanding on the ESF swap line as of September 30, 2017 and 2016. On October 

20, 2016, the Treasury renewed its participation in the agreement until December 12, 2017. 
DEPARTMENT OF THE TREASURY

EXCHANGE STABILIZATION FUND

NOTES TO FINANCIAL STATEMENTS

September 30, 2017 and 2016 

25

NOTE 9 – SUBSEQUENT EVENTS

On November 14, 2017, the Treasury renewed its participation in the ESA until December 12, 2018.
REPORT WASTE, FRAUD, AND ABUSE

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